A business plan is like a handshake – it’s part of the first impression. You could have a great product, a great team, and a profitable customer base, but make any of the following avoidable mistakes with your business and you’ve doomed your chances to get an investment.

Venture capitalists and angel investors get thousands of investment request, and see hundreds of business plans every year. The only two things they pay attention to are referrals from trusted or reputable sources, and the business plan. These are the only two things that decide who gets invited to a meeting and who doesn’t. It’s easy for an investor to turn you down for a simple mistake in your business plan, because entrepreneurs who know what they’re doing won’t make these fundamental mistakes. In a market like this, every mistake counts against you. The bigger the investments you are seeking, the more these mistakes matter.

Let’s look at some of the most common mistakes I’ve seen over the years.

Business Model

No Real Consumer Need

If you can’t define a clear, concrete need for your product or service, you don’t have a business. You can have the prettiest product, the cheapest product, the fastest product, or any number of superlatives, but unless there’s a clear, communicable need for it your product doesn’t matter. It’s harsh, but so are the investors reviewing your business plan.

Whether you’re a for-profit or a non-profit enterprise, your business survives because people want to pay you. People want to pay you because you can make some pain they are feeling go away. If you can’t relate to such a pain, your services just aren’t needed. In business speak, you’re not demonstrating a sustainable market opportunity. A well written business plan will identify the problem and the people facing the problem clearly, and will explain how the product solution works and how it works in the market context described.

Value Inflation

Your business is your baby. You have every right to be proud of it, to brag about it. Investors however are here for commercial reasons. They need straight facts, without the fluff. If you’re saying things like “unique and limited opportunity;” or “unparalleled in the industry;”  you need to stop.

Remember that investors will review your business and the market for themselves, and their version of “unparalleled in the industry” might be something different. You may very well be offering a unique and limited opportunity, but when presenting to an investor you need to stick to basic, verifiable facts, without any of the keywords. Stick to the following – the problem, the solution, the customers, and the execution – and stay away from the hype.

“We Do Everything”

You should definitely aim to be all you can be, but that doesn’t mean you should try to be everything. Too many failed companies believed that more is better – that by offering a lot of products and services they’d be sure to find at least one customer.

Wrong! If you offer brain surgery, and flu shots, and plastic surgery, and veterinary services, you won’t get any customers at all. The right model to follow is a single, unique and superior product that solves a big enough problem, in a sizeable market.

Now that’s not to say you shouldn’t think about additional products, applications, channels or markets, but understand that all these are secondary. They are meant to bolster your existing business model, like supporting characters for your hero, who is the single compelling core thread holding everything together.

No Market Execution Strategy

A fantastic product is not enough. You need a proper sales, marketing, and distribution strategy if your product is to succeed, and the investors know this. If you haven’t answered the questions: who will buy, how will they learn about my product, how will I reach them, how will I get the product to them, then you haven’t addressed one of the core aspects of business strategy.

No or Poor Competition Research

Yes you do. Regardless of what you are selling, you have competition. We’ve done till now without your product, we can keep on going without it. There might not be an identical solution to your market offering, but there’s always a competition. If you’re selling a new kind of door stop, remember that a book, a pair of heavy boots, or even an upturned chair can get the job done. It’s not pretty, but it serves the purpose. You need to consider “good enough” solutions when positioning your product.

Competitors are people and businesses who are chasing the same consumer dollars as you are. Every time an entrepreneur says we have no competitors, an investor tosses a business plan into the trash, concluding that you do not have a full understanding of the market.

If you need to stress that there are no competing products remotely as good as yours, you might want to break the competition down into primary and secondary competitors. In a well written business plan, the competition section works to your benefit, first by comparing and showcasing your strengths against all manner of competitors, and second by validating that there is in fact a market for your products.

What do you do if you don’t have any relative strengths you can showcase? You’ve got bigger problems than the semantics on your business plan.


Too long

A well-written business plan is more of a short story, rather than an epic Tolkien-ese ballad. Investors want to know you are capable of being succinct, and are able to convey the core message and complex ideas in as few, simple words as possible. Also, investors are busy people.

Say all you have to say in the fewest possible words, or your reader will be sure to skip them; and in the plainest possible words or he will certainly misunderstand them. Ideally, your executive summary is less than 2 pages, and your business plan (the main body) is less than 25 pages. The purpose of the business plan is to get the investor to give you a face to face meet, not to describe every aspect of the business. Those details go into their own respective documents: operating plan, R&D plan, marketing plan, etc.

Too Technical

Investors are people. They have a great deal of understanding about how markets work, how business function, how people think and other related fields. They probably don’t have a PhD in neuroscience, which explains why they can’t make heads or tails out of your business plan for your new brain drug.

Aim to write in layman’s terms as much as possible, and when writing about technology, focus on real world applications, that apply to a sizeable number of people. Do talk about how the technology can be protected through patents or other entry barriers, how the new/superior technology gives you a practical edge over the competition, and how this technology can also offer better exit options.

Don’t talk about the technical details and scientific jargon until the investor specifically asks for it, which they will in due time. The technical details will be reviewed by experts during the investor’s due diligence process. Again, these things go into their own documents – R&D plan, technical plan, or white papers.

No or Poor Risk Analysis

Investors make money by balancing risks against return. They need to know about the risks inherent in your business, and how you’re planning on tackling these risks. This both demonstrates your competence at understanding the market and its nature, and lets the investor know you’ve thought of everything.

