Top 3 Fatal Business Plan Mistakes
After mentoring hundreds of business executives and students during the business plan creation process, I have collected the ultimate list of reasons why business plans are rejected or given a low grade. This article describes the top 3 reasons.
- The Business Plan Is Unfinished
The most common reason that business plans fail is because important parts are missing. The parts that are missing are often the hardest parts to write, and this is why they are missing. People simply put off writing them.
The industry trend section is one of those hard-to-write sections. However, it is a crucial section of the business plan that reveals growth projections for the industry that the business in. For example, is the industry shrinking or growing, and how does the company plan to handle this change?
The financial statements, including monthly cash flow, income statement, and annual balance sheet must be designed according to accounting standards in the country that the business plan is being pitched in. I cannot count the number of times I have seen a company from a foreign country with foreign financial statements try to pitch in the US. It just looks sloppy.
- The Business Plan Has “Hockey Stick” Profit Projections
The second largest problem with business plans is overly optimistic profit projections.
A graph where revenues grow slowly at first and then sky-rocket through the top of the page in a hockey stick shape are often laughed at by angel investors and venture capitalists because they see the same chart in every presentation. After 500 presentations with unrealistic profit projections, a reasonable and conservative presentation is refreshing and well received. If you are in doubt about your profit potential be less optimistic; otherwise, you will be unable to defend your proposal. Overall, try to avoid embarrassing moments like having to admit that you didn’t do proper research prior to presenting your plan.
Some business plans go so far as to claim that they have “no competition.” This is most likely always false unless your business plan is to run an ice-cream store on the moon.
- The Business Plan Has Spelling Mistakes
The most helpful tip I have tried for finding spelling mistakes is to read each sentence backwards, starting with the last sentence. For example, you would read this sentence as, “as sentence this read would you example for.” This method forces you to look at each word separately and keeps your mind from automatically filling in the correct spelling.
In order to find grammar and punctuation mistakes, read each sentence out loud, starting with the last sentence on the page. For example, I edited this page by first reading aloud the sentence, “she has helped several firms optimize their business strategies before pitching to angel investors in the local region.”
When in Doubt, Hire Professional Help
Writing a business plan can be a daunting process, but the success of your company depends on your ability to craft a well written and well researched business plan. If you have the ideas but are having writer’s block then contact a professional writing service. There is no shame in hiring a professional editor or mentor to help you through the process.
Writing a business plan is only half of the battle. The other half is presenting the plan. Mentoring services can assist you in doing both the writing and the presentation of your business plan, and a stellar service will do the necessary research on competition, risk, licensing, and marketing. Look for a service with a strong track record that will make detailed Strength-Weakness-Opportunity-Threat (SWOT) analyses and compile reports on Porter’s Five Forces for business plans.
About the Author
Danielle Hendricks is an academic mentor at ACAD WRITE. In her free time, she is known for writing outgoing and funky pieces about the startup scene in Santa Fe, New Mexico. She has helped several firms optimize their business strategies before they pitch to angel investors in the local region.