Business Plan Blunders

A business plan is like a compass

Business plans are like a compass—they point the way for the company and explain the business to the investor. Yet, business plans can tell the wrong story and may even kill the deal with the investor.

Here are some examples of business plan blunders to avoid:

  • Lousy Writing: Nothing kills a plan more quickly than poor grammar, incorrect punctuation, and spelling errors. Enough said.
  • Target Market Poorly Defined– A product that fits everyone is a prescription for disaster. Don’t go there. Be very specific in your definition of your customer.
  • Incomplete Plan: Missing key elements or an incomplete plan tells the reader that the plan is half baked or not well thought out.
  • Too Technical: An obsession with technical details often is done at the expense of the business model. The investor wants to know how the business will make money.
  • Blue Sky Sales Projections: Although it is true that plans should be optimistic, a hockey stick growth curve needs to be backed up with strong assumptions and facts.
  • Risk Unaddressed: Not addressing risk in the plan is a major flaw—bankers and investors want to know what the downside risk is in the plan.
  • Ignoring the Competitive Environment: Ignoring or dismissing the competitive environment is a common blunder by business plan writers. Who is the competition and what do they do right and wrong?
  • NDAs Required. Don’t obsess about confidentiality since most investors won’t sign a Non-disclosure Agreement anyway. You need to tell your story to as many people as possible.
  • First to Market Claims: There are not many rewards for being first in a market; in fact, the opposite is generally true. Being first is very expensive and investors know this.
  • Business-Speak: Say what you mean and leave the big words for the lawyers. Be deliberate and concise. Avoid business clichés such as “think out of the box.”
  • Plan Too Long: The one inch thick business plan does not get read. Keep it below 50 pages.
  • Business Plan Services: Don’t even consider the use of cheap business plan services which outsource to India or other exotic places. Very tacky.
  • Business Plan Pre-made Templates: These templates are the pre-made plans you edit to fit your business. They are pure garbage. This is the domain of the lazy entrepreneur.
  • Business Plan Software: I am not sure why but most business plan software programs are bug ridden. Be sure to double check the financials.
  • Hidden Profits: Investors want to know how the business will make money and what the return on investment will be. Address it.
  • Unclear Valuation and Exit Strategy: What is the cost of ownership and how will the investor get their money out? This must be spelled out clearly or there is no deal. If you avoid these pitfalls, your plan will be better than 95% of the others out there.

John Bradley Jackson

Director Center for Entrepreneurship

California State University, Fullerton

 

 

Published by CSUF Entrepreneurship

We teach, coach and lead the principled, cross-disciplinary practice of entrepreneurship. We believe that, through determined practice, leadership and team work, our students, faculty, clients, volunteers and alums can systematically recombine the new and the old to forge new ventures, create an entrepreneurial culture, and dramatically benefit our community.

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  1. I have to agree with some of the points here. Keeping a business plan concise and to the point is the best practice. Writing a business plan is also a chance for the individual to truely evaluate the risks of the potential business, so I never understand why people wish to outsource such a task.

    I’m also often suprised just how many of my clients have never thought of an exit strategy or a worse case scenario. Preparing for all options leaves ensures you truely think about all risks and take decisions based on common sense and never hope alone.

    Good stuff

    Dee

  2. Dee,

    Good thoughts.

    I agree that a good business plan looks at the pros and the cons of the business concept. This is important for both the entrepreneur and the investor.

    JBJ

  3. Business plans are alway the important aspect a person rarly puts much into as we see here that is not the way it should be.
    Thank you for your very good information.

  4. I am presently teaching two High School students Consumer/Business Math. Explaining to them these concepts…there will always be pitfalls in Business, put preparation can help lessen the mistakes.
    Thank you for such valuable information…

    I will print it out for these students to read.

    Romona

  5. I think leaving the business speak at home is a huge one. People always try to get way too technical instead of keeping it simple. Bad grammar and poorly defined target markets are definitely huge no nos as well.

    The blue sky projections often happen as everyone is overly optimistic about their sales projections. Reality usually comes into play and then numbers usually need to be reduced. Ignoring the competition is a huge blunder. You must respect and learn from your competition rather than ignore them as a factor.

