“The absolute biggest business plan mistake you can make is to not plan at all.” So writes Noah Parsons in his helpful blog post 17 Key Business Plan Mistakes to Avoid in 2023. But how does one pull together all of the necessary components of a cohesive plan? It can feel overwhelming.
Eric Butow, CEO of online marketing ROI improvement firm Butow Communications Group, has teamed up with Entrepreneur Media to update the second edition of our best-selling book Write Your Business Plan to provide you with a simple, step-by-step process for creating a successful business plan. In the following excerpt, he gives ten tips to gather all of the critical information you will need to succeed.
1. Know your competition.
You need to name them and point out what makes you different from (and better than) each of them. But do not disparage your competition.
2. Know your audience.
You may need several versions of your business plan. For example, you may need one for bankers or venture capitalists, one for individual investors, and one for companies that may want to do a joint venture with you rather than fund you.
3. Have proof to back up every claim you make.
If you expect to be the leader in your field in six months, you have to say why you think that is. If you say your product will take the market by storm, you have to support this statement with facts. If you say your management team is fully qualified to make the business a success, be sure staff resumes demonstrate their experience.
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4. Be conservative in all financial estimates and projections.
If you feel certain you’ll capture 50 percent of the market in the first year, you can say why you think so and hint at what those numbers may be. But make your financial projections more conservative. For example, a 10 percent market share is much more credible.
5. Be realistic with time and resources available.
If you’re working with a big company before you buy a business, you may think things will happen faster than they will once you have to buy the supplies, write the checks, and answer the phones yourself. Being overly optimistic with time and resources is a common error entrepreneurs make. Being realistic is important because it lends credibility to your presentation. Always assume things will take 20 percent longer than you anticipated. Therefore, twenty weeks is now twenty-four weeks.
6. Be logical.
Think like a banker and write what they would want to see.
7. Have a strong management team.
Make sure it has good credentials and expertise. Your team members don’t have to have worked in the field. However, you need to draw parallels between what they’ve done and the skills needed to make your venture succeed. Don’t have all the skills you need? Consider adding an advisory board of people skilled in your field and include their resumes.
8. Document why your idea will work.
Have others done something similar that was successful? Have you made a prototype? Include all the variables that can have an impact on the result or outcome of your idea. Show why some of the variables don’t apply to your situation or explain how you intend to overcome them or make them better.
9. Describe your facilities and location for performing the work.
That includes equipment you use to create your products and/or services. If you’ll need to expand, discuss when, where, and why.
10. Discuss payout options for the investors.
Some investors want a hands-on role. Some want to put associates on your board of directors. Some don’t want to be involved in day-to-day activities at all. All investors want to know when they can get their money back and at what rate of return. Most want out within three to five years. Provide a brief description of options for investors, or at least mention that you’re ready to discuss options with any serious prospect.
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