One of the first things most entrepreneurs do when starting a company is to sit down and develop their business plan.
This is clearly a good thing, since spending time to think through and plan out your business is a critical factor that all successful businesses share.
However, in most cases, the initial goal of the business plan is not just to better understand and plan the business, but to raise money. This dual requirement, relying on the business plan both as a growth roadmap and as a financing tool, makes it much harder to complete. And, importantly, it’s the number one reason why most business plans fail to raise money.
Specifically, most entrepreneurs fail to understand what their business plan really is as it pertains to raising money. Which is this; when it comes to raising money, your business plan is a marketing document.
That’s right, you business plan markets your company to investors and/or lenders.
In this regard, including too much market research and/or an overly comprehensive operational plan actually hurts your chances of raising money. Sure, investors and lenders will want to see and/or learn this information before they invest, but it doesn’t belong in the business plan.
The business plan’s goal, particularly when raising equity capital, is to get you in the door. It must be more brochure-like, and explain the benefits of your venture. Why is the venture uniquely qualified to succeed? What is it about the concept, the market, the team, the opportunity, etc., that will allow the investor to get a great return on investment?
By making sure your business plan effectively markets your business, you will be much more successful in getting meetings with lenders and investors. And then, in those meetings, you can tell the full story of your venture.