In our efforts to find out why 99% of business plans are
typically rejected, numerous venture capitalists, investors,
bankers, and investment bankers have let us in on the things
they look for. When the following rules are broken, it becomes a
simple thing for the professionals to spot, thus helping them
save time by quickly weeding out the business plans they will
dump.
Follow these rules and give your business plan a better
chance of being seriously looked at.
Rule 1: The business plan is the most important document in
a business.
The business plan, whether on paper or in your head, guides
the company. It provides the basic framework of communicating
the goals of the organization. Few documents are as important to
the future of the enterprise. Unfortunately, few documents are
also as ignored and ill prepared.
Rule 2: The value of a business plan is directly
proportional to its use.
The more a business plan is used throughout the organization,
the more chance the business has of meeting its goals and
succeeding. Everyone in the organization should have access to
it to help them make decisions that are consistent with the
direction the company wants to go.
Corollary 2A: The only ones who will use the business plan
are those who believe it.
Corollary 2B: The first one to believe the business plan is
the one who writes it.
Rule 3: A business plan is first and foremost a guidance
document.
The purpose of the business plan is generally misunderstood.
Entrepreneurs think it is a document that is written once in
order to attract an investor. Once the business is funded, they
think the business plan is no longer needed.
The reality is that the business plan should be used as the
guiding document of the business. It should be reviewed
regularly to help refresh people as to the goals of the company.
The projections in it should be used to regularly compare
expectations against what actually happens in the company and
its marketplace to evaluate progress and determine "course
corrections."
Rule 4: The business plan does not run the business.
While the business plan is an important guidance document,
people, not the document, run the business. As time goes on,
more accurate information becomes available, new avenues become
apparent, and new goals get set.
Rule 5: The business plan is a dynamic document, not a
static document.
Because things change during the progress of a business, the
business plan should regularly be adjusted to reflect those
changes. New goals get set, new markets open up, some markets
close, etc. A maintained business plan allows the company to
keep important information in the forefront as well as
simplifies the process of attracting additional capital if
needed.
Rule 6: The business plan must be as complete as possible.
This rule is important in maintaining a useful document,
whether using it to help guide the company or using it to help
attract capital.
Rule 7: The business (funding) plan must be preceded by an
executive summary.
In the cases where the business plan is used to attract
capital, it must be preceded with a well-written Executive
Summary. Investors will not read the entire business plan at
first. Without a well-written and concise Executive Summary, the
plan doesn't have a chance.
Corollary 7A: The executive summary must not exceed three
pages.
Investors typically spend no more than five minutes to decide
whether or not to dig deeper into a business plan. They have
learned over many years that if the Executive Summary is more
than three pages long, they would be wasting their time. They
assume the entrepreneur is not capable of sufficiently
summarizing the company in order to save them time.
Rule 8: Appearances in the business (funding) plan are
critical.
Investors look for clues to help them cull business plans.
They know that entrepreneurs who do not pay attention to detail
will likely lose money and be unsuccessful. They also know that
if a business plan is flashy, the entrepreneur is inclined to
waste money. They have learned how to spot the "good" plans and
skip the "bad" plans by quickly perusing the document.
