Whether it is a new business or an expansion of a present business, you will need to write a business plan that is uniquely tailored to your situation. Here is a list of the 10 most common problems with business plan preparations.
1. No clear plan for progress
First of all, you must make it clear to the reader just what the business is, and that you can reach the goals outlined in your plan. Avoid broad, unsubstantiated statements like “It is a known fact…” If you cannot support statements with good, solid data, then don’t make them. Show prior successes; write detailed sales plans with numbers and schedules. Talk about previous marketing efforts and compare them with future marketing efforts.
Many plans describe where the business is now and talk about the markets they will sell to and how much money they will make, but present no step-by-step method to get there. Lenders want real facts. Be able to support everything you say, every number in your projections. Vague ideas, circuitous statements and shot-in-the dark guesses just won’t do.
2. Failing to describe the product in layman’s terms
Be clear, in simple language, what you are doing or making. In general, product description isn’t tool helpful for running the business, except that it leads you to question how you designed your product, and if it is right for the market. Avoid talking about the product too much, and when you do, avoid using a lot of industry jargon. Lenders will not be inclined to approve a loan or provide financing if they cannot tell what the business is. Pretending that you are explaining your product to a group of 10-year olds will do the trick.
3. Lack of market and competitor research
You must show where you fit in your market and you must know the details of your competitors’ products. List your competitors and identify their strengths and weaknesses. If possible, include estimates of their market shares and profit levels. Everyone has competitors, and to say that “We have no competition” in a business plan is almost a sure predictor of failure. To run a company effectively you have to know them and respect them.
4. Incomplete financials
Provide financials that are detailed enough that a reviewer can make guesses about your accuracy, including a clear and complete list of assumptions that form your financials. You must show actual figures if you have them. It is also advisable to have monthly figures at least for the first year; while tedious, it shows your foresight in getting through the slow months of your business. Most importantly, make sure that your numbers make sense. Review them thoroughly to ensure consistency in all sections, and back-up with facts and sensible plan every growth assumptions that you make.
>> RELATED: Free Sample Business Plans
5. Huge appendixes
The business plan should include supporting materials such as brochures, resumes of key managers, technical papers, summaries of market research studies, references from people acquainted with the company or founders. However, the idea that a heavier document is more impressive doesn’t work here. Be careful not to go into too much detail.
6. Bad Grammar
Nothing turns off a prospective investor faster than a poorly written business plan. If you think that your writing is not at par, get a good editor. And review, review and review.
7. Too little detail.
There are some principals who write four-page plans and feel they have nothing more to say. Use the outline as a crutch and keep researching and writing. Also, many of you who write four-page plans think businesses don’t need plans and that you can do it all from your head. If you want investors, you must have a plan.
8. The overall plan is too long
Avoid being excessively wordy in your plan. Forty pages or fewer is ideal for attracting investors; eighty pages is definitely too long, especially when you can reduce it just to 15 pages. Stick to the facts, state them clearly, and do not repeat them unnecessarily. The goal is not to write a long business plan, but a good business plan.
9. Overuse of Acronyms
As much as possible, reduce the use of acronyms in the plan, making your readers go back and reread the definition. If the full name is too tedious to type out, consider renaming it.
Organize your plan carefully and put each fact and plan in only one place, the place where it tells the story the best way. People who read business plans appreciate brevity and view it as an indication of your ability to identify and describe in an organized manner the important factors that will determine the success of your business.
Recommended Books on Writing a Business Plan:
- How to Write a Business Plan: Create Your Strategy; Forecast Your Finances; Produce a Persuasive Plan (Sunday Times Creating Success)
- The Right-Brain Business Plan: A Creative, Visual Map for Success
- Writing a Convincing Business Plan (Barron’s Business Library)
- The One Page Business Plan for the Creative Entrepreneur
- 8 Common Business Plan Mistakes
- Why You, Why Now – A Critical Component of a Winning Business Plan
- Do You Need a Business Plan?
- Basics of a Business Plan
- How to Maintain Your Business Plan