Avoid the Urgent Pitfalls in Your Business Plan

Hi, I'm Evan Carmichael. Welcome to another edition of #AskEvan. In today's episode, I'm going to answer a question from one of my readers, Nelson, who wrote to me asking me to check out his business plan, and I thought the easiest way to do it would be to do a screencast so you can kind of watch along with me. So Nelson is one of my Twitter followers and watches some YouTube videos of mine. And he's trying to get funding for this business idea. He's based in South Africa and wanted my advice on his plan. And so he attached it along with a whole bunch of different attachments down here. So I just opened the major document here, the business plan. And having a background as being a venture capitalist, we used to raise $500,000 to $15 million for companies to expand their businesses. And I looked at, I don't know how many business plans, too many to count. And we rejected, you know, 99% of them. And most of them were rejected rejected right here at this phase. So somebody emails me a plan and, you know, they get a quick look and then they get a rejection notice pretty quickly soon after. So this will be a kind of sneak peek as to how I look at business plans. For any of those of you who are looking to raise funding, hopefully this helps. So just looking at the document, here's this document. So we'll just go through it quickly. So business plan, fine. Pasi Events Management CCTA OnPrint. So I'm not exactly sure what all this is. It looks like the company's name is OnPrint. I don't know what all of this is before. I haven't kind of seen that kind of model. Maybe it's Pasi Events Management, and I don't know what this means. But so I'm a little confused already from the just the first page. Going down, so table of contents, that's fine. One thing I notice here You know, you want to make it look as professional as you can, so it's great to have a table of contents. Everything's aligned nicely. The right side here looks way off, so, you know, clean that up a little bit so people get a positive impression of you and your business. So, you know, the numbers could be aligned better. These are some weird-looking numbers down here. Break-even is on page 221. You know, just little things like that. If an investor, right, like right away here This is almost game over, right? If somebody submits this kind of business plan to me when I was in my venture capital days, you're almost game over. You have to really wow me after this. If there's any kind of errors or sloppiness on your, you know, table of contents, you're probably going to have a lot more mistakes later on. So you want to really go through it with a fine-tooth comb. What I would typically look for in looking at a business plan is I start with the executive summary. I then go to the About Us, so the team, which I don't really see. There's a little bit about the business, so we'll check that out, but there's nothing about management bios. And then we go down to the financials. So let's start with the executive summary and see what it's all about. Scrolling down, executive summary. Airborne Communications CC, the company. So I'm now even more confused because it's Airborne Communications CC, And at the top it's Pasi Events Management and On Print. So I'm not really sure what the name of this company is. So it was registered in 2007 by Nelson, a 30-year-old black male. I don't know if this is relevant, if you're black or not, or how old you are. Company was registered in response to identifying the opportunity to open— to open— establish a print-on-demand graphic design service. So right here, grammatical mistake. To open, you know, or establish. You wouldn't have both of them. So probably at this point, that's it. I'm done as an investor. You know, I have 100 other business plans to look at and don't have time for this one anymore. Well, just, just to kind of quickly go through the review, I'll keep going for your sake, Nelson. So going through sponsor form, the company to offer graphic design print-on-demand service product, which product will be reasonably priced. So another grammatical mistake there. The business focus on service quality in turnaround time, sponsor will obtain services through the equivalent staff. Okay, so you haven't grabbed me yet, and the job of your executive summary here is you want to grab the reader to say, this is really interesting, I want to learn more. So you got to do that in the first couple sentences. I want to know what the demand is like in your market. So all it shows here is that you saw an opportunity. It would be good to have a little more data and also show what it is that you do that's unique and different. So a print-on-demand graphic design service doesn't really showcase what's so different about you. So you're going to focus on service quality and turnaround times. You know, everybody's going to say that. So again, you haven't pulled me. So for a busy investor or banker who's seen tons of these, you're more likely to get rejected if you can't grab them quickly. So I'd focus on cleaning this up a little bit. Really showing that there's a strong demand for your business in your area and grabbing them quickly with what makes you different and why you're going to succeed where other companies have failed. So this is good to show the source of funds. So I guess you're going to be doing 100,000 of, you know, whatever your currency is here, and then you're going to be asking for 450,000 in return. I don't know what that converts to in