In one of our previous blogs, we discussed why you must have a business plan before the start of your business as a first-time entrepreneur. You shouldn’t start a business without a plan. This would be a costly mistake. The paper itself must worth something, instead of just romancing yourself in front of investors.
The thing is, you’re too optimistic. You think that your idea is the best if you managed to put it on paper. And your love towards your idea might not be what the investors are looking for. They need to know your financial projections and profit plans, not the same old “this one is going to change how consumers react” rhetoric.
Here are the most common slip-ups that start-ups can make when developing their first business plans:
The incompetently written business plan
The writing style is key when putting the plan on paper. Everything is important, from grammar to punctuation and spelling. Imagine how you start reading a blog post and all of a sudden you find inconsistency in words and spelling mistakes. Doesn’t it turn you off? You want to click “Close Tab”.
The same thing happens when investors take a look at a business plan. And investors don’t have time to correct grammatical mistakes. That’s why the plan can end up in the bin in a matter of seconds.
Presenting the package carelessly
Your presentation has to match with those accurate profit projections in your business plan. Make sure that you consult with an expert first before you begin creating your pitch. Keep in mind that your business plan may take months of development. However, investors and venture capitalists won’t give you more than five minutes to present your idea. Be one hundred percent sure that your presence alone will guide them through the paper perfectly and every section will be explained to investors concisely.
Important pieces missing from your business plan
You have consumers, a target market, products, services, marketing, sales, management, equity, and competitors. That is the minimum. What about your market insights? Industry trends? Also, financial projections and where is the profit plus monthly cash-flow statements as well as balance sheets?
If you’ve fully understood your industry, you will have the required analysis included in your business plan, and VC’s will notice no gaps here. They’ll most likely listen to an entrepreneur that understands his target market and industry with its trends, instead of a romantic optimist.
A business plan is not a book. And you’re not Jean-Paul Sartre either. Of course, an intelligent person will understand your idea, but you need to make sure that it’s acceptable to, let’s say “an intelligent person with a high-school diploma that happens to be the richest investor in your market”. If you’re that expert in writing, maybe you should pursue a writing career or start a business plan writing business.
Of course, the main assumption is that you’re going to succeed in executing your idea. The right business plan will point out to the main presumptions that are critical for the success of the idea and will offer some kind of justification for them.
On the other hand, bad business plans spread one assumption over 50 pages and the investors can’t tell where the facts are and where the fiction of success is. And everything involves assumptions, from market size to customer’s behavior. This data needs to be as clear as your industry’s touchstones.
Insufficient research to back up your business plan
It’s extremely important to have some kind of verification for your assumptions, as well as having the right research process to make sure that the facts in your assumptions are proven and true. You need to know everything about your industry, about your customers and their habits. Furthermore, you need to know the tactics of your competitors, and their market positioning and market share.
You can’t have a business plan without the numbers (charts and stats). Numbers are the only way to back up your market forecasts. Investors will have a look at the numbers before everything, and the numbers will prove if you’ve done your research right or not.
Asserting that your business idea is fail-proof
We already said above that you must not be too romantic about your idea. And start-ups need to be optimistic, as it is crucial to the success of the venture. But investors know better than you that there is no such thing as a “risk-free” idea.
The risk is always present. And you need the details in your business plan to prove that the risks can be minimized, not to promise the sky and stars to investors.
Idea uniqueness – Eliminating the competition
Investors are bored from start-ups that are “pioneering in their industry” and “nobody has done this before, there is no competition” ideas.
You already have, and will have competitors. It’s inevitable in business, directly or indirectly. They are breathing down your neck, and they are right in front of you. A competitive advantage is a pivotal component that will make your business plan acceptable to investors.
As a start-up team that has a great new business idea, we advise you to not jump into business waters without a plan, or even worse: a business plan that contains one of the errors above. There are important questions that need to be answered first before you even start presenting your idea to investors. The BizzBee team of experts is here for you to help you answer all those questions and guide you through the process of successful business planning.