I talk to a number of aspiring entrepreneurs every day, and a number of them have the same problem: They can’t get needed funding to start or grow their business. “There just isn’t any money out there,” they say. In reality, there is money out there, and the competition to get it is greater than it’s ever been. Many of these entrepreneurs or current business owners have a business plan, but just any old plan won’t do anymore.
Here are the top 5 reasons why your current business plan probably isn’t good enough to get what you need.
1. It’s written for the wrong audience – Many business owners make this very simple mistake – they write the plan for the wrong audience. Keep in mind who the reader will be. Is it an angel investor? A venture capital firm? The landlord? Each of these individuals will have different requirements and different information they want to get out of the plan. You must remember that the investor may not understand your industry or product. You have to explain it to them in terms that they can understand. Get technical enough to show your knowledge, but not so technical that it is over someone’s head. It’s a tricky line, but the experts know it.
2. It hasn’t been updated or has outdated research – I get a number of business plans sent to me each week that are old and outdated. Financial projections that start in 2011 and research from 2009 doesn’t cut it. Don’t you think our economy and financial picture have changed a little since the end of the 2000s? The plan should contain the latest research and findings to better indicate the real market and industry for investment purposes.
3. The financials aren’t realistic – Can you really make $2 million profit in the first year? Financial projections are exactly that – projections. But, they must be reasonable, contain all of the costs that will be absorbed by the business (plus a miscellaneous expense allowance), and they have to be in line with what similar companies are doing out there. If you don’t know what other companies are doing, research it. This should be in your Competition section of your business plan anyway.
4. The plan doesn’t clearly outline the business concept – Your business plan is your pitch to the investor and an opportunity to show someone with money available that you can do it. It’s a chance to prove that your concept works. There is no other aspect that is more important to the plan than to have a detailed concept description, many times in the lamest terms, so that the investor understands what you are trying to do. Don’t be vague…explain! If you can’t explain it on paper with as much time as needed to prepare, how are you supposed to sell it in a pressure situation to a potential investor?
5. The plan is too short or too long – A good rule of thumb for most business plans is to be somewhere between 20 and 40 pages. Sure, that’s a big gap. Every business (and business plan) is different. Don’t bother taking a 10 page business plan to a venture capital firm. At the same time, they don’t want to see a 95 page document either. Keep it to the important information only with as much detail as possible on the business operation and why the company will be successful. Knowing what to include and what to scrap is best done by experts.