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July 17, 2012

Top 5 Common Business Plan Mistakes to Avoid

Investors routinely say no to business plans that have a lot of potential because they spot mistakes that make them feel a little uneasy. Their eye is trained to spot flaws, which could be a problem if yours isn’t. Even an experienced entrepreneur can easily make a mistake that can make an otherwise amazing startup idea look like a risky investment. To prevent your business plan from suffering the same fate, learn the mistakes you need to watch out for and how you can avoid them.

==> Click here to learn how to write great business plan!

1. Lack of clarity and too much information.

Business plans don’t necessarily need to be short, but they do need to be concise. You might think that the more information you provide about your business ideas the better, but investors want concrete facts and realistic goals. They don’t want to read through pages of filler information to get to the main point. Don’t worry about being creative or descriptive. Business plans are professional documents, so it’s okay to keep your language plain and straightforward.

2. Overestimating profits.

Investors can quickly spot profit projections that seem too high because they follow market trends and know how comparable businesses are performing. Many entrepreneurs overestimate profits by at least 10%, which can make investors question their honesty and analytical skills. You can easily avoid this mistake by doing your own detailed market research and analysis. Get to know the industry you want to break into and learn what type of profits real businesses in that industry earn. Use the numbers to come up with a reasonable estimate that reflects current market trends.

3. Lack of essential financial data.

Overestimating your potential profits is bad, but not going over them at all is even worse. All of your financial projections must be listed in detail. In addition to estimating your profits and losses accurately, you need to break down your starting costs, cash flow projections, how much money you need from investors, and how you plan to spend it. Give as many details as possible, but be honest and never exaggerate your numbers.

4. Inflating market potential.

Exaggerating the demand for your products or services is another basic mistake that investors run into frequently. Don’t base your market potential on people who use the type of products or services you plan to provide. That’s unrealistic because there are other factors at work like competition, location, advertising and the economy. Instead of trying to come up with a specific number of potential customers, describe why your business will have an edge over competitors and how you plan to attract and keep new customers.

==> Click here to learn how to write great business plan!

5. Being vague about your strategies.

Investors want to know exactly what your goals are and how you are going to achieve them, so it’s important to outline your business strategies as clearly as possible. Showing that you know how to implement your ideas in real life is just as important as presenting a business plan that has a clear message and well-researched data.

Peter

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