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Profit Dynamics Venture Capital Survey
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Venture Capital Survey
Common Business Plan Mistakes
What is the most common mistake entrepreneurs make when completing their business plan? was asked of venture capitalists.
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By far the most frequently mentioned mistake was saying that the
company had no competition, or underestimating the strength of competitors (32%). The failure to describe a sustainable competitive advantage was also mentioned by 9%.
Not clearly explaining the opportunity was the next most frequently mentioned mistake, by 27%.
Following that was the related mistake of having a disorganized, unfocused, or even poor presentation (12%).
Miscalculation of market share and market size (9%) were also regarded as frequently seen mistakes, with several respondents saying that they still receive business plans that say, "The total market is $1 billion, if we only get 10% of it, we will be a $100 million company"--without ever explaining how they are going to sell $100 million worth of their product.
Respondents also said they commonly see business plans that do not address the risks of a venture, and contain no contingency plans for coping with the risks (also 9%).
Other less frequently mentioned responses were:
Not explaining how they are going to sell the product
They don't understand the venture capital process, and send the plan to the wrong audience
The overstate management's strengths
They make unrealistic projections
The information is incomplete; sections are missing; the financials are inadequate
They underestimate the amount of capital required and assume the business will develop easily
They refuse to cede control and insist on being CEO
The discussion of management is weak
They assume and Initial Private Offering or IPO can be their exit strategy
They overestimate the value of their enterprise
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