Writing your business plan is probably one of the most important business duties you will assume. If you follow a quality business plans template you will cover the basics of the plans, but there are still common mistakes made by entrepreneurs that hurt their cause. It is reminiscent of the teacher in school who gave you the parts of the essay for easy outlining and then marks points off because the essay is too long or too boring.
Following are some of the most common errors made in business plans. Some of them are simple errors, but that doesn’t minimize their importance. Other are mistakes usually made due to lack of experience. Either way, these mistakes can hurt the effectiveness of the overall business plan.
Including more than one business model in the false belief that more information and more strategies are always better (not true!)
Lacking cohesiveness throughout the business plans
Difficult to read due to illogical or poor layout (another reason to use a business plan template)
Including unsupported projections or estimates
Not fully analyzing the competition
Failing to prepare all required sections of a business plans (making your plan look amateurish or as if you are hiding something)
No value proposition separating your business from the competition
Not letting anyone else read your business plan and provide feedback before submission
Making the business plan difficult to read because it is written using mostly hard-to-understand industry or discipline terms (i.e. your funder may not know much about technology so using technical jargon will make the plan too difficult to understand)
Showing lack of understanding of the niche market to be served
These are certainly not the only mistakes, but they are some of the most common. You want to avoid writing a business plan that is too long and tedious, is not well written, and is boring. Though funders are often professionals looking for the next great business investment opportunity, they are also human. Grammatical errors and boring prose can quickly discourage anyone reading the business plan. It seems your essay teacher was right all along.
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The ideal business plan is composed of more than just history, marketing and financial sections. It should also convey the value proposition to the angel investors you approach about business funding. Typically, angel investors are sought after a business has been established so it’s possible to show real products, actual customers and a working business model. However, the angel investors will want to know how you define the company’s value proposition.
The business value proposition is developed with the marketplace in mind. The value proposition defines why people in the target market should buy your products or services. It defines what benefits purchase of the goods or services will provide or what problem will be solved by product or service use. It sounds like the statement would be long, but it should be kept short which forces the business owner to concisely explain the value the company is bringing to the marketplace and the relevance of the product to the customer. If it takes a long winded explanation then there’s good chance the business owner has not fully developed the business concept.
The value proposition is important to the angel investor because it concisely differentiates the business among its competitors and reflects an alignment of business operations with the market. The value proposition must also reflect specific results or performance and is not a generalized statement that any business could use. For example, a consulting business could say that it can help customers get a high return on investment , but that would be a weak value proposition. A strong value proposition would say that the business can demonstrate customers will experience an improvement of 15% Return on Investment (ROI) by using the company’s state-of-the-art proprietary software.
Angel investors expect a business plan to have a value proposition that quantifies market results and also states the source of its competitive advantage. That should never be a problem if a company is serious about success.
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One of the important components of a business plan is clearly defining objectives. Stephen Harper in Starting Your Own Business (McGraw Hill) writes, “Objectives can be viewed as dreams with a deadline.” The point he is making is that objectives should be specific in terms of projected amounts and timeframe.
For example, you would not write an objective like this: The business will grow over the next 5 years. You would write it like this: Sales are expected to be $2 million in 5 years and the business will be one of the top 5 niche market leaders. The dreams you have for the business should look ahead and establish where you want the business to be positioned or how much growth is expected within a set period of time. The dreams should also be reasonable, based in facts and business reality, and achievable.
For example, if you plan on opening 5 franchise businesses within 10 years (1 every 5 years) the objective should be stated as such. However, you should also be able to support plans for opening these franchises in the competitive analysis section of the business plan. If the market is already close to being saturated, those 5 new franchises may be difficult to open. When objectives are focused and sensible, the business plan will become a living breathing document that supports your dream.
If you are having trouble setting objectives for the business plan, there are some questions you can ask yourself to develop focus. Ask yourself what your ultimate goal is 5 years from now. Picture yourself as an entrepreneur 5 years from today and imagine the level of business success you want to succeed. Ask yourself questions like how many sales people you hope to have working and how much market share you want to gain. Picture yourself as successful and put your definition of success in writing.
Objectives will become clear when you take the time to look into the future. Though a business plan is not a crystal ball, it is a driving force with strategies for achieving success. Set clear objectives first and the rest of the business plan will be a lot easier to develop.
