Business plan with failure scenarios


5

I am helping a friend with some short to medium term scenarios/ projections for a business plan. I worked out some failure scenarios as in if the business folds in 6 months we will be able to salvage x amount of capital from the business. My friend is concerned about the reception of failure scenarios in the business plan. My friend would rather present a "perfect fool proof plan". I think it shows that we are not just swinging for a home run and investors have realistic expectations.

Should they stay or should they go? They were very helpful in guiding thoughts about initial capital expenditure.

Funding Recommendations Business Plan

asked Jun 7 '11 at 20:04
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Gerhard
150 points

2 Answers


5

Realistically there is no such thing as a fool proof plan, serious investors will know this.

Having the fall back positions is good but I wouldn't put them front and centre. I would have them as appendacies or overall "due dilegance material".

If your ever pitching to an investor I would mention that you have worked through these senarios "if they would like to see them" ... you are likely to get a mixed reaction: somewhere between

  • "great you have done your homework",
  • "I feel more comfortable because I'm only in for a percentage not the full amount"
  • "don't you trust yourself to deliver?"

Personally I would be the second one, my worst case is X because you have fall backs, others will differ and you will likely find a suitable match.

To answer you direct question, I think overall for most investors it is better to have these senarios thought out than not. I think they show a realistic streak that many investors will like and may set you apart from the masses ... remember the concept alone is only worth 20-30% the rest is how much they like you and how much the believe and trust in you ... for my money this shows far more than the majority put up.

answered Jun 7 '11 at 20:20
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Robin Vessey
8,394 points

-1

depends, if you are pitching to a conservative, long term investor - then yes leave it in as this shows prudence and security.

however, if you are pitching to your usual startup investor - then remove it completely. they invest money only in sure proof things (or what appears to be a foolproof thing, or at least viable enough). this money is EXTRA (they CAN afford to loose it) and they are not interested in saving x amount of it if you fail. the idea behind their investment is RISK - they invest but they have an y chance of success (y being different for differently risk aware investors).

answered Jun 7 '11 at 20:22
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B0x0rz
316 points

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