If you fail to plan, you’re planning to fail. Business plans are more than essential – they are crucial.
Planning for your business is not a grueling task, but it is an intricate and deeply involved one.
Business planning is the careful preparation necessary for success. Think about this, would you visit a doctor who did not finish medical school? How about legal advice from a lawyer who only completed year one of law school?
Now be honest, why would someone invest in your business when you’ve only partially prepared? Business planning is about preparing for success, anticipating challenges, and augmenting failure.
Business planning takes the elaborate vision, the determination of your mission and applies practicality and sensibility. Pitch Masters Academy teaches entrepreneurs how to apply the most successful strategy to creating a business plan that will enable you to succeed.
So, plan to win, and your plan will succeed.
NOT PLANNING TO WRITE A PLAN
If you will not take the time to write a business plan, why should someone invest? Invest in what, exactly?
Resisting the writing of a business plan communicates to investors an air of arrogance. It also suggests laziness.
Why would serious business owners resist the opportunity of creating a business plan for their business?
A lack of planning is a warning sign to potential investors. Individuals who resist writing a business plan are coined “the hype man” among investors.
These individuals believe their business idea is the absolute next best thing.
The emphatic use of superlatives to generate excitement does not equate to profit. It equates to you experiencing loss.
Furthermore, failure to write a business plan fails in the business. Let’s be clear: initially, there may be success.
Unfortunately, success without a plan is worse than initial failure.
Eventually, and eventually won’t be too far away, a lack of understanding of the factors contributing to the businesses’ success ultimately contributes to its swift erosion.
By nature, entrepreneurs are doers – they are self-starters. Understandably, entrepreneurs want to get the ball rolling.
However, entrepreneurs who do a plan have a plan to work. The plan is a guide, a working document, that guides and directs, not stifles productivity.
Therefore, be the entrepreneur who does it all: the planning and work.
LACK OF CLARITY
What is the problem this business idea seeks to solve? That’s the question investors pose. Businesses solve problems in the marketplace.
So, make sure your business plan communicates the problem well. The solving of the problem is the purpose of the business.
Therefore, be sure to:
- Communicate all aspects of the marketplace problem.
- Who is most affected by this problem?
- How did this problem come to be?
- Where does the problem exist?
- Is the problem the same in one area/region as in another?
- What solutions have been offered in the past that failed to work?
- Does your solution justify a new business, or could it be integrated into an existing business?
The purpose will communicate the depth of thought placed into the business idea. A well-written purpose alludes to the amount of research done.
It intrigues a potential investor to continue reading and listening to you. If done well, it may even persuade an investor to get involved with your plan.
Lastly, make sure your business plan has direction
Use these five questions to ensure your plan is well written and intentional:
- Why are you preparing a business plan?
- Is the business plan to persuade a lender?
- Is it to persuade a private investor?
- Is it an exploratory exercise to “flesh out” the viability of a business?
- Is it a blueprint to success?
By answering these questions, you will write a plan that intrigues the audience you intend to persuade.
Knowing the target audience is crucial to successfully partnering. No business appeals to everyone.
The audience must be well defined.
Understanding the specific target market, those who will benefit from your business’s presence determines whom you approach for investment.
UNCLEAR BUSINESS MODEL
Businesses should make a profit. Do not ignore this fact. Sure, people want to help others and solve problems, but rarely if it means losing money.
Goodwill is one thing; a loss of income and business instability is another.
Earning revenue is where a good business model makes the difference.
A business model shows the method for generating revenue, which exceeds expenses. It is the way the business will operate.
They are prescriptions for success and communicate deep thought on the entrepreneur seeking a partnership. Study multiple business models and not be afraid to examine models outside the industry you seek to enter.
Business models need to be tried, tested, and proven.
Often, it is the business model that attracts investors and good employees. And the absence of one communicates a lack of preparation.
The business model tells the investors “how” you intend to operate and drive revenue. It also communicates the efficiency of the business, which keeps income/expense in balance.
LACK OF RESEARCH
Research, research, and then research some more. Be a geek about your business. Investors like business owners who are continually learning about the business.
These business owners become known as Subject Matter Experts (SMEs). They become leaders in their industries and can drive the way the industry operates.
SMEs know the answers to the central questions:
- Will this business idea work?
- Why will this business idea work?
- What can cause this business idea to fail?
- How will competitors be handled, and who will be the potential competitor?
- What are the current trends in this industry, and what will change them?
To answer these questions, you must do extensive research. Lastly, to become an SME, you must know what research is terrible.
Unfortunately, we live in a society where all information is not necessarily reliable.
SMEs learn to recognize what research is dependable and what should be avoided.
WEAVE RESEARCH THROUGHOUT YOUR BUSINESS PLAN
Substantiate each portion of the plan with research, not just a single section. The research needs to be well documented and cited for investors to examine at their leisure.
