The role of the business plan/executive summary
You definitely need a “plan” for your business, but you probably don’t need a formal 30-page “business plan” like the one you might prepare in business school. Preparing a formal business plan can be a good exercise—it will probably make you think critically about your business in ways you might not otherwise. But don’t expect most investors to read it or even expect to see it.
You will need to have a well-written and concise 1–2 page executive summary. The executive summary needs to tell your story. It needs to be compelling. It is often your first and only opportunity to make an impression on a potential investor. If you don’t impress, you won’t get a second chance.
If your executive summary piques the interest of a potential investor, you’ll then be expected to “pitch” your story in person. This is where you get a chance to articulate your vision. Practice. Get feedback from people you trust. Develop a slide deck to help guide you and the story. Be prepared—if you are targeting the right investors, they will be knowledgeable about your market. They will test and question your assumptions. You need to be prepared to articulate and defend them.
As a result, preparing a business plan—whether a formal and lengthy plan, your executive summary and/or your slide deck—can help you accomplish some key goals. First, it forces you to articulate your vision and, if you are working with a team, can help align the team towards a common set of objectives. Second, it forces you to test your assumptions regarding the feasibility of the business. Third, your business plan is your primary pitch document—a way to attract and sell yourself and your company to potential investors. Although it may be possible to raise capital without a business plan, not having one will make your efforts more difficult and likely extend the amount of time it takes to raise capital.