Business plan vs. pitch deck? Which should you be focusing on first as a startup founder?
For decades entrepreneurs and business owners believed they needed to focus on building a comprehensive business plan. All before taking real action. There were good reasons for that. More recently, many entrepreneurs have gone almost exclusively with pitch decks in place of a traditional business plan.
Which of these two approaches is best? Does it depend on the type of business you are starting or if you plan any fundraising efforts? Is a hybrid approach the wisest move? Or should you stay intensely focused on one before the other?
The Ultimate Guide To Pitch Decks
Definitions: Business Plans Vs. Pitch Decks
A traditional business plan is a fairly lengthy text-based document. It lays out all of the parts of the business.
From the corporate structure to marketing plans to startup needs and growth plans and financial forecasts for the next five years. Plus the much longer-term game plan. This is typically in a Microsoft Word style format, and can easily run 25 pages. It begins with a brief executive summary. Which can be 1-3 pages long on its own.
A pitch deck is a slide-based presentation. Think PowerPoint or Google Slides formatting. Ideally, your pitch deck will run between 5 to 20 slides. It is a very short, simple and compact version of a traditional business plan. Pitch decks emerged specifically for pitching startups to potential investors for fundraising. However, they are increasingly replacing business plans.
Uses For A Business Plan Today
Are business plans still relevant today?
Yes and no. Every business and entrepreneur should have a plan. We all know what failing to plan means. Yet, what is effective and valuable in terms of business plans may be changing and evolving.
A business plan really helps you get depth and length in your plans. It gives more clarity than you could ever fit into a pitch deck. This process helps entrepreneurs really think through the details and big vision and long term game plan. It helps you get granular with marketing plans, startup costs, cash flow needs, and financial projections.
It also helps to give you a framework to start building on. As well as really thinking through a functional business model.
Investors, advisors and other key players may be completely satisfied with seeing a one-page business plan, executive summary, and bullet-pointed action plan. Providing that accompanies a great pitch deck.
However, there may still be some scenarios in which you will be asked for your business plan. This includes applying for some types of loans, leasing space and joining certain groups or applying for licenses.
The Pros & Cons Of Business Plans Today
The advantages of business plans:
- Being forced to think through the details
- Having an in-depth plan and awareness of your real needs
- Being able to back up the hype with something tangible
- Credibility with potential partners and early investors
- Being prepared if you are asked for it
- Having a comprehensive guide and roadmap to follow
The cons of business plans:
- Chances are no one else will ever read it
- Things move so fast, most may be irrelevant in a couple of months
- It’s a black hole for your time, energy and momentum
- Many entrepreneurs get bogged down here and miss their best opportunities
- Additional expenses with negligible returns
- Appearing like a novice to experienced investors
Uses For A Pitch Deck Today
A pitch deck is for more than just fundraising. Below is a video where I cover how to create a pitch deck.
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Pitch decks are synonymous with startup fundraising. Yet, they shouldn’t be exclusively tied to fundraising activities or only when you are out there actively raising for around.
In fact, you’ll find pitch decks useful from before day one through your exit.
These scenarios include:
- Honing your initial concept and model, like with a business plan
- Gaining initial feedback
- Recruiting cofounders
- Enrolling advisors
- Hiring early and key team members
- Pitching investors on and offline
- Securing early customers and strategic partnerships
- Through multiple fundraising rounds
- Getting to an exit
The Pros & Cons Of Pitch Decks Today
The advantages of pitch decks:
- Expected when raising capital
- A streamlined framework for creating a mini business plan
- Easily and efficiently updated for multiple purposes and overtime
- Much faster to create
- More likely that you will use and refer to it often
- Easier to share
- Enables you to get down to business faster
If you want to go more in detail you can view the video below where I cover this.
The cons of pitch decks:
- Can be an excuse not to have a real plan of model
- Dangerous gaps from not thinking through the details
- Not prepared when a business plan is requested
- Emphasis on fluff and hype versus substance
- Very short term outlook
There are many advantages and disadvantages of solely running on a traditional business plan or new modern pitch deck. Trying to juggle both simultaneously can further compound the cons, distraction, and length of time before you really get into the game.
