Type the word ‘’business plan’’ in Google and five billion results will pop up. How would you describe a business plan? The description of a venture you will create to exploit an idea or concept? An explanation of how your new business is going to achieve its goals from an operational, marketing and financial viewpoint? An action plan, a road map, a fund raising or sales tool? A business plan is all these and more.
Despite the singular importance of this document, however, feedback from investors indicates that many business owners make unfortunate mistakes when drawing up a business plan.
Here are four of the most common mistakes you need to avoid:
- Vague value proposition (mainly pre-existing ideas): Innovation is the cornerstone of a successful business. We all know of ‘’me-too’’ businesses – businesses selling commodities whose only point of difference is, for example, price. To avoid producing and promoting a ‘’me-too’’ product or service, strive to establish a memorable position in the minds and hearts of your customers by leveraging your strengths and reinforcing your weaknesses through a SWOT analysis.
- Difficulty laying out the operationalization of ideas: I’ve been privileged to judge several start-up competitions and I always choose a prosaic but practical business over an imaginative but impractical one. While this seems to fly in the face of the first advice on innovation, there is no inherent contradiction. Innovation, to be useful, should be capable of being operationalized and commercialized. In as much as a business person should be creative, a business plan is not a novel.
- Too optimistic financial projections (no sensitivity analysis): This point is related to the second. An entrepreneur should have his head in the clouds but his feet firmly on the ground. This means that his projections should be grounded in reality.
- Improper definition of your target market: Have you ever come across a business plan that begins thus: ‘’There are 100 million people in Nigeria and we plan to capture a market share of 1% in Year One.’’ Woolly statements like this underscore the importance of market segmentation. A business that tries to be all things to all people is doomed to be mediocre at best, and a failure, at worst.
You wouldn’t go on an extended trip without a map. In the same way, it’s foolhardy to start a business without a business plan. In doing so, please be sure to avoid the aforementioned pitfalls.
Do you want a helpful expert to review or create a business plan for you? You can search for ‘’business plan’’ consultants on our platform.
