When investors look at business plans, they are searching for why they should invest in a company, but they are also looking for why they should avoid it. As soon as they find one of the following three things, it does not matter what the rest of your business plan looks like. If one of these three things is present, your plan will be tossed in the trash can.
Do not do the following:
Say that you do not have any competitors
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A few entrepreneurs are so gung ho about showing barriers to entry that can make their company different. A barrier to entry is information that the owner has or a specific type of executive team experience that no one else has. The many components that make your business different are indeed appealing to investors, but there are not any businesses that do not have competitors.
The Industry Analysis area of your business plan has to state the industry size that you are competing in. The Market Analysis has to state the exact parameters of the niche that you are planning to focus on within you industry. The Competitive Analysis has to state the strengths of the competition and how you are going to tackle them.
You have to show that there are competitors so that investors will see that the market is large enough to invest in and be profitable. But, you also have to show that your plan is concentrated and different enough to tackle your competitors.
Utilize first mover advantage as your main exit plan
Businesses that have one exit plan or investor payout point that consists of flooding the market with a new product or service and selling the company in a year will not get a lot of good investors. Things are fast paced as a result of information technology. Investors want a business that can build up very rapidly, but steadily in steps. They search for business plans that detail a down to earth financial forecast and realistic financial exit plans.
Target just one big business to ultimately purchase your smaller business
For instance, if your business is creating new software packages, do not put all of your eggs in one company’s basket. If the exit plan for your business plan relies on a bigger business purchasing yours, then supply similar case studies. Provide enough proof that the same things can happen for your business just like they did for the other companies in the case studies.
Also, prove why a bigger company would not want or have the ability to create the same products by themselves.
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To summarize:
Do not say that you don’t have competitors
Do not utilize first mover advantage as your main exit plan.
Do not pinpoint just one big business to ultimately purchase your smaller business.
Do not fall victim to any of these business plan errors, which will bring more investors your way.