Last Updated Jun 14, 2011 12:31 PM EDT
If you're hoping to attract investors, short and sweet is the key to success. Here's what to leave out of your business plan if you want to be taken seriously and raise capital fast:
If you've been wrapped up in your business idea for months, it's easy to go overboard on geeky details. Investors want to know what you're building, but they don't need to know the nitty-gritty details of every technological tool you plan on using to create it. Instead, focus on keeping things simple. If you think a more thorough explanation of your process is necessary, explain the terms in detail in an appendix section.
And while you're at it, avoid using vague, corporate buzzwords like "synergistic" or "change catalyst;" instead, use terms that clearly convey what your business will do.
2. Unfounded predictions of success.
Sure, you want to sell $500,000 in product in your first year. But if you're not basing your prediction on specific details like market size and current sales patterns, such details have no place in your business plan. "Be conservative on revenue and sales projections," says Patrick Moraites, CFO of FIRM Consulting Group. "Businesses change and switch gears based on customer and client response, so it's important to plan accordingly. Profiting in the first year isn't always the case." It's okay to make predictions based on available data, but you won't fool anyone if you make financial predictions with nothing concrete to back them up.
It never hurts to throw in a few charts, graphs, or splashes of color -- where relevant. Just don't go overboard. Flashy fonts and extraneous pictures can create an impression that you're trying to shore up a shaky plan, and that you're not a serious businessperson. Instead of enhancing your plan, it may detract from your overall idea. Keep your plan sparse and to the point.
4. A baseless valuation.
In your own mind, your company may already be worth millions -- but how can you prove that when you have no product, customers or revenues? Providing a company valuation before you really have a company is likely to annoy potential investors, so unless you have hard figures to back up your valuation, leave it out altogether. "At an early stage, there is no valuation," says Jake Sigal, CEO of Livio Radio. "Trying to come up with one is going to screw over either you or your investor."
Except for your executive summary (a brief synopsis of everything you intend to cover in more detail in the rest of your business plan), every section of your plan should be unique and discuss information that isn't covered elsewhere. Your potential investors are busy people, and you need to show them that you value their time. Repeating yourself and taking a long time to get to the point does just the opposite.
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