Five fatal business planning mistakes
If you are planning to start a business, seeking sound financial advice from one of our CPA Caulfield based accountants is a good first step. An inexperienced entrepreneur faces many challenges when it comes to approaching potential investors.
Dunn & Bradstreet often see business plans that are not fully developed or even incomplete, these are obvious problems and may send a red flag to investors. They have compiled a list of the top five most common mistakes business owners make when developing a business plan.
1 - Unrealistic financial projections
Investors want to see a business plan that paints a realistic picture of the projected growth. If a plan is overly optimistic and not consistent with the industry it may not get taken seriously.
2 – Not defining a target audience
Your plan must define and present a clear picture of the potential customers. Knowing your audience and why they should purchase your product or service is a key part of a solid business plan.
3 – Being bombastic
Overuse of superlatives can be the downfall of an otherwise great business plan. Investors like to be wowed with a great business idea, not by hype or buzzwords. Business plans should not use blanket phrases, general statements or vague ideas; they should not be overly philosophical either.
4 – Poor research
If you put together your plan together too quickly it will be obvious to an experienced investor. It is imperative to double-check your facts and substantiating materials, make sure your research is accurate, verifiable and up to date.
5 – Don’t overlook the competition
Some poorly written business plans claim there is no competitors or describes what they are doing wrong. An investor wants to know who the competition is and how you plan to compete with them successfully.
If you paint an overly rosy picture of the competition, it will only show that you are unrealistic. Even if your product is brand new and there is no competition, if your idea is great you can be sure there will be competition to follow.
In addition to these five common mistakes, Dunn & Bradstreet says that weak writing skills, inconsistencies from section to section or simply having too little or too much information can cause a business plan to be rejected.
You must take the time to carefully review each section and first identify as many problems as you can. When you think it’s perfect, have a trusted friend critique it before sending it to any investors. One of our Caulfield accountants can also look over your plan and advise you as to any changes.
Hillyer Riches Management Pty Ltd is a Corporate Authorised Representative (No 466483) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. AFSL / ACL No. 223135.This document contains general advice only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.