Would-be entrepreneurs get business plans turned down by funders every day. These are some of the key mistakes which set off alarm bells in the minds of funders.

Would-be entrepreneurs get business plans turned down by funders every day. These are some of the key mistakes which set off alarm bells in the minds of funders.

“We Have No Competition”

Writing that your business has no current competition sounds like the description of an ideal situation, but once you consider what this means you can understand why funders don’t want to hear this. If there are no current competitors for a product or service you have designed, it is generally because there is no market to satisfy the customer need you are focused on. If there is a market and a demonstrated need, then funders expect that there are competitors you have simply not identified yet, or that you are are trying to fool them into ignoring the competition. Savvy funders will find who these competitors are during their due diligence, so don’t even try to trick them this way.

“We’ll Make a Killing In the First Year…”

Focusing on the immediate returns that a business can earn from a new product before direct competitors enter the market can be a mistake if not coupled with a description of how these short-term profits can be used to transform the company into a going concern. Investors are interested in putting their money in companies which have value down the road to either be sold or to keep operating and growing going forward. Lenders, who will generally be more conservative in their outlooks, will be wary of any “get rick quick” claims. They will always prefer a business that shows slow and steady growth, backed up by reasonable projections.

“(XYZ Huge Company) Will Want to Buy Us.”

The claim that your company will be well positioned for a strategic sale may be attractive to investors, but only if there is evidence to support this claim. Evidence should include cases of other similar purchases by that specific company, including details of how the situations are parallel. You should be able to make the case as to why it will be less expensive and quicker for XYZ Huge Company to purchase your business than to develop the same capabilities, brand, or products in-house. If claims of this type are not backed up with facts, investors will have a much dimmer view of your planning and claims throughout your plan.