If you have to write a business plan it needn’t be a gruelling experience. In fact, if it is tackled correctly, learning how to write a business plan can be an extremely illuminating exercise for a budding entrepreneur. There are many business plan templates available on the Internet that will churn out a generic business plan but these should be viewed with extreme caution. The reality is that learning how to write a business plan is a process and in order to extract the optimal results it is pivotal that the entrepreneur engages fully in that process. Your business plan should reflect you and your vision and should be supported by analysis and a firm strategy.
Hidden “mines” to avoid When You Write A Business Plan
We have written and reviewed hundreds of business plans and sourced funding from all avenues from Venture capital to straight bank loans. Here are the top five business plan statements that will decimate your chances of attracting funding instantly.
#1 – “The Competition is Low”
This is almost always going to be a false statement and is an immediate red flag for investors and lenders. If there is no competition then it means you have the next big thing on your hands that nobody else has invested yet. Not impossible but certainly not probable. This statement also begs the question, “why is the competition low?” If there is no competition it generally means there is no demand. When it’s time to write a business plan entrepreneurs often think that playing down the competition reduces the perceived risk in the business plan but in fact the opposite is true.
In all but the most extreme cases there will be competition and it must be analysed in detail as part of the overall business strategy. Claiming the competition is low (unless true of course) demonstrates that the level of competition risk has not been adequately assessed and that means an automatic rejection for funding.
#2 – “We Only Need to Unlock 0.01% Of The Global Market To Succeed”
A comment typically used to mitigate the fact that the competition is strong, this statement is misleading and will arouse contempt in the eyes of an investor or lender. When you write a business plan and are discussing the size of your market it is important to demonstrate your “relevant market”. Your relevant market is the segment of the overall market that pertains to your specific product or service. Many entrepreneurs fall into the trap of talking in terms of the overall market without realising that they are overestimating the market potential.
For example, if you sell ladies designer shoes you are trading in the ladies footwear market, which runs into the billions of dollars per annum. However, in reality, your relevant market is ladies designer shoes and is considerably smaller than the overall ladies shoes market. This is a common mistake and highlights a huge gap in the market research undertaken. Again, for an investor or lender this is unforgivable.