  6. This it TRUE. The main point I think is forgotten in every business plan is the exit strategy. I have developed many for many people and this is the LAST thing they think of.

  7. I want to thank you for this advise. I own an online jewelry store and I have made many mistakes. There is nothing like being very specific and detailed when it comes to structuring your business model.

    Investors are very skeptical when it comes to putting up their money. They are looking for security.

    For those reading this info, please share these very well explained rules/bullet points, as I will also.
    Have a great year.

    Geseell

  8. Also wanted to thank you for the advice. As I’m in the middle of putting a business plan together it was great to find this information. Very useful and full of great tips. Have bookmarked to come back again.

  9. There is not doubt that if you are going to have a business and have it become successful then you are going to need that business plan. You just cannot hit a target that is not well defined…or is constantly moving.

  10. Thanks for the great advice! I just came across your blog and love the content. I look forward to reading your posts in the future.I think leaving the business speak at home is a huge one. People always try to get way too technical instead of keeping it simple. Bad grammar and poorly defined target markets are definitely huge no nos as well…thanks

  11. you took excellent topic..Thanks for the great article!your example of business plan blunders I appriciate most which you explain point to point..I look forward to reading your posts in the future.I think leaving the business speak at home is a huge one..I’ll waitting for next

  12. Business plans are or have been a really good road map to follow. With technology advancing as fast as it is it can be difficult to write a 5 year plan today. For example where was facebook 5 years ago? Today facebook is an huge in business. If you are not using social networking in business you are falling behind so, it is difficult to write a plan today when something that may not even be invented yet will have a major effect in 5 years. Business plans today need to be fluid.

  13. Hi John,

    I think this is a very informative post. it’s important to emphasize the importance of business plans in order to keep things organized as they start their businesses. I totally agree with your list. Thanks for sharing this great entry!

    Justin Woltering

  14. The cookie cutter business plan is a joke. I am glad that you have brought that point out for new entrepreneurs.

    Additionally, the challenge with being first to market is that very few inventors are able to successfully market their product correctly. Friendster vs. Facebook, Aol vs Google, Apple OS vs Miscrosoft OS.

  15. Thanks for the info, great points. There is nothing better then clearly and concisely written business plan. If every part of the plan is completed as it should be then, you reduce your chances to fail to the very minimum.

  16. Nice post…This is really useful information in your post…I like all of your above points especially ” Incomplete Plan: Missing key elements or an incomplete plan tells the reader that the plan is half baked or not well thought out” and “Hidden Profits: Investors want to know how the business will make money and what the return on investment will be. Address it”…Keep it up…I am looking forward to reading more of your posts in the future…

  17. Great!
    Right now I’m preparing a business plan of the energetic company for my university tasks and I’ve found here some really usefull tips about how to make it more professional.
    Thanks a lot!

  18. Getting your business plan is key to having a successful business and not just to secure investment but to ensure your business is actually going to be profitable. Fail to plan and plan to fail. Thanks for the post.

  19. Thanks for the info, great points. There is nothing better then clearly and concisely written business plan. If every part of the plan is completed as it should be then, you reduce your chances to fail to the very minimum.

    thank you admin

  20. Business plan blunders are really good to note. Business plan should be realistic to the current economic trends and become integral part of other dependent factors.

    Danielle,
    Wedding Rings Reviews

  21. It still amazes me how many people I see who have just decided that they want to run their own business with no thought or planning. Even if you find it really difficult to start with everyone needs a simple business plan. If not you might as well be driving your car with no idea where you are going. Good information.

  22. Good advice, John. Not having a well thought-out business plan is a cause of failure before many entrepreneurs even have a chance to start. It’s worth holding back a little to get things started on a strong foundation before trying to get your new venture off the ground.

  23. Excellent post John.

    I agree that in planning you have to be brief and concise. Reading a very lengthy business plan is not very practical. I also agree with you when you said that a plan written with so many grammatical and punctuation errors will cause disaster to your business.

