give examples of how a business plan can be misused

13 Common Business Plan Mistakes to Avoid in (2024)

Business Plan Checklist

• June 1, 2024

Do you remember the first mistake you made creating a business plan? 

If you smiled a little, great. It means you’ve overcome it, and you understand that entrepreneurs make business plan mistakes all the time—and continue to learn from them.

However, there are certain mistakes no business owner should make in their plan to achieve their dreams.

So, in this article, we’ve listed 13 common business plan mistakes you can avoid to get ahead in the game. But before we dive in…

What is the biggest mistake when creating a business plan?

One of the most grave business plan mistakes is having no business plan!

With no business plan, what’s your purpose, and how will you let the world know your intentions? 

You don’t necessarily need to put it down on paper. But there has to be some kind of planning. Much like a north star, planning will give you direction.

Moreover, investors or clients will want to see a plan sometime down the line. Clearly, planning and documenting the plan is inevitable.

So, create a business plan. It can be a one-page business plan or a detailed one—either way, it’ll capture the essence of your vision.

13 common business plan mistakes to avoid

Now that you know you can’t escape a business plan, let’s check out the mistakes you can escape while creating a solid business plan:

1. Poor planning

The business of business planning is no joke. You can’t have a business plan in place just for the sake of it.

It has to have value—information that shows product or service viability, company details, projections, etc.

Why? Poor business planning can imply that:

• Your great idea isn’t so great because you haven’t thought it through.
• You don’t care enough, which can be unattractive for investors and banks. (You don’t want to miss out on the money.)
• You’ll witness scope creep, where stakeholders may want to add new objectives even when the project is underway. ( Not fun, is it? )

So, spend time planning, and you’ll naturally make fewer mistakes.

2. Poor executive summary

You and your business have 7 seconds to make an excellent first impression. Since an executive summary is the first impression, you don’t want to gamble with its quality.

A poor executive summary will instantly make clients and investors disinterested in your business plan—a big mistake.

So how do you fix it?

First, make it straightforward so anyone without a business background can get a clear understanding of your business idea.

Second, ensure it’s concise. Briefly mention all the important information, including:

• Business purpose
• Company description
• Market analysis
• Business goals, competition
• Financial plan

This will keep your clients or investors interested in learning about the rest of your business plans.

Lastly, don’t be shy about your intentions.

Is your focus on securing enough money for business operations? 

A bad executive summary can be worse than having any executive summary

Ensure to include your cash flow table, the money you wish to borrow, and the financial projections to back up your success claims. This way, investors know you mean business and appreciate transparency right off the bat.

3. Targeting the wrong audience

Obviously, your business doesn’t target everyone in this world. So, define your target market and potential customers. This way, you can write using the vocabulary and tone that best resonates with them.

After all, you want them to understand what your business is about.

However, that’s not enough!

When you write a business plan , you also want to show your work on how you decided on your target market and how you plan to appeal to them. This is more to impress your potential investors.

4. Not doing enough research

When you create a business plan without enough research, you’re hampering your success even before you’ve started your business.

• Imagine being unaware of your target market or closest competitors.
• Imagine having yet to think of the most obvious and effective marketing strategy.
• Imagine having an outdated sales technique.

Now, imagine potential customers or investors realizing these research gaps in your business plan.

One word: Nightmare!

It only shows you’re not prepared.

Hence, remember to carry out in-depth research so there’s nothing that can discredit your business idea.

5. Unrealistic financial projections

Another common mistake is to be unrealistic or overconfident about your earning projections.

Being unrealistic shows that you either don’t understand your business or aren’t qualified enough to make accurate projections.

The result? Banks and lenders won’t trust you or your business idea.

Moreover, unrealistic financial projects are also your one-way ticket to bankruptcy.

So the point is: Be as realistic as possible to gain inventors’ trust and launch a successful business.

6. Ignoring the competition

A good, detailed business plan never ignores competition because there can be serious consequences.

