A New Restaurant

Whether you’re starting a new business or trying to raise additional financing for an existing business, you need a good business plan. Most entrepreneurs know this, but still, a lot of them get it wrong. Here are 10 of the most common mistakes people make with their business plans.

      1.  The One-Size-Fits-All Business Plan

There are quite a few computer programs designed to make writing a business plan easier. The problem is, they also make it easier to write a cookie-cutter business plan. This isn’t a knock against the software; the problem is with the user. Just because you can plug in the numbers and crank out a new plan doesn’t mean you should.

To be effective, a business plan needs to be specific to your business. If you don’t take the time to make it unique, investors will know it. If it’s not important enough for you to make it your own, why should the investors think it’s important enough to give you money.

2. Unrealistic or Incomplete Financial Projections

The two areas that typically fall short are cash flow and growth projections. When putting together your financial projections you need to make sure you include enough information so the person reading it can make some decisions about whether or not it’s accurate. Your financial projections should also show that you’ve actually done some research into what your costs will be.

When presenting your financial information break down the first year into monthly projections. If your business is at all cyclical, showing monthly projections show that you have thought through budgeting for the slower periods. When you make assumptions in your projected financial statements, list those assumptions so the reviewer has a clearer picture of why you made the projections you did. This will show whether or not your forecasts are based in reality.

Most of all, make sure your projections are realistic. While we would all like to have a hockey stick shaped growth pattern, history shows that it’s more likely to be much more flat. It’s not a sin to be optimistic, but being unrealistic in your optimism is. Look over your financial projections as if you were the lender. Give them the “sniff test”. If it smells wrong, it probably is.

3. Failure To Address the Competition

Every business has competition! If you think you don’t, you’re only fooling yourself. While there may not be anyone in your area that is doing exactly what you are doing, there is someone who is competing for the same dollars. To state in your business plan that you don’t have any competition shows the lenders that you haven’t really thought it through. Don’t take a shortcut here. Do your homework and figure out who is going to try to take your customers.

4. Failure To Show Competitive Advantage

If you can’t show a competitive advantage, why are you trying to open a business? Figure out what it is that you do better than your competition. Spell out the reasons your customers will come to you instead of going elsewhere.

You also need to show how you intend to maintain your competitive advantage. Business do not keep a competitive advantage for long. As soon as you hit the market your competition will start making adjustments to keep their customers. You have to show that you understand your business well enough to be able to make adjustments as well, and continue to establish new advantages.

5. Unclear Goals

What is it you are trying to accomplish? Your business and your business plan should have a specific purpose. Your goals need to be spelled out in detail, as well as how you will go about reaching those goals. Try to avoid generalities when stating your goals. It’s a nice idea to try to “be the best in this market”, that doesn’t really tell anything about how you are planning to accomplish that. Lenders want to know that you have a solid plan to accomplish everything you say you’re going to accomplish.

6. Unspecific or Too Many Priorities

Similar to unclear goals is unclear priorities. Many experts say that you should limit your list of priorities to 3-5 items. Be specific and concise about what those priorities are. A list of 20 priorities shows a lack of focus. It’s the shotgun approach. It says “If I try to do everything, maybe something will work.”

7. Incomplete

I’ve said it before; Do your research. While you don’t want to fill your business plan with every trivial tidbit of information you can dig up, you need to make sure you have all of your bases covered. If you leave out information that is pertinent to your business, you will leave investors with the impression that either you are careless, or that you haven’t really thought through all aspects of your new business.

8. Redundancy

While you want your business plan to be long enough to adequately cover all of the necessary information, making it too long because of redundant information will turn potential investors off. Make sure your business plan is well organized so that you don’t repeat yourself any more than is necessary.

A clear and concise business plan shows thoughtfulness and organization skills. Repetitive information can be confusing and hard to read.

9. Putting It Off Until the Last Minute

The thought of writing a business plan can be a bit intimidating. Because of this, many entrepreneurs put of writing their plan until they absolutely have to. This makes the task mush more difficult than it needs to be.

This plan represents your business dreams, and your plan for financial success. It’s not something that you want to throw together at the last minute. Rushing through the process will lead to critical mistakes and incomplete information. The worst part is, because you didn’t leave time to adequately review the information, these mistakes may not be caught until after your business is open. At that point fixing mistakes can be very costly.

10. Spelling and Grammar Mistakes

This is the worst mistake you can make with your business plan. It is avoidable and so easy to fix that there is no excuse for allowing it to happen. Every decent word processing or business plan program has a spell check function. Use it. Many of them have very good grammar checkers as well.

After you write your business plan, run the spelling and grammar checks. After you have fixed any mistakes reread the plan. When you have finished rereading, give the business plan to a friend or relative to proofread (try to choose one with a good understanding of the English language). After it has been proofread, reread it again.

You business plan represents you and your new business. Careless mistakes and incomplete information tells a potential lender that you don’t car enough about it to get it right, or that you are too careless to be considered a good risk. If your new business is important to you, make sure you take the time to get it right.