Ever written up a business plan and felt something was missing? Business plans can be tricky at the best of times, and there are several obstacles you need to overcome before you build your best business plan. Before we explore the 10 business plan mistakes that are not all that uncommon, here are three key questions worth answering first:
- Why do you need a business plan?
- What should your business plan look like?
- When do you need to make a business plan?
Why Do You Need a Business Plan?
A business plan or pitch deck or playbook—whatever you want to call it—is a vital tool for any founder or a business owner.
Investors interested in your business, new hires looking to join your team, and—most importantly—you need to see where you are taking your business and how quickly you plan to get there.
Both investors and new hires want to know that they are signing up to something that not only has potential but has a realistic roadmap to success, as both parties are taking a leap of faith in you and your business. For you, the business owner, a good business plan can give you a degree of certainty, a clear direction, and the best chances for your business to survive.
What Should Your Business Plan Look Like?
Business plans take on different forms based on who the audience is, the context, and the evolving expectations of the business. Only a few years ago, a business plan was a 30-page document. Now it’s common to see business plans presented as a 10-slide pitch deck. Sometimes, start-ups launch so quickly and gain so much traction off the bat that they bypass doing any plan at all. Eventually, when they can catch their breath, they will need to document their vision, their mission, and where they are going, all in their playbook for the next 1, 3 or 5 years.
When Do You Need to Make a Business Plan?
If you are a new business then before you start your plan it is worth considering the problem your business is solving. Key things to consider include:
- Is the problem big enough or painful enough that people will pay you to solve it?
- Are there enough people with this problem?
- Is anyone else solving this problem?
Answering these questions gives you a sense of the pricing, the size of the market, and the competition you may be up against. If after looking at this you think it is worth committing your time and energy to this business idea, then it’s time to get planning.
10 Business Plan Mistakes That You Should Avoid
(Before we even start it goes without saying that poor formatting, spelling errors and inconsistencies will kill your plan.)
1. Not doing a business plan 🤦
This may be an obvious one, but it’s ridiculously common: having an idea and never formulating a business plan is bad practice. A business plan is much more than a document. When you sit down and actually think about your business and the problem it’s trying to solve, you undergo a process by which you can test your idea, raise finance, build team alignment, and set your business goals. It is an internal playbook that you share externally to raise finance or attract talent. It is a vital cornerstone to your business.
2. Over embellishment 📈
It is never worth pushing the truth too far. Worse still, stating that you are further ahead than you are is also a bad move. There is a balance between using positive language like “will” instead of “might” (in fact, we would encourage that!) but any over-exaggeration will quickly be identified in the due diligence and undermine your entire plan and risk damaging your relationship with the investor. Stick to the facts, and outline what you plan to achieve.
3. Getting stuck in the weeds 🌵
You have more than likely been thinking about your business for a while (years, if not decades) and hopefully done the research. You are at Chapter 10 of your story, but your audience is only starting on Chapter 1. Avoid jargon, acronyms, and assumptions. Keep it simple, to the point, and digestible. Start from the beginning, and highlight what you want to achieve with your business.
4. Being the over-optimist 🤞
We all want to be the next Slack or Airbnb or get bought out by Facebook but this would probably involve some luck and be your best business case. Whilst it is good to have lofty ambitions, it’s important to remember that presenting best-case scenarios may fall flat in front of an audience who are also tracking the worst business case. Having a balanced view, pre-empting the potential risks and ‘what-ifs’, and offering mitigation will show your audience you are a perfect balance of grounded, realistic, and ambitious.
5. Going to market too early ⏰
You will want to address all the perceived risks in your business plan and make sure you have the gaps filled. This could be gaps in your team, lack of market validation or no financial forecasts. Your business plan offers an opportunity to work to a defined structure and schedule, to help you fill gaps (or at least demonstrate when/how you are planning to fil them). You must get this sorted before you start sharing your business plan. Going out too early with missing parts to your strategy will only limit your success.
6. All strategy, no tactics 👊
A plan is generally setting long term goals, answering the question ‘where will you be in 5 years?’ or ‘what’s the destination?’. You will outline the broad strategy (the journey) to get to this point, for example; “we will launch in other territories in year 3, then raise Series B in year 2.”
Whilst these steps are a part of the plan, you also need to focus on the short term tactics. What happens in the first 100 days of your business? How are you going to get your first 1,000 customers? Tactics like this show the investor you are in the details as well as having a long-view. These practical tactics also help investors understand that their funds will be put to good use. You’ll be able to show them what the company will look like at each milestone.
7. Spreading yourself too thin 🕴️
Your plan cannot be all things to all people. Make sure you work out what is your core means of earning revenue and do that well. Understand the market dynamics, for example, competition, government policy and/or supply chain. It is far better to focus on one business model that is clear and well research than list different business models or broad customer segments. These opportunities may come, but as a start-up, you need to focus on the market where you can maximise traction.
8. Using templates 📝
Part of your business plan will be your unique writing style. You have to find your own writing style and this becomes difficult when you use templates. Templates might appear to offer some direction on what to write, but actually, they are quite rigid in structure. Some businesses are more complex than others, and to write an effective business plan, you must delve deeper into the business.
Templates are also really commonly used, so they don’t always stand out, and the best ones will have been seen by investors before, just in a slightly different colour. In a highly competitive world, you do not want your business to come across as the same as someone else’s and the same goes for your plan. Use an informed structure but make sure you write the bulk of your plan to suit your unique business proposal.
9. No financial forecasts 🔢
Have you ever turned up to a golf game with no clubs? How about a football match with no ball? It’s kind of impossible to play. Financial forecasts are the ball to your game; the business plan is the narrative for your numbers. Numbers show the investor the ambition and the end game. They don’t have to be spot on (in fact, they rarely ever will be) but your financial forecasts need to be well thought out, well laid out so they’re easy to read and backed by some solid logic.
A few scrawled numbers on the back of a napkin or unfounded determination simply won’t cut it with an investor. Have you confused your profits with your cashflow? (This happens a lot). Have you explained why you need the funding and how it’s going to be spent? (This needs to happy more). You need to have a steer on your numbers to articulate and defend your plan.
10. Writing your business plan once ➰
This might sound bonkers, but you should never consider your business plan finished. Why? Because numbers don’t just freeze, markets don’t stop, and your plan can never be static. A business plan is not a line in the sand nor is it something checked off your to-do list. It is a dynamic tool and serves a purpose to raise a funding round and then is your playbook to reach your next milestone.
As your business grows, you will get feedback from your audience (investors, customers) that make you rethink parts of your strategy. You must take into consideration their views of the risk and potential and you must update and improve your plan throughout your business’s life. It is ever-changing as the world around your business is constantly changing; new technology is released, new laws come out, the year 2020 happens. Such changes will force you to reconsider, update and adapt your plan and your financial forecasts. These may be minor tweaks or full pivots, but either way, your business plan is never set in stone.
Write Your Best Business Plan Ever
To write your best ever business plan, you’ve got to have your numbers sorted. Numberslides can build financial models to support your business plan, plus cash flow forecasting helps give a practical insight to your journey. The founders of Numberslides have worked with founders in all sectors and from all walks of life. At the very basis of the business plan is the need for clear numbers. Will your idea work? Will your product sell? Will you make a profit? Numberslides makes it really easy to answer all of these questions, and get started with building a really great business plan.