Investors see a lot of business plans. And we mean a lot. Therefore, most investors know when you jump on an idea and when they need to pack up their briefcases and high-tail it away from you and your idea. Avoid these top 5 mistakes when writing your business plan and you may have a better chance of catching that investor’s eye!
- A prediction of outrageous profits
High profitability projections tend to indicate that the entrepreneur or business owner is underestimating costs and expenses. By projecting outrageous profits, business owners are suggesting that profits come above growth. Instead of focusing on profitability in your business plan, invest leftover money from costs and expenses into marketing for higher growth—and tell investors that this is what you plan to do. In addition, many “failed” business plans have incomplete or inaccurate financial projections. Be sure to fill your business plan with a realistic cash flow projection and breakdown of starting costs. One of the best ways to project accurate financials is by hiring a bookkeeper or accountant.
- Overshadowing details with “big picture” visions
Entrepreneurs tend to be “big picture”-driven. Because of this, business plans may become clouded with larger-than-life thinking without enough attention paid to the important small details. Make sure that your business plan illustrates the economics of a single unit.
- Inflating the market
An investor will never believe that your online harmonica company is going to bring in a market of 8 million people. It is important to be realistic when it comes to defining your target market in the business plan that you present to investors. It’s better to skeptical and to make low-ball assumptions than to completely inflate your market and have your plan be considered inaccurate.
- Lack of a competitive analysis
To write a business plan without making note of your competition is a big mistake. It doesn’t matter how much research you’ve done: your business idea will have a competitor (sometimes, a boatload of them!). Be sure to highlight three to five competitors in detail in your business plan and be prepared to have three reasons that your product or service will be better than theirs.
- Boasting adjectives
Game-changing. Ground-breaking. Market-killing. Leave these words to your marketing and advertising departments, not to your initial business plan. Your business idea should speak for itself—no overwhelming adjectives need to be incorporated. Although you are selling your idea, you are not producing an advertisement. Keep it clean, keep it simple and keep it honest.