If you have never attempted to write a business plan before, beware! The territory is full of traps and you want to do your best to avoid them. If you are reading this Insight, I suggest you also read the positive side of writing a business plan—look at three Venture Founders Tools: Business Model Planner, Business Model Canvas and Business Plan Outline.
Below is my list of mistakes that entrepreneurs make, learned from my own and those of many others. I have mentored many business plan writers and very often I get the response, “… oh yes, of course!” when I point things out, and it’s understandable that if you’re totally wrapped up in your venture, you can miss the obvious.
The biggest error by far, in my book, is putting off the day when you start work on your business plan, whether it’s on the back of a napkin or is 50 pages long with all the bells and whistles—or worse, deciding that one is not necessary.
The second biggest error is not to focus on the audience for the particular version of the business plan that you’re working on. Going for a bank loan is very different to seeking an investor; finding a co-founder is different to seeking a business partner. You may end up with several versions of the plan
1. Writing a ‘one size fits all’ document—be clear with yourself about the audience; the document will have different detail or slant depending upon what you expect from the reader.
2. Having no clear business model—how you will generate revenue?
3. Failing to grab the reader from the get-go—different readers will respond to different things, but first get attention and then support with data.
4. Underestimating or denying competition—too often I have read, “We have no direct competitors.” You may think you have none, but you’ll have prospects who won’t buy anything!
5. Making unrealistic projections for first sales or hockey stick growth—by then end of week one of the startup, you will know your projections are wrong: hope springs eternal.
6. Assuming it’s a ‘sure thing’ with no risk—hiding weaknesses or gaps will soon be spotted by the canny reader; a risk assessment will help to mitigate the chances of screwing up.
7. Failing to present a team, whatever form it takes—very few successful startups manage without a team, however visionary the leader; if there’s no money and no co-founder, you can build a virtual team.
8. Being casual about the numbers—omitting income statement, balance sheet or cash flow projection, or doing the numbers without some critical input is likely to lead you astray.
9. Raising money to fund your salary—no lender in their right mind will fund your salary, unless they already see a lot of your skin in the game, preferably in the form of fixed assets.
10. Being to hesitant or too boastful—it’s OK to have doubts about certain aspects, but be honest about them; lavish claims will almost certainly be discounted.
11. Using either jargon or ‘biz-speak’ and using hype—be precise and use language that will be immediately understood.
12. Using too many adjectives, especially superlatives—they will come across like exaggeration and the plan should be based on justifiable statements.
13. Including much ‘stuff’, especially ‘fluff’ —each time you edit the document, try to get rid of the inessential.
14. Having the same material in the summary that appears in the body text—do not copy and paste; the summary is a summary and should only be written when the final draft is complete.
15. Being inconsistent or leaving gaps in research—they will catch you out; the reader may well know the facts + check, check and check again.
16. Not having others whose opinion you value give you feedback—this could almost be the most important element of writing a business plan, before ever showing to your intended audience.
17. Poor editing and proofreading, no page numbering—make it easy for the reader to find their way on first and subsequent reading.
18. Forgetting a table of contents and consistent headings and subheadings—almost too obvious to state. The document must be easy to read and for the reader to find her way around.
19. Having to much detail in the main text instead of using appendices—that’s where detail belongs; tables are okay, but only if they concentrate on the main points.
20. Once it’s written, never looking at the plan again—it’s probably the best benchmark you will have, especially in the early stages, and will help you identify what went wrong.