Business Plan Mistakes

Even with a very good, very well-written and detailed business plan, it will still be quite difficult to obtain funding from a bank or a private investor.

Most business plans are written for the purpose of securing funding. Although just about anyone can write a business plan, very few are taken seriously by professional investors or lenders, who typically invest in less than 1% of the companies that approach them.

Whether you are approaching angel investors, lenders, venture capital firms or alternative investors, you only have one chance to make a favourable impression. Most investors or lenders will not look at a proposition twice. Nor will they usually be interested in a proposition that has been "shopped around the market".

Chances of getting funding are improved by avoiding the basic mistakes mentioned below.

Overall content

By describing it just the way it is and by not using "superlatives", readers will be able to come to the right conclusions all by themselves.

Investors or lenders need a detailed understanding of your business, how it makes money, why it will be attractive to them and how you are going to use the funds raised.

There must be a strategy focused on solving only a single problem within the target market. A variety of alternative routes will only serve to distract. The narrower the focus the better the chances to get attention and interest. More information on strategy and planning..

Stating or believing there is no competition

Every single business, no matter what type, is going to have some form of competition. The definition of a competitor is anyone who is either trying to sell the same products or services as you, or to the same target market.

Your business plan must clearly differentiate your company from competitors within the target market. (More : marketing sections relating to effective product / service "differentness").

Investors and lenders must be shown clearly documented evidence that you and your company are going to be a strong performer within the market, how their funds are protected and how they will eventually exit.

If an investor or a lender hears that you have no competition, you can be certain of no funding.

Too long or too technical

The purpose of a business plan is to convey the ideas behind your business as concisely as possible. If there are important details but do not fit into the main sections of your business plan, it is best to include them in an addendum.

Your business plan should not be too scientific or too technical. While there should be plenty of facts, figures and other supporting documentation, it is important to keep it as simple as possiblecan.

A poorly organised business plan

Business plans should always be written in a logical way, with each section flowing together into the next. Many different resources are available when it comes to the planning a business plan itself. If you are having difficulty, engage a professional business plan writer, or seek qualified guidance at least.

In any case, the guiding light for a business plan is that factual documentation substantiates each part of your business case.

Incomplete
or inaccurate financial statements

When describing the financial condition of your business, use all of the right It should contain as many details as necessary to fully support the assumptions made about current and future business.

If you are not sure about specific figures, guessing is just about as bad as leaving them out as it is a critical part of any business plan.

Unreasonable
financial and market projections

All of the bases for establishing the numbers in the financial projections need to be similar to those that other companies in your industry are using. They also need to be reasonable. Balance sheets, cash flow and income statements are required and should be compliant with GAAP standards.

Misleading or incomplete information, or leaving out important financial details, guarantees disappointment.

Where is your risk?

Many business plans propose that the investors or lenders bear all the financial risks. If the business goes wrong for some reason, which part will be your risk and how will you also get hurt, aside from losing a business opportunity and a job?

Advance consideration and thoughtfulness is required for this factor. If it is inadequate, either the investor will ask for a larger share and more management controls to compensate for his risk or reject the business proposal. The higher the risk, the more you will have to give up. More information : raising venture funding. and preparing for venture funding.

Writing errors in a business plan

Proper grammar and spelling is important, avoiding redundancy whenever possible. The business plan should interesting to read from beginning to end, easy to follow and professionally presented. A business plan without these qualities will lose the attention of an investors.

Insufficient business planning

When investors or lenders see evidence of insufficient planning for the business or business processes, why consider risking their money? Meticulous planning with supporting evidence shows diligence to get it right. It creates confidence. An important part of the decision making process for investors or lenders are the people involved, their business skills, dedication and most of all   —   their passion.

An investor or lender also needs to satisfy himself that the managers involved have the right skills and can effectively lead and manage the new venture. They need to be confident that you can be trusted with their funds, that you are truthful and will deliver on your promises. When these factors are insufficient, a potential investor or bank will switch off very quickly and will in most cases not even tell you why there is no interest.

Insufficient risk assessment

In the presence of insufficient information, any person will fill that vacuum with his own. When investors or lenders get the perception that your risk assessment is too light, rejection will follow very quickly without there being a second chance. The risk assessment section needs to isolate all eventualities likely to impact on the business and expose them honestly.

When so done, the investor or lender knows that (a) you have done the hard work (b) that you are not trying to deceive him and (c) he can make up his own mind if the business proposition is worth taking the risk.

Insufficient timing

Your business plan should be in its final form long before you ever intend to present it to potential investors.

Before you turn your business plan in consideration, do obtain feedback from someone competent to review all of its sections. As this is far from a simple excercise, it is even worth paying a competent peerson for this service.

Advance preparation

Investors or lenders will ask piercing questions as to the soundness of your business plan. They mostly will not tell you what they really think. Each has their own criteria. Investors or lenders will instinctively attempt to find inconsistencies in your business plan.

An assumption that the investor or lender will not detect flighty answers or intentional omissions will negatively add to the "minus points" tally he is mentally marking up next to the "plus points".

Investors are very good at establishing very quickly the weaknesses of a business plan. Practice answering likely questions in detail with someone qualified before you make any personal presentations.

Business plan objective

The objective of a business plan is to fully engage, dazzle and excite potential investors. By observing the above points, you will stand a better chance.

In addition, your business plan will be an important blueprint for your business. Well planned and well written it will be an important part of your entrepreneurial toolkit, making it less likely for your business to fail.

Our business planning services

If you already have a business plan, we will be happy to review it for you. The Pertinax Partnership uses our own unique scoring system to give you a clear picture of it's strengths and weaknesses and the attractiveness of the business.

Please call us for a no obligation exploratory discussion

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