Entrepreneurs, beware of business plan writers who oversell. There are people who sell business plan writing as if the business plan itself—the formatting, the structure, the editing, the production values—will or won’t get investment. And that’s not true.
Nobody real will invest or not invest because of the production values of a document. Investment is about the opportunity and the people executing it. The business plan is necessary, yes, but what matters is its content. That means milestones, metrics, strategy, history, progress made, the people in charge, defensibility, and scalability.
Yesterday I posted a rant about finders fees as a business model on the blog at gust.com. Yes, I dislike people who sell introductions, connecting a startup to potential investors for a piece of the action.
If I charge you a fee for an introduction am I not implying that I’ve added economic value? Do you not feel cheated if the investor doesn’t like your deal? Am I promising, ahead of time, something that I really can’t control and can’t deliver?
Some of the business writers do the same thing as the ethically shady finders-fee people: they promise, ahead of time, something they really can’t control and can’t deliver. They use the lure of investment to reel in hopeful entrepreneurs like fish on a hook.
This was the fifth year in a row I’ve invested with a local angel investment group, and I see the role of the plan is the same as it was 12 years ago when I raised VC money for my company, and even before that, when I was consulting to VCs. Here is how it goes:
- The business plan is like the screenplay for the pitch. You can’t have a good pitch without a plan in the background.
- Investors will eliminate deals after looking at the summaries and the pitch only, without turning to the detail of the plan.
- Investors almost never invest in a deal without reading and reviewing a business plan.
- Investors don’t invest in business plans. They invest in opportunities and people.
- The plan is a necessary but not sufficient condition. Which means that you can’t get investment without a business plan, but having a business plan doesn’t mean you will get investment.
- The business plan process is vital, but the plan has to be kept alive and reviewed and revised often. It’s shelf life is a few weeks at best.
If you’re still interested in seeking out a business plan writer, make sure you do your homework.