10 Business Plan Blunders
Business Plan Disasters
Ten disastrous mistakes made in business plans
Listening to the StartupNation podcast this morning (it’s like 4:39am), I came across a discussion how to improve the chances of a young business. To begin the topic, they started with a reverse top-ten list on business plan mistakes. I want to remember it so that’s why I’m writing and publishing it here.
10. Over-diversification
When entrepreneurs get an idea, it’s not uncommon for them to see many opportunities surrounding that idea, not to mention further ideas built around it. With all this excitement, it can make focussing on the key opportunity difficult. Ultimately, this leads to trying to achieve too many things at the same time, all while getting nowhere.
9. No Target Market
Small business simply do not have the budget to market to the entire population, new businesses need to begin by targeting a market. “A target market with a screaming need is always going to be one that’s easier to roll out your service or product to… You don’t have to do as much selling.” Also, customers who are in your target market are more likely to promote your business by word of mouth.
8. Unrealistic Profitability
Profitability projections are difficult because being too conservative might make feasible opportunities seem unfeasible while extreme optimism can be very risky and lead to substantial loss. Providing rational reasoning and proof for profit projections is one way to improve realisticness.
7. No Sales Assumptions
Similarly to projected profitablity, projected sales can’t just be pulled from thin air. The details on how the sales figures were derived need to be included in the business plan and are arguably more important than the figures themselves.
6. Legal Problems
One of the more obvious issues in startups, legal problems are still a very common issue. Things such as intellectual property, employment agreements, and contracts need to be considered. When approaching investors, full disclosure of legal issues is encouraged because it creates the opportunity to discuss and solutions to avoid legal risks.
5. Failure To Address Risk
It’s important to look objectively at the business opportunity and analyse the risks. If there ways to avoid risk, they need to be explored and recorded in the business plan. When risks are external and uncontrollable, consider solutions that can mitigate the risk. Considering and addressing risks can be the difference between success and failure.
4. Competitive Analysis
A business plan needs to analyse the competitors - not just list them. Competitors can have heavy influence on a business’ sales and profitability. By actually analysing competitors, a business can often discover more effective processes and methods. For brialliant, feasible business opportunitities, the competitive analysis should actually be an effective selling point. A SWOT analysis should address competitors, too.
3. Lack of Integration
The two primary components of a business plan, the narrative and the numbers need to be consistent and “tell the same story”. This problem is often a result of a combintion of previous issues such as bad sales assumptions and unlrealistic profitability. All quantitative assumptions in a business plan need to be justified with logical evidence, explained and linked - this will improve consistency between the narrative and the numbers.
2. No Distribution Strategy
Without distributions, sales can not be made, revenue is negative and profits are non-existent. A business’ distribution strategy is to profits as our heart is to human life.
1. Not Disclosing Weaknesses
Although one of the most challenging tasks while writing it, considering the weaknesses of a business opportunity is one of the most useful functions of a business plan. It provides opportunity to explore contingency plans and ways to avoid exploitation of weaknesses. Being honest about weaknesses is extremely important when approaching investors - it is more likely to build credibility in your business plan, anyway.
Thank you to StartupNation’s episode ‘8 Secrets to Startup Success’ for this list! If you liked this, you might want to consider joining StartupNation’s online entrepreneur community.
Tags: advice, business, business plan, list, mistakes, reference