As an investor I see many business plans and there are various reasons that they do not get the full attention that they may deserve. How can an entrepreneur avoid these many pitfalls and be more certain of a successful presentation?
A Business Plan is a sales document to present (a) your business idea; (b) demonstrate you have the capability to execute the idea. If you deliver on both of these you’re likely to get to the next stage: time with the investor. So how can you fail to deliver… easy…
- Make it long. A Business Plan that exceeds the twenty page optimum can run into lots of problems. The reader/investor must have time to read it all (and a long plan is easy to put back onto the ToDo pile). The same facts/assertions may be repeated many times causing the reader to skim the document missing real nuggets of useful information. A long document will certainly have words that don’t add anything to the story or proposition, they need to be read and ignored. This all makes the proposition harder to understand…
- Miss out the Profit & Loss, Balance Sheet or Cash Flow. Investors will always look at the financials. They understand these standard formats. These formats have been around for a long time. If you include something else, the Investor has to learn a new format and try to understand what the implications are. Lots of extra work for the investor… you’re making their decision harder.
- Follow a template. There are many business plan templates available. While they have their place they should be used as an example or starting point to be modified to reflect your business. Wading through a document where someone has laboriously written the same comment under different headings makes for a boring read. If there’s nothing to be gained, cut it out!
- Have someone else can write it. If someone else writes your plan (which will be obvious when the Investor meets you) how can an Investor gauge your ability to execute the idea? They can gauge the ability of the author to execute your idea… Do you know every assertion and the reason for every line in the plan? If not, when the Investor asks questions you may be found wanting which does not give a good impression.
- Forget the Executive Summary. The one page summary encourages your investors to spend their time looking at the rest of the document. If they key points are missing (even though they are in the rest of the plan) you risk losing the interest of the Investor before they’ve heard the best stuff.
- It has to be perfect. Ideally Business Plans should not have any errors. For example, spelling errors suggest a lack of attention to detail which is a necessary part of running a business (and they are easily avoidable if you use a word processor). Get someone else to give it a critical read to make sure you’ve no grammatical or logical errors.
As with all things, there is a point of diminishing returns when writing a document. At some point it’s better to release the document and get started with finding the Investor. Everyone knows that the financials will change with time so as long as they are reasonably accurate, include assumptions and a date you’re good to go.