You have a great idea. You’re passionate about it, you know there’s a market for this product or service, and you’re ready to take the next step.
You sit down and pour your heart and soul into your business plan. You take it to a potential investor, certain that they’ll be as excited about your new ‘ventureling’ as you are.
Then you get turned down. What gives?
The fact is, investors see thousands of business plans every year. When they review these plans, they often look for the reasons it won’t work. They look for reasons to say ‘no’.
They often find them in these common mistakes.
This idea is your baby, so it’s completely understandable that you place a higher value on your product, service, or model than the real-world market might. It can be easy to buy into your own hype.
You need to step back and take an objective look at where your product fits into the market, how much it will cost, and how much the return is likely to be for your potential investor. If possible, have a trusted third-party review your business plan before approaching an investor. Just make sure it’s someone who will “tell it like it is.”
Underestimating Your Competition
You have competitors. They may not be direct competitors, but they share a part of the market you are trying to reach. They may not offer an identical service or product solution, but they likely offer another solution that will solve the same problem.
If you walk into a meeting with a potential investor and tell them that you don’t have any ‘real competition’, you’ll likely be shown the door. This is a sign that you don’t really understand your market.
Before you meet with an investor, perform a thorough competitive analysis. What are the market segments in your industry? Who are the major (and minor) players in each? How will you solve this problem better, and how will you convince your audience of that?
Forgetting About Cash Flow
Cash is the lifeblood of your business. Regardless of your revenue, your profits, your margins – you have to have a sustainable cash flow budget to make sure you can keep the proverbial lights on.
If you don’t include a budget or plan for how you pay vendors, suppliers, employees, and other responsibilities, your business idea will likely be rejected.
Take the time to take a look at your projects, and detail exactly how you spend (and save) your cash in the day-to-day operations of the business. We’ve covered this topic on the show before – listen here to review!
This is by no means an exhaustive list, but it’s a good reminder for building a comprehensive business plan to get that big investor for your next big idea.