Over the past 13 years, I have written my own business plans, secured investment funding and helped hundreds do the same. Finding angel investors or small business investors is a difficult task, and, unfortunately, most of those seeking investor funding do not achieve their original goal. This list highlights some of the many reasons why 90% of those seeking funding are not successful. By following these simple do’s and don’ts, you will find your success rate will be greatly enhanced when seeking funding.
DO: Write a Realistic Business Plan. Your business plan must be based on realistic assumptions and estimates that are supported by facts and concrete information. All business plans rely on estimates and assumptions, but a winning business plan supports all assumptions with facts and verifiable information.
DO: Ask for Enough Money. Make sure you are not asking for just enough money to fail. As a general rule, when determining how much money to seek from investors, consider all your marketing, personnel and fixed costs for three years. That total will become your funding request.
DON’T: Have a Weak or Incomplete Marketing Plan. Your marketing plan is going to be the center of your business plan. The executive summary, financials, management and the products/services sections all must support and revolve around your marketing. Therefore, the importance of the marketing plan cannot be ignored.
DON’T: Have Financial Spreadsheets that do not match your Business Plan. This is the second most important aspects of your business plan. The financial plan provides the numbers that correspond to your written plan. It is important to research the expected future revenues and expenses for your business. Monthly income statements and cash flow projections should be included. Existing businesses should also include historical financial statements.
DO: Include market research. Market research includes important information about your current and potential customers, including demographics (income, age, etc.) and industry information as well as the size and market for your business. Market research helps to determine the feasibility of your idea, an appropriate marketing strategy for your customers, and the likelihood of selling your product or service. By including market research and citing your data sources, you will lend credibility to your plan.
DON’T: Present Inexperienced Management Team. Angel investors need to feel secure with the experience and skills of the management team running the company. As the entrepreneur and business owner, your responsibility is to make sure you have a solid management team and personnel. Therefore, do not try and wear all hats in the company. Identify who will do accounting & payroll, sales & marketing, training and customer service. Include resumes and bios of key personnel.
DO: Acknowledge the Enemy. A common mistake made when writing a business plan is ignoring the competition. Even if it’s a new invention or new way of providing a service, competition always exists. Remember this rule; “If there is no competition, then there is no market for your product”. So acknowledge the competition, and then prove how your business has a sustainable competitive advantage.
DON’T: Be Paranoid. If you have a good idea, then believe that at least 10 other people have the same idea. If you have a great idea, then I bet 5 people have the same idea. Therefore, implementation and not secrecy is the key. So tell everybody your idea and as the Law of Attraction will confirm, those who believe in you and your idea will be drawn to you.
DON’T: Fail to Act. One of the worst mistakes people make is failure to act. Your first business plan will not be perfect, nor will it be great. But if you sit and worry, complain and make excuses, you will never complete it.
DON’T: Quit After The First No. Less than 1 percent of start-ups get funded by business investors or angel investors, so the odds are daunting. But you need to learn the reasons why you got a no, address them, refine your thinking and go back hard at it again. Be willing to accept rejection at least 6 times before you are successful in securing investor funding.
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