Your business plan is often the first impression potential investors get about your venture. But even if you have a great product, team, and customers, it could also be the last impression the investor gets if you make avoidable mistakes.
The business plan is the only basis investors have to decide whether or not to invite an entrepreneur to their offices for an initial meeting.
Every mistake counts against you.
1. Failing to relate to a true pain
Businesses and consumers pay good money to make their pain or problems go away. You are in business to get paid for making pain go away, to offer solutions to problems.
Pain, in this setting, is synonymous with market opportunity. The greater the pain, the more widespread the pain, and the better your product is at alleviating the pain, the greater your market potential.
A well written business plan for a startup places the solution firmly in the context of the problem being solved.
2. Value inflation
Lay out the facts – the problem, your solution, the market size, how you will sell it, and how you will stay ahead of competitors. Do not exaggerate what your business can do, as earlier mentioned, lay out the facts and let investors make their conclusions.
3. Trying to be all things to all people
Many early-stage companies believe that more is better. They explain how their product can be applied to multiple, very different markets, or they devise a complex suite of products to bring to a market.
Most investors prefer to see a more focused strategy, especially for very early-stage companies: a single, superior product that solves a troublesome problem in a single, large market that will be sold through a single, proven distribution strategy.
That is not to say that additional products, applications, markets, and distribution channels should be discarded – instead, they should be used to enrich and support the highly focused core strategy.
You need to hold the story together with a strong, compelling core thread. Identify that, and let the rest be supporting characters.
4. No go-to-market strategy
Business plans that fail to explain the sales, marketing, and distribution strategy are doomed.
The key questions that must be answered are: who will buy it, why, and most importantly, how will you get it to them?
You must explain how you have already generated customer interest, obtained pre-orders, or better yet, made actual sales – and describe how you will leverage this experience through a cost-effective go-to-market strategy.
5. “We have no competition”
No matter what you may think, you have competitors. Maybe not a direct competitor – in the sense of a company offering an identical solution – but at least a substitute. Fingers are a substitute for a spoon. First-class mail is a substitute for e-mail. A coronary bypass is a substitute for an angioplasty.
Competitors, simply stated, consist of everybody pursuing the same customerdollars.
To say that you have no competition is one of the fastest ways you can get your plan tossed – investors will conclude that you do not have a full understanding of your market.
The “Competition” section of your business plan is your opportunity to showcase your relative strengths against direct competitors, indirect competitors, and substitutes.
Besides, having competitors is a good thing. It shows investors that a real market exists.
6. Too long
Investors are very busy and do not have the time to read long business plans. They also favor entrepreneurs who demonstrate the ability to convey the most important elements of a complex idea with an economy of words.
An ideal executive summary is no more than 1-3 pages. An ideal business plan is 20-30 pages (and most investors prefer the lower end of this range).
Remember, the primary purpose of a fund-raising business plan is to motivate the investor to pick up the phone and invite you to an in-person meeting. It is not intended to describe every last detail.
Document the details elsewhere: in your operating plan, R&D plan, marketing plan, white papers, etc.
7. Too technical
Business plans – especially those authored by people with scientific backgrounds – are often packed with too many technical details and scientific jargon.
Initially, investors are interested in your technology only in terms of how it:
- Solves a really big problem that people will pay for;
- Is significantly better than competing solutions;
- Can be protected through patents or other means;
- Can be implemented on a reasonable budget.
All of these questions can be answered without a highly technical discussion of how your product works. The details will be reviewed by experts during the due diligence process.
8. No risk analysis
Investors are in the business of balancing risks versus rewards. Some of the first things they want to know are what are the risks inherent in your business, and what has been done to mitigate these risks.
9. Poorly organized
Your plan should flow in a nice, organized fashion. Each section should build logically on the previous section, without requiring the reader to know something that is presented later in the plan.
WANT DETAILED INFO ON HOW AND WHERE TO GET FUNDS FOR YOUR BUSINESS?
Join our Instagram @smartpreneurng Live session, June, 18, 2020 at 5pm Nigerian time as we talk to grant and loan boss, Stella Adebayo of bizgrant on how businesses can easily get funds.
