Venture Capitalists Tell Entrepreneurs The Critical Mistakes That Must Be Avoided In Business Plans

New Study Shows Critical Business Plan Mistakes. Venture capital companies were surveyed for study.

(PRWEB) April 25, 2003 - April 23, 2003- 74 venture capital companies across the United States were asked how they evaluated the business plans presented to them. The survey was conducted by Dee Power and Brian Hill, authors of "Inside Secrets To Venture Capital," and "Attracting Capital From
Angels."

The venture capitalists were asked: What is the worst mistake an entrepreneur can make when completing their company's business plan?

Six Critical Mistakes
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Lack of Marketing Strategies
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1. 28% of the VCs said that lack of marketing strategies or not defining the market was the most frequently occurring mistake. Entrepreneurs had trouble determining who would be their customers
and how they would communicate to the customer that their product/service was available.

Dont fall into the trap that the product or service will sell itself. Entrepreneurs should find companies with similar productsand research those companies marketing strategies through their
websites, promotional materials, and company brochures. Hire a marketing expert to either work with the company on its strategies in the business plan or to at least review those strategies and provide additional suggestions. Include a publicity
program as well as advertising.

Lack Of Clarity
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2. In second place, venture capitalists (21%) said that entrepreneurs were not clear in explaining the opportunity. Why the business model made sense, why their company would be successful. This lack of clarity kept the investor from being excited enough about the company to proceed to the next stage. The business plan failed to achieve the objective of telling the company's story in a clear fashion.

Entrepreneurs can avoid this mistake by simply asking several people who aren't familiar with their company to read their business plan. If those readers don't "get it", it's unlikely
an investor will.

Unrealistic Financial Projections/assumptions
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3. Tied for second place is a difficult error for entrepreneurs to avoid: unrealistic financial projections and assumptions (21%).

While it's true that the company must produce enough revenue, and therefore income, to be able to generate the 30% to 40% yearly returns that VCs expect, those projections have to be reasonable
and achievable. Apply common sense. Justify assumptions with as much research as possible. Entrepreneurs can get an idea of whether their projections are in the ballpark by looking at the
annual reports of public companies in the same industry.

Lack Of Detail
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4. Lack of specificity and or detail was mentioned by 15% of the survey respondents. Entrepreneurs didnt do their homework in justifying their assumptions,

Company outsiders can review the business plan and come up with a list of issues that they feel werent adequately covered. The companys accountant and attorney can be helpful in this way as well. And, of course, entrepreneurs should never lie. While its important to convey enthusiasm for the company and product/service,
dont exaggerate.

Overly Optimistic
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5. Many entrepreneurs make the mistake of being too optimistic (8%) in their time tables to profitability. Many overestimate their revenues and underestimate their costs.

Entrepreneurs are by nature optimistic, they have to be to face the challenges in starting and growing a business. Just keep in mind it always takes longer and takes more money that originally estimated. Make sure the company has a reasonable and achievable schedule.

Weak Analysis of Competition
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6. The analysis of competition in business plans is an area that the venture capitalists believe is weak (7%).

Never say the company or product has no competition. Even if the company has a leading edge technology there will still be competition for the customers dollars from well established companies. Many entrepreneurs do not make the effort, or find it too difficult, to research their competitors. State the companys competitive advantage in one paragraph. If thats not possible, or if it takes more than a paragraph, the competitive advantage hasnt been established.    

AND ALWAYS PUT YOUR CONTACT INFORMATION IN
YOUR BUSINESS PLAN!

One interesting response was that the entrepreneur failed to provide the name of anyone in the company to contact after finishing reading the plan. He or she must have been in quite a hurry to get the plan in the mail!

The entire 2003 venture capital survey is available at no feesend a blank email to mailto:offer@capital-connection.com and it will
be sent to you as a PDF document.

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Brian Hill and Dee Power are the authors of "Attracting Capital From Angels" and "Inside Secrets To Venture Capital" available in bookstores nationwide, online booksellers such as amazon.com
and from http://www.capital-connection.com You can reach Brian or Dee at mailto:business@capital-connection.com
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Media Contact ONLY Dee Power or Brian Hill 480-837-9590