6 Mistakes To Avoid in Your Business Plan

Rick Smith is the co-founder of Crosscut Ventures (http://crosscutventures.com/). You can watch more content here on Docstoc.

Here are six business plan mistakes:

  1. In today’s business world the plan has become the deck. Many work on a forty page business plan and a powerpoint, the business plan is a waste of time.
  2. Hiring a consultant. Investors want people who can write a plan themselves.
  3. Leaving out the management team.
  4. Unrealistic projections. This will say you don’t have a good basic business sense.
  5. Underestimating competition.
  6. Putting a valuation in your plan. Let the market determine your price.

So here are six business plan mistakes that I’ve seen over the years of being a venture capitalist.

Number one right. The plan has become the deck. In other words I would spend time working on a 15 page Powerpoint pitch deck rather than a 40 page single space business plan. That was nice 10 years ago, today you spend that time working on business.

Number two hiring a consultant. You don’t need one alright. As venture capitalist we’re looking for people who understand their business who can write about it. We’re not looking for perfect business plans or perfect pitch decks. We’re looking for folks who are passionate about their business. Not consultants who are passionate about the business.

Number three okay. Often times I see a great pitch deck that talks about the product that leaves out completely any mention of the management team. As venture capitalist we’re investing in management teams not products or ideas. So prominently put in your pitch deck, description of the management team and why that matters to this particular project that you may be working on.

Number four unrealistic projections. It’s really easy to turn to projections and you should have projections in your slide deck if you see those projections. I just saw one the other day that had the company going from zero to 1.7 billion dollars in revenue in two years. What it says is obviously that’s unrealistic but it also says that as a CEO or founder you don’t have really good basic business sense about how realistic the business is and how we’re going to grow that business.

Number five underestimating competition. Can’t tell you how many times I’ve seen people it’s a billion dollar market and there’s no one in it okay. Be realistic about the competition. We’re going to find out who’s doing what and where. It helps us if you as a venture capitalist if you tell us where that competition is and it also helps us understand that you are realistic about the market and people against whom you’re competing.

The sixth one is don’t put a valuation in your deck or business plan. The market’s going to set that. So don’t go out strong recommendation is-- don’t go out and say we’re going to raise this amount of money at this price. Let the market determine where that price is going to be.

So 6 business plan mistakes. There’s probably others but those are one’s that we see almost every day.