Ex-VC Reveals the Worst Thing To Do with Your Business Plan

Hi, I'm Evan Carmichael and welcome to a special edition of #AskEvan. Normally I shoot these videos in my hometown of Toronto, Ontario, but today we're in Saint John, New Brunswick for a special edition. This video is brought to you by American Express. They've just launched a new Facebook page called AMEX for Business Canada. If you guys have liked the videos I've done in the past, please go check out their site. I'm going to include the link below. Today I'm going to answer a question from one of my readers, Vinith, who is asking about how to raise capital, how to write a business plan, and how to convince investors to put money into your business.

So Vinith's specific question was: Dear Evan, the problem for me is that I'm an undergraduate and my total experience is approximately 24 months. The biggest problem for me is to make a business plan for investors and then convince them about my capability. Have a great day and thanks again for the information. Regards, Vinet. So thanks for the question, Vinet. Here are my thoughts for you. Number 1: Get some sales. Before I started EvanCarmichael.com, I was in the venture capital business and looked at more business plans than I can remember. Most business plans get rejected right on the spot and you don't get a chance to even come in and present your case. These plans might have been poorly written, the idea might not have been interesting enough, or we had serious doubts about the entrepreneur's capability of being able able to make this a success. One of the best ways to stand out from everyone else is to achieve sales. Just get one person to buy from you and show investors that people are willing to actually pay you for what you do, and you'll separate yourself from 90% of the other entrepreneurs who are pitching their ideas. You don't have to be making a lot of money, but proof that someone is willing to buy your products or services is a great first step to establishing credibility with potential investors. Number 2: Build an advisory board. After the executive summary, one of the first places an investor will turn to in your business plan is your management team. They want to know who they are potentially investing in and what kind of experience you have. The less experience you and your team have, the harder it will be to convince investors to give you money. One way around this is to build an advisory board. Talk to people who do have experience and ask them if they'd be willing to be your advisors. They're not liable like they would be if they were on your board of directors, and the compensation for their advice is up to you. Often advisors are willing to join because they are excited about the future of your company, and they don't ask for any immediate compensation. Being able to show that you have a solid team of advisors will go a long way to boosting your credibility and increase the chances of you getting the money you're looking for. Number 3: Pass the grandmother test. There's an expression within the venture capital industry around if your executive summary and business plan passes the grandmother test. In other words, would your grandmother understand the opportunity if you gave your business plan to her? Remember that most investors are generalists. They'll know a little bit about your industry, but they won't know it as well as you do. Too many entrepreneurs fill their business plans with jargon, complex industry terms, and tech speak, so much so that investors have a hard time understanding what their companies are all about. If an investor can't read your executive summary once and immediately understand what the opportunity is, then your business plan is going straight into the garbage and they're moving on to the next opportunity. Make sure you show your plan to people who do not know your market and see if they can understand it before you start pitching investors. Pass the grandmother test.

I hope that helps, Vinet. Remember, if you want to improve the chances of investors putting money into your business and improve your credibility with them, go get some sales, build an advisory board, and pass the grandmother test. If you guys like the video, please remember it's brought to you by MX Business Canada's Facebook page. Check it out, I'll include a link below. I'd also love to hear your thoughts and feedback if you want to leave a comment below the video. And stay tuned for the next episode.