terms of dollars, so if that's a reasonable amount for startup or not. One thing I've noticed here is a mistake here on the numbers. So source of funds and application of funds, this just should be $550,000 instead of $450,000, right? So both numbers should add up ideally to $550,000, and these two will add up to $550,000. So there's some, you know, numerical error here of how you're going to be, you know, spending, using the funds. Again, you know, somebody— you're talking to guys who are going to pour over your numbers, so you got to make sure that every number makes makes complete sense and you can break it down really clearly. So right away, again, if there's any mistake with your numbers, you're probably going to get a no pretty quickly. So you want to go through that a little more clearly. I don't know again what the conversion here is to dollars. It looks like you might want to think about having some more working capital. This might be low. You said somewhere that you're not going to— you're going to be making a loss for the first 5 months. So you might need a little more working capital than this, especially if it takes you longer than 5 months to get profitable. So that's something to consider. If I'm giving you money, I might be concerned that you would spend all this money buying up all your equipment and supplies, and then you wouldn't have enough money to actually run your business. So that, that might cause me some concern as somebody potentially giving you some money. Let's skip down and see if we can find out a little bit more about your business. So sponsor is a 30-year-old black male. Again, I don't know, I don't know why that makes a difference if you're black or not, or how old you are necessarily. Except experience in graphic design, business, print, web marketing, branding, animation, CV attached to marketing manager— experience as well. I'm mumbling to myself as I read CV attach. I would include more here. So this was the number 2 thing that I looked at as, as a venture capitalist is who's the team? And it's great to have the CV but if you don't grab people again here quickly then you're not going to get a yes. You're making them do extra work so I would add some of these things on there too. I would quickly show here some of the highlights of both of your careers and why you guys are uniquely situated to become a success in this industry where, you know, others may not have been as successful. That's the biggest worry for any investors. They're going to give you money and you're going to lose it, right? Anybody can spend money, but not everybody can make money or earn money. And that's the biggest fear for an investor, is that they're going to lend you all this money and you're going to just blow it and not be able to make a return. So that seems to be it. So this is all you have on your management team. So I definitely ramp that up. Do show more about yourself, your experience, show that you already have an existing client base of people you've worked with, any momentum you can show at all. If you've been in the media, if you're an expert, any, any big-name clients that they might recognize. And since you're both kind of young, what I might suggest is also having some advisors join on. So Advisors are a great way to show some momentum with your business, and you want to tap into people who have a little bit more experience than you do and whose names might carry some more weight than you do. How you compensate an advisor, it could be monetary, so you could pay them a fee, but a lot of times people will agree to be an advisor just, just to help, because people, you know, want to help other entrepreneurs and see them become successful. So even though they may not have a formal role with the business, if they agree to lend their name, especially for a business plan, it adds a lot of credibility. So if I'm an investor and I'm looking through this document and I see the name of somebody who I recognize, then that might make me want to at least keep reading on with the document. So, as I said, clean up the table of contents, then work on your executive summary, make it more grabbing, fix up your numbers, definitely add more on your management bios, and then the next thing would be to look at financials. I won't go into it here just so we don't reveal all your numbers publicly, but I would definitely make sure that all your numbers add up properly. The bankers or investors are definitely going to look through every number, and you need to have an answer for why each number exists on that page and how you're going to use that money. If you hesitate at all, then you're probably going to get a no, right? They might pick one number off of that huge sheet and say, why are you spending X on Y? Why are you spending this much money to buy whatever it is? And you have to have a really clear answer. And if you hesitate, then it shows that you haven't really thought it out much and you're not probably going to get the money. So hopefully that helps. For those watching the video, if you like the video, you want to see more like this, please give it a thumbs up. It makes me want to do more of these videos for you. I really enjoy it, and hopefully it's adding value to you. Your business. So I always love seeing those thumbs up come in. And if you have a comment about this video, about his business plan, or if you have a question that you'd like me to help you out with, feel free to leave it in the comment section below. And I will see you on the next episode.