Are pitch decks the same as business plans? It’s a common question that many entrepreneurs ask themselves when trying to seek funds for their company.
As a new entrepreneur, you need both of these to attract the right investors. So how are these two related, and how are they different?
Everything you need to know about pitch decks and business plans and why they’re so important is laid out in this guide.
Business Plan and Pitch Deck
Entrepreneurs and business owners have long held the belief that they need to devote their time and resources to develop a detailed business strategy. All of this occurs before taking any concrete action. Pitch decks have become increasingly popular as a substitute for a business plan among entrepreneurs in recent years.
For investors, entrepreneurs are expected to provide a detailed presentation of the company’s investment possibility. VCs are believed to spend an average of fewer than four minutes on each pitch deck. Investors will only glance at the document if it is prepared correctly.
What is a Business Plan?
Business plans are used to seek funding or attract investment even when no company’s track record has been developed yet. One of the essential components is a detailed description of an organization’s aims and how they will be achieved. A business plan’s marketing, financial, and operational aspects are all laid out in a written document.
It is an excellent strategy for expanding the scope of company plans. It provides far more detail than a typical pitch deck presentation. Entrepreneurs benefit from this process as it helps them think through the large picture and long-term strategy.
It lets you get more specific with your marketing objectives, launch expenditures, cash flow requirements, and financial projections. It also serves as a foundation from which you can begin to construct. As well as considering a viable company plan.
A one-page plan may suffice to attract the attention of financial backers, consultants, and other stakeholders provided it’s a part of an excellent presentation deck.
Purpose of Business Plan
With a plan, a company can outline its goals, how they will be accomplished, and when they will be achieved. The plan will also serve as a summary of the company’s mission, its goals, and its path to achieving them. Having a plan is essential for investors, partners, employees, and management to use as a benchmark to measure progress toward goals. The purpose is threefold;
- Having a well-thought-out plan will make it easier for you to run your company. It’s a good idea to write down and illustrate both your thoughts and strategies to create a road map. You’ll be able to track your development tangibly with a plan.
- The most likely scenario is that you’ll need a financial boost to support your expansion. Unless you have a plan that generates profit, your chances of having enough clients and free cash flow are low. In order to meet your working capital needs, you’ll have to raise money that’s outside the scope of your company’s budget. Financial backers will likely want to see the income statements, profit and loss records, and business plan when you approach them for financing. If you’re still in the concept stage or haven’t started producing sales, their judgment will be based entirely on the strength of your plan and you as an individual.
- Cash management is critical to the long-term success of your company. Your cash flow estimates should be referenced frequently in your plan. In the beginning, you’ll have to spend a lot of money before you get any money back. A lack of money management might lead to severe problems. Make sure your accountant is involved in designing your business plan and monitoring its effectiveness.
Advantages and Disadvantages of a Business Plan
A business plan informs potential investors and lenders of the business you’re seeking to start. Additionally, it serves as a guide for suppliers and other parties involved in the company.
However, it has both pros and drawbacks. This section of the article will examine the advantages and disadvantages of establishing a plan for a new firm. However, it is designed to be a benefit to the company, so the positives outweigh the disadvantages.
- Even if you have no previous trading background, a business plan can help you acquire capital. Funding is critical during the seed stage, particularly for tech and SaaS startups. An excellent plan can be a lifeline in this situation.
- Additionally, a business plan helps the entrepreneur do things right since the mind has a dozen ideas. Still, when the plan is written down, it becomes more clear, and the entrepreneur can focus on just one plan, rather than a dozen.
- As a further benefit, the owner is able to keep track of key business milestones, such as allocating resources appropriately and ensuring that the proper personnel is in place for the correct jobs.
- Having a business plan can cause you to lose sight of the world around you. When it comes to business, you have to be agile and adaptable. Focusing too much on your original company strategy could result in costly blunders or missed chances because they weren’t included in the original plan.
- Analysis of performance can take a long period. You can get pulled into a mindset of obsessing over your company plan’s goals and objectives, especially if you’re not reaching them. Spending too much time looking back and studying your company’s past performance could jeopardize your company’s future growth.
- The moment a business strategy is written, it is out of date. We’ve all seen how quickly the market shifts. When you’re ready to launch your business, some aspects of your plan may no longer be relevant.
When does a Business Need a Business Plan?
Entrepreneurs can use a well-written business plan to lay out their objectives and track their progress as their business grows. The first step in beginning a new firm is to write a plan. In addition to enticing investors, these are essential for determining if your organization is on the right road and worth its investment.
