The Role of a Business Plan When Raising Money
Most new entrepreneurs who attempt to raise money spend a lot of time writing their business plan. But the reality of raising money is that business plans play a much more limited role than most might think. In this article, we discuss the role of business plans in raising money.
The role of the business plan in raising money is overrated.
Business plans are too long and nobody reads them. Even executive summaries of business plans tend to be dry because they summarize lengthy business plans.
Accordingly, what entrepreneurs need is a multi-page colored brochure that sells investors on why they should even bother to look at the longer business plan.
This is in effect a marketing document and so it should have all the same attributes that good marketing pieces must have to rise above the all the other noise that's out there.
Typically, entrepreneurs don't create such a sales piece because they are completely exhausted after writing the business plan. But I guarantee you that most investors won't get excited if you hand them a massive business plan.
They need a teaser that sells them on the investment opportunity and they need to talk to you and see your investment presentation.
The bottomline? If you do write a full business plan prior to raising money, your work is not over. You still need to transform the contents of that business plan into something that will excite the investors and get them interested enough to prepare an investment term sheet.
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