8 Typical Mistakes When Writing a Business Plan

How to make a business plan?” This question is very often asked by people who have decided to found a business (or those who have already done it)! Everyone knows that a correctly written business plan is the key to the successful development of any enterprise. The completed business plan should describe your expectations from the new (or currently available) business and talk about your wonderful ideas to the prospective lender. The business plan is a kind of document, a compilation after which all issues related to the business should be solved without additional explanations.

The business plan, being a document of strategic planning, gives the first idea about the enterprise, its economic maturity, and the literacy of the project team. Accordingly, familiarity with the business plan can produce both a positive and negative impression on potential investors, forming a certain perception of the enterprise, its managers, and business in general. That is why the descriptive sections of the business plan should be presented in a harmonious, literary language, and the calculated sections should show the high-level economic literacy of the project developers.

A good impression of the business plan can result from a lively, creative approach to its development, thanks to the presence of creative ideas and a certain highlight that demonstrates the uniqueness of the project team. The reasons for the negative perception of the project can be from having boring language in the presentation, the presence of grammatical errors and the lack of interesting ideas. In these cases, a professional strategist should apply for the writing assistance like the one listed here. The basic rule is that creativity should be realized without excess, and the language of the presentation should correspond to the concept of the "business planning document."

Typical Mistakes in the Preparation of a Business Plan

  • Having insufficient knowledge of the market, its capacity, development trends, competition, and low argumentation of possible sales volumes of products (services)

This is the most common mistake. Often entrepreneurs emphasize the description of business issues, forgetting that the basis for successful implementation of the project is the demand for products (services) of the project from potential consumers. Therefore, when drafting a business plan, it is necessary to thoroughly analyze the market and the consumers, and provide reasoned conclusions about the possible volumes of sales of products (services).

  • Blurred project goals

The objectives of the project should be clear and unambiguous. For example: “By 2012, The Company is to become the market leader in Los Angeles in terms of volume, assortment, and quality of bifido-containing dairy products, and will ensure production of 25 tons of products per month.”

You should show potential investors an understanding of three things:

  1. The state of the company at the moment (who are we today?).

  2. A clear representation of the level that you are going to achieve in the future (where are we going?).

  3. The strategy for achieving goals (who are we in the future and how to come to this?).

  4. The existence of unresolved issues in the project.

The business plan should not have unprocessed issues, for example, such as:

  1. Lack of information about suppliers of equipment, raw materials, and consumables.

  2. Lack of a clear plan for attracting investments, indicating the need for attracting credit resources, and private investment.

  3. Lack of information about the property of the enterprise (individual entrepreneur), which can act as a lien for lending.

  • Underestimation of the cost of project implementation

This situation is due to the lack of thoroughness of the issues related to the cost of construction, equipment supplies, and the cost of obtaining permits. Often, when developing a business plan, when planning the acquisition of equipment in the cost estimate, an unreasonably low construction cost is indicated, while the cost of transport delivery and installation of equipment is not included. In the end, this leads to an increase in the cost of actual implementation of the project compared to the planned cost. Such a situation, at best, will lead to the need to attract additional investments, and in this situation, if additional investments are not attracted, it will lead to the complete halt of the project and bankruptcy of the entrepreneur.

  • Underestimation of the cost of production and services

This situation leads to a weak study of issues related to the organization of production. At the planning stage, entrepreneurs either do not pay enough attention to the consumption of raw materials, energy resources, and their actual cost or they use unverified information. The main result of this approach to production planning is the high cost of production, the loss of market competitiveness, and the inability to change the situation since in some cases a complete replacement of technology and equipment is required.

  • Unrealistic timing of the project

Often, business founders do not take into account the real deadlines for completion of the main stages, showing unrealistically short terms of project implementation, which shows their incompetence and the need for reassessment of their own capabilities. For investors and creditors, this is a dangerous symptom.

  • Disproportion of the project to the enterprise's potential

The scope of the project should not repeatedly exceed the financial results achieved by the enterprise at the current time. Disproportionate requests for resources to the size of an enterprise or firm, the size of the authorized capital, and the availability of funds, property or other assets leads to suspicion and distrust of potential investors and creditors, and most banks have direct regulatory prohibitions on financing projects that exceed the current financial capabilities of the enterprise.

  • No clear plan for product promotion

A fairly common mistake in the development of business plans is the concentration of the project on production issues and insufficient attention to the organization of sales and product promotion. Particularly often, such errors are observed in production and agricultural business plans. Poor development of the issues of product sales can lead, in the end, to a lack of revenue, and ultimately to the company's failure to achieve the targets planned in the business plan.

  • No clear scheme for repayment of borrowed funds (the beginning, stages, amounts)

The scheme of repayment of borrowed funds is perhaps the most important section for potential investors and creditors. The absence of this section may result in a refusal of financing a project.



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Tuesday, 23 July 2019
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