The reality is a professional business plan can take several revisions before it’s completed. Before you move ahead with your business plan read these common mistakes to avoid, and make note of our business plan writing suggestions.
1. No Market Research
This is the invisible mistake! Your business plan might look perfect, but when you go to implement it you’re wondering where all your customers are.
It’s an incredibly good idea to perform market research prior to investing in a business plan. Not many people do, because well, they’re excited, they’re extremely confident in their concept, or they don’t understand the importance of market research.
Market Research Example
Let’s take Ella for example.
Ella wants to create a virtual wedding planning business. Instead of just starting her business plan she wants to make sure that there’s a market for virtual weddings. In order to perform an unbiased market research study, she creates a multiple-choice questionnaire for 100 different couples that have got engaged in the past 3 months.
The questionnaire asks:
What sort of wedding do you plan on having?
A) Conventional
B) Destination
C) Open To Ideas
How much would you like to spend on your wedding?
A) 0 – $2,000
B) $2,000 – $10,000
C) $10,000 +
Would you consider having a virtual wedding for less than $2,000?
A) Yes
B) No
Out of the 100 couples, a whopping 60% were open to ideas other than a conventional or destination wedding. 55% would like to spend 0 – $2,000. Although, when asked the most crucial question: Would you consider having a virtual wedding for less than $2,000? Only 1 couple responded yes.
Some may look at that as 1% of the entire wedding market, but Ella decides it could as easily have been 2% or even 0%. Instead of using her hard earned money to develop a business plan and invest in the company, she decided to walk away from this opportunity.
Market research can take time, money, and can be a serious downer if you find out there isn’t a market for your business concept. You don’t necessarily have to, but it’s an excellent idea to prove the market viability of your concept before you invest your time, money, and energy.
2. Long-Winded Writing
Sentences that never seem to end. This is an excellent way to bore your audience and make them lose interest in a perfectly good concept.
What are entrepreneurs thinking? It’s pretty clear: “Filling up my business plan with lots of words will benefit me because it shows my audience that I can write lots, and therefore my business plan will be successful.”
Hold on a minute.
Less is More
Go into writing your business plan with the mindset that you need to use the least amount of words possible. This will force you to simplify your writing and refine each segment of your plan.
Your audience and your future self will love you for this!
Let’s take a common part of your business plan for example the mission and vision statement. The best mission and vision statements are condensed into a few words; subsequently, providing more impact. Below we’ll provide a few sample mission statements. Honestly, which is more impactful?
Long-Winded Mission Statement
Facebook: “Founded in 2004, Facebook’s mission is to give people the power to build community and bring the world closer together. People use Facebook to stay connected with friends and family, to discover what’s going on in the world, and to share and express what matters to them.”
Short but Impactful Mission Statements
Tesla: “To accelerate the world’s transition to sustainable energy.”
Harley Davidson: “We fulfill dreams of personal freedom.”
Disney: “Creating happiness through magical experiences.”
Just Write Clean!
By “writing clean” we mean to leave all the junk out. Condense your writing into what is necessary. In doing this, you as the business owner will understand which parts of your business are essential, and once you have the essentials you can expand on what is necessary to eloquently present your business.
2. No Competitive Advantage
Look, you’re only cheating yourself on this one. If you can’t clearly articulate what separates your business from your competition you will have a losing business plan.
What’s a Competitive Advantage?
A competitive advantage may also be described as a business strategy, unique selling point, unique selling proposition, unique value proposition, point of difference, unique offering, or unique perceived benefit. At the end of the day, all of these terms point to a “unique offering, competitive advantage, or differentiator” to the competition.
In order to develop a defendable competitive advantage, you first must develop a competitor analysis. Your competitor analysis will divide your industry into different segments, separating your competition by which division they fall under. Once you’ve divided your competitors into each market segment you must identify each of their unique offerings. Once you’ve done this you need to come up with an authentic competitive advantage for your business.
What are the 3 Business Strategies (Competitive Advantages)?
A) Cost Leadership: Wal-Mart is the greatest example of this. Wal-Mart’s prices “can not be beaten”. They have cemented a position as the cost leader of retail. We don’t recommend taking a position in cost leadership as it is extremely challenging to be a championed cost leader. Here’s why: when you have a few companies competing for cost leadership status it is often a race to zero, also known as a zero-sum competition.
B) Differentiation Strategy: The most commonly taken approach. Offering a different style of service, or a product that provides something distinct. Here’s a great example: Apple Inc. Apple has flawlessly differentiated their products by focusing on user-friendliness while using intelligent design.
C) Focus Strategy: A focus strategy chooses a demographic then reinvents products and services to meet the evolution of the chosen demographic. A prime example of a focus strategy would be Toys “R” Us. This company focuses on selling toys to kids. Rather than developing a product or service that is different their strategy is to hone in on their demographic by selling the most up to date products that will meet their evolving needs.
You need a competitive advantage (business strategy) in order to ensure the long-term success of your business.
3. Missing a SWOT Analysis
A SWOT Analysis identifies a company’s internal strengths and weaknesses (SW) and external opportunities and threats (OT) = SWOT Analysis. The best part about this is showing your audience that you can be truthful about two “negatives” being weaknesses and threats.
