Business Opportunities: On-Line Articles - Avoid These Business Plan Mistakes To Keep Your Dream on Track

Avoid These Business Plan Mistakes To Keep Your Dream on Track
By Bryan Howe

Right this minute, thousands of hopeful entrepreneurs and small business owners are hard at work writing business plans they hope will help them start or grow their companies. Sadly, most of their great ideas will never be funded because the plans failed to attract investors.

Mistake One: Outdated Approach. One of the biggest mistakes is presenting a plan that's boring and out-of-date. In the late 80s, we saw business plans that were short, bullet-point charts that focused on projected sales. That's not the case anymore. Today, CD-Rom and interactive DVD presentations are becoming the industry standard.

Mistake Two: Inadequate Preparation. Even the more savvy business owners simply aren't prepared to write today's complex business plans. It's not a skill set you need often in your life. Most people know what they want the business to look like, but they have no idea how to get that on paper in a thorough, professional manner. Simply conducting the market analysis correctly, for example, can be overwhelming.

A business plan is often a company's first marketing piece. As the initial point of contact with investors, it has to be done right. In the investment arena, you must focus on what's important, such as the management team's experience. Investors want a concise executive summary, and a clear description of how the deal will be structured.

Mistake Three: Missing Information. Small business owners often spend several hundred frustrating hours trying to do it themselves. Many have even tried using specialized software. But without a solid grasp of how financial formulas interact or how to properly convey marketing strategy, they waste time and may miss important financing opportunities.

Because of the intricacies of writing a modern business plan, a team approach is the most realistic. It is next to impossible to find one person with the right combination of skills. At Masterplans, we rely on an in-house team of credentialed professionals to prepare each project, including a writer, a researcher and a financial professional.

The researcher is responsible for completing a thorough market analysis, including target demographics and market size. The researcher must be able to understand and analyze industry trends and account for whatÕs happening within competing companies. A good researcher can delve into a lot of different areas, follow informational leads, then mold the raw data into something readable.

A financial professional must be well versed in more than just accounting. A business plan needs to present what's going to happen, not what's already happened. The best financial professionals for business plan writing are those who can think creatively. They should know where to apply future labor costs and be able to determine the sales volumes necessary to meet projections.

LOOKS DO COUNT

Mistake Four: Neglecting Standards and Appearance. If seeking help, look for a company that has kept up with the changing business plan standards and guarantees that its plans will meet Small Business Administration and bank lending requirements.

The best companies go the extra mile by also offering in-house graphic designers to assist with logos and other design elements. If you submit a business plan with the company name in Arial font on the cover, it won't look professional and may be thrown away. Some people donÕt believe us on this point, but they are back six months later to buy a logo design.

Approximately 30 to 40 percent of Masterplans' clients need their business plans completed quickly to act on immediate funding opportunities. A fast turnaround may also be needed to lease prime business space. Look for a company than can complete an accurate and professional plan within 10 days and offers tiered pricing based on factors such as complexity of the industry, market size and the team's experience with that industry.

Mistake Five: Overdoing the Market Analysis. Believe it or not, it can be overdone and frequently is. When you are pitching your plan to an investor, you need to trust that at some level they get it. If they don't get it pretty instinctively, it is very unlikely they are cutting a check.

Most great ideas will never be funded because the plan fails to attract investors.

Many times we see people who want these exhaustive studies on a well-documented industry. Meaning, if you are creating software that will solve a problem with virtually every computer, you donÕt need to ramble on for pages about how many people are using them. Trust the reader to see the opportunity in the market by identifying what the market is, but let the reader start dreaming about dollars signs if it shipped with every new computer.

Mistake Six: Ignoring Strategy. This ties into the above. Once you have the reader dreaming of private islands they can buy with the buckets of money they'll make, really focus on how you intend to get that big market. Just being "better" isn't going to cut it. You must have a solid strategy describing the underlying magic of the concept or product that will make it fly off the shelves.

Mistake Seven: Not Having a Qualified Management Team. Many times we have clients who were executives and department heads and now want money to start a company in the same line. One of the big mistakes is not specifying who is going to fill the roles in which the CEO has no experience.

Meaning, maybe you ran a department someplace else but does that qualify you as a CFO too? Best case is you have it filled with Superstar X, worst case should be acknowledging it is a weakness but committing to recruiting great talent for it."

MEANINGFUL INFO

Mistake Eight: Static, Incomplete Financials. Financial models should be linked to classic assumptions the reader can understand. While financial statements are required, a better use of reader time is per-unit economic assumptions.

Quickly demonstrating what a "sale" means in terms of COGS (cost of goods sold), labor and profit is much more meaningful than some-pie-in-the-sky 5-year pro forma that just shows a net income but doesn't show what assumptions must be met for those numbers to work.

Mistake Nine: Not Telling the Story Well. It's a pitch, so make it read like one. Whether you are using it internally or externally, the plan is pitching the success of the business. Don't make it too rah-rah with fluff language, but it should demonstrate a bright future with contingencies for darker days. Make it exciting and realistic, tell a great story, and make the reader want to be involved.

Mistake Ten: Ignoring the Little Things. "The devil is in the details. Typos, irregular font size and use, poorly formatted graphs and unused headers are my pet peeves. A typo probably isn't what anyone is basing a multimillion dollar deal on, but the little things finish the presentation for you. Detail-oriented, attractive plans have an advantage.

In today's environment, it takes a team to craft a business plan properly. At Masterplans, we're very aware that we're working with someone's ambitions, goals and passions. What we do affects their home life, family and friends. So we do our best to get their thoughts and ideas on paper while holding true to their dreams.

Plans should be exciting and realistic, tell a great story and draw the reader in.

Whether you do it on your own or tap the services of outside experts, preparing a good business plan is critical to the success of any new venture. This is not the place to try cutting corners by skimping on time, effort or resources.

A good business plan serves as a roadmap for your entrepreneurial venture, and it plays a vital role in communicating your vision to others--especially potential investors and financing sources.

Bryan Howe is the founder of Master-Plans.com, a Portland-based professional business plan writing firm. He can be reached at 877-453-2011 or by visiting www.masterplans.com.