Writing a sustainable and solid business plan is essential to business success; not only does it help with the entire decision-making progress but also makes it far more likely you’ll receive finance from investors.
Competitors exist in every industry; if there aren’t any competitors then it’s likely you’re operating in a dead market. When writing your business plan, ignoring your competitors and focusing on your own business instead of placing it in a wider market context is a common mistake. Your competitors will play a significant role in the decisions you make; what parts of the market you go after, what products or services you focus on, how you market and promote your ideas and other key business drivers. Ignoring competitors, and over-emphasising your own credentials, may put investors off as they may find it hard to be confident in your ability to run the business successfully.
Over-zealous financial projections
Realistic expectations are essential when writing a business plan: financial projections that are not attainable will both put investors off and make it hard for you to meet your targets. In many industries, start-ups take a standard route to growth and experience similar financial patterns regardless of their product or services. Caution is better than over-optimism when it comes to financial projections; things never work out as hoped and caution will show to an investor you’re a realistic entrepreneur.
Entrepreneurs often overestimated the size of their target market and therefore the number of customers likely to buy their products or services. This has a knock-on effect to all other tenets of the business plan, such as financial projections and growth predictions. This shows inexperience; businesses typically attempt to succeed in one or two smaller niches, building a customer base and growing organically, particularly in the early stages. It’s important to show a deep understanding of how firms attempt to gain market share; if in doubt, it’s better to underestimate your potential customers rather than overestimate them.
Superhuman time scales
Building a successful business takes time and a lot of it. When writing business plans first-time entrepreneurs often underestimate the time to important financial and logistical milestones. This, in turn, can skew financial projections and generally make the business plan untenable, seriously reducing the chance of gaining investment from banks and private investors. The fact that everything takes longer in business than you initially think is a widely repeated maxim; if you show no knowledge of this then you’ll come across as an amateur.
Inflating your idea
Even the best business ideas do not automatically translate into successful businesses; they still take plenty of hard work, dedicating and discipline to be brought to market. Yet some entrepreneurs overestimate the value of their idea and the value it brings to the business, while underestimating the importance of hard work and dedication. Investors will be less likely to invest in your business if you can’t show knowledge of how successful businesses are built and maintained.
Profit ahead of cash
Profit is understandably on every entrepreneur’s mind but in terms of business growth it’s better to focus on cash flow; in the early stages of your company sufficient liquidity will be essential to success. Very few businesses are profitable in their first few years of operation, and many fail because there isn’t enough cash in the company for all the required outgoings. Therefore an understanding of cash flow – and how it’s likely to stand in the early stages of the business – is essential when writing a business plan. Investors will want to know you’ll be able to keep your business afloat.