Thursday, 29 August 2019

Ten Ways to Ruin Your Business Plan

These errors in business plan preparation and presentation will undermine the
credibility of the plan and hurt your chances to receive funding:
• Submitting a “rough copy,” (with coffee stains and typos) tells the reader that
management doesn’t take the planning process seriously.
• Outdated historical financial information or unrealistic industry comparisons
will leave doubts about the entrepreneur’s planning abilities.
• Unsubstantiated assumptions can hurt a business plan; the business owner
must be prepared to explain the “why” of every point in the plan.
• Too much “blue sky” - a failure to consider prospective pitfalls - will lead the
reader to conclude that the idea is not realistic.
• A lack of understanding of financial information. Even if someone else
prepares the projections, the owner must be able to explain them.
• Lack of specific, detailed strategies. A plan that includes only general
statements of strategy (“We will provide world class service and the lowest
possible price.”) without important details will be dismissed as fluff.
Especially important if the business plan is prepared for a lender:
• No indication that the owner has anything at stake. The lender expects the
entrepreneur to have some equity capital invested in the business.
• Unwillingness to personally guarantee any loans. If the business owner isn’t
willing to stand behind his or her company, then why should the bank?
• Starting the plan with unrealistic loan amounts or terms. Do your
homework and propose a realistic structure.
• Too much focus on collateral. Even for a cash-secured loan, the banker is
looking toward projected profits for repayment of the loan. Cash flow should
be emphasized as the source of repayment.

Basic Business Plan Guidelines

Writing a Business Plan will probably take a lot of time. Up to 100 hours or
more is not uncommon for a new business that requires a lot of research.
A typical plan will have three sections. Section one is a written section
describing Management and Marketing aspects of the business. Section Two
includes financial projections. Section Three is supplemental information.
A short (3-5 pages) Executive Summary is often added at the beginning of
more complex business plans.
• Section One should be thorough, but concise and to-the-point. Use
headlines, graphs and "bullets" to improve readability. Length of this
section is usually 10 - 20 pages.
• Section Two describes in numbers the outcome of your business
strategies and plans. Your financial projections should be based on facts
and research, not “wild guesses.” Be prepared to justify your numbers.
• Section Three contains supporting information to reinforce the first two
sections. This section’s contents will vary with your type of business.
Owners should be very involved in the planning process. Hiring someone to
do it or delegating it to someone who is not a key member of the company
will result in an inferior plan.
No plan (or a poor plan) is a leading cause of business failure. You can
improve your chances of success with a good Business Plan.

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