Seven Common Business Plan Mistakes
1. Poorly written. While your business plan is not supposed to be a work of classic literature, it’s important that it be grammatically correct and free of spelling errors. A business plan full of typos sends a very bad message about your attention to detail. If you can’t get your business plan right, why would a potential investor think you can manage the details of your operation?
2. Incomplete. Don’t leave anything out of your plan. Essential elements of every business plan include a discussion of your target customers, your goods or services, your operations, your marketing and sales, your management team, and your competition. A description of your market and the inclusion of detailed financial figures and projections are essential as well. Neglecting to address any of these elements leaves a major hole in your plan.
3. Too vague—or too detailed. It’s important to be specific when it comes to market analysis, financial projections, your marketing plan, and other aspects of the plan. If the reader is left with key questions, you need to add details to the plan. On the other hand, it’s important not to get bogged down in technical details. An overview of your products and services is generally sufficient.
4. Unrealistic expectations. It can be tempting to rely on rosy projections concerning revenue, demand, and expenses—but doing so is a mistake. If your plan doesn’t appear feasible when the projections are realistic, you need to change your business model. In addition, unrealistic projections will destroy your credibility and call the rest of your plan into question.
5. Not written for the right audience. There are a variety of uses for a business plan. You’ll need it to secure financing from banks and investors, you’ll use it for long-term planning, and you’ll use it to communicate your vision to your management team. Your plan should not be one-size-fits-all. Create a version for banks, investors, managers, and for personal reflection. Tailor each version to be most helpful to the specific audience.
6. Pricing mistakes. Startup companies, in particular, often make the mistake of entering a market while charging far too little for their products and services. While low prices can be a good method for securing business quickly, they also define the quality of your products and services. Give careful thought to price levels before entering a market—because it’s not easy to escape a perception of your business as “low quality.”
7. Paying somebody else to write it. Writing a business plan takes time and effort. Many entrepreneurs and small business owners are tempted to delegate it to an employee or an outside consultant. Either decision is a mistake for two major reasons. One, because writing your business plan will force you to adopt a healthy long-term view of your company. And two, because you can’t afford mistakes in a plan that you’ll be presenting to potential investors, partners, or lenders. Bite the bullet and invest the time and energy—you won’t regret it.
A Business Plan format that I recommend as a starting place for most business is The One Page Business Plan.