The Business Plan vs Executive Summary Debate

businessplanCropWhich is better, the business plan or the executive summary? Academic institutions and the marketplace appear to be moving in opposite directions on this question. While many business students are required to develop 30- to 50-page business plans, we’ve found that these lengthy documents are used less and less in the real world, with the exception of more mature businesses in private equity or M&A transactions. For most early-stage businesses, 95 percent of a business plan is projection and conjecture, more akin to a work of fiction than an outlining of facts. And, deluged with plans, most investors have very limited time to spend reading. Most will look at a few pages and make a decision in a matter of minutes. If they cannot quickly figure out what the business does, how it is different from everyone else’s and why they should be interested, your plan is dead in the water.

A business plan/summary cannot be too short, it can only be too long. When plans are too long, they simply aren’t read. But, if you are able to pique investors’ interest with even a one-page summary, they are going to reach out to you for answers to their questions. And remember, this conversation is the primary objective of your written materials. No investor is going to write a check on the strength of the business plan alone. Other elements of a traditional business plan—such as financial projections, market research, detailed competitive analysis, and intellectual property and technical or product schemas—can be delivered after the audience’s attention is captured. (It’s also much easier to keep these detailed pieces up to date when they are separate from the fundraising piece.)

Our recommendation is that you focus on creating a three to four-page, detailed, executive summary that can be made into a PDF. The first paragraph should succinctly deliver your value proposition and explain why this is an attractive opportunity for an investor. In the next three to four paragraphs, provide the logic behind this assertion with key high-level data as supporting evidence. This summary should be your primary document when approaching prospective investors. If someone wants to learn more, ask for a call or a meeting, but don’t send additional information to someone who won’t take the time for either of these activities. If you do get a meeting or a phone call, we recommended that our clients have ready a 10- to 15-page PowerPoint presentation as well as backup documents, including sales projections, a financial model, any technical or intellectual-property documentation and any detailed market research available.

Developing an executive summary can be hard work. One of the processes that we undertake in developing a summary is to break the content up into distinct sections. This process of separating out and addressing key investor issues individually is often eye-opening, and entrepreneurs often find they need to rethink some of their assumptions. Certainly, it’s easier to obfuscate gaps with density in a long business plan. But that’s one reason why the summary is better. It brings to mind a quote we are fond of: “If I had more time, I would have written a shorter letter.”

5 comments

  1. Drew Hession-Kunz says:

    Very good article, and agree with the central theme.

    One clarification for the reason b-schools require the long plans- it is to think these things through completely. In an academic environment, they can’t actually START the business, so the (percieved) next best way to get them thinking this through is to have them write a plan.

    I am an adjunct in VC at BC, and believe this is their reasoning. Maybe we should just have them start a business- it would be more productive. I have a number of students who have done just that, and they learn a GREAT deal from the experience…

    =Drew

  2. Great post. If I may add one thing, back in the days when I used to train newly-hired college grads how to write a proposal for selling a large computer system (at Burroughs, now Unisys), I’d advise that – after the 40 to 50 page proposal was done – then the real work started; now they needed to write the 3 to 4 page summary that you describe. They would always be amazed at how long writing such a short document would take.

    And then when they were finished with that, I’d make them write a one-page summary. Heck the recommendation to develop the 747 was made to Boeing’s CEO on a single page because that’s the longest document he’d accept across his desk. The one-pager is great because it focuses only on the real reasons why someone should do the deal – whether buying a computer, building a jetliner, or investing in your start-up.

  3. Marc Brown says:

    Thanks. Great article!

  4. Jeff Wofford says:

    I’m an author, Entrepreneur, and Investor. The Business Plan is Dead. As an Entrepreneur, I wrote a book with this as the Title. As a person that’s raised capital in Silicon Valley, I will absolutely tell you they are not looking at a business plan as a prerequisite to fund your idea.

    It’s important to get your idea to one page. After the introduction page, you need an executive level presentation that maps out your Magic, Market, Management Team, and Money needed to get to profitability. Most importantly, you need a Network to shop your plan through. 96 percent of startup capital comes from the private market, not Venture Capital.

    For more, you can read my book, “The Business Plan is Dead – How to Raise Capital in the New Economy” by me, Jeff Wofford, Silicon Valley Entrepreneur. Available on Amazon. :-)

    Jeff Wofford, Author
    The Business Plan is Dead

  5. I agree with this approach as long as you have the financials to back it up. I’ve written the 25 page business plans and later shifted to a 3 – 4 page executive summary approach with a strong one-pager. Also, investors want to know exactly how you are planning to use their money. You’d be surprised at how many entrepreneurs haven’t really thought that part through and aren’t able to give a compelling answer.

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