There are many elements of a great business plan, and it often takes multiple iterations to get right. It is also not a one-and-done deal. Your business plan should be revisited on regular basis, as it truly is the best way to document what your business is and where it is going. Despite the importance of business plans, many professionals routinely rush through their plan, consequently resulting in small and potentially fatal errors for their business.
In this article, we outline some of the most common business planning mistakes.
1. Little market research
A common mistake that businesses make is not taking the time to do proper market analysis. In fact, this is one of the top reasons that startup businesses fail. Your business can build a great product, but a great product doesn’t necessarily translate into a successful business. Taking the time to understand the market and customers you are building the product or service for is a vital step. Some questions that all startups need to ask is:
What is the target demographic?
Where do they live?
What industry do they work in?
How do they [target demographic] communicate? How can you reach your target market?
What are the current trends in this market?
What is important to them? What pushes them to make a purchase?
What would be the biggest objections to purchasing your product/service?
Primary research such as surveys, focus groups, and observation, are common ways to generate data. Data from secondary research will also give a high‑level overview of market opportunities. A well‑designed market research plan is an absolute necessity - it can help determine whether or not there's a viable market for your products and/or services.
For further information on how to conduct market research, book a meeting with iota consultants today.
2. Unrealistic financial metrics
If you have ever watched a season of Shark Tank or Dragon’s Den, you will be very familiar with this mistake. It is common that many entrepreneurs are overly optimistic about the value of their company and/or their financial projections. If you are an entrepreneur that wants funding, you must paint a realistic picture of your business. Remember that nobody wins by overly optimistic forecasts. Be realistic and use numbers to back your data up.
For this section of the business plan, we suggest to include a sales forecast, expenses budget, cash-flow statement, income projections, assets & liabilities, and breakeven analysis.
3. Underestimate, camouflage, or hide your weaknesses
Don’t try to underestimate, camouflage, or hide your weaknesses. This isn’t an interview; don't try to twist your weaknesses into strengths. Every business has its weaknesses. The best way to address your weaknesses is to simply state them.
4. Little focus on the competition
You may think your plan is unique until you look at the competition. Rarely is there ‘no competition’. Avoiding to mention your competition will not convince investors to fund you. You should absolutely have a competition analysis section in the business plan. Remember to (i) focus on your niche, (ii) focus on how you differentiate from your competitors, and (iii) how you plan to compete in the marketplace.
We suggest that you ask the following questions when you have identified your main competitors:
What are your competitors' strengths? (i.e, price, service, convenience, etc)
What are your competitors' weaknesses?
What are your competitors' objectives?
How can you take market share away from them?
What are their marketing strategies?
How will they respond when you enter the market?
5. Plan is too vague, too detailed, or poorly written
These are all too common problems when it comes to writing business plans. We get it; business plans can be tough to write! It is important to get third party opinions - your co-founders, friends, colleagues, etc. These people can help identify silly errors in spelling and grammar or gaps in logic.
Alternatively, there are some qualified businesses and consultants (like iota consultants) that can help you write or review your business plan. If you are interested in business planning that works, contact us today!
Any other business plan mistakes that you often come across? Let us know!