Which 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.”