Everyday investors and lenders receive hundreds of hyped-up business plans. Unfortunately, such plans get tossed in the garbage and the entrepreneur’s chances of raising funding and starting their business diminish.
Seriously, when an investor reads the tenth business plan of the day that says we have “an unbeatable management team,” “first-mover advantage” or “no competition” they have no choice but to smile. And then discard your business plan, which is not funny.
The problem is that when entrepreneurs and business owners over-hype their business plans, the plan, the entrepreneur, and the venture all lose credibility which results in their business not getting funding.
5 ways to improve the credibility of your plan
In addition to ensuring your plan includes all the essential business plan components, here are five ways to improve the credibility of your plan so it is taken seriously by investors and lenders.
Highlighting past accomplishments
The best indicator of future success is a company’s past track record. And past accomplishments are generally fact and not hype.
Defining the “relevant market”
Don’t tell investors that you are competing in the trillion-dollar healthcare market because this tells them that you haven’t properly defined your target market. Rather, a more meaningful metric is the relevant market size, which equals the company’s sales if it were to capture 100% of its specific niche of the market. Defining and communicating a credible relevant market size is far more powerful than presenting generic industry figures.
Understanding and catering to customer needs
Your business plan must clearly define, using lots of third party market research, your customers’ needs, and then show how your products and services specifically cater to these needs. Also, describe how you will create a positive customer experience.
Proving barriers to entry
Your business plan must demonstrate how your company will build long-term barriers around customers. Simply saying that you have “first-mover advantage” is simply not compelling enough.
Developing realistic financial assumptions
It is critical that your financial assumptions and projections be realistic. It’s easy to project that your business is going to double in size every year…but you need to prove WHY this will be the case. As much as possible, you need to provide the research behind each of your assumptions.
For example, if you can show two related companies that have approximately 40% operating margins, it is fair for you to project 40% operating margins. If the other companies have 20% operating margins, you’d better have a great explanation regarding why your margins will be so much higher.
By generating credibility with investors and lenders, your chances of fundraising success will skyrocket. So be sure to do this in your business planning. Doing so will increase your productivity while developing your plan and increase your chances of raising funding.