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When you start a business, different people will advise you differently on how to turn your venture into a success. While it looks natural to have a business plan beforehand, do not be surprised if you find some people telling you to not have one. According to some, having a business plan limits you in your exploration and prevents you from taking risks. That might hold true in some cases, but that’s not how it is for everyone. Having a business plan is a sensible step, but if you are on the fence about whether to have one or not, here are some disadvantages of not having a business plan to help you make a well-informed decision.
Why Not Having a Business Plan Is Not Advisable
1. There Is Nothing to Achieve
Milestones have to be an integral part of any venture. When you don’t have any milestones and targets, there is nothing for you to achieve. Having no business plan is the first sign of your non-seriousness with your business. If you could not take out time to create a detailed plan, how can one expect you to manage your business – an activity that could require even up to 16 hours of continuous working at times? The problem with having nothing to achieve means you will have no strategies for your expenses, profits, revenues, etc.
How would you ever know how much you should spend or not spend? Why would you invest in marketing when you don’t have any goals?
2. There Is Nothing to Interest Investors
There might be some proponents of the idea that a business does not require a business plan, but there are still more people who believe in having a business plan. Investors always need indicators from entrepreneurs to judge their personalities and potentials. Business plan is one of the strongest indicators of a person’s potential of doing a business. When you ask investors for a certain amount of money, the first question they ask is why you need that money or what you need that money for. Your answer to this question can make it or break it for you.
In fact, that is not the only question. They will follow up this first question with a lineup of crucial follow-up questions. For example, if you tell them you will invest the money in marketing, they will ask you about the type of marketing you are aiming for, the return you expect and the costs of customer acquisition. How can you answer all those questions if you do not have a business plan?
3. Your Marketing Will Go Awry
One of the damages of not having a business plan is your marketing plans going awry. Entrepreneurs have more power to them today than they ever had before. These days, startup owners have internet where they can collect information about their customers in the startup stages. Collecting customer information helps them create buyer personas and target their audience with appropriate marketing. Here are some pieces of information you will have to collect.
What age group and gender my product appeals best to?
What interests my target age group and gender?
What platforms is my target audience most active on?
What is the average buying power of my target audience?
What type of content best attracts my target audience?
What expectations do my potential customers have with my product?
How can I personalize my marketing to my audience?
That’s just few of the many questions that you have to get the answers for to make your marketing endeavors profitable. However, all of this homework is a part of your business plan.
4. Your Team Won’t Share Your Vision
It is crucial for a business’ success to have a team that shares the same vision and endeavors to achieve it. Several studies and researches have proven that employees do not perform at their best when they don’t understand the vision well. You must define clear and vivid targets to your employees for them to know exactly what they have to do to be of value for the company. What you have to realize is that telling your team the vision of the business is not enough. It is a broad concept and does not define the action plan to your employees.
What you have to do is break the process of achieving your vision into small parts. These small parts are the milestones and within each milestone the role of your team is clearly defined. In short, break the entire pursuit of vision into small missions, and explain the role of every team member to achieve a milestone.
5. You Won’t Know When to Exit
One of the biggest mistakes most startup owners and entrepreneurs make is that they don’t know when to exit. If you can close down your business before it starts hurting you financially, that’s a form of success. The true failure is when you cannot realize that your business is hurting you and you keep burning dollars for its success. An integral part of a business plan is defining favorable and unfavorable conditions for the business to exist.
In a business, you have to define a deadline before which you must see positive results. You have to define a time frame within which you can continue to invest in your business. However, you have to draw a line to make it clear when you cannot continue anymore. If you have been running your business for six months and the money has been going out of your pocket, it might be an indicator that it won’t work for you.
Conclusion
A business plan should be considered a part and parcel of a venture. It is not an optional component because your success rests on it. If you are looking forward to starting your business, it is advisable that you sit down and take time to write and review your business plan. If that is too much for you, hire a professional to write it for you.
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Investors want to fund good business ideas. That’s a broad statement because what seems like a good idea to me may be different from what seems like a good idea to you. So many ideas never seem to go anywhere. Some are just so uninspiring that they can’t seem to get the attention of anyone, much less investors. You can even write a whole business plan around a bad idea, leading to great disappointment when investors spot the fact it’s bad.
