Business Plan vs Pitch Deck: What’s The Difference?

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Introduction

Entrepreneurs looking out to gain investments and find potential partners or investors are well versed in two types of important documents: the business plan and the pitch deck. Many may confuse the two documents with each other and may use them interchangeably, but the two are used for different purposes.

It is important to know the difference between the two to make the best use of them. In this article, we will discuss what a pitch deck is, how it is different from a business plan and when to choose which document. Let us first begin by looking into what a pitch deck is.

What Is A Pitch Deck?

A pitch deck is similar to a business plan in the way that it is meant to be sent to investors in order to gain investments for the business. The pitch deck is usually created as a presentation with around 15 to 20 slides.

The presentation is made into a pdf and shared with investors. Sometimes the pitch deck is used by entrepreneurs to assist them during their presentations for investors and pitch competitions.

The pitch deck consists of information about the business such as what the business is about, who the target audience is, the size of the market, etc that will attract investors. It also contains details of the marketing strategies and future opportunities for the business.

The pitch deck is created based on data collected from the research of the industry, and also the launch and growth plans collected from the business plan. It enables investors to know about the current state of the business, and its missions. The main purpose of the pitch deck is to present the business in a way that helps gain investments.

The Pros & Cons Of Pitch Decks Today

Like any document, the pitch decks have their own pros and cons.

The following are the pros of using a pitch deck for your business:

  • It provides a streamlined framework that can be used to create a mini business plan
  • It is much easier and faster to create a pitch deck than a business plan
  • It can be updated multiple times based on different purposes
  • It can be shared easily

The following are the cons of using a pitch deck:

  • It may not contain all the required information
  • A badly designed pitch deck does more damage than good
  • Banks usually do not accept pitch decks

What Is A Business Plan?

A business plan is a formal business document that is backed up by research. It usually is long and contains between 10 to 100 pages based on the needs of the business.

The business plan contains information that projects around 1 to 5 years into the future. It contains details on all aspects of the business such as marketing, financial plan, sales strategies, etc.

Learn more about creating a business plan here.

The Pros & Cons Of Business Plans Today

The following are the pros of using a business plan:

  • It helps to find goals and objectives for a business
  • It helps the business allocate its resources better
  • Banks prefer a business plan to pitch decks for providing loans

The following are the cons of using a business plan:

  • It is text-heavy
  • Investors usually do not read through the entire document
  • Angel investors and venture capitalists prefer a pitch deck to a business plan

The Differences and Uses of Business Plan and Pitch Deck

Both the business plan and the pitch deck are created for different purposes and hence have different uses. In this section, we will discuss the differences and uses of business plans and pitch decks.

The Pitch Deck Or The Business Plan: Which Came First?

The business plan is often the most used document in business. It has been used for planning, building, and funding businesses for a very long time. Business plans have been in use ever since businesses have been around.

In olden times, venture capital funds and different forms of equity funds were not available for businesses to get funding. Banks were the primary source that gave out loans to help businesses.

Banks needed to know about the business before they gave out loans to know if the business or entrepreneur will be able to repay the loan. In order to help make a decision, banks required entrepreneurs to submit a long business plan with details of the business that can help banks choose the business they can approve loans for.

Banks require entrepreneurs to submit business plans even today in order for them to apply for a loan. Some banks accept pitch decks but it is not usually acceptable.

Venture Capital Firms began to become a viable source of funding at the beginning of the 90s right before technology began to grow. Venture Capitals have helped many startups to launch and grow.

In the beginning banks and Venture Capital firms used to read the entire business plan to check the viability of a startup business. Venture Capitalists in particular received many applications for equity and it was quite difficult for them to read through the entire business plan.

The next set of years had the venture capitalists read only the executive summaries and one-page business plans to help them decide on a business to fund, but sometimes even such documents were loaded with text and reduced the efficiency in giving out funding.

