5 Common Business Plan Mistakes That Torpedo Startups
Writing a business plan is one of the first major steps you’ll take as an entrepreneur. It’s the tangible divide that separates entrepreneurs who just have an interesting idea and entrepreneurs who have a real, promising structure in place. It’s a key that opens doors to investors, partners and employees, and the blueprint that makes the first few years of your operations possible.
Accordingly, the strength of your business plan has a major influence on the outcome of your business, especially in the beginning. If your business plan is poorly written, or if it leaves out significant information, it could prevent you from getting the funding, assistance or attention you need. Despite this, too many prospective entrepreneurs take the business plan phase lightly and blow through it without much thought.
When writing your business plan, be sure to avoid these five all-too-common mistakes:
1. Ignoring a major section.
There are no firm rules on what constitutes a business plan, per say, but the mentors and investors who will be perusing your work will have certain expectations about its content. You need a business summary page, a model for growth that includes financials and you need to describe your target audience and explain why they need your product.
List your competitors and describe why you are better than they are. Mention your hiring plan and how you plan to grow. A business plan missing any of these critical components could instantly disqualify you from further conversation. Make sure you cover all your bases.
Related: Business Plans: A Step-by-Step Guide
2. Neglecting the research component.
Your idea is significant, but ideas are confined to the mind. What exists in reality, and what people want to see, are objective numbers that support that idea. You might have imagined the product perfectly, but if the data doesn’t support your supposition no investor will support you.
Take the time to do your research. Look at your target demographics, how well your competitors have performed and projected growth rates in your industry and similar statistics. Hard facts can’t be refuted, so the more of them you include in your business plan, the better. Not including any will make you appear amateurish, and could ruin your chances at making a solid first impression.
3. Being vague.
When you start developing your business idea, it may come to you in fuzzy terms. You might think of your new app as “some way” to help people cook breakfast, but that vague language isn’t going to cut it for serious investors and potential partners.
To make a good impression and solidify your business plan, you’ll need to be as detailed as possible. Explain exactly what the app is, exactly what it does, exactly how long it will take to develop and exactly how you plan to market it. This goes for every single section of your business plan. Plot out as many details as possible without deviating from your overall intentions.
Don’t underestimate the power of thoroughness.
4. Writing in a closed system.
You came up with your idea, you thought about it thoroughly, you did some Google searches to find data supporting your idea, and you spent weeks fleshing out the entire business plan in your basement. It’s comprehensive, well-researched, and well-written, but there’s one problem: you wrote in a closed system.
You didn’t get any outside opinions or feedback before completing your work, and in all likelihood, you failed to address significant problems that didn’t occur to you but would have to someone else. You prevent this by conducting market research or surveys about your product and talking to colleagues, family and friends.
5. Boring your reader.
The term “business plan” makes this document seem boring, and while it’s tough to liven up your financial spreadsheets, make your plan more exciting wherever you can. Talk about the possibilities for future expansion. Show your passionate for the idea. Write colloquially and informally, when appropriate, to reach your audience directly.
If you try to present your business as a series of numbers, nobody will want to read your plan. If you make it thrilling, people will see the personality behind the idea.
Think of your business plan as the foundation for the building that will one day be your company. It demands your full attention, your full effort and your full commitment. Invest the proper time and care into your business plan and it will support you as you turn your idea from speculation to reality.