Every entrepreneur starts their journey with high hopes for success. Whether they have a useful invention or mobile app in mind, entrepreneurs are at the forefront of innovation. But to continue growing beyond the initial idea stages, there’s a major hurdle that most startup founders face: getting money to support early operations.
Fortunately, entrepreneurs have a variety of funding options to choose from, including bank loans, angel investors, and crowdfunding. While each of these options have their own pros and cons, most choices require a business plan to move forward. With the exception of crowdfunding, every other viable funding source requires you to prove that you have a viable business with future market potential.
Because of this, business plans can easily mean the difference between securing funding and struggling (or having to shut down operations altogether). Unfortunately, many business owners don’t give their business plans the attention they deserve. With that in mind, here are common mistakes that you can avoid:
1) Not Customizing Your Template
Not everyone knows how to do a business plan, so it’s natural for you to start looking at business plan templates. There’s nothing wrong with a template; in fact, if you don’t have any experience, business plan templates are encouraged. They provide a great foundation for getting started and can offer guidance and inspiration.
However, business plan templates aren’t designed for you to simply copy the content it includes. Replacing a fictional company name with your own will make your plan feel like a cookie cutter document devoid of passion and character. Use the template as a compass and tailor it to your business.
2) Not Talking to a Professional
Once you’ve completed your first draft, take a break and come back again for a second revision. Once you’ve revised it two or three times, work with a business plan consultant or business plan writer to help you perfect the content and align the strategy. Business plan professionals can get your business plan into a desirable state and increase your chances of a potential investment.
There are different options you have depending on your budget and how seriously you want to take your business plan development. At the lower end of the spectrum, you can hire a business plan freelancer on a platform like UpWork. On the higher end of the spectrum, you can work with a consultant at a business plan firm that specializes in strategic capital raising. Weigh the pros and cons of each and explore different options.
3) Inflating Financial Projections
Investors want to know every detail of your financial circumstances, both now and in the future. It’s okay to be overly optimistic about your business, but it’s not okay to translate that optimism into your business plan without the data to prove it. Nor is it okay to “pad” your sales and forecasts in hopes of getting a “yes” from a lender.
Every aspect of your business plan—and particularly your financials—has to have a root basis. Lending institutions and individuals will not take your word for it; they’ll dig deeper into your paperwork to try to arrive at the same conclusions as you. They have highly extensive due diligence processes, and any discrepancies they find can damage the relationship and brand you as an untrustworthy and unreliable investment opportunity.
4) Making it Too Long (or to Short)
Don’t attempt to put your own spin on what a business plan should look like. The traditional business plan format and structure is acknowledged by the vast majority of lenders. Any deviation from the standard format can cause confusion. And the minute a potential investor has to put too much work into figuring things out, they’ll lose interest.
It’s possible for your business plan to be too long or too short. According to the Small Business Administration, business plans are typically between 30 and 50 pages. Of course, the length of your business plan depends on your business, what you’re asking for, and how complex your market is, etc. However, business plans that are too long can be confusing—especially if it’s too long without purpose. Every sentence in your business plan should have a purpose. Avoid lengthy, overly descriptive paragraphs and keep your content to the point.
On the other hand, business plans that are too short can give off the impression that you rushed through it or that your plan is missing important details. Don’t leave out details that matter, and don’t include details that don’t.
5) Writing Your Executive Summary First
Executive summaries are the first section of your business plan, but you shouldn’t start here. Your executive summary should summarize all the most important details contained in the other sections of your business plan. Until you’ve completed the plan in its entirety, it would be difficult and short-sighted to write the executive summary first.
Your executive summary is a short 1-2 page section whose purpose is to offer a glimpse into what the reader can expect and get them excited to continue reading. If you don’t start off strong, your potential investor might lose interest quickly.