Business plans are written to attract investors, so even if you have a great idea for a start-up, a poorly written plan can shoot down your dream before it gets off the ground. Without a strong plan, there’s no way to plan for the future, anticipate challenges and opportunities, or hope for a decent chance for success.
What are the typical pitfalls that plague entrepreneurs’ business plans?
Procrastination. Some plans never get written at all. Either the entrepreneur wastes his time and energy talking about the great idea during lunch meetings or he’s waiting until all his ducks (the right time, the right people, etc.) are in a row. Before anything else happens, you have to get something down in writing. If this is truly important to you, make the time to get it done.
No clear purpose. Some plans fail because the author wants his or her product to be all things to all people. It can’t be done. Trying to encompass several business models, industries, and issues in one plan suggests a lack of focus.
Investors also want to know the purpose of the plan. It should therefore answer such basic questions as:
- What issue are you addressing and what’s your solution?
- Why should I invest in your idea and not someone else’s?
- When can I expect to make back my initial investment?
- What’s your anticipated ROI?
- Are you seeking cash for your endeavor or do you need resources?
A clear purpose, communicated with enthusiasm, will draw investors to your plan.
Fuzzy forecasts. Some business plans get carried away, promising wildly optimistic financial projections of anticipated growth. Savvy investors can quickly determine whether your plan is based in reality or if it’s bypassing industry trends altogether.
Another business plan shortcoming: a lack of detail. Without a specific forecast of monthly and yearly milestones, accurate financials and detailed responsibilities, what do you have? A good plan outlines when things will happen and who will make them happen.
At the same time, a business plan with overly detailed projections of the next five or 10 years invite investor skepticism. Who knows what may occur over this time-span? Focus on how you’ll translate your great idea into a viable business model within twelve months.
Poorly researched target market. Too many plans lack a clear and credible breakdown of how the business will gain access to its target market. Have you identified your intended customer base? Why would they buy your product/service rather than a competitor’s? What’s your strategy for selling your product in a cost-effective way?
Lack of knowledge of competition. It’s nice to think your idea is unlike anything anyone’s ever thought of before. More likely, it’s a promising twist on an existing product or service – which means your fledgling business will face competition once it gets going. Too many business plans fail to take this into account. They either ignore the competition or neglect to gauge its impact on their proposed idea.
Investors won’t buy into ignoring or underestimating the competitive element, so you shouldn’t either. You need to demonstrate that you have a comprehensive understanding of the marketplace.
Badly written. A rambling, poorly organized and badly written business plan can be the stake in the heart of your entrepreneurial dream. Some plans get caught up in obscure industry jargon, losing the interest of investors who have no special knowledge of the field. Other plans go on and on, when in fact you should be able to present your idea first in a compelling executive summary and then within the three to four pages, at most. Stay focused on the main points. Make ample use of bullet points that communicate your idea for investors who like to skim.
Your idea is only as good as the business plan you create around it. Write the plan, show it to some friends, incorporate their feedback and make it as strong as you possibly can.
For additional information:
U.S. Small Business Administration – Business Plan Template