Traditionally, entrepreneurs spend weeks even months crafting their perfect business plans for one specific reason: to pitch their business ideas to potential investors… Although it became a norm to have a well-documented business plan, its relevance in the last years has become debatable. In this article we intend to explore why having a business plan isn’t necessary anymore:
Business plan is a terrible waste of time and money:
The size of a business plan can go up to 90 pages, so it can be time consuming even for a professional writer, and if you are a normal entrepreneur it can take you weeks and weeks of writing and proofreading… Instead, you should be testing your assumptions to validate them or pivot the company fast. And if you decide to outsource the task of writing the business plan to a professional, it’s going to cost you a lot more money, that’s why your startup doesn’t need a business plan.
Investors nowadays don’t want to see one:
One of the reasons why business plans aren’t necessary is because no investor in their right mind will read a 50-paged document. Investors are usually busy; they don’t have time to waste. In fact, some investors consider a detailed, formal business plan to be evidence of inexperience, poor prioritization skills, and even rank incompetence. This is why an investor pitch deck is the perfect alternative to a business plan. Typically, a couple of slides are used to showcase the company’s products, technology, and team to the investor. This is works more efficiently than a multi-page document, which nobody is willing to read.
Business rarely goes as planned; you’ll need to pivot anyway:
Any starting business is built on assumptions. On the assumption that this product or service is going to appeal to these users. The assumption that these marketing tactics are going to be effective in converting them. All of these assumptions might be wrong, and it’s the CEO’s job to test these assumptions fast, and if the premise is incorrect, pivot the company in the right direction as fast as possible. The moment you execute a pivot, your business plan becomes useless at best and an impediment at worst.
Planning can be an excuse for inaction:
Planning provides the illusion of getting something done without the hard work of actually doing something. You get to enjoy the fantasy of success in your imagination without the effort required to achieve that success in the real world. This is not to say that you don’t need some idea of what you’re doing and in what order but planning just to plan is wasted effort.
It can limit your thinking:
A business plan can only reflect your best perspective and understanding of the situation at the time you wrote it. Since there’s no education like experience, once you’ve arrived at “now” the ideas you had “then” are usually naïve and half-baked. Unfortunately, by the time you’ve gotten to “now,” the ideas you had “then” have continuously constrained and framed how you’re perceiving the “now.” Your business plan can thus blind you to new opportunities.
So, instead of working on a business Plan, you should be investing your time and effort into crafting your pitch. Well, pitches according to Hseven’s team (One of the best Startup accelerators in Africa).
Hseven’s team thinks that in order to make good use of your pitch, it is important to begin by defining its objectives. To achieve that, there are two important questions to ask yourself:
- Who’s the pitch for?
- What decision do you want them to make?
Based on this, you can divide your pitches into these four categories corresponding to startups’ most common challenges:
- Networking Pitch: your goal is to chat with other professionals and expand your network.
- Sales Pitch: your goal is to raise funds.
- Investor Pitch: your goal is to raise funds.
- Recruitment Pitch: your goal is to recruit talent for your startup
Now it’s up to you to make use of each of the four pitches in the relevant situations.
Important: For each setting, it’s best to go with one type of pitch. If you mix up the pitches, your message will not be as clear and your speech may lack impact.
The Networking Pitch
In the professional world, attending networking events is one of the most effective ways to expand your network. This is obvious, since you are surrounded by people who share the same interests as you. The best thing is to take advantage of this opportunity to network with the right people!
Entrepreneurs can come from a variety of backgrounds. Some may have been in the same industry as you for years and have all the answers. Others have just launched their startup and don’t understand the specialized terms you throw at them.
Therefore, you need to be able to move swiftly from jargon to common language, and discuss topics you may not be familiar with.
Tip: Verbs appeal more to the imagination than names and job titles. Therefore, it’s very helpful to use verbs to explain precisely what you do.
Remember: other entrepreneurs are also there to network. They want to meet as many people as possible and do not have hours to listen to your story.
Networking aims for one purpose: to make connections. If you’re lucky, you’ll get meaningful conversations that eventually lead to developing your startup. The goal is not to sell on the spot! You obviously don’t want to overwhelm your contacts with information.
The Sales Pitch
This pitch type is dedicated to your partners, customers and potential customers. With your customers, it is important that you focus on the problems they face, their particular needs and the solutions you offer them. With potential partners, you ought to focus more on what you can offer them and especially on what you expect from them.
It’s worth remembering that clients and partners are used to being pitched quite often. So, make sure you stand out. You should also research your potential customers and tailor your pitch accordingly. Telling the same story without researching your client may cause you to miss your next deal.
The Investor Pitch
In the case of the investor pitch, you have a single objective: you want to raise money. You know it, and your potential investors know it too. So, don’t beat around the bush. It’s very useful to be precise in this case: how much money do you want, who do you want it from and what do you want to do with it?
Focus on the problem your startup is solving. Investors need to understand the value of your product, so you need to do this without going through all the slides in your business plan. What frustrations inspired the creation of your product? What needs does your product address? These are your startup elements that will determine the success of your pitch.
Don’t forget that many investors pay special attention to the founders and employees of startups. It happens that they decide to invest in a startup because they believe in the team more than in the product. Numbers are obviously important, but the human aspect can also make a difference. So, in the pitch situation, you can explain to the investor the origin of your idea, talk about your passion, familiarize him with your team, its composition, and only then, broach the subject of numbers.
Your pitch is supposed to be brief and to the point. You don’t have hours to perform your pitch. You only have a moment to use your explanations to convince and amaze your audience.
The Recruiting Pitch
Even when you are preparing to hire new employees, it is important that you have an effective pitch. It needs to be clear: will they work on projects they have experience with, projects they can relate to?
Obviously, it goes beyond that. Employees are looking for a positive company culture, a learning environment and a job where they can have an impact.
Be clear about what you can offer them – even if you don’t have to go into detail during this initial exchange. Describe the work environment, could they work on projects they are passionate about, what are the prospects for growth? Salary and benefits are also convincing factors, so it’s best to offer your potential employee an attractive package.
So, what’re you waiting for?!! Throw your business plan and start crafting those pitches…