Here’s everything you can’t highlight without proper competitive analysis :

• What makes you unique?
• What strategy will help you beat your competitors?
• How will you grow your credibility?

These aspects are important for your business to avoid becoming complacent and convince investors and partners that you can survive in this saturated market.

7. Poor marketing strategies

Poor marketing strategies can hurt your own company in many ways, including:

• Reduced sales or profit
• Increased expenses
• Market your product or service to the wrong audience
• Confuse customers about your brand and business idea
• Drop in product or service prices resulting in financial loss
• Lose customers to competitors

Scary list, isn’t it?

These pitfalls are why you shouldn’t make the mistake of creating lousy marketing strategies.

8. Not highlighting your team’s unique skills

Many entrepreneurs make this mistake because they often forget the company isn’t just them but their team and what they bring to the table.

So, it’s only right to mention the experience and skills of their top team in a business plan. They should also include how their team plans to achieve the business goals and overall success.

9. Poor writing and presentation

Imagine presenting a business plan with serious ideas, ambitions, profit predictions, etc. But uh-oh . You notice the spelling of ‘projections’ is missing a ‘j,’ and the color scheme is off on one of the pages.

This is a major red flag and an embarrassing mistake that can cost potential clients!

Don’t worry, it’s fixable. Just double-check your spelling and proofread like your life depends on it.

Create visually appealing business plans with our

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10. Incomplete or missing information

A business plan is your business’s backbone. Missing any important information is like missing a disc in the spine. You’re bound to crumble.

The solution? Check your business plan multiple times to spot such mistakes.

Let others take a look as well. A fresh perspective can spot more missing information.

11. Adding too much information

Less is more. A cliche you want to employ while writing a business plan.

Investors want a clear understanding of whether you understand your business thoroughly. They can do that with just a few crisp pointers in your business plan.

In fact, visuals speak more than words. So, incorporate charts and graphs to reduce the wordiness and get your point across.

12. Being inconsistent

Focus on the consistency of your business plan’s key elements and all sections.

You don’t want to say your company predicts x amounts of profit in the executive summary only to mention y amounts of profit in the financial projections section.

Such inconsistency will only show under-preparedness to your investors—a major red flag.

13. Unclear exit strategy

A clear exit strategy is almost like a medical cover you ought to have.

When things go south (business struggles), you can’t limit your losses without a clear exit strategy.

There’s also an upside to this strategy. If your business booms, you profit significantly by selling your company shares. Either way, you’re covered!

How a business planning tool helps you avoid mistakes

Let’s just say a business planning software like Upmetrics makes everything so much easier and faster. Here’s why it’s a powerful tool:

• It helps entrepreneurs start with a basic business plan structure so they don’t miss the most important sections in their plan.
• The AI automates your business plan creation so you don’t have to worry about inconsistencies across the different sections.
• The AI can auto-write the different business plan sections in your preferred tone and style so you sound professional.
• AI-powered financial forecasting tool helps prepare accurate and realistic projections, ensuring you don’t under/overestimate them.
• Industry-specific business plan templates ensure the inclusion of industry-relevant research and marketing strategies.

Making mistakes during the planning process is only natural. But now that you know some common mistakes, you can speed up your process without making the most common and critical ones.

But what if you could speed up your business plan creation in under 10 minutes? It’s possible with an AI business plan generator .

A modern tool like Upmetrics can simplify business planning with its intuitive user interface, AI-powered features, and step-by-step guidance.

Try Upmetrics and don’t make mistakes that others do!

Build your Business Plan Faster

with step-by-step Guidance & AI Assistance.

Frequently Asked Questions

Can business planning software help me avoid mistakes.

Yes, absolutely. Business planning software like Upmetrics offers industry-specific business plan templates, saving you countless hours and avoiding errors like missing information and inconsistencies. Upmetrics’ AI can also fine-tune your content, creating a professional and factually accurate business plan without grammatical errors.

