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The Most Common Business Plan Pitfalls and How to Avoid Them
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Every company benefits from an updated business plan. While it seems necessary for start-ups, it applies to established firms, too. An efficiently written business plan keeps the whole business on track in the process of execution of the company’s strategy and reaching its business goals. Business plan mistakes can result in anything ranging from small oversights to fatal errors for your business. It is even more important for the business who are at the funds raising stage, so the information they provide is accurate and none of your ideas are misleading and are in tune with the current market. To help you avoid your business plan from being discarded, here are some of the critical business plan mistakes to be careful with:
- Long and bulky Executive Summary The readers of business plan such as investors, bank institutions and key vendors start considering your business idea from reading the executive summary. Executive summary is a highlight of the most important items of your business plan in a concise but informative way. It should succinctly describe your compelling story on how a highly skilled team will deliver products or services to precisely defined target markets based on a consistent strategy. Besides, it should state the company’s value proposition on how their products or services will change the life of its customers for the better in a profitable way. In fact, many executive summaries are boring and state some business idea whose execution remains vague. Often, it is presented as just cut and paste of some sections from the introduction and some other parts of business plan. Therefore, there are high chances of the busy investor to move on to the next proposal, if executive summary does not provide a clear, convincing, and persuasive overview of the business.
- Attaching your value proposition to dated technology or dwindling markets When formulating in your business plan the opportunity you see for a product or service, you need to question it and can’t just assume that the idea has automatic demand in the real world. A professionally written business plan will assure you are setting up your business for success. This implies that you must develop a value proposition of your product or service that will change an emerging or existing market. Those markets that are shrinking or are being replaced by new industries will make it incredibly challenging for you to get funding. For instance, what would your reaction be if someone developed waterproof ink for typewriter ribbons? You wouldn’t necessarily be amazed, because the number of people looking to buy something like that is miniscule.
- Not knowing the target audience and segments A product or service that is everything to everyone does not exist. If that were so, we would all be using the same phone. In fact, your product or service is specific and advantageous to an ideal type of customer. Without defining your target market, you cannot reason how you will handle the fierce competition. There are competitors who are providing the same product and service. Investors trust their funds to companies that have completed and gained a complete knowledge of primary and secondary market. You must define your target market and outline how you will target this audience.
- Having unrealistic and aggressive growth projections Having read the executive summary, many investors jump straight to the financial section of the business plan. It is important that the assumptions and projections in this section to be realistic. Plans that show sales forecast, operating margin and revenues that are poorly reasoned, internally inconsistent or simply unrealistic significantly damage the credibility of the entire business plan. In opposite, sober, well-supported financial assumptions and projections communicate operational maturity and credibility. Benchmarking is an especially useful tool to use in your financial analysis. By comparing and basing your projections on the financial performance of public companies within your marketplace, you can prove that your assumptions and projections are achievable. Planium Pro makes your life easier in that regard. Finance section of the Planium Pro’s software provides an easy and quick benchmarking tool for a variety of industries so you can efficiently measure your projections and key ratios against your market averages.
- Acknowledging your competitors, but not researching them Many new businesses are too much inward-focused. Being confident about your product or service is certainly a good attitude. But there is risk that this could twist your idea of how it correlates with products and services of competitors who have been in the market for some time. Besides, quite often entrepreneurs also miss or underestimate the possibility of new entrants who could increase competitive pressure. Our recommendation is to learn as much as you can about the people you’re going up against and perform Competitor Analysis, based on their pricing, quality, service and distribution channels. Knowing this information helps you prepare your own strategy to differentiate your business from theirs.
Next Steps • Keep these critical mistakes in mind when writing your business plan. • If you have already started writing your plan, use Planium Pro software to ease your preparation and streamline the process. Join our Planium Pro to see all the benefits yourself. Read More We would be interested to receive comments from small-business owners on what mistakes you have made in business plan writing and how you fixed them.
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