What to Avoid in Your Business Plan
A business plan is a useful guide for both start-ups and established companies but, if not done properly, a plan may actually hurt a business. There are several common mistakes you should avoid when creating your business plan, as it can affect not only your ability to implement the plan but also your chances of getting funding or financing for your venture.
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Procrastination
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Many business plans fail because the plan was written too late after the establishment of the business, or the plan was left incomplete. If you think you don't have enough time to write a business plan, try putting aside a set amount of time every day to work on the plan or hire a consultant to help you. Create a plan for your business before you launch and you'll be better prepared to deal with obstacles along the way.
Technical Language
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Using too much technical language or jargon in your business plan can make it difficult to read and leave readers bored or confused. If your business is in an industry that is particularly complex or has a lot of trade lingo, explain technical terms in simpler language to keep the reader engaged. Plain language will appeal to investors because it helps them understand your business.
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Over-emphasizing Profits
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Profits are easy to calculate, but they are not an accurate representation of a company's ability to pay its bills. A common mistake in a business plan is to place more emphasis on the profit and loss statement than on the cash flow statement. To manage cyclical cash flow, a well-constructed cash flow statement is an essential part of a business plan. The cash balance should never be negative; if it is, the company is not covering its costs and will fall behind on its expenses.
Inadequate Research
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If a business plan doesn't acknowledge risks or threats from competitors, chances are that not enough research was done on the business idea. Similarly, large, sweeping claims about the size of the market or the potential profits will be viewed as unrealistic without substantial credible research to back up any claims. Business planners need to have significant knowledge about who their customers are, who their competitors are and how much it costs to start up and run a company in a given industry. This information needs to be well-researched and articulated in the business plan.
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References
- Photo Credit Writing of business plan image by Vasyl Dudenko from Fotolia.com
