There are many common business plan mistakes to avoid when you’re getting off the ground. But if you know how to avoid pitfalls in business planning, you can build a plan that gives you a solid foundation for the future and provides a number of benefits. This is an important part of securing funding and getting your business going—you don’t want to get it wrong.
Here are our top seven business plan mistakes you should avoid:
1. Being Unrealistic
You don’t want to make this process overwhelming for yourself or anyone else who reads your plan. You want to be realistic with your expectations and the information in your business plan. Your plan shouldn’t represent the best possible scenario, but a realistic one. It should address the current realities of the market and any potential challenges.
A successful business plan can stay realistic by handling some key areas:
- Address Competition: A common mistake in a business plan is assuming you have little or no competition. Even if your product or service is unique, you will have to target certain customers and attract them to spend money with your business over others. Be prepared to address how you will entice customers and compete in the marketplace.
- Financial Projections: Avoid over-inflating or padding your earning projections. An intelligent lender will see through it and may even consider it against you when deciding whether to lend you money. It only hurts your business to be unrealistic from the start.
- Customer Base: With brick-and-mortar businesses, you need to address local customers and the demographics of your area. Businesses without a digital presence—or a small digital presence—must be able to rely on local customers. A business plan should address this potential issue.
- Market Research: A business plan should include realistic market research data to establish customer interest, competitor performance metrics, and market trends. The viability of your business depends on a realistic assessment of who will pay for your products or services.
Avoid unrealistic promises or guarantees in a business plan. Hyperbolic language is unlikely to sell your business plan to investors. They will make that decision for themselves.
2. Too Long
Your business plan is not meant to be a doctoral dissertation. Figure out what to avoid in your business plan—don’t make it too long just for the sake of it. A longer plan isn’t necessarily a better plan, which investors will quickly realize. Adding filler content will only distract from your message and make you look like an amateur.
Investors have a lot of plans to look over, so concise language that answers important questions is vital for a successful business plan. You should focus on answering questions like:
- How will the company make money?
- Who are your competitors, and how will you beat them?
- Who is ready to buy the product or service?
- What are the risks to the investors?
- What are the potential benefits for all involved?
- How much capital is required to get the business off the ground?
- How will the business be formed? (i.e. LLC, corporation, partnership)
You should try to stick to these important details. You can always clarify the finer details of your business later on when investors ask but get them interested first. Don’t put them to sleep with an unnecessarily long plan.
3. Too Vague/Lacks Clarity
Business plans need to be concise. If someone with a high school education doesn’t understand your plan, you should probably rewrite it. While you may need more complicated details, later on, your initial plan should catch a person’s attention quickly and easily. Plans that are too long are often vague, lacking the clarity they need to win over investors.
Your business plan should be direct about what you want and how the business will work. Keep details short and honest to keep the document clear throughout. If your business plan outlines a clear message, you’re more likely to attract investors and get your business started the right way.
4. Lacks Supporting Evidence
Business plans are full of assumptions, but they need evidence to back them up. An effective plan highlights these assumptions and directly connects them with evidence that supports them—don’t bury this evidence or put it at the end of a plan. Keep them together to support all your contentions.
Learn everything you can about your proposed business and the market you’re about to enter. The more informed you are, the better your plan will be.
Well-prepared investors will double-check your math and facts. If you make a statement about how your business will perform or something you can achieve, make sure it has supporting evidence. Good supporting evidence to have included, but isn’t limited to:
- Information about your consumer market
- Competitor data
- Supply chain requirements
- Product and other business costs
- Research into customer need for product or service
5. Not Addressing Your Weaknesses
Every investor knows there are potential risks and that a new business may have a weakness. Address this head-on — don’t hide them or choose not to address them at all. You need to identify your weaknesses in advance and include them in your business plan.
With any weakness, you identify, also identify how you will overcome or mitigate it. An investor wants to see that you have what it takes to succeed in the difficult business market. Support your statements with evidence and any experience you’ve had with overcoming these challenges in the past. Keep this section short and be ready to address it in detail if you need to.
There’s no need to spend a lot of time discussing your weaknesses, but be honest about them.
6. Poor Drafting
Poor drafting in a business plan can kill it before it even gets considered. Typos, inconsistencies, and grammatical mistakes show a lack of care. Investors will think: “If they can’t do this well, why would they run a successful business?” And, when you need them to see you as the successful entrepreneur you will be, you don’t want to make them assume the worst of you.
Make sure your formatting looks consistent throughout the document. Check for issues with font, spacing, and readability. Re-read the plan many times and have others review it for you—have people you trust pick it apart and ask lots of questions.
If you know someone with grammatical expertise or who is good at editing, let them look over the document and suggest edits. The help of a trusted friend can do a lot in creating a quality business plan free of errors.
Investors have a lot of business proposals to get through. If yours is riddled with errors, they will likely just move on. Make your plan stand out in the right way by making sure it’s well drafted and free of errors.
7. Not Making One
Many people are excited about getting the business started, but not the mundane act of putting together their business plan. When you don’t make a plan, you’re likely to get lost on certain crucial details. A plan puts this together for you and gives you an outline of how to get your business off the ground.
Many people choose not to make a business plan unless someone makes it for them. A business plan is not just for other people — it’s for you and your staff. It’s a guideline for what you want to achieve and how to get there.
Pre-planning helps you stay away from common pitfalls to avoid in business planning, making your business succeed. You should prioritize making a business plan to keep yourself on track.
Hopefully, this list removes a barrier to making your business plan, by making you more confident in knowing how to avoid pitfalls in business planning. Start building your own business plan today, using a template or a document builder to guide you through the process.
Build Your Business Plan
You can build your own business plan with this free business plan template. It outlines important sections and helps you get started, so you don’t have to start from scratch and risk making any common mistakes in writing a business plan.
Use a business plan template builder to get started. With a strong business plan in hand, you can pursue investors and get your future started.