Why A Business Plan

With so many opportunities, most investors simply focus on finding reasons to say no.

They reason that entrepreneurs who know what they are doing will not make fundamental mistakes. This article shows you how to avoid the most common errors found in business plans.

They explain how their product can be applied to multiple, very different markets, or they devise a complex suite of products to bring to a market.

Most investors prefer to see a more focused strategy, especially for very early stage companies: a single, superior product that solves a troublesome problem in a single, large market that will be sold through a single, proven distribution strategy.

No matter what you may think, you have competitors. A coronary bypass is a substitute for an angioplasty.

Maybe not a direct competitor – in the sense of a company offering an identical solution – but at least a substitute. Competitors, simply stated, consist of everybody pursuing the same customer dollars.An ideal executive summary is no more than 1-3 pages.An ideal business plan is 20-30 pages (and most investors prefer the lower end of this range).Phrases like “unparalleled in the industry;” “unique and limited opportunity;” or “superb returns with limited capital investment” – taken from actual documents – are nothing but assertions and hype. Lay out the facts – the problem, your solution, the market size, how you will sell it, and how you will stay ahead of competitors – and lay off the hype.Many early-stage companies believe that more is better.The key risks of entrepreneurial ventures include: This is, of course, just a partial list of risks.Even though you may feel that the risks are negligible, potential investors will feel otherwise unless you demonstrate that you have given a lot of thought to what can go wrong and have taken prudent steps to mitigate these risks. For example, suppose you sell something this month for 0, and it cost you to make it.To say that you have no competition is one of the fastest ways you can get your plan tossed – investors will conclude that you do not have a full understanding of your market. Investors are very busy and do not have the time to read long business plans.The “Competition” section of your business plan is your opportunity to showcase your relative strengths against direct competitors, indirect competitors, and substitutes. They also favor entrepreneurs who demonstrate the ability to convey the most important elements of a complex idea with an economy of words.Investors are in the business of balancing risks versus rewards.Some of the first things they want to know are what are the risks inherent in your business, and what has been done to mitigate these risks.


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