A good business idea is much more than just an idea. You can sit there all day and come up with ideas, but that doesn’t make them good. Good business ideas have certain qualities that differentiate them from other ideas. For one thing, a good business idea fulfills an unmet customer need, and it is often a need the consumer doesn’t even recognize yet. That may sound odd, but great ideas are often not great until someone invents a product or service.
Determining if a business idea is a good one requires more than just knowing the market will appreciate products or services. The idea must be feasible and realistic in terms of production costs, the time from funding to sales, profitability and safety. A good business idea is also one that can be brought to fruition because the entrepreneurs have the knowledge and skills needed.
There are more qualities associated with good business ideas, but one of the most important is related to innovation. Good business ideas offer a new twist on products or represent creative and innovative new products. The new twist or innovation should represent something that matters to people which means it brings some kind of satisfaction.
There are no hard and fast rules or magic formula to define a good business idea. Instead, investors will consider all of the qualities of the idea coupled with the marketing, competitive and financial factors.
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Chances are this is not your first business plans if you are considering starting a new business. Studies have shown that today’s successful entrepreneurs have tried 3 or 4 times before to start a business sales. Sharing that information is not meant to be discouraging though. It’s meant to be motivating because true entrepreneurs don’t give up easily.
In fact, you may like to know that Bill Gates and Paul Allen started Microsoft in 1981 after 3 prior failed business attempts. The 3 failed attempts were The Lakeside Programmers Group in 168, Traf-O-Data in 1970 and Micro-Soft partnership in 1975. In reality, the 3 failed companies were not failures at all in one very important sense. These 3 companies taught Gates and Allen a lot about business planning and development. They used that information to start Microsoft, Inc. and the rest is history as they say.
One of the strategies for managing a new business venture is the business plan. Because it forces the entrepreneur to identify sales specifics so that investors are comfortable providing equity, loans or other capital. The entrepreneur should also consider a graceful exit should the business not succeed as planned. Though you would not present a business destined to fail to investors, the people you are asking for money also want to know how their investment will be protected as much as possible.
When developing sales projections for the business plans, it’s important to go through each step with due diligence. It begins with a product or service description, followed by a market study. A sales estimate is calculated which drives needed production capacity. The needed production capacity then drives facilities planning and workforce estimates. Finally, the financial analysis is calculated.
One of the issues to be addressed in the business plan is the timing of sales growth. This is where entrepreneurs often get too optimistic. The end result is disappointed investors and a failed first, second or third venture. Sales projections need to be as realistic as possible because inflated numbers don’t do anyone any good. The business plan needs to tell an honest story and that will greatly increase your chances of getting the new business right the first time.
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Whether you have a small business or a large one, you have to have a business plan in order to set a path for it. A business plan is more like a manual or guide that lists your goals in an order, and how and when you will achieve them. It is even better to have a plan B if things do not work out the way you expect them to. But an important question you should ask yourself is “what makes up a perfect business plan?” What are the important factors that you have to take into consideration to create the perfect business plan?
Of course, you can’t make a plan randomly because business matters are a game of numbers—you have to be precise and accurate.
Describing Business and Writing a Summary
The first and foremost part of any business plan is the executive summary. It is a summary of what’s included in your business plan. You have to keep in mind the word “summary” i.e. you are supposed to summarize everything. You will face two challenges when you do that. First, you will have to find the most selling and appealing parts of your reports to grab the attention of the readers of your business plan instantly. Secondly, you have to find a way to shorten all the descriptions. Bear in mind that the details are in the plan itself, so you have to efficiently summarize all the points.
Furthermore, you have to explain the industry and your business. At this point, you want to talk about what industry your business serves, what the industry looks like and how much potential of growth your business (and the industry) has in the future.
Market and Competitor Analysis
At this point, you will have to put in some work to gather the details that will fill this section of your business plan. You have to know the market that you are about to target. For this, you will have to analyze the market and the sub-markets within it. By doing this, you are trying to paint a clear picture of your target audience. Without this type of analysis, you could end up selling the right product to the wrong people, which means your business will not survive. As you are describing your target audience and how you will approach them in the most effective way possible, you will have to do some analysis of your competitors.
