There is no single right way to produce a great business plan but there are a few definite things to avoid at all costs.
Steer clear of the following ten common mistakes and you’ll increase your chances of convincing potential investors that you really do mean business.
1. It’s not all about you
Your personal attributes are important and may be key to driving the business forward but prospective investors are more interested in the specifics of the project. Instead of promoting your expertise, dreams or past successes, focus your business plan on delivering answers and addressing any areas of concern your potential backers may have.
2. State your objective
Don’t neglect to give individuals a reason to invest in your project or business. Be specific about what they can expect to get back in return and what your objective is for the business going forward. If you want to build up the business to sell it, then say so; if this is a one-off project or part of a long-term strategy, make that clear to investors.
3. Don’t inflate the numbers
Even if you believe your business will enjoy exponential growth, be sensible when it comes to throwing in numbers. Show you’re a strategic thinker by rounding up revenue forecasts and be realistic about what you believe can be achieved in one, two, or three years down the line.
4. Market research
Your project is not an aspiration but a well-thought out plan based on solid market research. Data from a Google search won’t cut it, so show you’ve done your homework and understand how the market works, where the need for your products or service exists and the niche or gap you aim to fill.
You may have a great idea but you have to convince investors there’s a real demand for it. For example, if you’ve tested it on the market, explain briefly how well your product was received.
5. Don’t forget your USP
Don’t forget to say what it is that makes your business special. If you have a unique selling point say what it is and how this differentiates you from what your competitors are doing. If what you have to offer is an improvement or iteration of what already exists, say how this will give you an advantage.
6. Don’t dismiss the competition
Even if you have an exceptional and unique product, you’re likely to have some competition – if not now, then in future. Don’t try and pretend otherwise or dismiss the competition.
Backers will be more interested in seeing that you’ve considered how competitors may react, what this could mean for your business, and what your strategy will be in response.
7. What are the risks?
There are always risks in every venture. It’s important that you show potential investors that you have considered what these are, including market demand, competition, resources, supply lines etc., and how you would deal with a worse-case scenario. Of course, the flip side of risk is reward so don’t neglect to articulate the potential for growth by using simple graphics, where possible.
8. Don’t underestimate the resources you need
As a start-up, you may be operating from home and have fairly modest overheads, but as your business grows, you will need more resources.
Don’t neglect to factor in future costs to cover moving to bigger premises, buying new equipment, taking on staff, paying suppliers, consultant fees, and any other expenses you may incur in order to achieve the kind of growth you predict.
9. Serious investors aren’t naïve
Remember, serious investors will carry out due diligence before deciding to put money into your business, so make sure you are totally honest with them at all times. Don’t be tempted to exaggerate what the business can achieve or has already achieved to date. By all means, be positive in your predictions but never try and mislead investors.
10. Keep your business plan up-to-date
You may be lucky and get the backing you need at the first attempt but getting your business off the ground could take some time. It’s important to keep abreast of what’s going on in the market and change or adapt your business plan as required. Presenting a plan that doesn’t reflect the current market or business environment will make you look out of touch and could scupper your chances of attracting investors.
Read this guide for further information on creating your business plan.