Six business plan mistakes that will irk venture capitalists
What's more important for a new healthcare business: a business plan or a PowerPoint deck? Should you include a valuation of the company in the business plan?
Rick Smith, co-founder of Crosscut Ventures, offers advice on how to write a business plan and outlines some of the most common mistakes venture capitalists see in pitches from entrepreneurs:
- Spending too much time on a 40-page business plan rather than a 15-page PowerPoint deck. Creating a strong, impressionable deck is a much better use of time.
- Hiring a consultant. “We’re looking for people who understand their business and can write about it,” Smith says. “We’re not looking for perfect business plans or perfect pitch decks. We’re looking for folks who are passionate about their business.”
- Making the deck all about the product and not about the people behind it. “We’re investing in management teams, not ideas or products,” he says.
- Projecting unrealistic goals. A deck should have revenue projections, but if they are too high, investors will think the CEO lacks basic business sense.
- Underestimating competition. Claiming there’s a huge market for a product but not much competition isn’t going to fly. Investors will find out who’s doing what when they do their own research, so hearing it straight from the CEO helps them see that you are realistic about the market.
- Including a valuation of the company in the deck or business plan. The market will eventually determine this, so don’t try to do it yourself, Smith says.