Where can I find templates or examples of successful business plans?

The first option is Google search, where you’ll find many business plans and templates to write a successful one. The second, more effective option is to try business plan software. They typically offer numerous business plan example options and templates so that you can pick and customize them depending on your business type.

How long should my business plan be?

Typically, a good business plan is between 15-30 pages . However, depending on your purpose, product or service type, and target audience, you can have a one-page business plan or a 100-page one.

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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Top 10 Business Plan Mistakes When it comes to creating a business plan that attracts investors, these tips will help you get it right the first time.

Every business should have a business plan. Unfortunately, despite the fact that many of the underlying businesses are viable, the vast majority of plans are hardly worth the paper they're printed on. Most "bad" business plans share one or more of the following problems:

1. The plan is poorly written. Spelling, punctuation, grammar and style are all important when it comes to getting your business plan down on paper. Although investors don't expect to be investing in a company run by English majors, they are looking for clues about the underlying business and its leaders when they're perusing a plan. When they see one with spelling, punctuation and grammar errors, they immediately wonder what else is wrong with the business. But since there's no shortage of people looking for capital, they don't wonder for long--they just move on to the next plan.

Before you show your plan to a single investor or banker, go through every line of the plan with a fine-tooth comb. Run your spell check--which should catch spelling and punctuation errors, and have someone you know with strong "English teacher" skills review it for grammar problems.

Style is subtler, but it's equally important. Different entrepreneurs write in different styles. If your style is "confident," "crisp," "clean," "authoritative" or "formal," you'll rarely have problems. If, however, your style is "arrogant," "sloppy," "folksy," "turgid" or "smarmy," you may turn off potential investors, although it's a fact that different styles appeal to different investors. No matter what style you choose for your business plan, be sure it's consistent throughout the plan, and that it fits your intended audience and your business. For instance, I once met a conservative Midwest banker who funded an Indian-Japanese fusion restaurant partly because the plan was--like the restaurant concept--upbeat, trendy and unconventional.

2. The plan presentation is sloppy. Once your writing's perfect, the presentation has to match. Nothing peeves investors more than inconsistent margins, missing page numbers, charts without labels or with incorrect units, tables without headings, technical terminology without definitions or a missing table of contents. Have someone else proofread your plan before you show it to an investor, banker or venture capitalist. Remember that while you'll undoubtedly spend months working on your plan, most investors won't give it more than 10 minutes before they make an initial decision about it. So if they start paging through your plan and can't find the section on "Management," they may decide to move on to the next, more organized plan in the stack.

3. The plan is incomplete. Every business has customers, products and services, operations, marketing and sales, a management team, and competitors. At an absolute minimum, your plan must cover all these areas. A complete plan should also include a discussion of the industry, particularly industry trends, such as if the market is growing or shrinking. Finally, your plan should include detailed financial projections--monthly cash flow and income statements, as well as annual balance sheets--going out at least three years.

4. The plan is too vague. A business plan is not a novel, a poem or a cryptogram. If a reasonably intelligent person with a high school education can't understand your plan, then you need to rewrite it. If you're trying to keep the information vague because your business involves highly confidential material, processes or technologies, then show people your executive summary first (which should never contain any proprietary information). Then, if they're interested in learning more about the business, have them sign noncompete and nondisclosure agreements before showing them the entire plan. [Be forewarned, however: Many venture capitalists and investors will not sign these agreements since they want to minimize their legal fees and have no interest in competing with you in any case.]

5. The plan is too detailed. Do not get bogged down in technical details! This is especially common with technology-based startups. Keep the technical details to a minimum in the main plan--if you want to include them, do so elsewhere, say, in an appendix. One way to do this is to break your plan into three parts: a two- to three-page executive summary, a 10- to 20-page business plan and an appendix that includes as many pages as needed to make it clear that you know what you're doing. This way, anyone reading the plan can get the amount of detail he or she wants.