There are 4 key risks you want to look at:

  1. Market risks: risks revolving around people not buying your products
  2. Technology risks: risks centered on your technology not performing according to expectations
  3. Operational risks: risks arising from things going wrong in day to day activities –manufacturing, management, selling, customer support, etc.
  4. Legal risks: risks from protection of intellectual property

Be sure to mention the degree of risk in each case. Even if they’re negligible (to you) investors want to know about them, and make sure you won’t be overwhelmed by a hundred small, individually negligible, things going wrong at once.

Poor Flow

A well written business plan should flow in a nice, organized and easy to get way, with each section building logically on the previous section. Make sure all references are in order, and that the reader is able to find the information needed to understand something you wrote quickly. You can refer readers to previous portions of the business plan where you mentioned something, but never to later sections.

Thus you want to start with background information and product details, and cover market details and competitor details before moving onto positioning, marketing and finances. There is no “right” structure for a business plan that suits every business.

Financial Model

Forgetting Cash

Revenues are great, profits are even better, but cash is cash. Don’t forget to include the cash flow statement. A small cash shortage can disrupt your business in the early stage. Again, it shows the investors you know what you’re doing.

Lack of Detail

Financials should be created from the bottom-up, and then validated from the top-down. That means get the exact numbers, and let the investors know where you’ve rounded up, and what assumptions you’ve used. Big round numbers are a sure sign that you do not have a bottom up model.

The other issue here is lack of forecasts. Investors want to see 5 years of projections, based on reasonable assumptions and trends. You’ll also want to include adequate sensitivity analysis, showing how your projections change if the assumptions turn out to be incorrect. All of these must conform to GAAP (Generally Accepted Accounting Principles).

You should also provide financial ratios (liquidity, profitability, operating performance, and debt), and compare to industry benchmarks, or against your prime competitors. And finally have a best case, worst case, and expected scenario for all the projections. Let your investors know what to expect.

Unrealistic Financials

You might believe you’ll get a $100 million in sales in the first year, and you might very well get it too. Statistically though, it highly unlikely, and the investor knows it. Projecting that much in the business plan affects your credibility – you either don’t understand the market, or you don’t understand how forecasting works. On the other hand if you’re projecting $100,000 in sales after 5 years you’re too small for the investor to take seriously.

This is not to say you should always try to forecast something in between those numbers. What you should do is make a reasonable forecast, and have realistic facts and figure to back that up.

“Conservative” Assumptions

When making projections you should err on the side of caution. Unfortunately if you tell people your assumptions were conservative, no one will believe you. Use realistic assumptions you can support with verifiable data, and don’t say conservative or aggressive assumptions. In my experience the best way to go is to present 3 projections – best case, worst case, and optimum scenario. Show, don’t tell.

Offering a Valuation

The value of something is whatever someone is willing to pay for it. Similarly the value of your business is whatever investors are willing to pay for it. No amount of financial valuations is going to change that. The financers (investors, debtors, or crowdfunders) decide what your company is worth.

A business plan is not the place for offering a valuation. The business plan’s purpose is to explain your idea in the most compelling and convincing possible way so the investors can’t help but want to fund you. You can work out the exact value of the funding later.

Design and Aesthetics

Poor Spelling and Grammar

If you hand in a report with poor spelling and grammar anywhere, you’ll get a resounding no thank you. So what makes you think this would be any different. If you can’t be careful enough in the planning stage, what will you do with actual execution? Proofread the whole plan for spelling and grammar, then get 2 other people to do it independently. That’s how I do it.


If you’re going over the same few points over and over again, most of your business plan is unnecessary. Major points should be covered twice (once in the executive summary, and once in the plan body), and everything else should be covered once.

Design Matters

No matter what industry you’re in, you know that designs matter. Poor design destroys sales. It’s the same when approaching an investor. You know to put on your best suit, throw out your best smile, so why not do the same for your business plan? Get a great cover page, a high quality professional binding, and use a great font. Don’t be afraid to get some advice from a professional designer.


Not Starting Early

Funding usually takes a while. Investors wants to go through a lot of plans, and compare them to yours. If you make it to their short list, they will then appoint professionals to conduct research for due diligence. Funding can take anywhere from 3 months to a year.

You should be ready to put 500 hours into the plan, and the follow up with the investors. Is your time better spent building your product and your customer base? Maybe. Probably. So either make more time, or consider hiring an independent expert to develop the business plan.

Not Seeking Outside Review

You understand your business and your market better than anyone else, but are you able to communicate your understanding through your business plan? That is what it’s there for. Often good business don’t get funded because the business plan was unable to communicate its value to the investors.

Get a few people with an understanding of your market and strategies to review your plan before you send it out. It will also save you from marketing myopia (A short-sighted and inward looking approach to business that focuses on the needs of the company instead of defining the company and its products in terms of the customers’ needs and wants. It results in the failure to see the big picture and adjust to the rapid changes in the markets).


Every good entrepreneur knows you can’t wait for perfection. You can’t tweak your plan forever. As soon as it’s good enough to serve its purpose pull the trigger and put it out there.

The best way to know if it’s good enough is to get it in front of the investors and judging their reactions. If the investors were a good fit, their reaction to the business plan can tell you volumes about your business model. Get their feedback and go refine your plan based on the general consensus.

Now I’m not advocating you go in ill-prepared by any means, but don’t take forever to finish the business plan. Your time is better spent building the business, and your customer base.

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