So … yesterday I was just complying with the prescription to write a short letter … albeit totally nudge-nudge-wink-wink as, you may have guessed, I had more to say. (Somebody muzzle this man, yeah-yeah, I know.) Anyway, the pithy gist of Mr. Twain’s quip is that it’s easy to write and write and write (this blog is proof-positive) but to write concisely with real impact takes skill — and, can have great value, as any entrepreneur who’s lost sleep struggling with the proverbial Elevator Pitch can attest.
I mention this because recently someone asked me what part of a business plan for a new venture is the most important. Is it the management team? The pro formas? The intellectual property? The market size? The exit strategy? Use of funds? I planted myself squarely in the middle and professed that the Executive Summary is the curio cabinet, underscoring my holistic view that everything in the entrepreneur’s quiver is critical to success.
Few people will actually read an entire business plan unless they’ve got a real vested interest, or are a prospective investor who’s moved into a diligence phase or at least some mode of serious consideration. Far more likely they’ll read the summary overview and maybe flip through and skim the rest. As they turn the pages they might stop on something here or there, perhaps the bio of a key team member (e.g., CEO, President, Founder, Chairman), or a chart or other schematic that provides a visual overview of a process or critical path important to the success of the new venture. That’s about it.
Now, depending on one’s perspective (i.e., one’s area of expertise), it can fairly easily be argued that the financials are the most important. Meaning, how’s this thing going to actually make money? And if it does, how’s it going to stay afloat and throw off some tasty dividends? Hard to argue with that. Especially if there’s to be an earnest attempt to use the BP to guide the operations of the company moving forward. However, it’s rare that it will be used as much more than a North Star beyond capitalization.
Another thing, have you ever seen a set of pro formas that didn’t work? That didn’t present the company opportunity as being huge, the Next Big Thing? All too often financial projections are presented as “conservative” but are more akin to best case scenarios safe from hidden competition, ticking clocks, x-factors, downturns, acts of God and other anomalies that can put a bullet in a Big Idea.
OK, so what about the people? The leadership team? Critically important of course. But here again, the Executive Summary is an overview of the plan at large, so it should provide, at minimum, a narrative snapshot of the key players, what they’ve done, and why they’re the torchbearers, heavy lifters and super glue to make it happen.
Bottom line, in most cases business plans are developed, written, printed and bound simply to get the attention of a prospective investor or other strategic partner. From there the dance typically moves quickly (or not at all) into dog and pony show-n-tell and chemistry tests. And given the time impoverishment of most people today — and I’m impressed if you’ve taken the time to read this far — if they don’t understand the proposition quickly and clearly, you’ll lose them, count on it.
Posted by: Colin Mangham