6. The plan makes unfounded or unrealistic assumptions. By their very nature, business plans are full of assumptions. The most important assumption, of course, is that your business will succeed! The best business plans highlight critical assumptions and provide some sort of rationalization for them. The worst business plans bury assumptions throughout the plan so no one can tell where the assumptions end and the facts begin. Market size, acceptable pricing, customer purchasing behavior, time to commercialization--these all involve assumptions. Wherever possible, make sure you check your assumptions against benchmarks from the same industry, a similar industry or some other acceptable standard. Tie your assumptions to facts.

A simple example of this would be the real estate section of your plan. Every company eventually needs some sort of real estate, whether it's office space, industrial space or retail space. You should research the locations and costs for real estate in your area, and make a careful estimate of how much space you'll actually need before presenting your plan to any investors or lenders.

7. The plan includes inadequate research. Just as it's important to tie your assumptions to facts, it's equally important to make sure your facts are, well, facts. Learn everything you can about your business and your industry--customer purchasing habits, motivations and fears; competitor positioning, size and market share; and overall market trends. You don't want to get bogged down by the facts, but you should have some numbers, charts and statistics to back up any assumptions or projections you make. Well-prepared investors will check your numbers against industry data or third party studies--if your numbers don't jibe with their numbers, your plan probably won't get funded.

8. You claim there's no risk involved in your new venture. Any sensible investor understands there's really no such thing as a "no risk" business. There are always risks. You must understand them before presenting your plan to investors or lenders. Since a business plan is more of a marketing tool than anything else, I'd recommend minimizing the discussion of risks in your plan. If you do mention any risks, be sure to emphasize how you'll minimize or mitigate them. And be well prepared for questions about risks in later discussions with investors.

9. You claim you have no competition. It's absolutely amazing how many potential business owners include this statement in their business plans: "We have no competition."

If that's what you think, you couldn't be further from the truth. Every successful business has competitors, both direct and indirect. You should plan for stiff competition from the beginning. If you can't find any direct competitors today, try to imagine how the marketplace might look once you're successful. Identify ways you can compete, and accentuate your competitive advantages in the business plan.

10. The business plan is really no plan at all. A good business plan presents an overview of the business--now, in the short term, and in the long term. However, it doesn't just describe what the business looks like at each of those stages; it also describes how you'll get from one stage to the next. In other words, the plan provides a "roadmap" for the business, a roadmap that should be as specific as possible. It should contain definite milestones--major targets that have real meaning for your business. For instance, reasonable milestones might be "signing the 100th client" or "producing 10,000 units of product." The business plan should also outline all the major steps you need to complete to reach each milestone.

Smoothing Out the Rough Spots Once you know what mistakes not to make, there are still a few steps you need to take to make your business plan "bulletproof." Be sure you . . .

• Think it through. You might have a great idea, but have you carefully mapped out all the steps you'll need to take to make the business a reality? Think about building your management team, hiring salespeople, setting up operations, getting your first customer, protecting yourself from lawsuits, outmaneuvering your competition, and so on. Think about cash flow and what measures you can take to minimize your expenses and maximize your revenue.
• Do your research. Investigate everything you can about your proposed business before you start writing your business plan--and long before you start the business. You'll also need to continue your research while you write the business plan, since inevitably, things will change as you uncover critical information. And while you're researching, be sure to consult multiple sources since many times the experts will disagree.
• Research your potential customers and competitors. Is your product or service something people really want or need, or is it just "cool"? Study your market. Is it growing or shrinking? Could some sort of disruptive technology or regulatory change alter the market in fundamental ways? Why do you think people will buy your product or service? If you don't have any customers or clients yet, you'll need to convince investors that you have something people really want or need, and more important, that they'll buy it at the price you expect.
• Get feedback. Obtain as much feedback as you can from trusted friends, colleagues, nonprofit organizations, and potential investors or lenders. You'll quickly find that almost everyone thinks they're an expert and they all could do a better job than you. This may be annoying, but it's just part of the feedback process. You'll know when you're done when you've heard the same questions and criticisms again and again and have a good answer to almost everything anyone can throw at you.
• Hire professional help. Find a professional you trust to help guide you through the entire process, fill in knowledge gaps (for instance, if you know marketing but not finance, you should hire a finance expert), provide additional, unbiased feedback, and package your plan in an attractive, professional format.

