Editor's Note:
Developing your business plan is essential. If you are using
it for the purpose of securing financing, consider that there are
many mistakes that mean 90% of business plans are turned down on
the first pass.
Even if you aren't
looking for financial assistance but are developing your business
plan for your own reasons, it only makes sense to avoid these
mistakes. If these business plan omissions and mistakes are
inadequate for financial institutions, should you risk your
finances and time on anything less?
Top 10 Mistakes Made in Business Plans
by: Jan B. King
Lenders and investors may see hundreds of business plans in a
single day. Make your business plan stand out against the rest, and
avoid these common mistakes.
1. Not proving that you have the management expertise to make it
happen. The quality of your people will lend credibility to your
ideas and even to your financial projections. If your management
team is not as strong as it could be, join forces with a great board
of advisors.
2. Not demonstrating where your revenue will come from - what
customers pay you and why they pay you. Don’t be too aggressive in
setting revenue projections or you will undermine your credibility.
3. Not proving that your business model and long term cost
structure is good enough to make a real profit. How will your
business make money - what is your margin structure, what are your
costs?
4. Not being clear enough in your product description to allow
the reader to quickly see the need and the niche for this product.
It may seem obvious to you, but not so to the reader not educated in
your business.
5. Not proving that the market opportunity is big enough to get
interested in. How big is your market now and what will it look like
in 5 years?
6. Not adequately acknowledging your competition. Investors know
that if there is no perceived competition, there may be no market
for what you are offering. The better you can describe your
competition, the better you understand your market, and the more
likely you will dominate it.
7. Not writing for the target audience. Although the core is the
same, the plan should be written for the perspective of banks,
equity investors, and others. Go as far as you can to tailor each
plan to the audience’s specific interests to show you’ve done
your homework and know to whom you are talking.
8. Starting with a boring, unenthusiastic executive summary. This
is the first section to be read, and if it isn’t exciting the rest
may never be seen. Make it fun and be enthusiastic. It should stand
alone and generate interest for more. It deserves all the thought
you would put into a professionally done promotional piece for your
customers.
9. Poor presentation. If you have typos and grammatical errors in
your business plan, the reader will assume the work you do in your
business is sloppy too.
10. Saying too much. Keep the entire plan to a maximum of 30
pages, with an executive summary of 3 pages or less. If investors
are interested, they will ask for any other information they need.
Amateurs talk in the business plan about unimportant details because
they don’t know what they should say and what they shouldn’t.
Hire a professional editor to reduce the page count and help you
emphasize your strengths.
About The Author
Jan B. King is the former President & CEO of Merritt
Publishing, one of the 50 largest woman-owned and run businesses in
Los Angeles and the author of Business Plans to Game Plans: A
Practical System for Turning Strategies into Action (John Wiley
& Sons, 2004). She has helped hundreds of small businesses turn
their business plans into game plans with her book and her ebooks,
The Do-It-Yourself Business Plan Workbook, and The Do-It-Yourself
Game Plan Workbook. Visit her site at www.janbking.com
for more information.
jan@janbking.com