Today, it seems the best-prepared entrepreneurs, especially when it comes to getting funded are those with a strong pitch deck, and at least a one-page business plan, and strong executive summary.
Do not dismiss the importance and value of having a real plan. You could be sabotaging your own mission and future. If you plan to stay small local business or solopreneur forever a real business plan is smart. Though as the founder of a fast-moving startup that needs funding, a pitch deck can be even more important. You’ll probably be moving so fast your business plan will never keep up.
If you have to choose one, it should be focusing on knocking out a winning pitch deck. This process will also give you many of the answers and framework for fleshing out your real business plan. At least this way you’ll be poised to raise money, and build out your team and gain early clients in the meantime.
Remember that storytelling plays a key role in fundraising and you will need capital to scale things up. This is being able to capture the essence of the business in 15 to 20 slides. For a winning deck, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
FULL TRANSCRIPTION OF THE VIDEO:
Hello, everyone. This is Alejandro Cremades, and today we’re going to be talking about the main difference between a pitch deck and a business plan. Essentially, a pitch deck is a 15 to 20 slide presentation, while a business plan is a 10 page to a 100-page document. Both have been sent in the past or have been used to be sent to investors when you’re raising capital. So with that being said, let’s go into it and really understand the difference between one and the other.
In terms of the actual use: the actual use of the business fund, I think it’s a great way to give a complete inside to the business to the investor. Remember: it’s a 10 page to 100-page document. The thing about a business plan is that it tends to be lengthy. Data shows that typically investors, right off the bat, especially doing the first discussions, they’re going to be only allocating to reviewing your opportunity about 2:41. That’s it.
With that being said, the main difference here is that, for example, on the pitch deck, you’re really giving that possibility to the investor of reviewing everything in those 15 to 20 slide of the business, understanding the 30,000-foot view, and really knowing if that’s an opportunity that they want to pursue further, or perhaps that it makes no sense because maybe it’s not a fit with their investment thesis.
In terms of the actual disadvantages of maybe pitch decks or business plans, the main disadvantage of a business plan is the fact that your business is going to be constantly changing. No single business plan is completely bulletproof to the market. So you may be investing a ton of time in putting those 100 pages. Then you go to the market, and you realize that you need to either optimize or iterate on the business model in order to get it right. So that’s basically going back to the drawing board.
What I like about the pitch deck is that it’s just a 15 to 20 slide presentation where you can continue to iterate and optimize the presentation as you go based on the feedback that you’re getting from investors, from customers, from employees, whoever that is that is helping you to understand how you’re positioning this better towards the investors that are going to be reviewing the document.
In terms of the business plan today, certainly, it has taken a backstep towards the fundraising process when it comes to pitch decks. Pitch decks today are used more than business plans, and they’ve been taking the lead over the course of time.
Now, the beauty here of business plans, though, is that they’ve taken a backstep, but they’re a great document that you could use with your team and then also to showcase to investors if there’s further interest as an 18 to 24-month roadmap as to how you’re planning to execute the business.
For the pitch deck, again, it’s a great way to showcase the 30,000-foot view of your business in a way in which you can continue to change depending on the concerns and those questions that you’re receiving while you’re out there raising the capital.
Lastly, as part of the difference between the business plan, and then also the pitch deck, remember timing. Timing is the reason why you’re going to be sending a business plan is because the investor is about to make the investment. It’s one of the last things that they need in order to push forward and give you the money.
Then while you’re sending the pitch deck is because you want a secure meeting because you want to maybe convince the investor further. But, really, the difference is that one is going to be lengthy, while the other one is going to provide a 30,000-foot view of the business.
So with that being said, if you like the video, make sure that you Like this video and then also hit the Subscribe so that you don’t miss any other videos, and then leave a comment. And don’t forget to check out the fundraising training where you’re going to be able to see how we help founders from A all the way to Z with everything related to fundraising, live Q&A, templates, agreements, you name it. Thank you so much for watching.