10 Mistakes to Avoid in Writing the Business Plan
Writing a business plan is an important step in starting any business. A well-written business plan can help you get financing, recruit partners and employees, and, why not, better clarify your business idea.
On the other hand, a plan full of mistakes can lead you to failure in a much shorter time, so make sure you know what the most common mistakes that occur in the business plan and learn to avoid them are.
Here are some common errors that happen in business plans and solutions that are recommended by the best business plan writers.
1. Vague objectives
The goals you set for your business should not be marketing slogans but should reflect what you want to do and how you intend to implement them. When defining your goals, apply the SMART rule (specific, measurable, accessible, relevant, time-bound). Clear and consistent goals are easy to follow and help you maintain business direction because, based on them, you will monitor your progress.
2. Lack of research
Out of the desire to put your business plan on paper as soon as possible, you will be tempted not to do market research or to do a superficial one, thinking that you will improve it along the way. The lack of this component can cost you a lot in the long run, so you should study intensively the industry in which you are going to operate long before you start a business and make sure that the data you get is up to date and easy to check. Learn as much as possible about your field of activity, its trends, and evolution, about your customers and their buying behavior, about their competitors and their strategies, to prove to the one who will evaluate your business plan that you know your market and are ready to do it—the face of the competition.
3. Unrealistic estimates
Entrepreneurs often fall into the trap of unrealistic estimates for business: the number of potential customers, production costs, the level of sales, or the price at which they can sell products and services. The premises from which you start are very important because they influence all subsequent decisions: if the figures included in your plan are in a total discrepancy with the evolution of the market, a potential investor will notice this immediately. Unrealistic data is easily detected by experts and can affect your credibility and thus your chance at financing. In addition, you must be prepared to support your financial projections and provide detailed explanations where appropriate
In this stage, you can significantly ease your work using an Excel application for business plans that help you to make financial forecasts and then generate all the financial-accounting reports necessary to evaluate the profitability of a business idea.
4. Ignoring the competition
No business operates on an empty market, so it is important that during the business plan, you show that you know your direct and indirect competitors. If the entrepreneur underestimates his competition and overestimates the value of the delivered product/service, he can give a negative signal to potential investors because they may assume that there is a risk that he will lose sight of other elements that may have a significant impact on the business. Even if your business idea is completely new and you have no competitors now, you will surely have it in the future. Guaranteed. A useful tool to evaluate your competition is the Competitors Benchmarking Matrix.
5. Ignoring cash flow
In business planning, very few entrepreneurs calculate the amount of cash needed to perform basic activities. Most calculations come down to costs and sources of income. If the income is higher than the costs and a profit is obtained, then the investment seems opportune. However, this is not the only condition that a business model must meet. The availability of money at the right time is another criterion that you must take into account from the planning stage.
6. Omission of risks
Enthusiasm for a new business can prevent many entrepreneurs from omitting the risks that may arise in running a business. Although it is good to start the road with optimism, it is not superfluous to think about the risks that can threaten the business. Spare plans are the ace up the sleeve that the entrepreneur can use when negative scenarios materialize.
A risk management plan will help you a lot to get an overview of the evolution of the business, so don't do it just for the sake of completing another chapter to catch the eyes of the financier: if you move to risks only the possibility of an earthquake or fire, you will not impress anyone. The effect will be the opposite. An extremely useful tool in this regard is the Risk Analysis Matrix.
7. The plan is written in vague terms
A business plan is not a short story or a novel, so before sending it to a potential financier or investor, give it to a friend or family member outside the business to read. If he doesn't understand at first what the business idea is, what the competitive advantage is, and how you will grow the business next year, rewrite it. Why? Because in this case, the evaluator will not read your plan three times and make assumptions about what you wanted to say but will reject it. Think that those who have the role of evaluating business plans, see dozens if not hundreds of such documents, so you need to make sure that you describe everything as well structured as possible and in terms as clear and unambiguous as possible.
8. The plan is too detailed
Don't go into too much detail on specific technical details, because you risk boring or tiring the person who has the role of evaluating your plan. Keep the technical details to a minimum necessary during the business plan, but if they are necessary for better clarification, you can include them in a section of annexes. The potential financier or investor does not need to know in this first stage how many grams of meat you use in each preparation or the technical specifications of the software that you will use for a certain activity. It provides all the technical information in the annexes so that the reader of the plan can access this information if he needs more details.
9. The plan is not consistent
Eliminate possible contradictions: check the correlations between the activities included in the business plan and the business budget. If you changed some numbers in cash flow because your calculations didn't work out, make sure you change those numbers everywhere in the plan and budget. Do not budget in Word, but in Excel, to have a more precise record of calculations. Make sure that the figures provided in the market analysis regarding industry, market shares, competition are accurate and easy to verify. Provide in plan the sources you used to inform yourself.
10. Negligent editing
It may seem unimportant because many entrepreneurs think that the idea they have is so valuable, and the profit potential is so great that it no longer matters how it is presented. In reality, investors pay attention to these details, and a business plan full of spelling mistakes can discredit the entrepreneur, even if his business idea is good. In addition, the reader of the business plan may think that if you have not given enough importance to the way you wrote your business plan, you will be just as careless with the way you will manage your business.
So you have to remember that not only what you write is essential, but also how you write. In addition, materials that deal with financial issues should be put in Excel and not in Word or Pdf, to make it easy for the person evaluating your plan to check the numbers.