Do you know that a good business plan should not only contain the goals of a company but also the time frame for achieving such goals? In drafting a good business plan, it is important to know that you should ensure to include your competitor’s analysis, management plan, risk analysis, and business summary.

The truth is most business plans get turned down by investors. The reasons may vary, but you shouldn’t beat yourself up. The trick is to make your business plan as attractive as possible to attract investors. Although you may fail at first, you will be successful eventually.

One mistake most entrepreneurs make is not addressing risk analysis in their business plans. We all take risks every day.

If an investor decides to accept your business proposal, it’s a risk. Every business takes risks, so while drafting your business plan, identify the risks and how you’ll be able to manage them.

As said earlier, the reasons why business plans are turned down by investors are limitless. In this piece, you will learn common reasons why investors reject business plans. Knowing these reasons will help you have a better chance of success in the future.

7 Explainable Reasons Behind Investor’s Rejections

Investors reject business plans based on various reasons. An investor may reject your business plan if it’s not organized, contains jargon, lacks risk analysis, and is poorly written amongst others. A few reasons behind investors’ rejections include:

Too Long Or Too Short Business Plan

When drafting your business plan, have it in mind that no investor has the luxury of time to read a long business plan. They are busy and have other things to attend to, so make sure your business plan is not too long.

As much as you don’t want to bore an investor with a long business plan, it shouldn’t also be too short. Making it too short may turn off some investors.

Poorly Written Or Formatted Business Plan

This is the most common reason that turns off investors. If your business plan is poorly written, how will you convince the investor that you will be able to manage such a business?

Your business plan must be very clear to convince investors. Investors shouldn’t be confused after they’ve read your business plan. In addition, it should contain no grammatical, spelling, or punctuation errors.

Unrealistic Business Valuation

The worst thing you can do is to make unrealistic business goals. If your business plan is unrealistic, it is enough reason to drive away potential investors.

Inadequate Market Research

You must research the market you will be selling your products or offering your services. Who is your target market? Are they children or car owners? Are they gender-specific? Identify your market and how your product or service can solve their pains.

Poor Team Financial Planning And Risk Analysis

You can hire a financial advisor if you’re not so great at organizing your team. A financial advisor can also help in planning financially and identifying risks.

They can also advise you on how to manage risks. Investors want you to identify risks and ways you can manage them. Not identifying risks can raise a red flag for investors.

Inexperienced Or Incomplete Team

From the way you draft your business plan to its presentation, investors can identify an inexperienced team.

Even if you are inexperienced, find someone who’s been in the business for a long time and let them put you through.

Lack Of Competitive Advantage

First, you must research your competitors and ways to gain a competitive edge over them.  How can your product or service stand out amongst your competitors? Presenting it to potential investors is a green flag.

How To Avoid These Mistakes 

A few ways to avoid investors turning you down are:

Carefully Proofread Your Business Plan

Ensure your business plan is error-free and contains all the details it should. It should contain any grammatical, spelling, punctuation, and other errors that can easily deter investors. You can give a proofreader to proofread your business plan.

Seek Constructive Feedback Before Submission

You must be open to constructive criticism. Do not read your business plan alone. Find people who have been in the game and seek advice from them. Ask if there’s a way your business plan can be better and do the needful.

Do in-depth Market Research

Research your target market and narrow it down to a specific audience. This gives credibility. Do in-depth research on the market, and your competitors.

Address Risks And Include An Exit Strategy

It is a green card when you address risks and exit strategy to investors. Investors want to see that they are making a mistake in accepting your plan.

Indeed, there will be risk. Address those risks you might face and ways to mitigate or manage them. This also gives credibility.

Make Proper Presentation

Failure to present your business plan well shows inexperience. This can deter investors. Make sure to practice quite well before meeting potential investors. You can also seek the help of professionals.

Conclusion

Knowing the reasons why investors reject business plans is a good start to writing yours. If you can identify these reasons, you can avoid them so you don’t fall victim to rejection. Also, make sure your business plan is as attractive as you can. Give investors a reason to trust you.