Writing a business plan is hard work--many people spend a year or more writing their plan. In the early, drafting stages, business plan software can be very helpful. But the hard part is developing a coherent picture of the business that makes sense, is appealing to others and provides a reasonable road map for the future. Your products, services, business model, customers, marketing and sales plan, internal operations, management team and financial projections must all tie together seamlessly. If they don't, you may not ever get your business off the ground.

Andrew Clarke is the CEO of Ground Floor Partners , a business consulting firm that helps early-stage, small and middle-market businesses grow through design and execution of sound business strategies.

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11 Common Business Plan Mistakes to Avoid in 2024

Written by Vinay Kevadiya

Published Jun. 18 2024 · 7 Min Read

We all know—drafting a successful business plan is no easy feat. There are so many aspects to consider. This is especially true if you’re new to this game.

Lucky for you, there have been many entrepreneurs before you who have made many business plan mistakes so you can learn from them. In other words, they walked so you could run.

But wait, what are these mistakes? And how can you avoid such mistakes to create a good business plan?

Worry not—we're here to guide you through it all.

In this article, we've listed the 11 most common business plan mistakes that no business owner should make in their plans to get ahead of the game.

Sounds good? Let's dive right in!

11 common business plan mistakes to avoid

Even if you've got a great idea, making these common business plan mistakes can reduce your chances for funding. So, try to avoid them while creating a plan.

1. Not considering the business planning process

Some entrepreneurs don't take the business planning process seriously and draft a document just to fulfill the condition of a bank or investor.

Well, that's the biggest mistake anyone can make!

If you do so, it indicates that you really don't care about your business and haven't thought about how it will succeed. This can impact negatively.

So, try to invest your valuable time and energy into the planning process for a clear understanding of your business idea & strategies. And win potential lenders or investors.

2. Writing a poor executive summary

Since the executive summary is the first section of a plan, it provides a quick overview of your business. It's also your sole chance to engage potential investors or readers and persuade them to delve further into the plan.

If you write a poor executive summary and don't make it informative yet compelling enough, it will reduce their interest in your business plan.

Therefore, you should focus more on your plan summary and keep it simple, concise, as well as engaging.

Also, consider including all the key elements, such as business concept, market opportunities, target customers, marketing plan, and financial highlights, so that anyone can quickly understand your business idea.

3. Lack of market research

It's very crucial to conduct comprehensive market research while writing a business plan. If you skip this step, your business plan doesn't accurately reflect the market insights and facts.

Without in-depth analysis, you won't have specific knowledge of the industry, target audience, potential customers' needs & preferences, and competitors.

Also, you might miss the shifts in consumer behavior and emerging trends. This will eventually make your business plan less effective and realistic.

4. Overlooking legal & regulatory requirements

Every business has to follow necessary legal and regulatory requirements. However, overlooking these specific regulations can lead to significant issues for your business.

For instance, if you ignore securing the essential licenses and permits for your business, this can result in fines, legal actions, or even halt your business operations.

To avoid such problems, make sure that you comply with all local, state, and federal laws relevant to your business.

Note that your business plans must cover legal & regulatory compliance, contractual obligations, intellectual properties, tax obligations, and insurance requirements.

5. Underestimating your competitors

Well, it's a common mistake in many business plans—not knowing who your competitors are and/or believing that you have no competition.

But always keep in mind that every business has competition, even if your product or service is unique.

