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How to Get Your Business Plan Rejected by Venture Capitalists
When you are presenting your new or growing business to a venture capitalist firm, the first, and sometimes only, thing that the firm will look at when making a decision about your business is your business plan. If your goal is to be read, you need to avoid these things. They are the best ways to ensure that your business plan ends up in the trash!
First, remember that first impressions are important in the investment business. If the look of your business plan and cover letter do not represent your plan well, then you can be guaranteed that it will end up in the circular file! First, if you are struggling to fund your business, you may be tempted to ask the investor to send your business plan back in a prepaid envelope if they are not interested in what you present. While this seems like an economical suggestion, it does not sit well in the minds of the investor. You are showing the investor that you are desperate to get capital for your business. So desperate, in fact, that you cannot even afford to draft multiple copies of your business plan for potential investors. Desperation does not lead to success in the mind of the investor.
Conversely, do not overdo your business plan. You can spend hundreds on creating a truly professional document, even going so far as having it professionally bound. However, this is not necessary, and the investor may interpret it as the fact that you are wasteful with the limited resources your business has, or that you do not really need money after all.
If your plan does pass the initial visual inspection, the first thing the investor is likely to look at is the executive summary. If your plan does not have one, then it will end up in the trash. Also, if the summary is too long, longer than three pages, or appears to be only fluff, then you will not be considered.
Once the plan has passed these external looks, then the investor will open the plan. Usually, potential investors turn to the end of the plan, not the beginning. The end of the plan is where you will summarize the financial aspects of the business. Remember, the investor wants to see where he will make a profit. The product or service you are offering is much less important than the financial projections you give. This is when the investor will start looking at the details of the plan. They want to see several pages of financial projections, not just a few summaries.
After passing the financial test, organization of the document is important. Each page should have some white space, and the document should be easy to read, with headers and numbered sections. It should flow smoothly from one topic to the next. At this point, they will actually read the executive summary and start to make a decision. With these initial aspects in place, you will likely have a chance at having your entire proposal read and considered.
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