Few business plan mistakes can result to anything from the delayed of approval to the total rejection of your business plan. Unfortunately when rushing to get your funding in place and launch your business, your plan can get neglected. Below we have highlighted few of the very common business plan mistakes you should be aware:
Unrealistic Financial Projections
Lenders and investors expect you to show a realistic picture of your business as at now and where it hopes to be in the future. Therefore, it will be a major business plan mistake to overly optimistic with no explanation of your projections. For example a good sales forecast need to be supported by marketing plan that will find sales lead and convert them into customers, and an analysis of competitors reaction.
If your projected numbers looks “too good to be true” and without an explanation to support the projections, the reader discounts them and moves on, and you will probably not be in the room to defend your plan. Projections can also be presented with a summary scenario analysis indicating base, worse and best case scenario.
Keep the Plan Simple and avoid Technical Jargons
Avoid many technical jargons because it can shy away the investors. This is especially true in science and engineering related business. Try to use simple, specific, and concrete phrases to describe your business.
Some would even think you deliberately want to confuse them with your jargons. A wise investor will never want to invest in any firm that he or she do not understand their business plan.
Including Too Much Information
If you were an investor or a banker, would you prefer to read a 300 page business plan? Well, most investors have a checklist that points what they are looking for in a business plan. The purpose of your plan is to present a business case that can make some money for the investors and the business. If you have additional information which you would like to include in the business plan, add them to the appendix.
No Clear Business Model
Business model discuss about how you will generate revenue and is the most crucial for cash flow generation. It’s important you clearly communicate this in your business plan when applying for bank loans and any other external funding.
No Clear Target Audience
Remember the old adage “You can’t please all the people all the time”. The business that appeals to everyone doesn’t exist. You must define your specific target market, present how you have made these assumptions. Businesses are successful when they provide products and services that satisfy customers need. Conducting proper market research should help to know your target market.
No Focus on your Competition
There is no such thing as no competition. You may have a unique business idea but it takes few days for someone to create a substitute product or service.
Do not equally over highlight your competition as the investors could worry that the business will not survive the competition. Focus on your niche and provide good value proposition to your customers.
Not Knowing your Distribution Channels
Producing goods or service is one thing and get it to the right customer is another thing. You are making a business plan mistake if you do not clearly show how you intend to distribute your products. It will also be helpful if you could indicate why you think the chosen channels are the right network.
Another business plan mistake is the inconsistency in the document. Your target markets, strategies, distribution channels, financials are not aligned. An example could be that you applied for D600,000 funding whiles your cash flow statement is showing D250,000. Take your time to review each section of your business plan and ensure they are not conflicting.
Much of the Funding goes to General Expenses.
Banks and investors prefer to provide funding for investments that will generate future cash flow for the business. This includes buying equipment, designing and building a website, or strategic marketing program. Planning for a modest salary until the business generates sufficient cash flow is often seen as your commitment to grow the business.
Using an outdated Information
Most elements of your business plan information will relates to researched information and forecast. This includes market demand, key economic indicators, competitive environment etc. You cannot present a business plan prepared in 2008 to bankers or investors in 2015.
Keep these business plan mistakes in mind when writing your plans, because committing them will most likely result in your business plan being rejected by a potential bank lender or investor.
Do you have any questions about business planning that we didn’t cover? Let us know in the comments.