It’s become quite trendy for bloggers to try to shake things up by bashing business plans. “” on Entrepreneur. “” on Inc. “” on VentureBeat. “” on Forbes. The gist? “You don’t need a business plan. Just put together a pitch deck.”
These Silicon Valley bloggers and investment “authorities” are misleading entrepreneurs. And I’m not just saying that because my livelihood depends on it. If the business plan really were dead, I’d be out of business. Not only that, but it’s simply untrue that most entrepreneurs don’t need one. I’d go so far as to say it’s irresponsible for writers to suggest as much.
“Fred,” a two-time client of mine, sweet-talked me into developing a pitch deck for his meeting with angel investors. He wanted to skip the business plan so he could “strike while the iron is hot.” I tried to talk Fred out of it, but he had read a contrarian blog (ahem) and was convinced he could save some money. I conceded, and my team jammed out an impressive pitch deck for Fred in less than a week. It was so impressive that he raved, “They loved it. I’ve set up a second meeting .” Wait for it… “They want to see my full business plan, so let’s get that started.” Forehead slap.
Side note to all you entrepreneurs out there: When I tell you that it takes on average 250 hours for someone to write their own investor-ready business plan, it isn’t just a sales pitch. Ask anyone who got an A+ on their business plan in their MBA program. Business planning is complex. And it’s an iterative process. You are building, arguably,
I tell Fred, “It takes us about 10 business days to develop a comprehensive first draft, and then we need to iterate from there, which takes time.” Fred pleads with me to do it faster and I tell him that we can, but it’s going to be about double the price because I have to keep the team after hours and over the weekend. Either that or he reschedule the presentation, which he does.
Fred likes our first draft...but he decides to change the revenue model and his target demographics, which means he needs additional market research. “I’ve got a meeting ,” he says. “You think you’ll have me a revised business plan by then?”
I like to think of myself as a rather calm, cool, and collected guy, but Fred is lucky someone in Silicon Valley hasn’t invented the Slap-o-Matic send-a-slap app. I explain to him, “Fred, that’s like a week’s worth of work -- three days minimum.”
My second example doesn’t end with telepathic threats via uninvented technology. A bright young app developer, we’ll call him Dave, calls me and explains, “I have my pitch deck done [re: same bloggers’ advice], but I started discussing things with a local forum, and they want to see my business plan. I’m pulling my hair out and I’ve got 10 versions going. Plus, my pitch deck is definitely going to change now that I’ve really got into the research and started a new version of the financial model.”
“Don’t worry, Dave,” I said. “We’ve got your back.” Here’s what I told him goes into a solid business plan:
Two conclusions from the above list. First, business plans are meant to evolve and should continue to evolve, even beyond fundraising. And second, a three-day process this ain’t.
Take your time. Think it through. You may only get one shot with that ideal investment partner. It’s better to develop a well-thought-out business model, one that you understand and can get behind, than to walk into a rushed meeting and get flustered the first time someone asks you a hard question. And they will ask you hard questions.
Oh yeah, you are probably wondering about Dave. He called me and said, and I quote, “I have three investors courting me. They loved my presentation. I’m the belle of the ball.”
And we even did his pitch deck.
we finished the business plan, of course.