Hi there. If you are in the process of writing your business plan, you’re in luck. If you avoid the following common errors, you are far likelier to reach your goals.
1. Make basic mistakes: If you leave out key info or get basic facts wrong, you’ll mess up your entire business plan. Your readers will then begin looking for other obvious mistakes in your research and will discredit your ability to understand your position in the market and how to reach your target audience. Do your homework so you’re familiar with standard industry practices. Educate yourself about distribution channels, price mark-ups, regulations, and legal and accounting matters. One error can ruin all your projections and assumptions.
2. Underestimate the competition: The worst thing you can say in a business plan is “There is no competition.” No matter how unique or terrific your product or service, if you don’t have competition, it means there’s no market for what you’re selling. Be sure to consider potential future competition once you’ve proven the concept.
3. Overestimate sales: When you launch a product or service that’s better, faster, or cheaper than the competitions’, it’s natural to assume customers will beat a path to your door. They won’t. Be realistic, even conservative, about how difficult it will be to build a customer base and how long it will take.
4. Plan more than one business at a time: Even though your business may eventually have a number of revenue streams, concentrate on one part of it at a time. Show you can be successful in one area before branching out.
5. Go it alone: Nobody can build a successful business alone. Strategic alliances, particularly with strong existing businesses, can improve your chances of success. And if you want your business to grow, you’ll need to attract and keep capable management and personnel. Show you can work well and creatively with others to leverage your resources.
6. Use “phantom” numbers: Don’t use financial projections just because they sound good. Don’t use “boilerplate” numbers: industry averages might not apply in your situation. Be able to substantiate where you got your numbers and why you made your financial assumptions. Always overestimate expenses and underestimate income.
7. Forget a “Sources and Use of Funds” statement: Financing sources want to see exactly how much money you’ll need, how you intend to use it, what money you’re contributing, and whether you are expecting to get funds from other sources. If you don’t include this information in a clear, concise format, you’ll confuse potential investors or lenders.
8. Omit an exit strategy: While you may plan on running your business forever, others who invest in your company want to know how they’ll get their money out. It’s usually not enough for them to just get an annual return; they will want a way to make their original investment “liquid.”
9. Lie: This is the best way to get a business plan rejected, increase the chances of your business failing, and ruin your reputation. While every business plan is developed with a certain degree of optimism, when the plan becomes fiction, you’re in trouble.
10. Under-develop the psychographic profile of your ideal client/customer: Money comes from people making decisions. If you don’t thoroughly understand the decision-making process of your preferred client or customer (the person who is most likely to buy what you are offering), you are setting yourself up for low ROIs of your marketing capital.