COMMON BUSINESS PLAN ERRORS THAT DESTROY BUSINESS FORMULATION
What are the challenges of a good business plan? What are some common pitfalls to be avoided in preparation of business plan? Do you know mistakes can arise in the process of trying to identify and analyze various sources of information for a business plan?
There are a lot of factors that affect the success or failure of a new business. One of these factors is your business plan. What are the common mistakes entrepreneurs make when writing a business plan? How can you avoid these mistakes? This article contains common business plan mistakes that must be avoided.
How to Avoid Pitfalls in Business Planning
Before listing the mistakes, you need to know what a business plan is. A business plan is a formal statement that describes the framework of your business. The business plan shows the goals of your business and it highlights the plans in place to achieve these goals and objectives. The business plan is ever moving, dynamic and it grows as your business grows or expands.
Many business owners recognize the importance of this plan. However, many people, after drawing up the business plan, discover that things are not going as smoothly as they expected.
Despite the perceived viability of their business idea, they get turned down by potential investors. This might be due to varied factors, but an underlying factor in many of these situations are the mistakes when writing the business plan. These are some common mistakes in writing a business plan:
1. Inadequate Research
This is one big mistake most entrepreneurs make when preparing a business plan for their business. No matter how good your business plan might look, if you have failed to do the proper amount of research, if you have analyzed data that are grossly inaccurate, your business is destined for failure.
Thus, learn all you possibly can about both your business and the industry. Serious-minded investors will ensure that your facts, figures, and research are accurate, so do not think you can do very little research and get away with it. Wrong information will harm your business.
2. Bad Risk Assessment
In every single business endeavor, there is an element of risk. If you write a business plan that fails to highlight the risks, the business plan will chase away any potential investors as there is no “risk-free” business. Therefore, do not hide your risks, or your weaknesses. Rather, let these be known along with the steps that you plan on implementing to deal with these risks.
3. Lack of Purpose or Objectives
This is one common business plan mistake business owners also make. The specific purpose of your business plan will affect the entire structure of the business plan. If your business plan lacks a specific purpose or objective, investors will not be interested in your business, and your business will fail in the end.
4. A Poorly Written Plan
Investors do not expect you to hire an English professor to help you write your business plan. However, they expect to see a well written detailed business plan. Thus, pay attention to your grammar, punctuation and other things. If your plan is poorly written, they will end up wondering to themselves what else is wrong with your business apart from your grammar. Therefore, before handing your business plan to any investors, read it thoroughly, nit-picking for errors and mistakes. Let the style of your writing attract the type of customers you want to appeal to. Ensure your style is constant throughout the plan.
5. Bad Presentation
This is one common business plan mistakes that people make. After writing a good plan, many do not present the plan well. If your presentation is sloppy, potential investors will not be impressed, and will not take you seriously. Thus, organize your plan well, have a friend proofread your work. If your “proof-reader’ is having problems understanding what you have written, or cannot find the section on “financials”, then it is time to revise your plan.
6. Too much Information
While your plan should be comprehensive and detailed, it should not overwhelm people or investors with too much information. This is one of the common mistakes in preparing a business plan that must be avoided. Thus, focus on the important components of your business, Make it clear and concise. Do not bog them with too many technical terms and details. Some successful business plan writers have said that if perchance you have excess information, you can create an appendix.
7. A lack of Competition
No matter how novel or ground-breaking your business idea might seem, the plain fact is that you have competition. No matter the business, you will have competitors, either direct competition or indirect competition. Another note of warning is that you should not focus too much on the competition, if you do, investors might start wondering if your business has any chance of thriving.
8. Bad Assumptions and Financial Projection
A business plan that does not delineate between facts and assumptions is going to run into trouble sooner or later. A bad financial projection is one of the common business plan mistakes. Therefore, ensure you have realistic projections. Do not inflate the true value of your business, or be overly optimistic about the future financial projections as this will chase away your investors
Business plans are one of the most important components of running a successful business. Take note of the common errors in business plan formulation stated in this article to avoid them and run a successful business. Let me know what you think via the comment box.