Often, your business plan is the first impression potential investors have of your company. Even if you have a wonderful product, team, and consumers, if you make any of these avoidable mistakes, it could be the last impression the investor has of you.
Even in this down market, investors see thousands of business plans each year. The business plan is the sole foundation they have for deciding whether or not to bring an entrepreneur to their offices for an initial meeting, aside from a recommendation from a reliable source.
Most investors simply focus on finding excuses to say no in the face of so many chances. They believe that entrepreneurs who know what they’re doing will avoid making critical errors. Every blunder you make counts against you.
This article will show you how to avoid the most typical business plan mistakes.
- Failing to relate to a true pain
My computer network keeps collapsing; my accounts receivable cycle is too long; existing treatments for a medical issue are useless; my tax returns are too difficult to complete are just a few examples of pain. Businesses and consumers pay a lot of money to get rid of the pain. You’re in business to make money by relieving misery.
In this context, pain is equated with market opportunity. The more prevalent the suffering, the higher your market potential, and the better your solution is at relieving the pain, the greater your market potential. In a well-written startup business plan, the solution is firmly embedded in the context of the problem to be solved.Value inflation
“Unparalleled in the business,” “unique and limited opportunity,” and “superb profits with minimum capital input” are all statements and exaggerations, according to the actual documentation.
Investors will make their own decisions based on these factors. Lay down the facts – the problem, your solution, the market size, how you’ll sell it, and how you’ll remain ahead of the competition.
- Trying to be all things to all people
Many young businesses assume that more is better. They describe how their product may be used in a variety of areas or create a sophisticated suite of items to introduce to a market. Most investors, especially for very early-stage startups, desire to see a more focused strategy: a single, superior product that addresses a difficult problem in a single, huge market and is marketed through a single, established distribution channel.
That isn’t to argue that other goods, applications, markets, or distribution methods should be ignored; rather, they should be leveraged to complement and enhance the core strategy’s narrow emphasis.
A powerful, engaging core thread must be used to tie the plot together. Determine this and make them supporting characters.
- No go-to-market strategy
Sales, marketing, and distribution strategies that aren’t explained in business plans are doomed.
The following are the most critical questions to address: who will buy it, why will they buy it, and, most importantly, how will you get it to them. You must detail how you have already piqued client interest, received pre-orders, or, better yet, produced actual sales – and how you will capitalize on this knowledge through a cost-effective go-to-market strategy.
- “We have no competition”
You have competitors, regardless of what you may believe. Perhaps not a direct competition in the sense of a firm providing the same service, but at the very least a substitute. A spoon can be replaced with fingers. E-mail can be replaced with first-class mail. An angioplasty can be replaced with a cardiac bypass. Simply put, competitors are those who are vying for the same client cash. Saying you have no competition is one of the quickest ways to get your proposal thrown out — investors will assume you don’t fully grasp your market.
Your business plan’s “Competition” section is your chance to highlight your relative advantages over direct competitors, indirect competitors, and substitutes. Aside from that, having rivals is a positive thing. It demonstrates to investors that there is a viable market.
- Too long
Investors are extremely busy people who do not have time to read lengthy company plans. They also choose entrepreneurs who can communicate the most crucial aspects of a difficult idea with a minimum of words.
A good executive summary should be no more than 1-3 pages long. A 20-30 page business plan is good (and most investors prefer the lower end of this range).
Remember, the main goal of a fund-raising business plan is to persuade an investor to pick up the phone and call you for a face-to-face meeting. It is not intended to go into great detail. Details should be recorded elsewhere, such as in your operations plan, R&D strategy, marketing plan, white papers, and so on.
- Too technical
Business plans, especially those written by people with scientific backgrounds, are sometimes overburdened with technical details and jargon. Initially, investors are only interested in your idea if it:
Solves a significant problem that people are willing to pay for
- Is a substantial improvement above rival options
- Patents or other methods of protection may be used
- Can be implemented on a budget that is affordable
All of these questions can be answered without delving too deeply into the technical details of your product’s operation. During the due diligence procedure, professionals will examine the details. Keep the company plan as concise as possible. Separate white papers should be used to document the technical specifics.
- No risk analysis
The business of investing is balancing risks and benefits. Some of the first questions they ask are about the dangers that your company faces and what steps have been taken to manage those risks. The following are some of the most significant dangers associated with starting a business: