A business plan can serve many functions. It’s a document to understand and communicate how your business is put together, a tool to help track your progress, and it can even help you secure funding.
Whether you’re crafting a plan to plot the course of your company or as a pitch to potential investors, here are some mistakes to avoid.
1. Not having a business plan
Some budding entrepreneurs believe they only need a business plan when seeking finance while others are focused on different things and don’t make time for it. But the document is a powerful management tool for both new and established businesses to ensure their day-to-day operations are aligning with overall objectives.
A business plan highlights:
- Goals and objectives
- Opportunities and threats in your industry
- Potential customers and their buying behaviours
- Your company’s strengths and weaknesses
- Financial position now and predictions for the future
- Your company offering to suppliers, lenders, and new employees
If you’re really stuck, find a professional who can guide you through the process. They should be able to fill in any knowledge gaps, provide unbiased feedback and package your plan in a concise format.
2. Missing information
No two business plans are the same, but regardless of a company’s size, structure or stage of growth, the document requires some key elements. If your business plan is missing any of the points below, it may not be as effective as you’d like and could inhibit you from obtaining finance.
Make sure you include:
- Executive summary
- Business snapshot
- Product or service offering
- Goals, milestones, strategies
- The competitive landscape
- Financial statement
As you write your business plan, come back to this list as a guide to ensure your plan has covered the basics.
3. Skipping numbers
The financial statement is the most important part of your document and often readers will go there first. If numbers are missing your business plan may not look professional and it could be difficult to be taken seriously. The figures should include three key financial statements:
- Profit and loss (or income) statement
- Balance sheet
- Cash flow statement.
If the plan is for expansion of an existing business, your statements will be based on current financial data. If the business is a start-up, your statements will be projections.
If you’re stuck, your accountant, a business plan template or the many accounting software tools available can help guide you on what to include.
4. Glossing over weaknesses
One of the trickiest aspects of writing a business plan is highlighting the problems and risks your business faces. It’s important to be honest so you’re aware of challenges ahead and can prepare for them. It can also help you avoid confrontation with external stakeholders later on.
The best way to address problems and risks is to clearly identify what they are and outline an action plan. Some risks to consider include new entrants, new technology, legislative issues as well as changes in consumer demand and the broader economy.
5. The plan is too detailed
Some business plans are packed with technical details, dense text and industry jargon. This can be off-putting to readers and can prevent people from understanding your business. Measure your plan by readability rather than page count. It should leave a reader with a general idea of its contents after a 15-minute skim. Some tips to keep your business plan interesting:
- Format, headings, white space and illustrations enhance readability
- Charts help make data easier to absorb
- Consider photographs and drawings to show locations, products and services
- Summaries help identify the key points quickly
You can put technical details or research data in a separate white paper or appendix. This way, the reader can quickly get the amount of detail they require.
6. Keeping things to yourself
Ask people who may have some experience building a business to look at your business plan and give you feedback. This is particularly necessary if there are any parts you’re unsure of or are struggling to understand.
7. Not consulting or updating your plan
Business aims and circumstances change monthly, weekly and even daily. While it’s important to use your business plan to guide you, it’s also important to make sure that the objectives and goals are still accurate.
Revisit and update your business plan to:
- Remind yourself of your goals and priorities
- Assess whether your strategies are working
- Adapt to change in your environment
- Seize new opportunities.