30 Most Common Business Plan Mistakes

Raising capital is hard enough as it is. Don’t make it even harder by committing any of these common business plan mistakes.

1. Financial Projections are Too Optimistic – Entrepreneurs always say they are “conservative” but you just aren’t.  (See: How to Create Realistic Financial Projections)

2. Business Plan is Too Long – Stay under 30 pages.

3. Executive Summary is Too Long – 2 pages or less – This is one of the major executive summary mistakes in my blog post “15 Executive Summary Mistakes That Cause Your Business Plan To Find the Trash”

4. All Paragraph Format – Use bullet points, graphs, tables etc. Should not look like a novel.

5. Using a Generic Template – Investors want to see YOUR business plan. Using a template might make it look like some sort of canned business plan.

6. Using a Consultant to Write the Entire Plan – Consultants can certainly help, but you need to write your own business plan. Who knows your business better than you?

7. Top Down Financial Projections – Don’t start from the top saying if we can get just 1% of the market… Start from the bottom and show exactly how you plan to capture 1% of the market.

8. No Focus on Cash Flow – As a startup cash flow is probably the most important single factor for the survival of your small business. Focus on it closely.  (See: How to Create a Cash Flow Projection – 3 Cash Flow Nightmares)

9. Exponential Growth Projections – Most businesses do not grow exponentially like Silicon Valley darlings like Facebook, Twitter, and Foursquare. Be realistic. (See: Example Financial Projections for Startup)

10. Poor Pricing – Price your product or service based on extensive research. Too low and you are not profitable, too high and you can’t make a single sale.

11. A “New” Business Model – Investors want innovation in just about every area except your business model. Rely on proven business models when possible

12. Claiming That You Have No Competition – Every one has competition! No matter what! Identify your competition and your strategy to win.

13. Asking For Readers to Sign a Non Disclosure Agreement – If your business is feeble enough that you need to ask for an NDA then you don’t have much of a business.

14. No Sustainable Competitive Advantage – If a competitor can beat you at your own game tomorrow then you don’t have much of a long term advantage

15. Faulty Arithmetic – Make sure your projected balance sheet actually balances!

16. Bad Spelling or Grammar – If you did not pay attention in English class then have someone who did read your business plan first.

17. Overly Technical Writing – If you are an engineer or technical professional then have your spouse read your plan. If they can’t understand it neither will investors.

18. Failing to Request a Next Step – Does your business plan just end? Make sure to ask for a meeting or a phone call, or even an investment.

19. Failure to Include Contact Information – An investor loves your idea and wants to invest, but you forgot to include a way for them to contact you.

20. Over Reliance on Financial Projections – If financial projections came true even 50% of the time every investor would be a billionaire. Don’t take your financial projections too seriously they won’t be right anyway.

21. Poor Research – You claim that no one has ever done this before and yet a simple Google Search reveals 3 attempts and failures of this very idea.

22. Claiming Your Startup To Be a “No Risk” Venture – Startups are always risky no matter what!

23. No Partner – It is hard to run a company by yourself and even harder to secure investment without a partner

24. Lack of Experience and No Plan to Mitigate – You don’t always need experience to start a successful business, but if you don’t have the experience then make sure to surround yourself with experts.
25. No Market for Product or Service – Just because you have a “cool” product or service doesn’t mean that anyone will be willing to pay for it.

26. Inability to Scale the Business – If the business plan says the biggest your business would ever be able to grow to is $1 million in revenue then say goodbye to potential investors. Investors want a Grand Slam.

27. Out of Date – If you wrote your business plan in 2007 and it is 2010 and you are still passing around the same document you will undoubtedly turn off investors. Update your plan.

28. Forgot Expenses – Oops did you remember to include pesky items like insurance, lawyer fees and taxes in your financial projections?

29. Inconsistencies – Make sure that your numbers and your statements are the same throughout the plan.

30. Lack of Color or Pictures – Even investors like to read picture books. Spice it up a bit with some color and pictures.

If you have created your business plan and successfully made it through this laundry list of common mistakes, then you are ready to submit your business plan to potential investors.  (See: Find Angel Investors – Top 10 Angel Investor Websites)