First impressions mean everything when you are presenting your company to a potential investor. Positioning your company so that it attracts the right investors can be a very challenging process. Yet somehow, majority of entrepreneurs forget that the investors that they are presenting to often have started up and sold multiple companies – after all, that is the precise reason why they are angels.
All entrepreneurs must remember one thing: these investors can smell exaggeration and a shaky plan from the first paragraph of an executive summary – 100% of the time. This is no joke!
Having said this, we often review business plans with the same mistakes over and over again. We wish to share some of our insight so that your company does not fall into the same trap. The Next Idea recommends that you follow these simple points before sending any investor your business plan.
- Be realistic in your financial projection. There is very little reason to believe that you will capture 8% of the US GDP through your proprietary transaction engine or that although you are losing $1million for the first two-years of operation, you will make a profit of $36 million on your third year.
- Make sure your assumptions are based on sound research, as investors will question you heavily on your financial forecasts. Any declaration that your company plans to ‘Capture 1% of the market’ is a sure way to lose any potential investor.
- Investors are never interested in ‘who will sign’ a massive contract with your firm in two weeks and that you cannot disclose who it is. Investors want to hear who your current customers are and what your current business development strategy is. The same advice goes for any assertion of signing ‘rainmaker’ personnel once funding is completed. Start ups should be especially cautious about making claims of confirmed accounts or clients.
- Regardless of what your company is doing, you have competition. There are two levels of competition: direct and indirect. Be realistic and present the threats as they are because the truth ‘will’ surface and when it does, you will lose tremendous credibility. Stay away from making claims that the ‘100lbs gorilla’ of the industry is too slow or too caught up in its own bureaucracy to be able to directly compete with you.
- BE REALISTIC. BE REALISTIC. BE REALISTIC. Build your business plan with this in thought: if I were an angel investor, why would I sign a $1 million check to fund this idea? Remember again that these people have been ‘around the block’ and that they can sense shaky with a simple glance at your business plan.
Above all – be clear in YOUR proposal.
Robert Ancill is CEO of Restaurant Consulting Services Group; The Next Idea. http://www.thenextidea.net. For information about Business Plans, Financial Forecasting and general start up advice please visit our site at: http://www.thenextidea.net
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