Business Plan Writer for Companies Raising Capital

Should You Add Failures to Your Business Plans?

I was inspired to write about this topic based on a video I saw. It was about entrepreneurial failure and why we shouldn’t be afraid of it.

Here are 3 questions to ask:

1.    Should you fail in your business?

2.    Should you be afraid of failure in your business?

3.    Should you talk about your failures in your business plan as you’re talking about raising capital?

I believe the answer to all 3 is a resounding YES.

There’s nothing wrong with having small failures in your business. In fact, failure is good. Some failures could include a marketing strategy that didn’t work, a target demographic that doesn’t buy your product, or a team member that doesn’t work out as expected.

There are many reasons why you might fail in business… but that is a part of life. It doesn’t mean we act stupid or take reckless risks. However, you should be proud of failing small and figuring out what doesn’t work fast and inexpensively. For example, you might say, “Let’s throw some Facebook ads out there. We’ll invest $200 over a 7 day period and see if we get any response.” If no response comes, it’s okay. We may also choose to spend $300 on a conference that attracts a new target market for our business. If no one within the conference is interested in your offer, it’s okay. You failed small.

You may fail small with hiring someone. As entrepreneurs, finding the right team is extremely hard and you’ll go through many people. You may hire someone for a 30-90 day probation period and determine that they’re not a good fit. This is the cost of doing business. Without failure, you cannot succeed. You cannot hire the right person without making a few wrong hires.

Entrepreneurial failure is a way for us to figure out what does work and what doesn’t work. If you’re not prepared for that, then you’re not going to be as successful as you could be. You’re always going to play it safe and that’s more risky than taking small calculated risks.

FAILURE AND BUSINESS PLANS

You may ask me – what does this have to do with business plans? Should I include my failures in my business plan? The answer is yes. You want to place failures that you have overcome within your business plan.

For example, if you have tried several marketing methods and finally found 3 that work, then mention that in your business plan. Let investors know that you took the risk (both monetarily and time-wise) to fail and figured out what doesn’t work. Now you know what does work and with a $250K investment, you will be able to grow your business to $2 million in annual revenues.

Guess what happens at that point…your investor respects you more and you’re more likely to be offered money. You may also receive a better valuation because of where you are in your business’ life cycle.

I can’t tell you how many people come to me and they don’t even have a prototype or a wireframe for their technology idea. Yet they want an investor to fund the whole thing. You will most likely receive a NO.

Your best bet is to create an alpha and beta version of your technology on your own dime (if possible) or with close family and friend money. Then once you have gotten past that stage and have begun generating money with your beta version (for all tech projects except medical devices…which is another story), then you’re ready to raise millions from investors.

You’ve proven to investors that you have already failed, that you know how to fail, and you can overcome failure. Investors love entrepreneurs who are agile and face failure head on.

Cheree Warrick is a business plan writer. To contact her, visit wewritebusinessplans.com.