  24. The process of developing your business plan will require you to focus on exactly what you are trying to achieve, precisely where you want to be going, and exactly how you plan to get there. It will force you to detail the many expenses involved to open your business, the projected sales and monthly expenses of actual operation, and the volume of business you will need to generate to meet your obligations.

  25. The process of developing your business plan will require you to focus on exactly what you are trying to achieve, precisely where you want to be going, and exactly how you plan to get there. It will force you to detail the many expenses involved to open your business, the projected sales and monthly expenses of actual operation, and the volume of business you will need to generate to meet your obligations.

  26. This is an excellent article.

    I think there are three main questions you need to ask yourself, when compiling a business plan.

    Problem 1: Is your business plan too complex?

    Solution: Keep it simple and in easy terms. Don’t reduce the goals in your plan to mere activities. There are too many possible activities to choose from! It’s too cumbersome to track each task, and there are too many to focus on at one time. Out of frustration or confusion, you’ll simply stop the planning process or stop using the plan. Make sure your business plan includes only what you need to manage your business.

    Problem 2: Are you focused enough?

    Solution: To improve your focus, reduce your measurable goals in your business plan to initial appointments with new clients, and stop there.

    Problem 3: Are You Motivated Enough to Achieve These Goals?

    Solution: Consider your business goals and your purpose behind those goals. This will create a deep and lasting motivation and prevent you from feeling powerless and mediocre.

    Write down at least five answers to the question, “What do I want my business to do for my life? What do I want my business to accomplish for me and my loved ones?”

    Then, ask yourself, “Why do I want that?” And keep writing those answers down and continually asking, “And why do I want that?”

    Hope that helps!

  27. Nice….thnx for the post and some great tips share with us……I also think that hard work is the most important aspect of getting any success………I like all the points which u described very proper way…..Especially: Business Plan Services: Don’t even consider the use of cheap business plan services which outsource to India or other exotic places. Very tacky. …..I hope to see more article about business in the future…….

  28. Thanks for this article. One cannot repeat it often enough how important a business plan is.

    The plan is the road-map to achieve the desired goal. Independent if one is working/starting of on line or off line.

    The business plan also helps to keep the commitment with oneself when starting.

  29. Good advice, John. Not having a well thought-out business plan is a cause of failure before many entrepreneurs even have a chance to start. It’s worth holding back a little to get things started on a strong foundation before trying to get your new venture off the ground.

  30. I agree that a good business plan looks at the pros and the cons of the business concept. This is important for both the entrepreneur and the investor.

  31. Need to carefully prepare for the start of business. And the creation of a business plan is an important step to make a profit from their work.

    1. Some say that business plans are dead. Some say that when a business plan is done it should be discarded. I say make the business plan come to life. Long live the business plan.

  32. I like you bullet point regarding “too technical” the best. I have seen people succeed highly in business despite their apparent lack of business acumen because their business model was so strong. With a strong business model you can make mistakes and revenue will still come in and in a predictable fashion. Investors will look for a business model that can weather any storm.

  33. Good solid information and advice. I am in the process of developing a business plan and feel it is a foundation for the business. Without proper planning you are going in blind and failure is a possibility. I was looking at some business plan software and now will look elsewhere, perhaps a few books to help out with the plan. Thank you for the article.

  34. The above factors are vital in any field of business that we might have. Without a good business planning then you are just wasting your effort.

  35. Very good article.

    But one thing is writing a business plan on paper and quite another to materialize, so it is important to be very clear at the time of writing a business plan.

    Greetings.

  36. Good solid information and advice. I am in the process of developing a business plan and feel it is a foundation for the business. Without proper planning you are going in blind and failure is a possibility. I was looking at some business plan software and now will look elsewhere, perhaps a few books to help out with the plan. http://fns.userpro.net/ Thank you for the article.

  37. This is simply outstanding !!
    Just loved it..
    “Business plans are like a compass—they point the way for the company and explain the business to the investor. Yet, business plans can tell the wrong story and may even kill the deal with the investor.”

  38. I agree. Business plans are like a compass. Without proper business plans we will fail. Think creatively before proceed with our plan. our Vision and Goal must be clear.

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