Write a Business Plan, But Don’t Pitch It
by jleffall
Nearly seven years ago, a business partner and I sat down in several offices of people who were much richer than us to present a business plan.
The business plan was bound with spiral binding, a glossy presentation booklet with catchy title, marketing buzzwords and phrases such as “three-headed distribution monster,” “walk with us,” and snazzy acronyms such as “J.U.M.P.”
More than all of the above we had a detailed breakdown of operational costs, projected salaries, marketing costs, potential return on investment and all that jazz.
We were proud of our booklets and eventually received a modicum of funding. In essence we sold the project, but we didn’t sell it because of our cute little booklets. In fact the people who funded us never even read the plan. They read us and we stayed in their face long enough for them to pay us.
You may not hear this from an advisor or consultant whose business is to find funding for you but it’s true. Write a business plan but don’t pitch that plan. What you are selling more than anything is you.
Take this guy, he wears cool wire-rimmed glasses, rocks jeans to work and swings deals for August Capital, a VC shop managing an estimated $1.3 billion portfolio of companies. This guy, whose name is David Hornik, says VCs tend not to read business plans in their entirety. They are too long, he says and usually your business, especially if it’s high-tech or trend oriented, will change quicker than you can get out of the traffic jam to get to the meeting. Okay I added that “traffic jam” but you get the drift.
The key is the Executive Summary of your plan, which most VC’s do actually read. Here’s what that summary should contain.
No. 1: The fact that you’re you, and you did something and plan to do something else.
No. 2: The fact that you understand your business and that of your competition.
No. 3: That you have a proven product or service already making money or with customers ready to buy or be serviced pending the procurement of operational funds.
No. 4: That you are the next big thing or you are highly innovative on an existing business model.
At the end of the day your business plan should be your source document and you should be able to cite facts and figures from it verbatim, on the fly, without breaking the bank at the FedEx Office to make fresh little booklets.
There are many ways to get yourself in front of a VC firm, the most common is: meet people. More than any start-up financing realm, the world of VC is a world of referrals and gladhanding.
A few paragraphs up, I said we got it done by staying in front of these “richer than-us,” people and we stayed in front of them because along the way, people vouched for our ability. Indeed your credibility, viability and bankability as an entrepreneur can be made or broken by those who do or do not vouch for you.
Category: Capital | Tags: August Capital, Business Planning, Financing, small business marketing, Venture Capital, Venture CapitalistDid you like this article? Share It!
T. says:
another thing one can do with a business plan is posting it at newly launched website http://www.investengine.com
it has just gone public so there are few people using it, but the early bird eats it all =))
David Hornik says:
I think you are absolutely right about this. Writing a business plan can be an excellent exercise in understanding your business and your market. You will learn a ton working through the process of writing the business plan. But don't get too caught up in it.
That said, you are also absolutely right that VCs will definitely read your Executive Summary, so spend a bunch of time on that. At the end of the day, your chance of getting a meeting with VCs will depend on who makes the intro to the VCs and how compelling your Executive Summary is. A great one pager and intros from the right folks will get you in the door every time.
bookluver321 says:
Part of any good business plan should include knowing how to find funding for a business and how to grow that business when the time comes. Kenneth H. Marks offers a lot of great suggestions on how to do this in his latest book, “The Handbook of Financing Growth.” It is a great guide and a reference for anyone in business.
juanroberts says:
This is by far one of the best articles I have ever read on BW2.0. It is concise, direct points and full of clear information that can be used NOW. Thanks.