There are many factors involved in business planning. It takes time and many revisions to get it right. Unfortunately, too many plans are sent to potential interested parties (banks, investors) before they are ready to be read. It is important to understand how to write a business plan when writing it for approval by someone else. Listed below are five of the key mistakes commonly found in plans for startup companies seeking finance.
1. Unrealistic financial projections:
Investors and banks expect to see a business plan that paints a realistic financial picture of the anticipated growth of the company. If the plan is overly aggressive and not consistent with growth in the industry, it can cause the plan to be shelved. It is best to be realistic with your financial projections. You need to be prepared to defend and explain all important assumptions concerning your projections. When I was a panelist on the Dragons’ Den program I got to witness pitch after pitch as small-busines owners tried to raise interest and investment for their fledgling business. Most of the businesses that didn’t get funded (or airtime on the Channel 7 program) did not have sound financials. The business owners didn’t really know what their businesses were worth and often overestimated the valued that had been built in their business.
2. Not having a defined target audience:
No business will appeal to “every-one.” The market must be clearly defined and you must present a clear picture of who will buy your product and why they need it. More an more, as competition grows, knowing exactly who your target market is will allow you to speak to them directly through all the various channels now available to you. If you describe your market broadly, e.g. women 35-55 you are probably not being specific enough. What are their interests? What are their pain points? What can you offer that is unique and totally relevant?
3. Over-hype:
Too much hype and the overuse of superlatives can be the downfall of an otherwise sound business plan. Wow them with the business idea, not hype or buzz words.
4. Poor research:
In an effort to get a plan together hastily, many business owners do not double-check and substantiate their claims. Make sure your research is accurate and up-to-date. Also, conduct a SWOT (strengths, weaknesses, opportunities and threats) to fully understand where you stand in the market and where you can improve.
5. No focus on your competition:
Some business plans state that there will be “no competition,” while others indicate only what the competition has done wrong. Investors reading a business plan expect to see such competition and how you plan to compete in the market. You cannot ignore competition or paint an inaccurate picture. A quick easy way to suss out your competition is through a competitor analysis.
What to do once you have the plan:
- Have several other sets of eyes read it before sending it to investors or bankers.
- Have your mentor take a look at it and help you take it to the next level.
- Format it in a way that works for you. Is a one-page quarterly plan more likely to be looked at than 20 pages of 12 point Times Roman font in a folder?