So, don't underestimate your key competitors. Identify direct and indirect competitors, including those who use other ways to solve the same problem you're addressing.

Likewise, understand their strategies and evaluate how to differentiate your business in the competitive marketplace. This will help you improve your strategy and position your business for long-term success.

6. Neglecting risk management strategies

It's a big red flag! Why?

If you don't include a robust plan for identifying and mitigating risks, this will make your business vulnerable to unexpected challenges and lead to serious setbacks or even failure.

So, it’s important to foresee potential risks that could negatively impact your business, such as market changes, financial issues, operational risks, and external threats.

Also, develop detailed risk mitigation strategies or contingency plans that help your business adapt to unforeseen changes quickly and efficiently.

This means you can protect your business and make it more trustworthy to investors.

7. Developing unrealistic financial projections

While starting a new business, most individuals often focus on profitability and develop unrealistic financial projections or overestimate the value of their business.

But, doing so will make your business plan unreliable and inaccurate. Even potential investors are much more likely to doubt your plan and reject it as they expect to see a realistic picture of your financial health.

If you don't have actual numbers, it's quite acceptable to use general assumptions and compare your estimates with industry benchmarks to set a practical baseline.

This will help you create accurate and realistic projections that make your financial plan more credible and build trust among investors.

8. Not highlighting sales and marketing strategies

If you don't summarize how you plan to attract new customers and retain existing ones, your business plan might not be effective and convincing.

Even, your plan can fall flat without clear and detailed sales & marketing strategies. This is so because potential investors or stakeholders won’t be fully persuaded of your business's potential for growth.

By having a solid yet effective marketing strategy, you can demonstrate how you will grow your business and highlight how you will influence your target market to choose your product or service over others.

9. Failing to review and update your plan

A business plan isn’t just a one-time document; it's a professional, living document that needs to be reviewed and updated regularly.

However, many entrepreneurs fail to do so, which leads to outdated strategies, missed opportunities, and poor decision-making.

So, ensure you review and update your plan as your business evolves and the market changes. This will help you stay focused on your goals and adapt to changes more effectively.

For instance, if you update your financial plan regularly, you can better manage your cash flow and make more accurate investment decisions.

10. Providing too much information

One of the most common mistakes in business plan creation is providing too much information, especially irrelevant data or excessive technical details.

We understand that it's natural to share everything about your business, but this can overwhelm and confuse potential investors or readers.

In fact, investors don't have enough time to go through all the details you mentioned but they typically look for 10 to 12 pointers in a detailed business plan.

Therefore, keep your plan concise and highlight the most essential aspects of your business that draw readers' attention. Also, use visuals and charts to convey more complex data more effectively.

11. Inconsistent information and poor presentation

Your business plan needs to be polished and well-organized as it's going to represent your business idea, goals, and strategies to achieve them.

If you state a certain sales figure in the executive summary and then mention a different amount in the financial plan, this might seem unprofessional and damage your first impression.

So, make sure that you're consistent throughout your plan and don't make any sloppy mistakes, including typos, grammatical errors, or poor formatting.

Lastly, don't forget to proofread your plan before sending it out!

Now that you're aware of these most common mistakes, you can create a business plan—either a one-page business plan or a detailed one without repeating such mistakes.

If you need help drafting a business plan that wins investors and sets a strong foundation for your business, Bizplanr could be a great choice.

It’s a modern AI business plan generator that streamlines the entire business planning process with its AI-powered features, step-by-step guides, and other valuable resources.

So, don't wait; get your first draft ready in minutes!

Get Your Business Plan Ready In Minutes

Answer a few questions, and AI will generate a detailed business plan.

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Frequently Asked Questions

What should I do if my business plan is rejected by investors due to mistakes?

