Common Mistakes in Preparation of a Business Plan
Incomplete understanding of the business, not defining the target audience, not evaluating business risks, not defining a clear business model and unbelievable sales forecast are common mistakes in the preparation of a business plan.
You know the obvious reason to have a business plan, but there are various other good reasons such as setting objectives, making strategy, hiring new people, buying or leasing assets, seeking investments, and above all growing your exiting business. At one stage, you would like to invite investors, and they will look over your business plan. An unstructured plan not only makes a venture unattractive to an investor but also fails to provide the right direction to your business.
There is plenty of information on how to write a good business plan, yet many companies, especially start-ups, fail to write an impactful plan. Though there is no sort of thing like a perfect business plan exists, it needs to have useful content that reflects your business. When it comes to writing a business plan, most of the entrepreneurs make several mistakes that fall out of the approval of investors. Here are the common mistakes you may commit while preparing a business plan.
Incomplete understanding of the business
A business plan reflects the essence of a business. An investor will always like to see the success rate of your business. Most of the time, entrepreneurs fail to throw light on the detailed vision, which leads to ambiguity and pushes them away. To pitch an investor, you need to show how your business is unsurpassed and how they can benefit from it.
· Your business plan must corroborate with your mission statement. It must reflect the direction.
· Follow a basic structure that includes your company’s overview, offerings, business model, marketing strategy and operational strategy.
A well-defined business plan will help people analyse your business in a broader term.
Not Knowing the target audience
Without defining your target audience, you cannot justify how you will withstand the fierce competition. There are competitors who are selling out the same product and service. Investors look for companies that have complete knowledge of primary and secondary market research.
· You must define your target audience and outline how you will target the market.
· Mention the strategy you have been using to stand out
Not evaluating business risks
Ignoring business risks can endanger the growth of your company. An entrepreneur needs to follow a prudent concept. Of course, you will have to be savvy enough to grab opportunities, but at the same time, you must have an acute vision to see lurking threats and risks.
You need to take into account global trends. A sudden change in demand, increasing competition, political risks, and economic fluctuations can hamper the growth of your company. You must have a strategy to deal with these unexpected changes.
Not defining a transparent business model
Deciding a product or service for sale and deciding a business model are two different things. A business model is a strategy that a business will use to make profits over and above expenses.
· A right business model describes goods and services that a company offers
· Why do you think that your audience needs them?
A common mistake that entrepreneurs commit is they underestimate the cost of funding the business before it becomes profitable. If you need funds for your business, you will have to explain to a lender how you will continue to grow. Whether you apply for small business loans, no lender will fund your needs if your business model is ambiguously explained.
Unbelievable sales forecast
Whether you are selling a unique product or an existing product, you must have a marketing plan that will convert prospects into sales. You will have to analyse data, market trends, competition, and competitors’ strategy to see whether your approach will be beneficial.
You can predict short term and long-term performance based on sales forecast, and hence it must be as closely accurate as possible. It will lead to an effective allocation of resources and future growth.
Many young entrepreneurs make a plan based on a lot of conjectures. This will not only affect the growth of your business but also deter investors and creditors.
Making a business plan is no picnic. It must be detailed disclosing everything from your business model to marketing strategy. Try not to introduce vague ideas and unrealistic assumptions. Your business plan must aim at explaining how you will get from the current level to the next one.