🔒Don’t bring a business plan to investors

The rules for business constantly are changed by innovators who have bright ideas and fresh solutions for nagging problems — often before industries, the public, and laws can catch up.

Innovators and investors are lurking for the next big opportunity. Uber harnessed the power of a hungry, on-call workforce into a mobile-phone app sensation, bypassing the traditional taxi model. Uber, a private company, is valued at over $60 billion. Starting in Hartford in 1981, Alan Lazowski and his childhood friends improved parking and built the global company Laz Parking, the third largest parking company in America.

What may have worked yesterday is usually the starting point for entrepreneurs to ask, “Is there a better way?” When an entrepreneur finds a novel solution to a problem, it's time to create a business around that solution. In the past, the voluminous business plan was the first tangible document that entrepreneurs would share with outsiders. If you wanted to open up the bank vault to get money, bankers demanded to see your business plan before they would take your business seriously.

Business plans became popular with military contractors such as Dupont and GM during World War II. But the business plan fell out of favor a long time ago with funders and professionals who create businesses. “In many circles, it's a fairly antiquated term,” says Bill Kenney, CEO of Test My Pitch. Investors want a document that is a quick read and answers salient questions. Using Microsoft PowerPoint, presentations morphed into what is now called the pitch deck. Kenney states, “It's not your granddad's business plan.” He sees over 100 pitch decks a year.

Evan Baehr and Evan Loomis are entrepreneurs and authors of the book, “Get Backed.” Their book condenses the building blocks of a pitch deck into 10 sections: overview, opportunity, problem, solution, traction, customer or market, competition, business model, team and use of funds. The pitch deck is presented in 11 to 12 succinct pages designed to get attention and save time for the readers, who are often the investors in the room.

The transition from business plan to pitch deck is complete. Loomis says, “Business plans are not that bad, but what is happening is a major shift. You're not going to get funded with a business plan. Investors won't take you seriously if you give that to them. It's not a funding document — 20 years ago, it was a legit document. If you're knocking on doors for investors' money, don't bring a business plan.”

Pitch decks have the advantage over a business plan because they can be updated quickly and are concise. According to Loomis, once you create one, the second and third are really easy. He has personally created about 50 decks. Loomis states, “Investors have insane ADD [Attention Deficit Disorder] because they are hit up every day.” So, a pitch deck will help you get to the point, fast.

The pitch deck is practical because at some point you will have to pitch your idea to an audience, whether that be family, friends or angel investors. Kenney states, “The pitch is one moment of how you can connect and build relationships.” His tips for a successful pitch are: 1. Know your audience; 2. Have something worth talking about — from the audience perspective; 3. Communicate simply and directly.

“Get Backed” offers insight into the investors mindset with the three questions they ask themselves during a pitch: 1. Do I like you? 2. Do I trust you? 3. Do I want to do business with you? During your pitch, Loomis observes, “The best investor meetings are great conversations, not pitches. Better to be interrupted than to finish your sentence.”

While the business plan may live on with bankers, universities, the Small Business Administration and other service providers, it is no longer the be-all for business. Times change, and you should too. Put the pitch deck into your lexicon and create one.

Anthony Price is the CEO of LootScout, which counsels small businesses how to raise capital. You can reach him at Anthony@LootScout.com.

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