In our work with many business owners and startups we often see the same repeat mistakes. Here are 4 of the biggest ones:
1. Unrealistic Financial Projections.
One of the biggest mistakes made in business plans are unrealistic financial projections. The assumption that a start-up business will immediately be profitable is often a naive mistake made by beginning entrepreneurs. Most start-up companies should anticipate being “in the red” for at least the first year of business.
Another major down fall in the financial projections is the tendency to over estimate your start-up costs and financial needs. The last thing an investor or bank wants to see is an overly greedy entrepreneur looking for a boat load of cash without proper reasoning to back it. We make sure that our clients have reasonable cost evaluations and financial projections in order to properly display the business’ future financials and appeal to banks and investors.
2. Inadequate Research.
All claims and statements in your business plan must be double-checked and substantiated. Your company’s market research must be thorough and specific to your market location and competitors. Often times, the biggest down fall to entrepreneurs in this category is a lack in available research resources and access to the specific information in your business’ geographical area.
Ethos pulls from over 30 paid databases full of specific geographical research broken down by individual business types and industries. We strive to provide our clients with the most accurate research details in their specific area of expertise.
3. Oblivious to Competition.
It is an overly common mistake for an entrepreneur to state that there is no competition or that competition is inadequate without documenting the real threats to your business. You must be realistic in this area of your business plan. Investors want to see a thorough competitor evaluation in order to trust that you know what it takes to compete with the best in your industry. Unfortunately, one of the most common mistakes we see in this industry is an overestimation in the importance or demand for an entrepreneur’s product.
Everyone has a “brilliant idea”, that’s why they’re going into business, but it’s very easy to get caught up in the excitement of your new business or product and lose sight of reality. There are very few instances where you will have absolutely no competition.
4. Too Long.
It’s very easy to get overly exciting and caught up in every little detailed plan for your business. Investors want to see a clear, concise business plan without the fluff and filler about your dreams and hopes for the business. They care strictly about the company or product itself, the people that will be in charge of it, its ability to succeed and how much money they will be forking over for it. Don’t get lost in your own imagination and the dream you want to portrait. Stick to the facts and relevant information that investors are looking for.