by Brock Carter
Published Fri, Aug 12th 2016, 16:09 | Business
A business plan is quite integral for the success of any business. However, many business plans lack the properties which must be present in them and therefore, result in a number of losses. In order to obtain the complete benefits of a business plan, you must ensure that it is not full of errors. Don’t know how to do that? Here’s a list of Mistakes to avoid when building your business plan:
1. Making an Incomplete Plan
This is one of the most important Mistakes to avoid when building your business plan. Any business is based on several factors such as customers, operations, services, competitors and products (there are more factors too!). Any business and finance plan must cover all of these factors to be termed as a ‘complete’ plan. Ignore any one of them and the plan would become quite ineffective. In addition, a plan must have other information and features such as trends of the industry or financial forecasts before it becomes a ‘complete’ plan.
2. The Plan has many Unnecessary Details
Creating a business plan which is full of irrelevant details is among the crucial Mistakes to avoid when building your business plan too. It is essential for you to avoid getting into complicated details (especially during a technology based startup) while making your business plan. If you wish to have an idea of what you are up to, write down such details in an appendix. Do not mention them in the business plan. Otherwise, the plan may be rendered useless.
3. Making Unrealistic Assumptions
It is obvious that assumptions are an important part of a business plan- you just cannot have a business plan without assumptions. However, a good business plan has realistic assumptions which are then supported by some sort of facts or reasoning. Alternatively, a bad business plan is full of useless and unbacked assumptions and lacks proper facts. In such a plan, it is difficult to figure out where the assumptions have ended and where the facts have begun. Truly, making unrealistic assumptions is among the most critical Mistakes to avoid when building your business plan.
4. Not Mentioning Initial Financial Needs Clearly
Mentioning financial requirements does not mean that you have to write something like: “I need 500,000 dollars”. Your plan must contain all the financial needs and present them in a clear manner. This would allow the reader to understand your plan easily. Having a detailed outline of all the needs also helps you in determining your costs. This allows you to arrange for adequate finances as well (You do not want to run out of money in the middle of a startup!)
5. Creating an Unclear Plan
While writing a business plan, you must keep in mind that it must be easy to read and understand. Nobody wants to be sitting for hours in order to determine the underlying meaning of your business plan. Creating an unclear plan is one of the most popular Mistakes to avoid when building your business plan. If you do not want to disclose confidential information in your plan, provide people with an executive summary. If anyone wants to know more, give him a clear business plan after getting him to sign a non-disclosure contract.
6. Lack of Research
A business plan which does not have necessary facts in it is not a business plan at all. Now, in order to get your hands on some nice and solid facts, you must do some good quality research. Not doing sufficient research is another item on this list of Mistakes to avoid when building your business plan. You must try and find out every piece of important information regarding your business and sector. Some important things to know include, but are not limited to: fears and motivations of the customers, market share and size of the competitors and trends prevailing in the market.
Also, make sure that you have sufficient statistical facts in your plan too. Investors tend to check the numbers or charts that you have in your plan. They then compare the data you have with theirs- if they are similar, you get funded and if not, you don’t get it anything from the investors.
7. Underestimating Competition
Yet another extremely common error among these Mistakes to avoid when building your business plan is claiming that you have no competition at all or underestimating it. You must understand that you cannot have a business without any competition. If you do not have any competitors at present, do not think this would be the case forever. Eventually, when you will get successful, you will have to face competition. Prepare for that.
8. Terming your Business as a ‘Risk-Free’ One
It is impossible for any business to be free of risks. This fact is well known to almost every single experienced investor or businessman in the world. Therefore, you should not state that your business is risk-free. It is advisable for you to avoid discussing risks in your business plan, but this does not imply that you should claim that your business does not have any risks at all. Even if you do mention risks, do not get into unnecessary details and remember to mention the ways in which you will counter them.
It does not matter whether you like risks or not- you will have to learn about them, devise strategies to mitigate them and be prepared to answer questions regarding them.
9. Making an Inconsistent Plan
When a plan is written by more than a single person, there are high chances of inconsistencies emerging into the final document when all the small parts are combined. Do ensure that your plan is consistent. Otherwise, the results can be quite displeasing.
A business plan is one of the most important factors influencing the success of any business. In order to reap the numerous benefits of a business plan, you must try to make it perfect. Avoiding the mistakes mentioned above can help you in creating a great business plan.