While investors seek reasons to love the business whenever they peruse a business plan they are also seeking reasons to discard it.
When they come across one of the following mistakes they will discard it without any consideration for whether the rest of the plan is any good.
What you must not do:
Do not claim that there isn’t competition.
When it comes to the important barriers to entry some entrepreneurs really get over zealous in demonstrating to the investors that their company is truly a cut above the rest. Barrier entry is proprietary info or knowledge, or management skills in a team that no other company has. While the factors that set your business apart are attractive to investors it is unrealistic to claim there is no competition.
The Industry Analysis section of the plan needs to indicate the size of the industry that your company is competing in. The Market Analysis indicates the sub-set of that industry that you will be focusing on. The Competitive Analysis has to indicate the strong points of your competitors as well as how you will overcome them.
You really can have it all. You need to indicate that there is sufficient competition so that your investors will be convinced that the market is big enough to make sizeable profits but that your strategy is focused and unique enough so as to be able to work out an exclusive path through the competition that is out there.
First-mover advantage must be used as your primary exit strategy.
When a company’s exit strategy incorporates flooding the market and then selling after a year are unlikely to find investors. We live in a fast paced information age. Investors what companies that will grow quickly yet steadily in phases. This is why they are interested in those plans that exhibit slow, realistic financial lookouts as well as fiscally responsible exit strategies.
Aim at a single large company to ultimately purchase your smaller company.
Let’s say that your company is in the business of developing new software. Don’t count solely on Google or Microsoft. If your exit strategy is dependent upon a bigger business purchasing yours you need to include parallel case studies. You need to indicate enough evidence that the conditions are identical for your business as they were for the sale of those in your case studies.
Also, indicate the reason why a bigger business wouldn’t want or be in a position to develop the same product themselves.
We need to be complete clear:
- Do not insist on zero competition.
- Do not make use of first-mover advantage as your primary exit strategy.
- Do not target a single big business to ultimately purchase yours.
If you avoid these common errors you will find that obtaining funding will be much clearer.