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Don't Make These Mistakes in Your Business Plan

By: Brian Hill

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Entrepreneurs sometimes mistakenly think their Business Plan raises capital for them. They believe that if the Plan is good enough, obtaining financing is pretty much a sure thing. The reality is that professional investors put their money behind people, not paper. The determining factor is whether the investor believes the management team members have the skill sets and experience necessary to give the venture a high probability of succeeding. This can only be established after a thorough due diligence process usually involving a number of meetings between the investor and the management team. The Plan is simply a means to introduce the company to the investor and get the ball rolling for further discussions.

The other unpleasant reality is that a poorly prepared Business Plan can decrease the chances of the management team obtaining capital, because the Plan is often the first impression the venture capitalist or angel investor has of the business and the management team.

If you try to avoid the following mistakes, your Plan is more likely to make a favorable impression and lead to investors wanting to meet with you and your team.

Not writing with clarity. The goal of the Plan is simple: to show the investor why the venture will make money. Too often entrepreneurs provide a convoluted explanation of how wonderful the technology is and fail to explain why the product or service they will be offering addresses a critical need in the marketplace. Unless you are offering something that is significantly better than what is out there now, your start-up will have a difficult time succeeding.

A document that is full of mistake or errors. These can be spelling or grammar mistakes, or formulas in the projections that are incorrect or do not match the assumptions provided. These can be avoided by having several trusted associates read the Plan and note any errors they spot. You can also have a business planning professional review the plan; they read so many plans that they can quickly spot any problem areas.

Underestimating the strength or number of competitors. Many times the section of the Plan devoted to competition is weak or incomplete. Entrepreneurs often fail to gather data about their competition in any systematic way. Or even worse, they make the strange statement, "We have no significant competition at the present time." The truth is, every business has competition.

Underestimating the cost of entering the market, and therefore underestimating the amount of capital that will be required to get started. Savvy investors have a good feel for the marketing cost required to launch a company and if your numbers look too optimistic, this can be a red flag for the reader. You need to make sure that the initial capitalization of the company is sufficient to accomplish your objectives. Otherwise, you will have to go back to the investors and ask for more money.

Vague, generalized marketing strategies rather than solid tactics to get out there and sell. It's easy to say, "We're in a billion dollar market, if we get just 2 percent of that, our revenues will be $20 million." But what investors want to see is a clear indication you know how to reach that market and obtain actual customers. How will you find the customers and win them over?

Article Source: http://depositarticles.com/

Free business plan format. Brian Hill is the co-author of Business Plan Basics on how to write a business plan and several other nonfiction books. They'll answer your business plan writing questions.

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