Sin 1: Be vague
You need to be very clear exactly what it is you do. Customers and investors alike need to be able to put you in a category in their mind (eg: “Ah Johnny – he explains numbers to entrepreneurs”). This level of focus and clarity is essential, especially in your business plan, otherwise busy investors won’t get what it is you do. This is a very common reason for rejection.
Sin 2: Set up a 50:50 partnership
When you start, avoid going into business in a 50:50 relationship – the business world is littered with broken partnerships. Someone needs to be in charge. It may be reassuring when you start to have a partner but, inevitably, one of you will outgrow the other.
Sin 3: Don’t document agreements
After a meeting, send an email confirming what has been agreed. This is not a substitute for legal agreements but, given legal agreements cost at least £700 a pop, it is better than nothing.
Sin 4: Set unrealistic sales forecasts
Most business plan unravel because the sales target is unrealistic – usually not in the level of sales but how quickly it is assumed the business will ramp up. There is no magic wand to get it right, but look at the rate of growth of similar businesses or businesses selling related products or with related customers. How long did it take them to build up? And never ever describe your sales forecast as conservative in your business plan – red rag to investors.
Sin 5: Ignore IP
Virtually every business is now dependent on its IP for competitive advantage – make sure you understand how this area works. Investors certainly will.
Sin 6: Don’t bother with a marketing plan
Getting noticed and creating the “bridge” to your customers (as the business schools call it) is crucial. Whether it’s JCB painting its tractors yellow or Everbuild putting a pink dye in its glue, there is no point having a better mouse trap if people haven’t heard of you/noticed you. This is also why investors pay such attention to the marketing section of your business plan – it’s not enough to just say £15,000 on PR and social media.
Sin 7: Take too long on the plan
I meet so many people who have been working on their business plan for YEARS! In today’s internet world, the only certainty is other people are thinking about your idea too. You need to plan – but get started. As Siddhartha Guatama, the spiritual teacher who founded Buddhism, once said: “There are two mistakes one can make along the road to truth. Not starting and not going all the way.”
Johnny Martin is an experienced finance director who has turned around and sold three businesses on behalf of Baring Venture Partners, JO Hambro and Monument Trust. He has prepared business plans that have raised over £25m, including $3m TV production finance for award-winning Icon Films.
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