Getting a new business off the ground is never easy. Increase your chances of success by avoiding these common business plan mistakes.
1. Giving top-down financial projections
Don’t base your entire business plan on capturing a certain percentage of the market. Your investors will think that you are being far too optimistic, and your chances of raising capital will be scuppered with just one question; what if you don’t achieve that market share? Show your investors you’ve thought about this by explaining exactly how you’ll grow your market share, and giving detailed timelines and projections.
2. Predicting exponential growth
The vast majority of businesses do not enjoy exponential growth. Even if you’re launching a social network, it’s unlikely that you’ll be the next Facebook or Twitter. That doesn’t mean that your business is doomed to fail, just that it needs to carve out a smaller niche, and find a realistic way of monetizing its smaller market share.
3. Claiming that you have no competition
Every business has competition. There may be no companies offering the same product or service as you in your local area, but all that means is that you have no direct competitors. You still have to contend with indirect competition. Let’s take cinemas as an example; a cinema’s direct competition comes from other cinemas, and from movie streaming and rental services. Their indirect competitors are other things that eat up people’s leisure time – such as video games, TV shows, and even pubs and gyms. Customers have a limited amount of time and money, and you need to persuade them to spend it with you.
4. Weak market research
Before you invest any money in your business plan, or ask anyone else to invest, make sure your research is airtight. Don’t just rely on a quick Google search. Download some relevant white papers, read some books about your industry, and do your own research too.
5. Failing to consider general expenses
Have you included insurance, taxes, utility bills and other day-to-day expenses in your plan? Forgetting one or more of those bills is all too easy, and it could throw off your financial predictions massively.
6. Poor understanding of cash flow
Cash flow is the bane of most small businesses. All too often, an otherwise viable business goes under because of a temporary cash flow problem. They have enough customers, but they can’t access money when they need it to pay bills. Make sure that your business plan factors in the possibility of late payments, unexpected expenses, or short term losses, and includes a buffer that will help you survive if things go wrong.
7. Failure to show an objective
If you’re looking for investors, you have to show them a reason to invest. Make it clear in your business plan how long it will take for the investor to get their money back, and how much more you expect to make for them.
Even if you aren’t seeking investment, it’s a good idea to include an objective in your business plan. Do you want to grow the business and then sell it? Do you plan to expand the business and offer franchise options to others? Are you making a “lifestyle business”? If you know what you want out of your business, it’s easier to measure success.
8. Failure to show real demand
Don’t make the mistake of assuming that demand exists just because you think a product would be awesome. It’s important to test the demand for your product – especially if you are planning to launch a business with high start-up costs. Consider testing the product on a small scale before you pour too much money into your idea.
9. Lack of Experience
Many new businesses fail because the person starting the business lacks the skills to run it. Be honest about your abilities. You may have a great idea for a restaurant, and you may have found the perfect premises and the best suppliers, but if you don’t know anything about catering, you should seriously consider hiring someone who does.
10. Failing to update your plan
Yes, it can take a couple of years to get your idea off the ground, but that doesn’t mean that you should rely on the same business plan year after year. Re-visit the plan every six months or so and update your financial predictions and competition sections. In addition, carry out new market research. Consumer tastes change, and you don’t want to launch into a market that is no longer interested in your product.
Related Post: Why Become an Entrepreneur
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