The 5 Most Devastating Funding Mistakes that Most Entrepreneurs Make : Under30CEO The 5 Most Devastating Funding Mistakes that Most Entrepreneurs Make : Under30CEO
arrow
Join the Under30CEO Community We deliver tips, tools and inspiration for your business. Daily to your inbox.

The 5 Most Devastating Funding Mistakes that Most Entrepreneurs Make

| December 3, 2010 | 8 Comments

funding

For most entrepreneurs these days, funding is nearly impossible to come by.  According to the report titled, “Important Things for Entrepreneurs to Know about Angel Investors” which is distributed by the Angel Capital Education Foundation, only 1 to 4% of angel investment applicants successfully raise angel investment capital.  So before you ruin your chance at securing investors, please make sure you have not committed any of the following deadly mistakes.

1. Wait Until you Need It - So many entrepreneurs make the mistake of waiting until they need the capital “tomorrow” to begin the process of seeking funding.  Make no mistake about it, the process of raising capital can take months and months.  Even a simple loan will require enough paperwork to kill a small tree.  Ironically bankers and investors are more likely to provide you with additional capital when you don’t need it!  So don’t wait until you have an immediate need to begin the funding process.

2.  Submit a Full Business Plan - Another great way to get your funding application thrown in the trash is to submit an unsolicited, full business plan.  An investor or banker is not going to waste 2 hours to read through an entire business plan with your initial funding request.  Submit a short executive summary, then if you are asked to submit a full business plan – great!  Just don’t start with your business plan.

3.  Claim “Conservative” Projections - It can be a major turn off to some investors and bankers when you call your financial projections “conservative.”  Of course you think your projections are conservative, but the fact of the matter is that many, if not most, businesses fail within a few years of launch.  If every entrepreneur’s projections were truly conservative, then why are so many small businesses unsuccessful at reaching their projections?  Don’t let yourself sound ignorant.  Simply state your projections and let the bankers or investors make their own judgment.

4.  No Next Step - Maybe you get a chance to submit an executive summary to a potential investor or even recite an elevator pitch to an interested banker.  This is a golden opportunity that can be worthless if you fail to outline a clear next step.  For instance, in your executive summary you should request a meeting or a phone call as a clear next step.  If you simply end your elevator pitch without a clear next step, your audience will quickly forget your funding needs.

5.  No Follow Up – Don’t just assume that a potential investor will follow up with you if they are interested.  They may want to gauge your commitment by waiting for you to follow up.  Give the investor a couple of days to review your executive summary, but make sure to follow up before you fall of their radar screen.

Keep these potential deal breakers in the forefront of your mind as you begin the funding process for your small business.

About the Author – Adam Hoeksema is the Founder & CEO of ExecutivePlan, which offers entrepreneurs extensive guides, templates and articles to help create more powerful, effective, and memorable business plan executive summaries.  Access our free 11 page guide on How to Write a Powerful Executive Summary today at www.theexecutiveplan.com.

If this information helped you, sign-up to get our 5 day e-course on Starting Your Business with Less Money and Fewer Mistakes!

Opt In Image
Awesome People + Awesome Places
Travel around the world while making new friends

Under30Experiences curates awesome experiences around the world for young travelers.

Tags: , , ,

Category: Funding, Startup Advice

  • Pingback: Tweets that mention The 5 Most Devastating Funding Mistakes that Most Entrepreneurs Make | Under30CEO -- Topsy.com

  • Anonymous

    A lot of good advice here!

  • http://askrizzo.com John

    really helpful insights here and very timely to a situation I am facing right now with my business. Thanks Adam!

  • http://twitter.com/Alaskanpoet michael ridley

    I

  • Anonymous

    John,

    Glad I could help! Let me know if there is anything else I can do for you. You might enjoy my free 11 page ebook on How to Write a Business Plan Executive Summary at http://www.theexecutiveplan.com.

  • Stacy Robin

    As a follow-up to #3, another big mistake is that entrepreneurs who don’t understand financials/projections allow an outside advisor to design them – and never take the time understand their own financial models. Entrepreneurs need to be able to speak intelligently about their own companies’ numbers – especially when discussing them with investors.

  • Pingback: Tweets that mention The 5 Most Devastating Funding Mistakes that Most Entrepreneurs Make | Under30CEO -- Topsy.com

  • Anonymous

    If only 1 to 4% of angel investment applicants successfully raise angel investment capital, then the most devastating funding mistake is spending so much time going after angel capital in the first place when your friends and family are more likely to be in your corner and help you get access to capital.

    Using friends and family money, contacts and connections creates a moral imperative to plan and manage funds responsibly. Whether friendly investors are demanding or not, entrepreneurs should be fully prepared to succeed through sound planning on the http://Fundingroadmap.com eco-friendly launch pad that helps entrepreneurs think, organize, collaborate, benchmark , post to a virtual market place and “elevator-pitch”, using a video platform. This is a revolutionary and innovative system for a 21st century digital world that will quickly transform the process of getting capital into the hands of entrepreneurs and small business owners who have historically been, and who will continue to the be, the primary creators of jobs in a strong and sustainable economy.