If you are writing a business plan for the first time, it is important to make sure you do not make any mistakes. Although there are many business plan templates available with instructions, you can still make mistakes if you do not follow them carefully.
I’ve seen a lot of business plans and there are some common mistakes people make.
What is the biggest mistake when preparing a business plan?
The worst thing you can do when it comes to your business is to not plan ahead at all. Although everyone doesn’t need to sit down and write out an entire business plan, it’s still important to map out a general plan for where you want your business to go. This way, you can change and adapt your plans as needed, but you’ll always have a general idea of where you want your business to be.
19 common business plan mistakes to avoid
Assuming you’ve at least decided that you should do some business planning, here are the top business plan mistakes to avoid:
1. Not taking the planning process seriously
It’s a bad idea to write a business plan just so you can have something to show a loan officer at the bank. If you don’t take the planning process seriously, it will look like you don’t care about your business and haven’t thought about how it will succeed.
Instead of rushing through the planning process, take the time to really understand how your business will be successful. This will improve your chances with lenders and investors and help you run a better business in the long run.
2. Not having a defined purpose for your business plan
The reason for writing a business plan is to ensure everyone is on the same page with the company’s strategy. Having a plan also allows for transparency and accountability to avoid any confusion or waste of time on areas that are not important.
3. Not writing for the right audience
Consider your audience when writing your business plan. This is especially critical for businesses in the technology and medical industries. If your reader will not understand the specialized vocabulary you use to describe your business, then they will not understand your business. On the other hand, if your audience is composed of industry insiders, make sure to write in the language they understand.
4. Writing a business plan that’s too long
Instead of writing a book, focus on making your business plan as short as possible. Start with a one-page plan to keep things concise. You can always include additional details in an appendix or in follow-up documents if your reader needs more information.
5. Not doing enough research
Although you don’t need to spend a lot of time researching, your business plan should show that you knows your industry well, who your target market is, and who your competitors are. If you don’t know this essential information, it will appear that you are not ready to launch your business. To make things more manageable, follow this four-step process to ensure you do a thorough initial market analysis.
6. Not defining your target market
Do not think that your products are for “everyone”. Start by targeting a specific group like college students, and then gradually expand to other markets. Knowing your target market is important to investors as it shows that you are clear about who you are selling to and that your product is designed for a specific group.
7. Failing to establish a sound business model
Every business needs a way to make money. Your business plan needs to explain who your customers are and what they pay you. Financial projections show your path to profitability. Without a real business model, it will be difficult to show that you have a viable path to success.
8. Failing to showcase current traction and milestones
Great business plans contain more than just a list of ideas; they also show that the business has already seen some success. This could be in the form of pre-orders from a Kickstarter campaign or initial contracts that have been signed with customers. The more commitment that can be demonstrated, the better, but even simple expressed interest from potential customers is a form of traction. Milestones are the next steps in the business plan, including what is going to be done and when it is going to be done. Make sure to include an estimated timeline for future milestones in the plan.
9. Having unrealistic financial projections
It’s rare for sales to start at zero and then skyrocket. If your financial projections look too good to be true, it’s worth taking a closer look. Investors don’t want you to be too conservative, but your forecast should be based in reality and easy to explain.
You don’t need exact numbers when you first start out. You can make general assumptions and compare them to competitive benchmarks to set a baseline for your business. The key is to develop reasonable projections that you and any external parties can reference and see as viable.
10. Ignoring your competitors
Pretending that you don’t have any competitors is a mistake that many people make. It might be easy to say that you don’t have any rivals, but that would be taking the easy way out. There is always competition for every business, even if the competitors offer a different solution to the same problem. For example, the early competition for Henry Ford’s automobiles were not other cars, but horse-drawn carriages.
11. Missing organizational or team information
It’s common not to have hired everyone you’ll need when starting a business. The mistake people make is not including in their business plan that there are still key positions to fill. Your business plan should highlight the key roles you plan to hire for and the types of people needed. This is important when pitching to investors to show that you’re thinking ahead.
12. Inconsistent information and mistakes
Proofread your plan before sending it out to avoid any discrepancies, such as different numerical values.
