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5 Ways to Increase the Credibility of Your Business Plan

Written by: Dave Lavinsky

Article Overview: What most entrepreneurs and business owners don't realize is that investors and lenders receive so many hyped-up business plans each day that it actually becomes comical to them. Here are five ways to improve the credibility of your business plan so it is taken seriously by investors and lenders.

5 Ways to Increase the Credibility of Your Business Plan

What most entrepreneurs and business owners don't realize is that investors and lenders receive so many hyped-up business plans each day that it actually becomes comical to them.

Seriously, when an investor reads the tenth business plan of the day that says we have "an unbeatable management team," "first mover advantage" or "no competition" they have no choice but to smile. And then discard your business plan in the garbage. And that’s not funny.

The problem is that when entrepreneurs and business owners over-hype their business plans, the plan, the entrepreneur and the venture all lose credibility which results in their business NOT getting funding.

Here are five ways to improve the credibility of your business plan so it is taken seriously by investors and lenders.

1. Highlighting past accomplishments: The best indicator of future success is a company's past track record. And past accomplishments are generally FACT and not hype.

2. Defining the "relevant market": Don't tell investors that you are competing in the trillion dollar healthcare market because this tells them that you haven't properly defined your target market. Rather, a more meaningful metric is the relevant market size, which equals the company's sales if it were to capture 100% of its specific niche of the market. Defining and communicating a credible relevant market size is far more powerful than presenting generic industry figures.

3. Understanding and catering to customer needs: Your business plan must clearly define, using lots of third part market research, your customers' needs, and then show how your products and services specifically cater to these needs

4. Proving barriers to entry: Your business plan must demonstrate how your company will build long-term barriers around customers. Simply saying that you have "first mover advantage" is simply not compelling enough.

5. Developing realistic financial assumptions: It is critical that your financial assumptions and projections be realistic. It's easy to project that your business is going to double in size every year…but you need to prove WHY this will be the case. As much as possible, you need to provide research behind each of your assumptions. For example, if you can show two related companies that have approximately 40% operating margins, it is fair for you to project 40% operating margins. If the other companies have 20% operating margins, you’d better have a great explanation regarding why your margins will be so much higher.

By generating credibility with investors and lenders, your chances of fundraising success will skyrocket.

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Article Tags: barriers to entry, business owners, business plan, credibility, customers needs, entrepreneur, financial assumptions, first mover advantage, garbage, generic industry, healthcare market, hype, hyped up, lenders, management team, niche, relevant market, s sales, target market, trillion



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