Even the best business idea and most competent management team will fail to raise capital if the company’s business plan is of poor quality or contains avoidable errors. The following are some of the most important mistakes to avoid.

• Failing to Explain the Opportunity. The business plan is usually the first impression a venture capital firm or other capital provider receives of the company and the investment opportunity. If the reasons why the business will be successful are unclear there is no incentive for the investor to commit capital or even pursue discussions further.
• Unrealistic Projections and Assumptions: By their nature, business plans are forward looking and contain many assumptions. Entrepreneurial enthusiasm, or plain exaggeration, can lead management to overestimate the company’s ability to develop, capture market share, and increase revenues and profitability. A business plan will be better received if assumptions appear realistic and, where possible, substantiated. management strengths and credentials should also not be overstated.
• Incomplete Competitive Analysis: Errors can range from the claim that the business has no competitors, to vague competitive analysis, or omitting to analyze successful competitors. Admitting the existence of competitors is not considered a business strategy flaw. On the contrary, successful competition is an indication of customer demand. Focus should be on the reasons why the business will generate a sustainable competitive advantage.
• Inadequate Research: Linked to the above point is the importance of including all relevant facts and data that will have a direct impact on the business’ ability to succeed. This data should be adequately researched and verifiable. Important areas, in addition to competitive analysis, include industry and market trends, customer analysis and any relevant regulatory issues.
• Plan is Poorly Written or Incomplete: Every effort should be made to avoid typographical errors as well as grammar and punctuation mistakes. The writing style and presentation should also be tailored to the audience to convey competence, authority and clarity, without arrogance. While a capital provider is not investing in a company’s writing skills, the large number of plans received means those that do not exhibit professionalism are discarded. The plan should also be complete, incorporating all the sections that investors expect to see.
• There is no Plan: Many plans do a reasonable job of conveying the opportunity but lack any coherent outline of the steps that will be taken to capitalize on this opportunity. A business plan is not solely a marketing document, it should also provide a roadmap for management and investors on how the company’s goals will be achieved. While the internal business plan may be more detailed in this respect, these elements should not be omitted from the plan sent to capital providers.

A poorly prepared business plan can result in an investment rejection even before a company has met or spoken with a capital provider. By committing the time and effort to produce a quality document, conduct research and think through the practical steps, the business will benefit greatly from the increased focus and enhanced ability to raise capital.