A business plan is a blueprint of your business; what you want to achieve and how you plan to go about it. A well-written business plan can mean the difference between success and failure. Business plans may be internally or externally focused.
Depending on the target or goal of writing a business plan, it is always important to convey the ideas that will make the business succeed or attract the necessary funding needed if you are targeting an investor. These are nine of the common business plan mistakes that should be avoided.
1. No clear answer to “What problem are you solving?”
The problem you are solving should be very obvious to investor if you intend to raise money. Investors want to know what the problem is and how you intend to solve it right from the beginning of your pitch when you get the opportunity to present it. Your solution should be clear in your plan and be prepared to defend it passionately.
2. No clear specific, realistic and attainable goals and objectives.
What do you want to achieve? Set specific, measurable, attainable, relevant and time-bound goals. What do you want done in the first year? Break it down. What percentage of the product can be build in the first six months when begin intensive work on it? Are your goals realistic given the team and the resources you have.
3. Overestimating the value and desirability of your product.
How many people have you interviewed who are ready and willing to use your product once you launch it. Is there a need for your product? Have your verified your product? Get the basics right, find out if there is a need for it before you make an investment of time and resources into a product that may not sell as you expect.
4. Minimal market and competitive analysis to identify what you are up against.
Don’t underestimate your competition, they can crush you before you even start. You should be offering something better than what is currently on the market. Can you beat the competition? If you are thinking of killing eBay or Craiglist, think again. Acknowledge your competition and your weaknesses and take advantage of your strengths.
5. Overestimating market share, growth and revenue.
Your goal isn’t to fit in; you want your business plan to stand out and achieve it’s purpose. But what you don’t want is to overestimate how much market share you will capture by year two, three or four and no mention of how to defend and sustain that growth you are promising yourself and your potential partners.
Your competition have been in business for years and still cannot boast of greater percentage of the market share yet. Your market share, growth and revenue will not be as high as you expect even in third year. Prepare for the worst but work for the best.
6. Overly optimistic financial numbers.
Almost every business plan has “hockey stick” financial numbers. You start off with little or no revenue in the first year and by the third year or fourth year, your numbers are hitting the roof. That is simply unrealistic. Ask any practical entrepreneur and he or she will tell you the real situation on the ground. Forget what your business lecturer thought you because it never work out the way you planned it. Prepare for surprises.
7. Not enough detail on how the capital will be used…
If you are requesting for funds, your potential investors want to know how you intend to use that money. You should clearly spell out how much goes into employee salary, marketing, and how much will go into the actual development of your product (that is what you want to focus on when you don’t have a product yet.)
8. Using a template with limited changes.
Business plan templates have worked in the past for first-time entrepreneurs. Most entrepreneurs still rely on niche business plan templates to quickly put together a great plan they can work with. Don’t just use any template without making the necessary changes to reflect your exact needs.
9. Underestimation of the financing required.
If you intend to seek funds from investors, the worst thing you don’t want to do it to request funds that will get you nowhere. Of course, you also don’t want to seek too much money you don’t need. Access your present situation, work out what can take to you break-even point, and request what you really need to go the extra mile.
Savvy entrepreneurs should focus far more on building actual products and the eventual pivot points than on sticking to a written plan. Don’t waste too much time on your business plan. Business plans are about business execution and management gets to work as soon as possible.