It is just another level of market analysis. You want to get a good idea of what your competitors are doing to run their similar businesses and how much they are succeeding with their strategies. You should also pinpoint their weaknesses and why certain strategies are not working. When you have a business with many competitors, your investors will always ask you several questions about your competitors. They do this not only to know how knowledgeable you are about your target market but also to figure out if what you are about to do is going to work at all.
Development and Design
This is the section where you will define not only the design of the product but how the development takes place. Are you creating the product in your garage or do you have manufacturing plant working for you? How do you get the materials for creating the product? Are you producing your product within the country or outsourcing the production? In case of either of the options, you will have to explain why you have chosen that path. Investors will also ask you how much it costs you to design your product and make it available on the shelf.
What they don’t want you to do is pay more for the production and design of your product than you should. If there are other options available but you are sticking to the expensive ones, it will show them either the stubborn side of your personality or the less knowledgeable.
Costs of Operation and Management Planning
The ongoing processes of the business are the most important ones to pay attention to. How have you planned to take care of the daily matters? How have you assigned the roles and why have you assigned them to certain individuals? At this stage, you also have to talk about the costs of operations. You have to keep your costs realistic and justify that what you intend to spend is not an excessive by any means. In the costs of operations, you will also have to have an estimate of how much you will be spending in salaries. You can include this particular piece of information under the financial planning section as well.
Financial Planning
In this section you have to describe how you intend to finance the business. Are you using your own money to start the business or have you borrowed it from a family member? What kind of debts are there on your business. Debt is deadly for a business, so you want to have a very strong plan on how you will handle the initial debt when starting the business. You also have to show your management of the financial resources and knowledge to prove that any loans that you are taking for the business will be paid off in time and with ease.
If you have given a detail of various loans that you intend to use for your business, you will also have to state how you will use the money. Your usage of the money should be precise. At no point should the investors get a hint that you are going to use the money for something personal or something that will not benefit your business in any way.
Conclusion
Last but not least, make projections a part of your business plan as well. You will need to ready balance sheets and income statements for the coming years. It is imperative to know here that business plans are just assumptions, not facts. You should always expect things to go a bit away from how you planned them. However, such minor setbacks should not stop you from going forward and turning your small business into a large one.
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It’s no secret that angel investors prefer a sure thing when it comes investing in a business startup. But, that doesn’t always mean they won’t take risks when it comes to funding a business that shows great promise. If you your business startup has all the makings of a successful operation, but you keep striking out when it comes to getting the nod from a seed investor you need to consider the reasons they keep saying “no” to you.
Here are four reasons why an angel funder may be hesitant to fund your business startup.
You Need A Business Plan That Works
It is imperative to have a business plan in place when you seek out funding from a private investor. An undetailed business plan can raise eyebrows and have seed investors cooling off to your ideas. Take the time to develop your business plan, marketing plan, and short- and long-term goals for the business before you approach an angel investor for business funding as they will be more receptive to your proposal and help you avoid that resounding “no” for no good reason.
It Needs To Be The Right Time And Place
They say that timing is everything in business. It may be true of your angel investor as well. While you may have a stellar idea, sales coming in already, and a strong business plan to back you up, if your investor isn’t ready to make the leap, the chances of you getting funding may soon walk out the door. Don’t take these rejections personally. Realize that when the time comes, and an angel investor is ready, you’ll reap the rewards of waiting until the time was right.
They Don’t Understand The Market
Some markets require a steep learning curve to understand and recognize who the competition is. Your private investor may not be able to grasp who your target customer is and what your business brings that is new. Finding an investor that sees your vision is imperative as you look to propel your business forward. You want an investor that backs you and without a clear understanding of the market, you may face rejection from an angel investor that wasn’t right, to begin with.
They Are Just Not The Right Investor
Sometimes hearing a “no” from abusiness investor is a blessing in disguise. They may not have complimented your business in the way that you needed them to or they may not have given you the support you needed to soldier on. Finding the right angel partner can help your business to thrive, but waiting for them to come along can be a challenge. With a little patience, you won’t be disappointed.
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One of the most daunting tasks for business startup owners is finding an angel investor who would be willing to finance the bulk of the company’s expenses. And while there are a lot of possible investors out there, the number of people competing for these opportunities is also huge.
