You’ve spent weeks finalizing your business concept, combing through your financials, and developing a thorough business plan that covers each minute detail of your business. It’s already been emailed to every investor on your list, and after several weeks, you still haven’t received a single response. Sound familiar?
Unfortunately, the vast majority of entrepreneurs that complete a business plan find themselves in this exact scenario. While a business plan is a fantastic tool, tools are useless if you do not know how to use them properly.
In this post, we will examine the top reasons that business plans fail and give you several tips to writing a plan that investors want to read.
Why Do Business Plans Fail?
The business landscape is competitive. There are over 28 million businesses operating in the United States with 543,000 new startups launching each and every year. With so many options to choose from, investors don’t need to invest their capital in average businesses.
Instead, they put their money in the most promising ventures where the greatest return can be expected. If you are going to stand out among the competition, your business plan needs to be far better than average. In fact, it needs to be outstanding.
Just because a business plan meets all the informational requirements doesn’t mean that investors will read it. Here are three reasons the average business plan fails to generate interest from investors.
They are sent unsolicited.
Investors become quickly annoyed with receiving unsolicited pitches. Business plans sent randomly quickly end up in the virtual trash. If investors actually read all the unsolicited business plans they received, they’d spend every day reading and would never have time to actually invest.
When they do read your documents, it is often only for a brief duration. Introductory pitch decks, for example, are only viewed for 3 minutes and 44 seconds on average by investors – and that’s when it is solicited and expected!
Business plans should only be sent to an investor after an introduction. If introduced by the right person, you can almost guarantee that your plan will at least be browsed and considered.
Take a look at your personal network. Put the word out that you are seeking investors for your business. You never know who can introduce you to someone that can introduce you to someone else!
The executive summary is weak.
Too many entrepreneurs treat their executive summary as a “catch-all” of information. The executive summary isn’t just a requirement, it’s an opportunity for you to provide readers with the most exciting points of your business and convince them to read further on into the plan.
An executive summary serves the same purpose as a blurb on the back of a novel. If you picked up a book, read the back of it and weren’t excited about what you read – would you read the rest of the book? Probably not.
The quote, “don’t judge a book by its cover” may be good advice, but it is rarely followed by investors.
They are boring.
Let’s face it, most business plans are about as exciting as a snail race. While details differ, many plans use the same structure and say the exact same things. They use the same words to describe the business (like “disruptive” or “the Uber of X”) and their competitive advantages are barely advantages at all. What makes your business plan stand out?
Before writing your plan, search and browse as many business plan samples as you can. Look at the similarities between each example and make sure your plan exceeds the average. Find phrases that are common between all of them and approach your plan in a way that is better, different and unexpected.
Add images that help to better explain your venture and use charts and graphs to display complex information. Make it easy to read, exciting, and most of all, persuasive.
How To Create A Better Business Plan
Writing a business plan isn’t just critical to securing funding, it’s also required for bringing a business to success. In a study of 2,900 entrepreneurs, 72% of those with a business plan were able to raise money, while only 36% of without a business plan did so. Furthermore, entrepreneurs with formal plans were 16% more likely to achieve viability than those who did not.
There are many steps to creating an amazing business plan – from choosing the right format and giving the right details, to the use of graphics and imagery. The following infographic from ThinkLions gives several excellent tips for creating a business plan that excites and impresses investors!