Every day I get asked, “How can I get an investor to read my plan?” Or a columnist asks me to write 10 tips on getting your plan read by a banker.
These are good questions but the best answers often come from the obvious mistakes, not the simple solutions. Here are the 4 absolute paths to failure. By knowing these, you can know success.
Trash Can Plan Element #1: Put a big ‘ol fat NDA, non-compete, non-circumvent, non-interpret, burn-after-reading clause on the front. Nothing screams weak business model more than a big “this is super secret” declaration. I’ve said it before, and I’ll say it again… if your business model is so susceptible to theft that you, as the owner, are basically irrelevant, why in the world would anyone ever buy in? If some business plan troll can hear of your idea and obviate your competitive advantage… you never had one to begin with. “But my attorney said…” In this regard, attorneys are like airport security; your goal on this trip is to limit contact to get where you are going unmolested with minimal headache.
Trash Can Plan Element #2: Make the plan at least 50 pages. Maybe even longer. Add everything you can to your plan. Pack in the kitchen sink and all the superfluous sections you can find. Go to a government or wiki site and download a table of contents with at least 80 subsections. Make sure you have a very detailed description of the standard technologies you will employ to meet the minimum standards of performance. Be sure to make clear that you will use a CRM to properly ensure you “know stuff” about people who might buy from you. Spend no less than 500 words describing your customers. Spend at least 3 pages describing how you will handle the most rudimentary of business tasks, like accounting in Quickbooks and leasing an antivirus program for your work machines. When you start to feel you have enough, make sure you ask an MBA student to read it and add another 3 or 4 more sections no one thought to include. When done, add an appendix of financial information so the plan feels like a book, not a brief. If you want your plan in the trash, make it scream “this will take all afternoon to read.”
Trash Can Plan Element #3: Be very clear this is a completely unique idea and that you have no competitors. Lead off this section with “The company has virtually no competitors in this completely new niche market.” I’ll bet this one single statement brings investor eye-rolls more than other point. Everyone has a competitor… even if it’s a substitute product or something indirect.
Trash Can Plan Element #4: Completely underestimate the intelligence of the investor. That’s why they have the money they do, and you don’t. The most surefire way to part these low-brows with their cash is through the art of financial projections. Be sure to show a net margin of at least 30–40%. Any good business, as these dumb dumbs know, prints cash. Make sure your zero overhead business displays the most perfect picture. Investors love to see big big profits and believe them. That’s how they got rich to begin with—unbridled optimism. Buy into their gullibility and you can be sure they will read every line of your spreadsheet.
We can guarantee (and we don’t do that often) that if you follow these 4 basic laws of business planning, your plan will never be completely read by anyone… other than your parents or your spouse, and maybe the MBA student we mentioned in #2. Avoid these, and you just might get your business plan read.