Inside Entrepreneurship: Business plan must be clear, not long

Inside Entrepreneurship: Business plan must be clear, not long


Q. How long should a business plan be for a subscription content Web site that already has some advertising revenue?

— C. Lynn, Seattle

A. It is said that Mark Twain once apologized for the long length of a letter to a friend. As the story goes, if he had had more time to improve the clarity of his writing, the letter would have been shorter!

The same holds true for business plans. It's not the length that matters, but the quality of the content that keeps reader attention. Straightforward, hyperbole-free prose is the way to go.

Keep in mind that there is no "one size fits all" document. The tone and contents of a business plan written for venture investors should be different than a plan written for a Small Business Administration lender or even a corporate executive who evaluates joint venture opportunities.

Business plan writers have to tailor information to the interests of the audience. Documents written for lenders should emphasize indicators of financial stability so lenders gain confidence in the business's ability to repay loans on a timely basis. In contrast, venture funds look for fast growth. Near-term cash flow is less important than revenue and profits and working toward the day the company is sold for a premium sum.

For tech-oriented business builders who prefer to write good code over a good paragraph, entrepreneurs can now get in the door of a venture fund with a well-written five-page executive summary plus a 10- to 15-slide PowerPoint presentation. The full plan is often requested after the executive summary attracts funding interest.

What else are venture capitalists looking for? DHR International's Scott Rabinowitz, who specializes in finding talent for venture fund portfolio companies, says: "(Venture capitalists) are drawn to patterns of management accomplishment. The wrong management team can be just as costly as any product development error."

Investors know that, too. In fact, some investors I know just skip to a business plan's management team description. If they see that one or more senior management members previously worked at a successful startup, managed a similar development project or were top revenue producers at larger companies, they read on. Better business plans also outline what specific management positions will be filled with new investor money.

Here are a few other suggestions:

  • You can make your plan more believable by including a timetable and cost for achieving certain operating milestones. That helps readers understand the feasibility of your objectives.
  • Don't invest too much in printing and binding business plan documents. It's likely that you will update the plan at least every three months while raising venture capital.
  • Be cautious about "publishing" detailed technology information that might be the basis for a U.S. or international patent. Learn the rules by visiting
  • Don't skip over obvious risks and concerns raised by readers of first plan drafts. Actually, I encourage entrepreneurs to add a section to the plan that specifically addresses market risks. While some entrepreneurs worry that this unnecessarily highlights potential business weaknesses, venture capitalists agree it demonstrates entrepreneurial practicality and maturity.

    Now, back to your question about business plan length. The average startup plan is about 20 pages; business plans for more established companies can be 30 pages or more. Still, because most investors stop reading when the first few pages are vague or full of hype, I'd say the business plan length is less important than the quality of the executive summary.

    The point here is, get to the point. Don't bury your best business attributes on Page 12 when time-strapped readers want to see it on Page One.

    Susan Schreter writes about startup planning and small-business financing for the Seattle P-I. She has an investment banking and buyout background and serves as a coach to entrepreneurs and consultant to corporations. Find more Inside Entrepreneurship columns at Send questions about small- business management or raising money for your business to or by mail to Inside Entrepreneurship, c/o Seattle P-I Business Section, 101 Elliott Ave. W., Seattle, WA 98119.
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