January 14, 2008

How many pages is your business plan?

I was at an event a few weeks ago and one of the entrepreneurs in attendance came bragging, “My business plan is nearly perfect; I have nearly 100 pages on my business plan.”

100 pages in a business plan!?

Wow.  Unless you have created the most technical advancement in aerospace of life sciences, I’m going to tell you to throw that 100 page document in the trash!  Let’s be honest, no investor is going to read a 100 page business plan.  In fact, they probably won’t read it if it is over 10 pages.

If you are going through the rigorous process of creating a business plan, here are a few suggestions (that have been validated by many investors):

  1. Keep it short.  Investors see hundreds of business plans and, no matter how great your plan is, they will not spend an hour trying to figure out what you do.  While there are exceptions to this rule, I’d recommend a 3-8 page business plan/executive summary.
  2. Don’t spend too much time on the product.  Remember that you are selling your company, not your product.
  3. Thing big.  Investors are looking for the next Google.  While $1-2M in revenue might be a large company to you, it’s probably not something that most investors are going to get excited about.
  4. Think from an investor’s perspective.  Do the economics make sense?  Make sure to evaluate the risk vs. reward balance.
  5. Don’t get too fancy.  Make sure that it is clean and presentable, but don’t try and make it too trendy.
  6. Use images and graphs — especially to explain difficult concepts.  They are usually easier to read and understand, which can only help.