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If you're looking for investors, you need a business plan andnot just any business plan. You need one that is well crafted,concise and exciting. But how do you know what venture capitalistswant to see in a business plan and how can you avoid what they feelare the top seven critical mistakes? We asked venture capitalcompanies across the United States how they evaluated the businessplans presented to them. The VCs were asked: What is the worstmistake an entrepreneur can make when completing their company'sbusiness plan?Seven Critical Mistakes1. Lack of Clarity**********************VCs believe that entrepreneurs are not clear in explaining theopportunity. Why the business made sense, why the businessmodel would be successful. Entrepreneurs can avoid this mistakeby simply asking several people who aren't familiar with theircompany to read the business plan. If they don't "get it",it's unlikely an investor will.2. Unrealistic Projections******************************In second place is a mistake that is difficult for entrepreneursto avoid: unrealistic projections. While it's true that thecompany must produce enough revenue to be able to generate the30% to 40% yearly returns that VCs expect, those projections haveto be reasonable and achievable. Apply common sense. You canget an idea of whether your projections are in the ballpark bylooking at the annual reports of public companies in your industry.3. Simplistic Assumptions*************************Simplistic assumptions are closely related to unrealisticprojections. Avoid the 'all the tea in china' syndrome. You knowthe logic of 'there are 80 billion Chinese people, if we selljust one tea bag to only 10% of them we'll make a lot of money'.Justify your assumptions, base them on as much research as you can.4. Competition Analysis****************************The analysis of competition and the failure to describe asustainable competitive advantage are killer mistakes in businessand business plans. Many entrepreneurs do not make the effort, orfind it too difficult, to research their competitors. Entrepreneursoften say there is no competition, or underestimate the strength ofcompetitors. Their business plans do not describe a competitiveadvantage for the company, or how to achieve a competitive advantage.5. Mistakes and errors************************These appear frequently in business plans, according to the VCs.Rely on more than just the spell checker in your word processingsoftware. If you aren't very good at spotting grammatical errorsor incorrect spelling, hire someone to act as a copy editor.6. Lack of Management Strengths********************************Management strengths were overstated in the plan, with oneVC even saying that entrepreneurs "lie" about their credentials.Venture capitalists always complete thorough background checks. Ifyour management team is weak, try to assemble an advisory boardthat has the strengths in the areas your team lacks.7. Incompleteness*********************This includes leaving sections out of the plan, or not includingsufficient support data. One interesting response was thatthe entrepreneur failed to provide the name of anyone in thecompany to contact. He or she must have been in quite a hurry toget the plan in the mail! Article Tags: Seven Critical Mistakes, Seven Critical, Critical Mistakes, Business Plan, Business Plans
Seven,Critical,Mistakes,You,Do