The first paragraph of this article provides a concise summary of the content. It discusses the common mistakes entrepreneurs make when writing a business plan, including providing too much information, ignoring weaknesses, misunderstanding distribution channels, inadequate competitive analysis, overlooking potential legal issues, failing to assess risks, and unsupported financial projections.
A 25-page business plan is always preferable to a 200-page one. Most investors have a mental checklist of specific points they look for in a business plan. Anything beyond these points is considered extraneous and can be off-putting. The goal of your business plan should be to present the key elements of your plan as succinctly and straightforwardly as possible. If there are additional details you feel are important, include them in an addendum and reference them in the main body of the plan.
Every business has weaknesses, and a good business plan addresses these issues directly. Ignoring or glossing over negative aspects of your business can be damaging and often fatal to your chances of securing investment. Investors are adept at identifying weaknesses in your product, service, or strategy. If they discover that you have not been completely honest, they will question what else you might be hiding. The best approach is to openly acknowledge these problems and provide a detailed action plan to address them.
Your understanding of distribution channels is crucial to your business plan. How your product reaches the market is one of the most important aspects of your plan, and your ability to articulate this strategy is critical. Avoid the temptation to list every possible channel; this only indicates a lack of a clear channel strategy.
A competitive analysis involves more than just listing your competitors. Investors want to know your competitors' strategic direction, core competencies, customer base, potential for strategic relationships or acquisitions, sales and support organization, funding position, and weaknesses. A lack of knowledge about your competition indicates a lack of preparation.
Investors are acutely aware of potential legal issues. If they are interested in your business proposal, they will conduct their own due diligence. However, it is best to address any potential legal issues during the plan review. If you have any doubts about potential legal issues, consult an attorney before meeting with an investor.
Risks are different from weaknesses in that they deal with future events that are usually outside your control. Consider market forces that could affect your business, such as new technology, e-commerce, and changes in consumer demand.
Your financial projections must be supported by data. Be prepared to provide a convincing rationale for your projections. The likelihood of securing funding is strongly correlated with the amount of research data supporting your projections.
Forbes and Entrepreneur are excellent resources for more information on writing a successful business plan.
