I remember writing my first business plan, it was an extremely thorough document that took me countless hours of research and months of writing to complete. But when I finished I had a solid plan in my hands that was ready to submitted to any bank or financial institution for funding. More than a document that opened doors for funding, the business plan gave me just that; a plan to operate my business for at least the next 3 fiscal years.
But as the lean start up movement is roaring among young entrepreneurs I have been noticing that the business plan is being replaced by the pitch deck at an alarming and unsettling rate. So what I wanted to do is to do a close analysis of what these two very different documents are, their strengths theirs weakness and see if the new trendy kid on the block the “pitch deck” alone can make up for the old traditional ways of its clunckier cousin the business plan.
Let’s start with the pitch deck. A deck is a quick short presentation used to provide a quick overview of your business. A deck is usually used in in-person presentation with potentials investors, customers, clients or potential partners. A pitch deck usually has no more than 10-12 slides and each slide is very specific without too much content yet very informative
- Introduction: Quick intro of your company and brand
- Team: Who makes up your team and the people behind the idea
- Problem: What is the problem you are trying to solve
- Solution: How does your product or service solve that problem
- Advantage: What makes your product a better solution and how is it different
- Market: The size of the opportunity in dollars
- Product: How your product capitalizes on that market share
- Validation: Has the product/service been validated through sales
- Competition: Who else is out there competing with you
- Financials: How does your product/service make money
- Investing: How can someone invest
To better visualize the pros and cons of both the pitch and deck and business plan I have separated the pros and cons by short and long term and internal and external basis. This, I am hoping will give you a really good picture on where to use the pitch deck and when to invest time in creating a solid business plan.
The long term and short term columns are self explanatory; however the internal and external factors require a little more explanation. An internal factor would be something that comes into effect from within the organization such as the founders, employees, contractors etc; team members that are working for the organization from within. Whereas an external factor would be outside the organization and could be customers, competitors or even the market in general. So to give an example, the ease of writing a pitch deck is an internal pro because your team internally benefits on saving time because of the brief nature of a deck; however a short-term con can be a lack in deeper market understanding by your team due to the simplistic research inherent to a pitch deck.
And now the traditional business plan. The reason why I think the business plan gets a bad rep is because it is associated with the “old ways” of doing things and in a world of hyper neoentrprenerialism the olden ways have become fashionably the bashing grounds of the lean start up movement. But I am convinced that I can demonstrate the value in a business plan that far surpasses that of a pitch deck. Not to say that the deck is not an important tool when it comes to a start up business but it is definitely not the end all as the new age junkies have been sprucing it to be.
Lets start with the main components of a business plan:
- Executive Summary: A summary of your business plan written mostly at the end.
- Business Description: This is where you would describe the overall business, ownership, history and current status, objectives and success factors.
- Products and Services: a description of your products and services, unique features, new and follow up products.
- Market Research: Industry analysis, market analysis and competitor analysis.
- Marketing and Sales Strategies: How do you plan to market and sell your product/services.
- Management: The team, their strengths and capabilities.
- Operations: Scope of operations, personnel, operational expenses, location, facilities, logistics etc.
- Financials: This is probably the most looked at part of your business plan it would include numbers on Start-up funds, current financial position, operational forecast, income statement and cash flow.
As you can tell, both the pitch deck and business plan have their merits but the business plan has a lot more weight behind it that can prepare for you what your business really needs to get off the ground; and that is planning. I agree that long corporate style business plans might be a thing of the past but planning for a business is not and as Sabrina Parsons, the CEO of Paolo Alto Software says, “Planning should be nimble. Planning should focus on just the information you need to run your business, and planning should be an ongoing process to help you understand where you are doing well, and where you may be headed into trouble– before it happens.”
Pitching is great, but having both these documents in your arsenal will give you a leg up with your competitors and you’ll be ready when the next potential investors comes knocking for more information on your business.