Successful businesses run based on an up-to-date business plan, particularly if you have a need to secure outside funding to launch or grow your business. In order to make your business plan turn into a document that you can actually use to run your business, it’s best to avoid these 5 common mistakes when writing a business plan.
- Unrealistic Financials. Nothing makes a funder more annoyed than reading a business plan that shows the business is starting with less than $10,000 and in the first year will do $2 Million in revenue. If you do not have an accounting background, you should have an accountant or seasoned bookkeeper working with you to develop your numbers. Plus, if you are writing a business plan– using business plan software such as Business Plan Pro they offer readymade formulas that can really cut down on any guesswork you may find yourself doing. Also If you take a business plan course to complete your roadmap to success like I suggest in my book Become Your Own Boss in 12 Months, your instructor will also have information and resources that can help your complete your budget and financial projections.
- Lack of Competitive Analysis. Do not believe that there’s no competition for your product or service. It’s a big mistake. Your customer’s need is being met by some business even if it’s not exactly like yours. You should make sure that you can highlight 3-5 competitors in detail in your business plan, and more than that you should have three reasons each how you will be different in the marketplace. And here’s a big tip, if you have competitors that also shows there’s a viable market for your product or service, provided there’s not some 800 pound gorilla competitor such as Microsoft, Comcast, or MTV. Even then, those businesses can be taken down by drilling down a niche that they’re not serving well, but you need a lot of resources to compete with the big boys.
- Lack of a Business Case. You should think of your business plan ultimately like a sales document. You need investors, partners, employees and even your spouse to buy into what you are trying to accomplish with your new business. You need to have real data to back up your claims about the market opportunity. Start by capturing your industry financial ratios, then use data marketing companies to support any industry background and market share claims. www.bizminer.com and www.hoovers.com are good resources for this kind of data. I would also use demographic stats and trade industry data as well. You want anyone who reads your business plan to understand that you really know your industry.
- Lack of Scaled Operations. It’s great to use your business plan to show how sales are going to start ramping up, but sales do not just happen — you need people to execute the production and delivery side of your business. It’s important to show how your staff and operation processes will expand to meet the projected growth in your business. It’s terrific that family members, two freelancers and a couple of interns are the team driving the business at first, but what will you do the day to get an order that triples the size of your business? Map out how your supply chain will grow with the company.
- Lack of Update. Your business plan is not a historical document that belongs in a museum. In the first few years of a business, your business plan should be reviewed and updated every two — three months to make sure your business is on the right track. Your business plan is really a hypothesis of what you think is going to happen in your business, it will change once your business is exposed to the marketplace. The biggest issue you’ll need to manage is cash flow and responding to slow or fast growth. Review and update your business plan with your accountant at least in the fourth quarter of every year, so that you start the new year with an updated budget and projections.
Melinda F. Emerson, known to many as SmallBizLady is one of America’s leading small business experts. As a seasoned entrepreneur, professional speaker, and small business coach, she develops audio, video and written content to fulfill her mission to end small business failure. As CEO of MFE Consulting LLC, Melinda educates entrepreneurs and Fortune 500 companies on subjects including small business start-up, business development and social media marketing. Forbes Magazine recently named her one of the Top 20 women for entrepreneurs to follow on Twitter. She hosts #SmallBizChat Wednesdays on Twitter 8-9pm ET for emerging entrepreneurs. She also publishes a resource blog www.succeedasyourownboss.com Melinda is also the author of the national bestseller Become Your Own Boss in 12 months; A Month-by-Month Guide to a Business That Works. (Adams Media 2010)