10 Things Not to Do with Your Business Plan
Business plans are never foolproof. You can, however, minimize the risk of putting together a poorly constructed plan if you know what to do — and what not to do as you develop your company's documented direction for the future.
Don’t forget the basics in your business plan
While acknowledging that any business plan created in only a couple of days is going to be a tad dodgy, you still want to give your plan its best chance. So whatever you do, don’t forget the basics:
An executive overview: Don’t forget to say who you are, what it is you plan to sell, and what it is that makes you better than anyone else.
A people plan: Don’t forget to sell the experience, natural charm and exceptional skills of yourself and your employees.
Money stuff: Even if you normally break out in a rash when dealing with figures, no plan is complete without financial projections for at least the next 12 months. A Profit & Loss Projection is a bare minimum, along with a breakdown of how you arrived at your sales forecasts. Also, if your business has already been trading for more than a few months, you need to include historical Profit & Loss information as well.
A marketing plan: Marketing plans have as many formats as a songwriter has lyrics, but make sure your plan includes a competitor analysis, a detailed analysis of customers, a logical assessment of market potential and a set of sales goals and objectives.
An industry analysis: You may not have time for the whole kit and caboodle, but at the very least, don’t forget to include an overview of your industry as a whole, and the kind of trends it’s facing.
Remember, any lender or sensible investor isn’t going to look at your plan for more than five minutes if you fail to cover the essentials.
Don’t argue competition is non-existent
If people are going to want the product or service that you sell, you will always get competition. A business that is truly without competition is a business that’s a dud.
‘I’m going to be the only bookstore in town!’ you may argue. This could be true. However, if residents of your town want to buy a book, the sad truth of the matter is they can probably buy a broader and cheaper range of books online.
If a business really has no competitors, you can be sure that nobody wants that product or service very much. Sure, you may be the first to invent a solar-powered sunhat complete with a fan on the top, but really, who wants to walk the streets looking like a complete idiot?
Don’t air your dirty laundry
Your business plan isn’t the place for you to chronicle previous disagreements, legal battles or problems. Maybe you had a customer who took you to court, maybe you had to rebuild your business after an acrimonious divorce, or maybe you’ve had a nasty dispute with your current business partner.
Prospective investors or lenders don’t want to hear about your messy past. Chances are that if others have found you a difficult person to get along with, they will too.
Fibbing on a business plan is a bad idea. However, when does exaggeration become a white lie, a white lie become a fib, or a fib become a great dirty whopper? These distinctions are probably something that only you can define, but even a little exaggeration can lead to troubled waters.
Imagine you include a large sale in your financial projections that you’re pretty sure you’ll pull off, but which the customer hasn’t confirmed yet. Your future profit looks rosy and, with this in mind, you commit to a hefty marketing budget and an expensive lease on new premises.
If the big sale falls through, where does this leave you? How will an investor feel if you have to explain why sales fall so short of predictions?
If you’re not sure of something, say so, and if necessary include a couple of different scenarios in your business plan. Remember that exaggerating sales prospects, overstating profit margins or hiding a history of losses isn’t going to do you or anyone else any favours.
Don’t calculate future sales based on market share
Forecasts based on potential market share may sound terrific, but such forecasts usually belong to the realm of fiction.
So don’t compare apples with zucchini. Although even just a fraction of market share could be worth squillions, that fraction can be mighty hard to get.
Don’t make your plan into a product manual
Just because you’re a nerd doesn’t mean investors or lenders are. People reading your plan want the juice on your product; they want to know why your product is different and what it can do. They don’t want to read a 30-page manufacturing manual.
Reserve technical information for the appendices at the back of your business plan and, even then, keep product specifications down to a maximum of two or three pages.
Don’t make unrealistic assumptions
Even for relatively stable and established businesses, a business plan always includes a whole series of assumptions. After all, who can ever predict the future with any reliability?
For example, imagine you’re opening up a new wine bar. How are you going to justify the sales that you predict you’ll generate in the first 12 months? You can’t just pluck figures out of the ether, but instead you need to research how other wine bars in similar areas are faring, as well as what demand exists for the kind of wine bar you’re planning to open.
The key here is to substantiate any assumptions you make, particularly regarding sales. A perceptive investor will be able to detect unrealistic sales projections quicker than a beagle can find a bone.
Don’t claim you’re going to be the next big thing
Grand statements declaring that your business is going to be the next Facebook, Google or that your product is going to be a sensation like Pokemon or the Rubik’s Cube are going to make any investor roll their eyes and groan. Of course, nothing is impossible, but declaring that you’re going to be the Next Big Thing is akin to saying that you’re going to win Lotto next month.
Feel free to hint at possibilities and allude to great potential, but avoid grand statements that make you look like a fool.
Don’t be slapdash
Imagine you’re fronting up to a meeting with a couple of potential investors. Hopefully, you’re going to leave the singlet and board shorts at home, and instead make some effort to look the part. Your business plan requires the same level of care in regards to presentation.
If you don’t have time to prepare a decent cover sheet, a mix of graphs and text and properly formatted financials, do take an hour to two to run a spell check, go through your grammar, ensure your written style is consistent and check for things such as missing page numbers or pages in the wrong order. Also, if written English isn’t really your bag, get someone else to read your plan before you share it with others.
Don’t forget to be passionate
Try to let your passion shine through with infectious enthusiasm. While you’re probably best not to show ridiculous rates of sales growth in your financial projections, if you sincerely believe that this kind of growth is possible, include a paragraph or two describing why you believe this to be the case.
Talk about why you want this business and why you’re the perfect person (or you have the perfect team) to make this business successful. Your plan needs to be inspirational, not just for potential investors, but for you as well.