If your business requires investment, then it is likely you will have to write a business plan. Writing a business plan is not that difficult just as long as you understand what the potential investor is expecting to see.
Below are some of the common business plan mistakes made by entrepreneurs.
1. They Don’t Understand The Purpose Of The Plan
A business plan is a sales document where you are trying to sell your business to the investor. The whole document should be tailored to the needs of the audience. A business plan is not the place for detailed product descriptions and narratives.
2. They Don’t Sell Their Business In The Executive Summary
The Executive Summary should summarise the main points of your business plan. It is likely the Executive Summary will be the only part of their business plan that will be read. An Executive Summary is a selling tool, not just for your business, but for the rest of your business plan.
The Executive Summary is your opportunity to sell your business or business idea. You need to prove that your business is unique, viable, profitable, and you have the expertise and people to make it happen.
3. They Don’t Explain How This Will Achieve Targets
Stating how many sales you will make or the revenue targets you will hit is not enough. You should explain how you plan to achieve your targets. Your marketing and sales plans should demonstrate how you will engage with your target market and how you convince them to buy your product or service.
It is also not enough to calculate the market size and then say you will capture a small percentage. It will not convince an investor unless they have specific industry knowledge and can understand the value proposition of your business.
4. There Is No Full Financial Model
This is an easy mistake to fix. You should include the full financial projections with your business plan as part of the appendix. If the investor is interested in your business, they will probably ask a financially minded person to double-check the financial model before they begin due diligence on the business.
When presenting the summary financials within the actual plan, include a narrative of what the financial models are trying to convey. Most investors will not understand the financial model by itself.
5. There Is No Acceptable Exit Strategy
Professional investors want to know how much money they will make and when they will get their money. The only realistic way this will happen is if you sell the business to a larger company. In your business plan mention, you believe the business will be valuable enough to be acquired from a larger business within 2-5 years.
IPOs and management buyouts are rare and do not appeal to investors.
No matter how good your business idea is if you make some of the mistakes above it will distract attention from the business; the potential investor will only focus on the flaws in your business plan.
The key to writing a good business plan remains the same, re-read it from an investor perspective and think if they have all the information they need to make a decision whether they will invest in your business.