Statements to AVOID When Writing Your Business Plan

It can be very helpful to know what NOT to write as much as what to include in a plan, especially if you are new to the process. Experienced investors see 100’s plans and it helps to avoid things that would put them off when reading yours.

Gerry Lemberg, a very experienced entrepreneur, teacher and now fund raiser, has some great ideas:

1. There is no competition.

Perhaps no other company sells a product substantially similar to yours, but this does not imply a lack of competition. Any substitute product, process or service that satisfies the same need as your business is a competitive solution. Stating that no competition exists reveals either a lack of research or imagination on your part. If you are correct, investors interpret the lack of competition as evidence that the market is undesirable or having need of consumer education.

2. The existing competition is (lazy/stupid/pick an adjective).

Denigrating your competition will detract from your business plan more than it adds. The statement offers potential investors no insight into why your company will succeed against an entrenched company. For example, if the competition has failed to seize the initiative due to its organization as a not for- profit company, speak to the lack of incentives implied by this type of organization. Identify weaknesses in the competition that are difficult to change, as opposed to poor leadership, which is relatively easy to change? Offer potential investors information about the competitive landscape rather than invectives against existing companies.

3. Company founders have invested £X worth of their time in the company.

Investors like to see that the founders of an entrepreneurial company believe in their business enough to make investment and personal sacrifice to sustain its survival, but do not confuse the two. While foregone salary represents an economic cost of the venture to an entrepreneur, it is not an investment into the business. Investment translates to cash spent for costs related to starting and developing the business. If founders have spent a significant amount to do this, include the figure somewhere in the financial section of your business plan.

4. Our channel partners will sell our product.

Making the sale of your product somebody else’s problem is not the solution to the marketing section of your plan in 9 out of 10 cases. Your product is competing with alternatives in your industry and others for your channel partners’ time, so the incentives in terms of volume, margin and strategic benefit (ability to sell corollary services) must justify their commitment. If your marketing plan is dependent on this strategy, provide compelling evidence that it is viable.

5. We will sell into the £X Trillion global (name any) market.

Incorrectly sizing the market may give investors the perception that management lacks either the knowledge to assess who would buy the product or the integrity to delimit this statistic accurately. Here’s a simple statement that may be of assistance: “If my company had 100% Market share for the product we sell, company revenues would be X.” Given that your customer is defined accurately; this is your total addressable market.

6. Absence of information regarding how funding will be used.

This is a critical piece of information, but one that is often left out. Investors would like to know why you are raising capital, so provide a breakdown of where the dollars go. Expenses amounting to less than 10% of the capital being raised need not be detailed in your Executive Summary.

By Gerry Lemberg, Silver Fox Venture Partners.

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