A business plan full of hype is a poor business plan. Your plan should be clear, evidence-based, and honest. By executing a proper SWOT Analysis you will not only impress your audience, but you will enable yourself to work on your weaknesses and prepare yourself for future threats.
At a minimum, you should aim to have at least 5 solid points for each segment. For further clarification don’t have 10 points for strengths, 1 weakness, 8 opportunities, and 2 threats. It is easy to identify lots of positives, but it takes transparency to identify equal positives and negatives; therefore, have at least 5 points for your strengths, weaknesses, opportunities, and threats.
4. Having One Management Team Member
Have you ever watched DragonsDen or Shark Tank? “What will I ever do if you get struck by lightning?”
Nobody wants to loan money or invest in a business that is owned and operated by one sole person. You need a succession plan, by having at least two capable management team members.
“But I can’t, I’m the only person involved.” There is always someone capable to be your co-pilot; it’s just a matter of putting it out there to the universe and going for it.
In our experience, having clients look for another management team member is one of the best parts of the process. It’s incredible how many people have a wonderfully qualified management team member close by, and never realize it.
By having at least two qualified, management team members you show potential investors and financiers that your business will continue regardless of whether you or your co-pilot are leading the team. An essential piece to securing the most strategic of investments or bank loans.
5. Unreasonable Financial Projections
Financial projections for a startup is like asking a kindergartner what they’re going to do with the rest of their life. Alright, that might have been a bit extreme, but hopefully, you get the point.
Look, every startup wants to believe that their financial forecast is promising, and I’m not saying that it can’t be. The majority of business plans portray their financials to be stronger than they actually are, so expect to be classified as a business that grossly overestimates their financial future. Moreover, you need to explain precisely why your financials will meet specific revenue, sales, or earnings projections.
Instead of being optimistic, you should be realistic.
Perform market research to justify how many people out of the number you reach will be interested in your product or service, and how many will actually move ahead with paying their hard-earned money for it. Unfortunately, your Mom doesn’t count.
6. Outdated Business Plans
Hey, your business plan for that store that sells stuff online might be a little out of date.
In our business plan review service, we come across this all the time.
Once completed, your business plan should be updated every quarter (3 months). The same rule applies to a new business concept. Any longer than 3 months and you need to review and revise the plan.
Remember, your plan might be completed but the economy is still moving, so what may have been a revolutionary idea can turn into old news within a matter of months. Keep your business plan fresh, and get it in motion.
7. Poor Presentation
When it comes to the presentation of a business plan I can honestly say that our Creative Director develops the best business plans available. Look, that is the icing on the cake. You don’t NEED the best business plans available to receive an investment, but it absolutely helps.
The presentation of your business plan is imperative. If the presentation is clean you’ll show that you’re organized. If the presentation is sloppy you’ll show that you’re disorganized. Honestly, who wants to work, invest, or lend money to someone who is disorganized when you don’t have to?
This doesn’t even take that much effort. Just ensure the continuity of spacing, fonts, borders, and color themes throughout the plan. As a rule of thumb: “less is more”. Make the design as clear and eligible as possible so your audience can read right through it.
8. Overly Detailed
To be clear: investors and financiers are looking for the goldilox business plan – not too long, detailed and not too short, unexpansive.
Going back to “Mistake 2. Long-Winded Writing” the paramount step is to write clearly and coherently. No dead weight, or loose ideas. Here’s the thing about clear and detailed writing: you need to know where to expand, and where to stop.
As a rule of thumb, your business plan should be no longer than 15 – 20 pages of text, which equates to around 3,500 – 5,000 words. Remember, that’s the long version; unless you’re writing a business plan for NASA.
So considering that “standard business plan size” you should be able to include an executive summary, mission statement, vision statement, company summary, market analysis, competitor analysis, market growth rate, business model, unique selling point, business pipeline, marketing strategy, key channels, financial projections, opening balance sheet, income statement, profit/loss statement, management team, key personnel, compensation summary and references within 15-20 pages.
9. Unreliable Sources
In nearly every business plan you’ll reference data to build your case and develop projections.
What are credible sources for your business plan?
https://www.statcan.gc.ca/eng/start
https://www.bloomberg.com/canada
https://www.economy.com/canada/indicators
https://data.worldbank.org/country/canada?view=chart
Unfortunately, we come across business plans that quote experts on quora, answerbag, and yahoo answers. This is the equivalent of quoting your great aunt’s political views from last year’s Christmas dinner!
The lesson here: use reliable, credible, trusted sources that will instill trust in your audience.
10. No Management Team Pictures
Your audience can build so much trust by just seeing a picture of you! So many people are concerned about what they look like to the point that they refuse to use a headshot photo. It doesn’t necessarily need to be anything fancy. Just take a picture of you being you. You have so much to gain, and well not much to lose at all. No one is going to judge you. The absence of a headshot photo is the real concern.
To Conclude 10 Common Business Plan Writing Mistakes
We hope this article sheds some light on what not to do, but also what you can do to create a winning business plan. Your business plan won’t be perfect, but by reading this article, and editing your plan you should get close to it.
We like to think of our clients as experts in their area, and us as experts in management consulting. Having a firm such as ours develop your business plan will likely be the best investment you’ll ever make; a business plan that is concise, implementable, and appealing to the senses.
Best of luck with your business plan. We’ll speak with you soon.
