There are many elements that make a good business plan. It often takes time, patience and many revisions before you get it right. Unfortunately when rushing to get your funding in place and launch your business, your plan can get neglected. Below we have highlighted a few of the very common business plan mistakes:
1. Unrealistic Financial Projections
Most Canadians are familiar with the businesses on CBC’s Dragons’ Den who grossly overestimate the value of their company and are chastised and shot down by the dragons. It’s one of the most common business plan mistakes. Lenders and investors expect to be shown a realistic picture of where your business is now and where it hopes to be, therefore if the plan is overly optimistic with no explanation of the projections, it will ring warning bells and cause the plan to be rejected.
2. Not Defining the Target Audience
No business will appeal to everyone. You must define your specific target market, present how you have made these assumptions and outline how you will specifically target this market.
Need help defining your target market and learning about primary and secondary market research? Small Business BC offers seminars on market research (hyperlink) and one-on-one consultations with an in-house market research expert.
You may believe your business idea is the next big thing but you need to be able to back-up your claim. Over-hyping your business idea and littering your plan with superlatives like hottest and greatest does not substantiate your product or service. Wow them with you business idea, research and financial plan, not with the words you think they want to hear.
4. Bad Research
All research must be double checked and substantiated. By using incorrect or out of date information you will discredit your business idea and the remainder of the plan.
5. No Focus on your Competition
Even if you think you have a ‘unique’ business idea and are sure that no other business like yours exists, check and double check. There is no such thing as no competition. Even if your business is one of kind, it comes down to the dollar; if your business didn’t exist, but the customers’ need still existed, where would they spend their money?
Equally if you highlight your competition too much the investor will worry that the business will not survive. Focus on your niche, what differentiates you from the competition, how you plan to compete in the marketplace and paint accurate picture of what the industry is like now and where you see it going in the future.
6. Hiding Your Weaknesses
Do not hide your weaknesses but do not highlight them too much. Every business has its weaknesses but by hiding them or highlighting them too much you will put off the investor. The only way to address these weaknesses is to include a detailed strategy of how you plan address these problems.
7. Not Knowing your Distribution Channels
Have a secure plan how to provide your service or distribute your product. Including all possible channels in your plan without substantiating why these are the correct channels and how they will reach your target market will make the investor assume that you have just thought of the list off the top of your head. The ability to articulate your strategy about how your product or service will reach your client is vital.
8. Including Too Much Information
If you were an investor, would you want to read a 200 page business plan? Most investors have a mental checklist of 10 to 12 points that they are looking for in the plan, everything else just gets in the way. The purpose of your plan is not to demonstrate the depth of your knowledge but to focus on the key elements of your business. Clear and concise writing is always appreciated and if you have additional information which you would like to include in the document, create an appendix.
9. Being Inconsistent
Highlighting different target markets, quoting conflicting statistics or having competing strategies within a plan will make an investor challenge whether you know your business and its market well enough. Sections of plans are often written on different days or by different people and then pasted together into one document resulting in inconsistency. Take time to review each section of your business plan.
10. One Writer, One Reader
Make sure you ask several people to review your plan before submitting it. It is easy for you to glaze over spelling mistakes and grammatical errors because you know the information inside and out. Another set of eyes will help your plan to look more professional and ensure that it reads correctly.
Need Help Reviewing Your Business Plan?
Small Business BC’s business advisors can objectively review you business plan and provide feedback with resources of how to improve the plan through our Business Plan Review Advisory Service.