Financiers required a shorter document to help them make the decision. With the invention of Microsoft Powerpoint in 1987, this became possible. PowerPoint became popular in the 90s and people began to use it as a visual aid for their presentations.

Founders began using Powerpoint with pictures and charts that helped them make their pitches to investors. This later merged with business plans and the pitch deck was created. Entrepreneurs made a visual representation of the business plan using slide deck tools and make a pitch to potential investors.

Why You Might Not Need Both Pitch Deck And Business Plan

It might be tempting for entrepreneurs to create both a pitch deck and a business plan, but in most cases, people need just one of them. Which one you need is based upon the stage of business you’re in and what the goal of the business is.

The business plan is an elaborate document and consists of the whole plan and layout of the business. Entrepreneurs can either have a single traditional business plan or a number of separate documents that contain information on the different sections of the business.

The pitch deck on the other hand may not require as many details but usually needs at least a partial business plan for the deck designer to work on and create a pitch deck for your business.

When A Business Plan Is Required Instead Of A Pitch Deck

As mentioned before, whether you need a business plan or a pitch deck is based on what you are trying to achieve using it. The following are some situations where the business requires a business plan and not a pitch deck:

The Business Needs Debt Financing

When the business is seeking out a bank loan from banks, it still needs a business plan. Bank managers review business plans before approving loans for the business.

The Business Needs Huge Funding

When the business requires a huge sum of money as an investment, the investors need to know why you need the money, and how you intend to use it to grow the business. In such a case, a business plan is more feasible.

The Business Has More Than One Owner Or Founder

When a business has more than one founder, it can often be difficult to communicate and stay on the same page the business. The business plan helps to clear out any confusion and keep the members of the business updated on the activities and goals of the business.

When A Pitch Deck Is Required Rather Than A Business Plan

The following are some situations where a pitch deck is preferred over a business plan:

The Business Needs Equity Funding

When the business requires equity funding rather than debt financing, it is advisable to use a pitch deck to draw the attention of venture capitalists and angel investors.

The Entrepreneur Needs To Network With Investors

Oftentimes the entrepreneur may be in a situation where he or she is not looking for immediate investment but is looking to network with investors for prospects. In such a case, a pitch deck comes in very handy.

The Entrepreneur Participates In Pitch Competitions

Pitch events and competitions are often held to help entrepreneurs develop their skills in pitching their business. Having a pitch deck ready in such a case is helpful to train the entrepreneur’s pitching skills.

The Business Needs A Co-Founder

Businesses that need a co-founder need pitch decks since they help convey the concept of the business to potential candidates better than a business plan.

The Entrepreneur Applies To An Accelerator

Accelerators may often entrepreneurs apply using a pitch deck. The pitch deck allows them to evaluate the business and help them decide if you can apply for the next cohort.

The Pitch Deck Or The Business Plan: Which Is More Important?

People may generally consider a pitch deck to be more important than a business plan since it is more likely to be seen by many people. The drawback of a pitch deck is that if it is not well-made investors may not be interested in having a talk with you about the business and not make much difference in the growth of the business.

Pitch decks may help you get a chance to meet investors but if the content is not reliable it doesn’t serve the purpose it is created for. A business plan can help overcome this potential problem by creating a foundation upon which the pitch deck can be created. Both the documents are important for different purposes.

How To Choose Between A Business Plan And A Pitch Deck

The first thing to consider when deciding between a business plan and a pitch deck is who the document is intended for, and why you are using it.

If you need a document to gain debt financing for your business and are seeking a bank to approve a loan, or if you are looking for a new partner or founder, it is best to choose a business plan to provide a piece of more detailed information on the business.

If you need a document to pitch your business to angel investors and venture capital firms or network with potential investors, it is best to choose a pitch deck.

Conclusion

The business plan is a more comprehensive document that outlines the overall strategy and goals of the company, while the pitch deck is a shorter presentation used to get potential investors interested in funding your company.

While both are different, one does not outweigh the other and can complement each other to secure a funding for your unique business idea.

This post is also available in: English

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