Top 10 mistakes people make when writing a business plan
While each small business is different, many prosperous ones have a similar foundation: a business plan. Writing and researching a business plan is crucial in outlining the course your company will take and is essential to obtaining funding for startup fees or expansion.
Numerous components go into a successful business plan; avoid these blunders and give your venture the pitch it merits. Before you get anything properly, it frequently takes time, patience, and numerous modifications. Sadly, while you’re eager to secure capital and start your business, your plan may go overlooked. We’ve identified a few of the most frequent business plan errors below:
- Poor executive summary
The executive summary of your business plan will be read by a lender (or grant-giving organization), and from there, he will decide whether to keep reading it or throw it away. These are the only two choices, and depending on how it was written, your executive summary aids the assessor in rapidly selecting one of these two options. Depending on what their gut tells them, the lender may choose to read on or stop. So, it’s important to pay attention to the executive summary. It should explain why your company is viable in a few concise terms such that someone without a background in business can grasp it. It’s advised to include 1-3 words on your company history, clientele, the market, competitors, credentials, and staff. Your audience should be persuaded to continue reading with a succinct summary that fits into two pages or less. Prospective lenders should be made aware of how much money you intend to borrow and how it will be used right away if your plan is centred on acquiring funding.
- Being unrealistic
If you’re not willing, to be honest with yourself, ask probing questions, and conduct thorough research, this can occur on various levels. Your business plan must take into account market realities, financial realities, and the entrepreneurial environment; it cannot depict the ideal situation or how you hope things will turn out. Be realistic in the following areas:
- Financial projections: Be careful not to overstate or pad your expected future earnings. In the best-case scenario, a bank won’t trust you enough to lend you money because you’ll appear to be uninformed about your actions. The worst-case scenario is that they lend you the money and you default or file for bankruptcy.
- Competition: A major red flag in many company plans is the assertion that there is little to no competition. You are constantly vying for market share. Even if your product is distinctive, your target market still has options for how to spend their money. You need to think about how you’ll convince your target market to pay you money.
- Market research: What you want to build or sell doesn’t matter when conducting market research. It must be worth selling for someone willing to purchase it at that price. No business plan is complete without spending time and effort on current market research to fully comprehend market trends, client interest, rival performance, and other aspects of product or service viability.
- The customer base for brick-and-mortar businesses: Your mother may travel across the state to buy a Pepsi from you, but it’s unlikely that anyone else will. Your clients will largely be in your local area for many goods and services. Customers may be looking within walking distance or a 5- to 10-minute drive in your neighbourhood. Find out as much as you can about the local demographics from the census, and be honest about how many of your target clients are nearby.
- The plan is poorly written
Writing your business plan on paper requires careful attention to spelling, punctuation, language, and style. Investors examine a strategy in order to find hints about the underlying firm and its management, even though they don’t anticipate investing in a company run by English majors. They quickly wonder what else is wrong with the company when they see one that contains grammar, punctuation, and spelling mistakes. They don’t ponder this for very long, though, as there are always others looking for money; instead, they move on to the next idea. Examine each line of the strategy with a fine-tooth comb before presenting it to a single investor or banker. Run your spelling and punctuation check, which should find errors, then have a friend with excellent “English teacher” abilities examine it for grammar issues.
Though quieter, style is just as significant. Different business owners have varying writing styles. You won’t encounter any issues if your style is “confident,” “crisp,” “clean,” “authoritative,” or “formal.” While it is true that different styles appeal to various investors, if your style is “arrogant,” “sloppy,” “folksy,” “turgid,” or “smarmy,” you risk alienating potential investors. Any design you decide to use for your business plan should be consistent throughout and appropriate for your target market and your company.
- Inadequate or no research before writing the plan
Make sure your facts are just as crucial as connecting your assumptions to facts. Learn everything you can about your company’s niche market, including competition positioning, size, market share, and general market trends. Even if you don’t want to get mired down by the details, any assumptions or projections you make should be supported by some data, charts, and statistics. Well-prepared investors will compare your numbers to industry statistics or independent research; if they don’t match, it’s likely that your plan won’t be funded.
- Not focusing on the team, and your role as the head
No small business owner possesses all the abilities and character traits required to grow a company from the earliest stages of conception to the present day on their own. It is appropriate and crucial to mention any gaps in your education and experience and to explain how you plan to close them. It’s also important to briefly introduce your top team members, highlight their value to your business, and demonstrate how, as a whole, they are well-rounded and prepared to face the difficulties ahead.
- Making the plan too long
A brief and well-structured business plan for the majority of small firms should be 5–10 pages long. When necessary, an engaging business plan uses visuals to prevent using unnecessary words when a graph, chart, or map would be more successful. An appendix can contain further supporting financial forecasts or research data. Plans that are much lengthier run the danger of losing their audience before they are really read and may not provide additional or better information.
- Hiding Your Weaknesses
Do not downplay your flaws, but do not exaggerate them either. Every company has flaws, but if you hide them or draw too much attention to them, you’ll turn off investors. Include a thorough strategy of how you intend to deal with these issues if you want to remedy these deficiencies.
- Not Knowing your Distribution Channels
Have a safety plan in place for how you will deliver your service or distribute your goods. If you mention every potential channel in your plan without explaining why each one is appropriate and how it will reach your target market, the investor will conclude that you came up with the list on the spot. It is crucial to clearly explain your approach to reaching your client with your product or service.
- Being Inconsistent
If you highlight various target markets, provide inconsistent data, or include competing tactics in your strategy, an investor may question how well you understand your company and its market. Plans frequently have distinct sections produced on different days or by separate authors, which are subsequently put together into one document and cause inconsistencies. Review each section of your business strategy carefully.
- Including Too Much Information
Would you want to read a 200-page business plan if you were an investor? The majority of investors have a mental checklist of 10 to 12 things they want to see in a plan, and everything else just gets in the way. Your plan’s focus should be on the essential components of your company rather than showcasing your extensive knowledge. If you have more information that you would like to include in the paper, write an appendix. Clear, clear language is usually welcomed.
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