Using your business plan

Bill Payne , Angel Investor , Frontier Angel Fund

22 Mar 2012

Business plans come in several flavors and you will need each of them to successfully raise money. I’ll briefly describe the forms of your business plan, but more importantly, explain how to avoid common mistakes in using your plans.

Elevator Pitch – A two-minute verbal description of your business. Illustrate the problem you are solving and how your solution will delight customers. Imagine you enter an elevator on the twenty floor and find yourself standing next to an investor. How can you explain your business while the investor is a captive audience?

Video Pitch – A video of your elevator pitch that can be used electronically to introduce your business to investors. Take advantage of the media and enhance your pitch by showing investors a prototype or graphic.

Executive Summary – A one- to three-page description of your business, summarizing your entire business plan but emphasizing the problems customers are encountering and your solution to these problems. Entrepreneurs usually provide condensed descriptions of the competitive environment, the management team, brief pro forma financials and the amount of capital required to start and grow the business.

PowerPoint Presentation – Follow Guy Kawasaki’s 10/20/30 rule as described in The Art of the Start: Describe your business in 10 slides, deliver the presentation in 20 minutes using few words and large typestyle (>30 font). Look on investor websites for an outline of investor expectations for PowerPoint decks.

Business Plan – A full-blown description of your business. Regardless of what you read elsewhere from investors, writing either a full business plan, or an agile lean plan is key to understanding all aspects of the business and to create alignment among the management team, employees, vendors, customers, partners, and investors. Most investors continue to demand a full plan and often use them as an outline for their due diligence before investing.

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Imagine a fishing analogy: The elevator and video pitches are lures—used to attract investors. After pitching, give those investors a copy of your executive summary. Interested investors will then set up a verbal presentation. Use your PowerPoint presentation to “set the hook.” Expect lots of questions from your investor audience. Investors who wish to pursue investment will ask for a copy of your business plan and enter a stage called “due diligence,” spending lots of time with you validating the investment opportunity. “Reel the investors in” and close the deal.

Here are some do’s and do not’s:

• Don’t spend too much of your time with investors talking about products and technology. Talk about solving customer problems. Why would users select your solution? Be ready to discuss all aspects of your business. Investors fund companies, not products.
• Do not hand investors your business plan when you first meet them. They will politely accept it and then likely throw it away before reading. Wait until you have attracted investors and they ask for a copy of your business plan.
• Practice your Elevator Pitch and your PowerPoint presentation until you can deliver each smoothly. Cover all the materials quickly, leaving extra time for questions from your investor audience. It is usually the interactions during the Q&A period that will cement interest among investors.
• Understand the size of your opportunity. Do not estimate revenues as a percentage of the market. Do a bottoms-up analysis. Which customers will buy how much of your product.
• Don’t overemphasize the importance of “first to market.” Investors know that among successful giants, like Facebook, Google and Internet Explorer, none were first to market.
• Be sure to include your contact information in your Executive Summary and Business Plan. It is very frustrating for investors to meet an interesting entrepreneur, take a copy of their Executive Summary home to read, generate more interest by reading it and then discovering you have no contact information to facilitate follow-up meetings.

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