In fact, some information regarding investments showed that less than 10 percent of business startups in the United States get the nod of the most sought after angel investors in the land. This figure, however, should not discourage business owners who are competing for some financial support from investors. After all, one in every ten applicants gets the nod of an angel investor.
The question, therefore, is how will business owners ensure that they will be the one who will get the coveted nod of an angel investor? The answer is simple – a good business plan!
While angel investors take into consideration a number of things, one of the most important criteria that they look at is the business plan. Thus, having a well-polished plan is something that business startups need to have, especially if they want to secure the support of an angel investor.
There are a number ways to come up with an investor-ready business plan. But one of the first things that the entrepreneur must look at is the actual idea for the business.
Ideas should not be the one-paragraph description of what the entrepreneur wants the business to be. Rather, it should be as detailed as possible so that it covers items such as the target market, marketing strategy, capital allocation, and return of investment for possible business partners.
Having a detailed business idea is a good start into coming up with a business plan. This will assure possible investors that you are serious about the business and are not just toying around with the idea.
Ideas are one thing, but a detailed understanding of the things that would have to be done to make the idea a real thing is another. Angel investors prefer the latter.
Once, would-be business owners have a detailed idea regarding the comings and goings of the proposed business, then this is the good to time come up with a good business plan.
Business plans are actual documents that detail a number of things that angel investors want to see. In addition to the description of the proposed business, the plan should also include a step-by-step process on how the objectives and vision of the company will achieve.
It is necessary for the business plan to be detailed, but not long enough to bore the angel investors to death. Moreover, it should be written in a way that the investors will understand its contents.
Having a good business plan is a good way to attract angel investors. Therefore, business owners must thrive to come up with something that will entice possible partners to enter into an agreement with the company.
More detailed information and useful advice can be found at Funded.com. If you need to access our network of angel investors or a business plan for start-up funding visit Funded.com
One of the mistakes made during the writing of business plans is treating business funding as if it is a completely separate section with no real relevance to the rest of the plan. In other words, you write your executive summary, business description, market strategies and analyze the competition in a funding vacuum. Then the financial section gets tacked on, and it basically states you need money and here’s how much money you need.
But investors read business plans closely, and they are looking for a particular type of company that fits their requirements. The words you choose to describe your business and the presentation counts. For example, if you are looking for a business loans from traditional lenders, they are not going to be impressed with hype in the least. You may have the most “stunning” invention ever created that will change the way mankind lives once your product hits the market, but a bank is going to see that kind of claim as marketing hype.
Professional From Beginning to End
Business plans are unique products. They must be interesting, professional and well written while being interesting, entertaining and exciting. That’s not easy to accomplish which is why so many entrepreneurs decide to get professional help writing their plans. Yet one of the most important features that a business plan should have, yet is often overlooked, is funder appeal.
In other words, the funders you plan on appealing to need to be attracted to what you say in your business plan from the beginning all the way to the financing plan. It’s easy to get carried away while writing because you’re excited about your business and finding startup funding. This can lead to the use of a lot of superlatives that make your business plan look like a lot of hype without substance.
Polish the Product
As a entrepreneur you are not a huckster, so the business plan should not make you look like the equivalent of a snake oil salesman. The business plan that makes a lot of wild promises is not going to attract equity partners. Unsubstantiated claims will not get you approval for business loans. Statements that portray you as a gambler will turn angel investors away.
Business plans should be polished products that are consistently honest and give the right impression throughout the entire document. You can’t write a plan that is sassy and reckless and then expect venture capital funding to be approved because you decide to get serious in the section on financing.
Payment and Plan in Full
Polishing business plans also means making sure the plan is complete. You are in a hurry to get your plan done and to find financing, but a condensed plan won’t get you anything except rejected and especially when looking for startup funding. Business plans prepared for venture capital firms or equity partners need to contain all of the important information about your business. The same thing is true for angel investors. If your plan is missing essential information including marketing plan details or financial projections or only summarizes an operational plan, then the assumption will be you have not bothered to work through these details.
The original business plans that entrepreneurs use to find business funding need to be comprehensive plans that are consistent and always keep potential investors in mind. It never pays to skip the details.
More detailed information and useful advice can be found at Funded.com. it offers expertise and assistance with developing and funding your concept. If you need to access a network of angel investors or business plans for start-up funding visit Funded.com
