Business plans are usually put together for three reasons:
- For clarity and to fuel an action plan in developing a strategy around growing your business;
- To provide a backbone for your idea when trying to get money from investors;
- To show others (potential partners, executives, and mentors) what your vision is and how you plan to get there.
One of the many challenges of writing a business plan is that it is typically written for a number of audiences, and so the information within it must satisfy as many questions as possible while keeping it succinct and focused. The one thing you can guarantee is that no mentor, VC, or business professional who reviews your plan will come away thinking the exact same thing. The reason is because each person has their own interests in mind, and looks for specific points that help them make a decision.
So, while you will very likely run into some areas where you'll have to elaborate -- or perhaps alter -- your line of thinking, there are a few things you can do to help get your plan off on the right foot, no matter who might take a look at it. Don't put your business plan in danger of being discarded; avoid these 5 pitfalls:
1. Attaching Your Business Vision to Dated Technology or Declining Markets
When spelling out in your business plan the opportunity you see for a product or service, you can't just have a sense that the idea will have legs in the real world. A proper business plan (and anyone who you hope will give you money) will ensure you are setting yourself up for success. This means you must develop a business vision around something that will make an impact on an emerging or existing market. Those markets that are dwindling or are being taken over by new industries will make it incredibly difficult 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 enthused, because the number of people looking to buy something like that is incredibly small.
2. Not Acknowledging Your Weaknesses
To be a successful small business owner, you must know that it's impossible to do everything on your own. Mentors and investors don't expect you to successfully juggle the production, operation, administrative, marketing, and sales aspects of your business -- at least not for the long term. An impactful business plan will have a strategy for dealing with weaknesses. Don't convince yourself that investors won't provide funding if you draw attention to a challenge you struggle with. If you acknowledge only what you're good at, those that review your business plan will very likely ask the tough questions looking to uncover the contrary.
3. Identifying Your Core Customer as "Everyone"
There is no product or service that is everything to everyone. If there were, we'd all be driving around in the same car. The fact is, your product or service is specific and beneficial to an ideal type of customer, not anyone willing to fork over a handful of cash. It's tough to wrap your head around, particularly when you're just starting out, and when you need every customer possible to make your case. But as your business grows, you'll be positioned for success only when you aren't trying to please everyone that comes through your door. Your market research will not only help you target the "right" customer for your business, but will also help you determine the proper market size for your projections.
4. Having Unrealistic Growth Projections
Yes, a business plan will require you to do some legitimate math, and not just estimate what you believe to be the opportunity. You must first estimate your market size and use as many resources as you can to determine what kind of audience you're talking about. The stronger a position you can take as to what opportunity the market provides and how you can capture their attention, the more likely you are to secure funding. This includes understanding the market value (how much is spent by various types of customers), not just the market size. If you're looking to grow a presence online and want to display how you'll capture a sizeable market share of web traffic, you may use data from search engines to determine how many people are looking for keywords related to the products you provide as well.
5. Acknowledging Your Competitors, but Not Analyzing Them
It's common for new business owners to say, "We have no competitors," in hopes of appearing to be unique, but it's far more impressive to simply list your competitors as considerations when surveying the market. Listing your competitors is not a strategy against winning business from them. When putting together this section of your business plan, it's important to know as much as you can about the people you're going up against. It's important to be as objective as possible: What are they doing right? How are they succeeding? Why do customers choose them? Knowing this information helps you prepare your own strategy to differentiate your business from theirs.
What other business plan challenges did you have to face?
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