Other than the Executive Summary, a high-level overview of the business, research is conveniently and purposefully inserted throughout your business plan.
Many entrepreneurs are so excited about their business they think of themselves as more significant than the market.
Amazon did not become the company it is overnight. It took time, planning, adjusting, more time, more planning, more adjusting. Your business plan should include the realities of the market.
With bona fide research, your plan will communicate:
- What is the problem or unsatisfied customer in the marketplace?
- What will make the current customer buy your product/service?
- Will purchasing your product require a change in buying behavior?
- Will potential customers have to change brand loyalty?
- What economic trend will shake this market?
- When will that economic trend occur?
Pose more questions, but these six are sufficient to get you thinking. Also, it is crucial to do some market research yourself – this is not difficult.
The advent of social media makes market research quite simple. Design a survey that answers the above questions in a user-friendly way. Post it on Facebook, Instagram, LinkedIn and ask for honest feedback.
You will be surprised at the number of responses you will get.
If you get a large enough number of respondents, you will have first-hand market research.
POOR FINANCIAL PREPARATIONS
The financials are quite important. Investors and lenders alike want to know your financial well-being.
It does not have to show you are a millionaire, but it needs to reveal the truth. Therefore, you should provide the following:
- Income Statement
- Cash Flow Projection
- Balance Sheet
These statements communicate to investors and lenders:
- How much money is required?
- How much money will the business earn in year-one?
- When can a profit be realized?
There are two common errors entrepreneurs make when writing this portion of their business plan.
- Unrealistic expense estimate. Some entrepreneurs think showing as few expenses as possible is more attractive. It is not. Would you purchase a house, having been told it will cost a certain amount to find out after moving it the expense of ownership is double?
- Excessive optimism about the business’s potential. Do not inflate cash flow projections. Doing so suggests a fraudulent or novice mind about entrepreneurship. Be honest.
USE THE BUSINESS PLAN AS A WORKING DOCUMENT
Business plans are not encyclopedias. They are working documents. In other words, design your business plan to be a road map to success.
The most outstanding value of a business plan is one that continues to evolve. As you operate the business, adjustments will be needed. The vision statement will require some tweaking as market trends change.
The mission statement will need adjusting as the business grows and expands its reach.
Amend the business plan to address overarching goals annually – this is a working document; therefore, do not set it aside and forget about it.
Remember, Not Every Business Plan is Worth Finishing
Writing a business plan is akin to a scientist experimenting. There are times when the research reaches an early end.
Experiments fail – this is a sobering moment for the scientist, and it is for the entrepreneur.
However, do not fret.
The research will also reveal the failure potential of an idea.
Now, the entrepreneur knows this idea will not work. The answer to the market problem is still out there, however.
Do not give up. Keep thinking, dreaming, and researching. There is an answer.
The research will bear it out. Look at it this way, you failed without incurring a high financial cost. This is undoubtedly a positive outcome to a failed experiment and offers incredible opportunities for learning how to adapt and what to try next.
5 Common Business Plan Mistakes
Many entrepreneurs make the following mistakes when drafting a business plan. They are common, but need not be the norm with you.
- Hiding Your Weaknesses
You do not need to hide your weaknesses but do not over highlight them either. Every business has vulnerabilities to it. That’s fine. Acknowledge them and have contingencies to augment them.
- Not Knowing your Distribution Channels
As an entrepreneur, you must understand the distribution channels of your product/service. How will the consumer get the goods they have purchased? Who owns or dominates that channel, and how will you best work with them? You need to know this.
- Too Much Information
Remember that what you are writing is a business plan, not a novel. Two hundred pages are too much. No investor has that kind of time to read your project. Most savvy investors have 10 to 12 items they look for in a plan. Therefore, reserve your complete writing for your autobiography and give the investors the critical stuff. Be clear. Be concise.
- Being Inconsistent
Do not quote conflicting data or develop inconsistent strategies, as this will undoubtedly cause investors to give you prompt “No.” Be consistent with your data. You are telling a story about how you will solve a problem in the marketplace. Be consistent.
- One Writer, One Reader
Be sure to have multiple readers examine your plan during the proofreading stage. It is easy to miss simple things like spelling, grammar, or even math errors. Feedback from family, friends, and other entrepreneurs is essential to writing a successful business plan.
PITCH YOUR WAY TO SUCCESS AT PITCH MASTERS ACADEMY
Writing a business plan is the beginning of your success as an entrepreneur. Making a pitch to investors or lenders with a well-drafted plan lends to your credibility.
Remember, they are not only investing in your plan but in you.
Learn everything you need to know about pitching your new business or scaling success at www.PitchMasterAcademy.com.