I remember my first time writing a business plan after graduate school. I was so sure my business would be successful. Armed with a MBA degree, I happily purchased a business plan software, gathered research, and carefully crafted my plan. After completing the plan in 6 months (yes, it took that long) I began shopping it around to investors, VCs, and banks.
After no interest, I hired a consultant and asked him, “what am I doing wrong?” He chuckled and said, “no one cares about your business idea.” I was so embarrassed and crushed but in the conversation, I came away with some valuable information. As he explained, investors want guarantees that they will get their money. I learned that a business plan is not just about describing your idea, it is also about articulating how the investor is going to get a BIG return on investment (ROI).
I recently interviewed Andrew Forsdick from Addison Capital Advisors in Memphis TN. Addison Capital Advisors is a venture capital firm based in Memphis, TN focused on seed and early stage deals. Andrew gave me an interview and stated that he finds that all start-ups need financial accounting help. According to Andrew, “Entrepreneurs are good at coming up with ideas but are not good in articulating how the business is going to make money.”
I have read thousands of business plans that have this fatal error. Even the most experienced Executives sometimes have unrealistic forecasts and problems demonstrating a good ROI for investors. In reviewing your business plan, this is a hint of what is wrong with most business plans.
In my next post, I will discuss a good, structured deal that will attract VCs. Stay tuned!
NaShawn
1 comment:
Yes, business plans written for investors need to appeal to what they want -- return. Indeed any document you prepare for your business should be written with the reader in mind.
But business plans are useful even when you're not looking for outside investors. The format forces you to articulate what the business is about, helps you stay organized, is useful for sharing with people you work with, can be a starting point for developing marketing materials, etc.
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