- When seeking debt financing: Banks are indeed reviewing business plans, so if you want to acquire any type of loan from a bank, you’ll need to submit it.
- To raise funds for the company: Having a plan for what you’re going to do with the money you raise is essential if you’re going to raise a significant amount of money. Make sure you are prepared for investors to conduct due diligence on your company.
- When you have founders: When you have a team of co-founders, having a written and agreed-upon strategy will ensure that everyone stays on track and executes it the way you intended. Ideally, this should be an ever-evolving document that changes as the world changes.
What is a Pitch Deck?
A business pitch deck is a graphic summary of several components of the enterprise. An overview of the business concept is presented in various slides. In addition, it serves as a visual aid for investors to comprehend better the fundamental concepts that support the company’s operations. Entrepreneurs typically utilize it to get a second meeting with investors by piquing their interest.
Purpose of a Pitch Deck
Pitch decks are a type of sales tool. A pitch deck aims to get funding or make your product or company stand out during competition or other events. In the end, the purpose of a pitch deck is to attract and hold the audience’s interest.
A pitch deck needs to be concise but thorough. It is essential to provide the most relevant information in a few clear slides. Make sure you’re clear on what you want your pitch deck to accomplish before you begin. There is a fine line between conveying your message and making people excited. In order to acquire funding, you’ll need to have a good pitch deck.
Advantages and Disadvantages of a Pitch Deck
Potential investors are more likely to invest if you have a well-prepared business pitch deck. In addition, you may not be able to contact essential mentors and partners who could help you grow your startup business. That said, a pitch desk has its own advantages and disadvantages;
- Can be used when trying to raise money
- Effortlessly generating a small plan with this structure
- Updates can be made quickly and easily for a variety of purposes and over time.
- A lot less time is required to prepare a pitch deck
- Using and referring to it regularly will be more suitable.
- Sharing is easier
- Allows you to get to work more quickly.
- Can be used as an excuse to avoid developing a detailed model plan.
- Risky omissions from not considering all aspects of a project.
- Insufficiently prepared.
- Fluff and hype are given more weight than substance.
- The outlook is extremely short-term.
When does a Business Need a Pitch Deck?
There are instances when it’s challenging to figure out when and how to put together your company’s pitch presentation deck. Your pitch deck should be built at the right time for your business in the middle of the four stages of your company’s lifecycle. We’ll go over them altogether.
- When seeking equity funding: Your pitch deck is essential if you want to secure investment from venture capitalists, angel investors, or well-connected relatives and family.
- To make a relationship with investors: If you’re not ready for investment but you have the chance to meet investors, then you should have a pitch deck ready. When it comes to developing powerful partnerships, first impressions matter.
- When competition is high: Startups have a lot of events and competitions where they may practice pitching their firm to acquire more exposure and learn how to do so. A pitch deck is a must-have for your business.
- To find a co-founder: If you’re seeking co-founders, a pitch deck is the best method to express your vision and the value you bring to the table.
- To apply for an accelerator program: Many accelerators demand applicants to submit a pitch deck in order to be considered for participation. They use the deck to analyze your firm and determine whether or not you should join the next cohort.
What are the Main Differences between Business Plans and Pitch Decks?
As a rule, the typical business plan is a lengthy, text-based document. It lays out every aspect of the company. Everything from the business structure to the marketing plan to starting necessities as well as growth objectives for the following five years is covered.
In addition, there is a far longer-term strategy in place. This is often a Microsoft Word-style document, and it can easily exceed 25 pages in length. There’s a quick executive summary to go over to get things started, which can be between one and three pages long.
A pitch deck is a presentation that uses slides. Think about a presentation in PowerPoint or Google Slides. Between 5 and 20 slides is ideal for a pitch deck. It’s a simplified form of a standard plan that’s easy to read and understand.
Pitch decks were created to help entrepreneurs pitch their ideas to investors in order to raise capital. However, they are increasingly being used in place of business plans.
A one-page plan and a solid executive summary appear to be the ideal preparation for entrepreneurs today when it comes to securing funding. As a small business owner or solopreneur, it’s vital to have a business plan.
A pitch deck can be even more significant if you are the founder of a fast-moving startup that requires money. As a result, your plan is likely to become obsolete very quickly.
If you have to pick just one thing to work on, make sure you’re putting up a spectacular business plan pitch deck. Many of the answers and framework you need to flesh out your true company strategy can be found during this phase.
Even if you fail, at least you’ll be able to raise money, establish a team, and get early clients while you’re at it.