Common mistakes in business plans
Common mistakes in business plans
A business plan is a written document that details a company’s key business functions, objectives, and plans to achieve those goals. It serves as a guide for how to start, run and grow a company. A business plan allows the company’s management to have a unified vision of the company’s goals and can also be used to secure investment funding. A good business plan should include a description of the company, its objectives, the product or service it offers, a market analysis of the industry and its competitors, a marketing and funding strategy, budget, and a prospective financial projection outlook.
A good business plan can help the entrepreneur turn his dreams into reality, while a bad one could lead to disappointment, failure and financial loss.
Here are some common mistakes people make when creating a business plan and how you can avoid them.
A business plan riddled with errors such as spelling and formatting errors will create a bad impression of the company. Avoid this by running spell-check or getting someone with the requisite skills to vet the plan. Use clear and concise language and make sure your formatting is consistent.
Undefined target market and audience
Entrepreneurs with a product or service without a specific target market have a high likelihood of failing. The business plan should detail how the product or service would be a good match for a specific user demographic, include marketing plans, and propose appropriate distribution channels.
Using unsubstantiated or outdated data can be detrimental to a business plan. Credible, authoritative and up-to-date resources on areas such as market trends, competitor analysis, size and market share, consumers’ purchasing habits and motivations should be used to help the entrepreneur better position and market his product or service.
Be sure that assumptions that you make about your business and its industry are realistic. Two common unrealistic assumptions are:
Financial projections: inflationary projections of future earnings should be avoided. Investors tend to be wary of overly optimistic plans that do not have concrete evidence to back them up.
Competition: believing that competition does not exist is a fallacious assumption. Emphasise the unique selling points of your product or service to help maximise your company’s competitive advantage.
Too long, too short or too vague
Instead of producing a 200-page business plan, focus on the key elements of the business such as marketing strategy and budget projections. Use visuals (graphs, charts, tables, maps) to illustrate your points. Further research data and technical details should go into an appendix.
Writing a good business plan takes time and effort, but it provides a handy road map to get a business up and running and convince investors to come on board.
Clarke, Andrew. “Top 10 business plan mistakes”. Entreprenuer. Accessed 17 February 2022, https://www.entrepreneur.com/article/81188
Full Scale. “Your plan is wrong: Common mistakes in business planning”. Published 7 April 2021, https://fullscale.io/blog/your-plan-is-wrong-common-mistakes-business-planning/
Hayes, Adam. “Business plan”. Investopedia. Updated 4 May 2022, https://www.investopedia.com/terms/b/business-plan.asp
Rhode Island Small Business Development Center. “Seven common business plan mistakes”. Accessed 17 February 2022, https://web.uri.edu/risbdc/seven-common-business-plan-mistakes/
Small Business BC. “10 common business plan mistakes”. Accessed 17 February 2022, https://smallbusinessbc.ca/article/10-common-business-plan-mistakes/