March 22, 2007

Five ways to avoid Business Plan mistakes

When you start a business,the first thing which comes to mind is raising capital.Every person has ideas but most of the ideas don't get implemented either because they don't get capital to implement the idea or they are not serious about it's implementation.Well,I am sure that I would be facing a similar problem for my own idea especially,when we try to scale up.As far the initial funding is considered,it can come from your family members or your close friends.

Just happened to see WebMarketingPlan where Paul A. Broni of Mercury Partners Inc. points out "The 5 lessons to avoid Business plan mistakes" (the important learnings) which are given below:

a. Submitting the Plan to the Wrong People
Check if the investor or the lender has an interest in your business.This can be done by making a call or just sending an introductory email.If you have a referal from accountant,banker than it gives you a better chance.An unsolicited plan would just lie at the bottom of the pile and would not be shown any interest.

b. Incomplete Executive Summary
Every investor would be interested in your executive summary and this should be present at the last in your Business Plan.Also,it should not exceed more than 2-3 pages.It should be broken into five sections given below:
  • The Opportunity
  • The Solution
  • Management
  • Market Size and Share Expectations
  • Financing Need and Exit Strategy
c. Weak Management
One of the sections that all investors will read first is the discussion on management. If you do not have direct, significant experience in the industry in which you're trying to start your business, add someone to the management team who makes up for your weakness.Either agree to hire full-time executives or bring skilled directors onto the board.Venture capitalists, on the other hand, are not likely to invest until the management team is complete.

d. Unreasonable Financial Projections
All lenders and investors are accustomed to seeing financial projections that go in only one direction -- up!!!While every business owner and entrepreneur has the best of intentions when preparing a forecast for the next five years, it is seldom realistic to assume that sales will grow by 50-100% YOY.Hence,before exposing your projections be sure that your business projections are reasonable as well as realistic

e. Greed
Nothing will ruin a deal faster than greed. If your business is little more than an idea at this point, it is not feasible to value the company at more than a few million dollars. If your plan is to raise $2 million in exchange for 10% of the business (i.e., a $20 million valuation), you are going to have a tough time attracting the interest of venture capitalists and angel investors.Spend less time getting worried about the valuation today and focus on increasing scaling up your business for the future.

You can read the complete article here

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