5. No large market application:
If your market isn’t very big, it’s hard to get outside investors fired up about chasing it with you. It’s one thing if you own a storefront business or operate an enterprise within a single community, but if you’re competing nationally you’ll need a minimum market size of $100 million.
Consider the case of one anonymous company that had developed computed medical systems capable of scanning down to the DNA level. Unfortunately, the machines were so expensive, they were restricted to the government and Fortune 50 laboratory markets. Annual sales for the entire market were only $20 million. The company might overcome this challenge by developing products which cost considerably less, thus increasing their market potential.
6. No strength in your business plan:
A weak business plan may not render your deal absolutely un-fundable. After all, someone might see the genius behind the clutter. If you’re going to a professional investor or an active angel investor chances are, they get inundated with business plans. If that’s the case, they won’t take the time to labor through your muddled presentation. There’s really no excuse for poorly written business plans because there are many places to get help preparing them.
7. No or poor financial assumptions:
One area of a business plan that can definitely make your deal un-fundable is the financial projections. There are several ways this can happen. For established companies, a sales and earnings curve that deviates too much from historical standards isn’t good. That is, the top and bottom lines have been growing at about 5 percent per year, but you’re predicting they’re suddenly going to accelerate to a growth rate of 50 percent per year once the company is funded.
Sometimes there are no assumptions. Other times they’re just plain naive, especially regarding sales growth and selling costs. Assuming sales start at some base level and increase by 20 percent per year is just garbage. The fact is, there’s nothing formulaic whatsoever about projecting future sales. It means thinking about what will happen each week, month or quarter.
Think like an investor. Is your deal un-fundable? If so, talk to y our attorney, accountant or management consultant about the basic changes you can make to increase the likelihood of attracting investors.
Raising money is like running a business. You’ve got to make mistakes in order to learn. Once you learn how the game is played, however, success is within your reach.
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