13. Including incomplete financial information
If you want your business plan to be complete, you need to include a full financial forecast. This area is often neglected because it seems challenging, but using a tool like LivePlan can make the process easy. Your forecast should include Profit and Loss, Cash Flow, and Balance Sheet, as well as additional detail related to your sales forecast. For example, if you run a subscription business, you should include information about your churn rate and customer retention.
14. Adding too much information
Don’t try to put everything you know about your business, your industry, and your target market into your business plan. Keep it concise so that people will read it. A simple plan will engage your reader and could prompt follow-up requests for additional information.
The most important thing to focus on when writing a business plan is the executive summary, as this is what will determine whether or not you get a meeting with investors or whether your team will actually read the plan. Other details can be pushed into the appendix or left out altogether, as they are not critical to the main purpose of the business plan.
What should not be included in a business plan?
Here are a few things to leave out of your plan:
- Full resumes of each team member. Just hit the highlights.
- Detailed technical explanations or schematics of how your product works. Put these in the appendix or just leave them out completely.
- A long history of your industry. A few sentences should be enough.
- Detailed market research. Yes, you want market research but just include the summary of your findings, not all the data.
Make sure to include:
- Executive summary.
- Financial projections.
- Market research (just a summary)
- Competition overview
- Funding needs (if you’re raising money)
15. Having no one review your plan
It is beneficial to have other people review your work as you progress. You are not required to please everyone or follow every suggestion, but you should pay attention to recurring themes in the feedback and make changes accordingly.
It can be helpful to have someone else look over your work for typos and errors, as well as to get a second opinion on areas of your plan that may be confusing. You could also hire a professional to give your plan a more thorough analysis.
16. Never revisiting your business plan
No business plan is ever going to be 100% accurate and things will never go according to plan. Just like when you set out on a road trip and have a plan to reach your final destination as well as an idea of how you’re going to get there, things can always change along the way and you may need to adjust your route.
Nearly every business owner knows that a business plan is crucial to the success of their enterprise, but what many don’t realize is that this process should be ongoing. As your business develops, so too should your plans for it. A well-maintained business plan will do more than just help you get funding – it will also keep you focused on your goals, and ensure that you’re allocating your resources in the most efficient way possible. Make sure to schedule regular review sessions for your business plan, and to make time for these sessions in your company’s day-to-day operations.
17. Not using your business plan to manage your business
You need to regularly revisit and revise your business plan if you want to use it to effectively manage your business. This will help you stay on track with your goals and budget. Your business plan is a valuable tool that can help you steer your business towards success. You can use it to set sales goals and create a growth strategy.
With a plan in place, you can manage your business’s cash flow and growth more effectively, rather than having to guess and live with uncertainty about the future.
18.Preferring quantity over quality
This is a common mistake among beginner entrepreneurs who think that more is always better. They try to offer a wide range of products, even if they are not related, and promote through all available channels. This approach often leads to unsuccessful campaigns and disillusionment among the target audience.
You would rather have quality over quantity, especially because you would be alone and have to do all the work by yourself.
If a product or promotion method does not work, you can try another one and see clearer results. Once you know what works, you can focus on that.
People who think that the more products you offer, the more customers will buy are especially true for dropshipping businesses. This is because there is no need to purchase goods in advance when you dropship. You can import hundreds of products without having to worry about unsold stuff.
19.Planning too long
Waiting too long to take action on your business can become your worst mistake. Business is no joke and Requires serious planning, determination, and Courage. Many people fail but are afraid to even try because of the Fear of failing.
Some risks can’t be calculated, so you shouldn’t wait too long to start a venture.
How a business planning and management tool helps you avoid mistakes
Writing a business plan does not have to be a daunting task. You can find free templates and advice on this website. However, doing it on your own can slow the process down, lead to mistakes, and keep you from actually working on building your business. Consider using a planning tool, like LivePlan, which features step-by-step guidance and financial forecasting tools to help you through the process.
LivePlan can help you focus on what you need in your plan, and save time on formatting and presentation. It can also help you build strong financial models that you can trust, without worrying about getting everything right in a spreadsheet. Finally, it can turn your plan into a management tool that will help you compare your forecasts to your actual results, so you can track your progress and make adjustments as needed.
A well-crafted business plan created with LivePlan can help you achieve your business goals, whether you’re seeking investment funding, trying to secure a loan, or simply want to run your business more efficiently.
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