Without realizing it, you may make mistakes when writing a business plan. While these mistakes may seem minor to you, it may be viewed seriously by the potential financier.
You certainly don’t want these errors to nullify your hard work and defeat the whole purpose of the plan.
Here are examples of mistakes you should seek to avoid when putting together a business plan:
Executive Summary Not Straight to the Point
The Executive summary is probably the most important part of a business plan. Upon reading it the potential financier should be spurred to read further on .
You could do well to focus on the core of the business idea and explain why it would be successful, emphasizing on unfulfilled market needs. Avoid including charts or tables, which would only take up space and distract the reader.
Remember that bankers and investors are busy people. Give them what they want to hear and you’ll create a good impression by having an executive summary that gets to the heart of the matter. Among others,focus on the unique ways you plan to market your products/service sand how the management team would spur the business before forecast the financial returns.
Put yourself in the financier’s shoes and figure out what he or she would like to know.
Poor Layout and Repetitious Content
Take the trouble to ensure that the layout is pleasing to the eye. Have your diagrams and charts in their proper places, so that they contribute to your message.
In your effort to make your business plan lengthy enough, avoid fluff and irrelevant content. As far as possible don’t repeat verbatim what has already been said. If mention is required, do so briefly.
Not Focusing on How Products/Services Will Add Value to the Customer
While you can mention your expertise or prior experience in the business, don’t overdo it. Instead, spend more time explaining how the products and services would add value to potential customers and explain why they would welcome such services or products. Would they have to spend less than what they are already spending? Will they be getting a better product than what is already available out there in the market?
Hiding Key Information in the Company Background Section
It’s better to be transparent when it comes to the company’s current commitments. Is it obtaining funding from other investors? Any pending legal issues? It would be advisable to reveal this to potential investors or financiers and explain these unfavorable aspects rather than having them find the ‘unsavory’ information through other sources. Hiding such information which is later exposed by the financier would not only damage your company’s reputation and but most likely kill your chances of securing financial assistance.
Full Focus not Placed On Products and Services
Instead of vaguely describing the products and services. Provide a broad description then go on to explain the products and services that you would consider are unique offerings to the market. Don’t just say you’ll create or secure any product that the market wants. Show evidence of the knowledge of products and services the market really needs.
Talking Too Much About The Business’ Future Instead of Current Issues
Investors would not be impressed with lengthy explanations of the company’s future potential . Instead they would like to know its current performance, the challenges and the issues it’s confronted with presently. So, talk too much about of the future at the expense of the present.
Not Explaining the Market Essentials Adequately/Making Generalizations About The Market
Don’t make vague and unsubstantiated statements about the market. Back up everything you say with solid evidence as far as possible. Don’t assume market information is general knowledge to investors and bankers.
You want to give the impression that you’ve studied and know the market well. Don’t, for example say, there is virtually no competition for the business you’ll be starting. You’ll have a hard time convincing potential investors and bankers.
Make accurate statements about the market and explain how your company will adapt to the demands of the market.
Back up your statements with evidence from reliable third party sources.
Not Clear About Revenue Generation Strategy
To impress your reader to invest in your business you need to be clear about how you’ll be generating revenue for the business. You must have thought this out thoroughly before writing the business plan. The investor would like to know this from the Return on Investment angle.
You can’t just say revenue will be generated by the usual marketing channels. You have get to spell it out. For example what percentage of the revenue will be generated through walk-in customers and what percentage via online orders.
Unrealistic Sales Predictions
In your attempt to impress the investor don’t publish unrealistic sales forecast. You’ll definitely be questioned on this and it would be embarrassing if you can’t justify your predictions and find yourself groping for logical answers.
Lack of a Concrete Marketing Plan
Don’t assume that you only have to start your business and customers will make a beeline to your door. You’ll need to show the investor in your business plan that you have a solid marketing plan which has been comprehensively thought out.
Lack of Relevance in the Backgrounds of Management Team
You’re out to prove you have a solid team behind the business. You want to prove that they have the relevant qualifications and experience to help the business achieve its goals. Include as much relevant biographical information on the key players in the management team. Avoid experience and qualifications, though impressive but don’t really contribute to the business.
If the business needs a support team, highlight briefly that the ability of the team you have at hand.
Mentioning You’ll Not Invest in the Business
Avoid mentioning you’ll be investing no money in the business and will solely rely on external funding. This, if anything, indicates lack of faith in the business and hence unwilling to take the financial risk that may accompany it.
Plan a sizable investment in the business with the help of family and friends. Your own investment shows your commitment to the business.
Submitting Incomplete Financial Statements
Make sure you don’t ignore such financial statements as income statement, cash flow statement, and balance sheet, among others, for at least a period of three years. They should be carefully prepared to reflect the viability of the business.
Also make sure the amount requested reflects the needs of the business and show that spending would be undertaken on important areas that would develop the business highlighting matters like acquisition of equipment and recruitment of specialist staff.
How to Avoid These Mistakes
Nobody writes a perfect business plan. A good business plan is one that has a few errors which would not adversely affect the judgement of potential financiers.
One way to minimize mistakes in business plans is to start preparing as early as possible. A useful tip is start preparing the business plan even if you don’t need it at the moment. It’s like having an umbrella ready before it rains.
You’ll find that working on a business plan sharpens your understanding of your business and prepares you for eventualities.
This is merely a checklist. Remember, that you’re writing a business plan not to please yourself but to impress, convince and persuade a potential financier. So, make a checklist, based on your own understanding of what would not impress the the financier.
By doing this you consciously minimize mistakes that will you let you down when you present the business plan.
Alternatively, imagine you’re the investor. What matters would you like highlighted in the business plan?
Before You Submit Your Business Plan
If you’re the only one working on a business plan, get another pair of eyes to go through it. Preferably get someone experienced in preparing business plans whose judgement you trust.