10 Common Business Planning Errors
#1 - Developing a 1 or 2 year business plan: Considering that most new businesses are not profitable in the first or second year, it would be challenging to instil confidence in your business concept with a 1 or 2 year business plan.
#2 - Assuming that the human resource section of the business plan is only relevant if you are hiring: In the case of a business that does not hire any staff in the first 3 years of business, the human resource section would be expected to account for the following components: a biography and job description for the owner, a list of business advisors and mentors along with biographies for each and a discussion that justifies the staffing decision.
#3 - Assuming that the operations section of the business plan is only relevant to product based businesses: The operations section is relevant to both service and product based businesses. The operations section for a service business should include: 1. a production process chart that identifies key steps involved in providing the service, 2. a list of vendors that supply products consumed throughout the delivery of the service and 3. in some cases an inventory plan would also be expected.
#4 - Treating the executive summary as simply a summary of the business plan: The executive summary is only successful if it compels the reader to continue to read the rest of the business plan. Think of your executive summary as 'packaging'. Not only does it need to reiterate the key points of your business plan but it needs to do so in a manner that communicates enthusiasm for, and confidence in, your business concept.
#5 - Using a chart of marketing activities to address the marketing section of the business plan: It would be challenging to convince the reader that your marketing activities will achieve your goals if the chart of marketing activities is not accompanied by a discussion rationalizing your marketing decisions.
#6 - Writing each section of the business plan in isolation of the rest: Although each section of the business plan has unique requirements, the story about your business concept must tie together from one section to the next. For example, the unique value that your business concept offers could be supported by your choice of suppliers, the type of people you hire etc..
#7 - Basing sales projections on goals or capacity: Sales projections are rather challenging to develop. The key to this exercise is to understand: 1. how long it will take for a marketing campaign to generate sales and 2. how much your close rate and referral rate will improve over the 3 year period of the business plan.
#8 - Assuming that price should be based on cost: Pricing can be based on competition, value, profit margin or cost: The best way to assign a price to your products or services is to consider all the pricing strategies available and identify the one most aligned with your market.
#9 - Hiding weakness or risk associated with a business concept: Investors will specifically look for risk in a business plan, as it is assumed to exist. If risk is not presented in the business plan the reader will assume you do not understand the risk you are undertaking, which will leave them with doubts about your level of expertise.
#10 - Understating risk mitigation strategies: Investors want to know that if they invest in your business they are going to get their money back. While they expect an element of risk they also expect that it would be accompanied by an appropriate risk management strategy.