If your business plan is rejected by investors due to mistakes, consider following the below steps to improve the plan and increase your chances of getting funding:

• Identify the specific reasons for rejection
• Efficiently address the issues
• Strengthen your unique value proposition
• Create detailed and realistic growth plans
• Carefully proofread your plan
• Get feedback from trusted investors
• Enhance your presentation skills

How can I make sure my financial projections are realistic?

If you want to make sure your financial projections are realistic, consider using past financial performance data as a baseline, conduct thorough market analysis, use conservative estimates for revenue and expenses, plan for potential risks, provide multiple scenario analyses, as well as regularly review and update your projections.

Why do some business plans fail to impress investors?

Some business plans fail to impress investors because of skipping detailed execution strategy, unrealistic and inaccurate financial projections, lack of market research and experienced team, overlooking risk and contingency plan, or not having a clear path to profitability.

What are some common financial mistakes in business plans?

Here are a few common financial mistakes that many entrepreneurs make in their business plans:

• Unrealistic revenue projections
• Failing to account for all business expenses
• Overestimating profit margins
• Ineffective cash flow management
• Not having contingency plans
• Ignoring tax planning

As the founder and CEO of Upmetrics, Vinay Kevadiya has over 12 years of experience in business planning. He provides valuable insights to help entrepreneurs build and manage successful business plans.

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Seven Common Business Plan Mistakes

Though every small business is unique, many successful ones start with a common foundation: a business plan. Researching and writing a business plan is an important step in laying out the road map your business will travel, and an indispensable step in securing funding for startup costs or growth. Save time and energy by avoiding these common business plan mistakes.

Seven top business plan mistakes:

1. Not making one

As an entrepreneur, surely you’re more excited about doing the thing you want to do that writing a plan about it. But recall the wisdom of Yogi Berra: “If you don’t know where you’re going, you’ll end up somewhere else.” Without a plan, you’re likely to spend valuable time and energy pursuing fruitless paths and spreading yourself thin. Make completing your plan a priority to focus your energy, stay on the right path, and improve your chances of landing a small business loan.

2. Being unrealistic

This can happen on a number of fronts if you’re not willing to ask hard questions, do concrete research, and be honest with yourself. Your business plan can’t represent the best case scenario or the way you hope things go: it has to grapple with the reality of the marketplace, financial truths, and the entrepreneurial landscape. Focus on being realistic in a few key areas:

• Financial projections:  Don’t pad or overinflate your future earnings projections. At best, you’ll look like you don’t know what you’re doing and a bank won’t trust you enough to lend you money. At worst, they’ll lend you the money and you’ll go into default or bankruptcy.
• Competition:  A big red flag in many business plans is a belief that you have minimal competition — or even none. “You’re always competing for dollars,” said RISBDC counselor Manuel Batlle. Even if your product is unique, your target customers still have choices about what to do with their money. You must address how you will persuade your target market to give their dollars to you .
• Market research:  It doesn’t matter what you want to build or sell. Someone has to be willing to buy it for a price that makes it worth selling. No business plan is complete without investing time and energy in up-to-date market research to truly understand market trends, customer interest, competitor performance, and other aspects of product or service viability.
• Customer base for brick and mortar businesses:  Your mother may be willing to drive across the state to buy a soda from you, but probably no one else will. For many products and services, your customers are going to be local. Particularly in Rhode Island, customers may be  searching within walking distance, or a 5-10 minute drive. Dig deep into the census information on demographics in your area and be realistic about how many target customers are within buying distance.

3. Poor executive summary

A lender will read your business plan’s executive summary and “give it the sniff test, then the gut test,” said RISBDC business counselor Josh Daly. The lender may decide whether or not to continue reading based on what their intuition tells them. So the executive summary is worth focusing on. Someone without a deep business background should be able to understand it, and it should make the case that your business is viable in short, clear points. Daly recommends 1-3 sentences each on your business background, customer base, the market, the competition, your qualifications, and your team. A concise summary should fit into about two pages and convince your audience to keep reading. If your plan is focused on securing financing, prospective lenders should immediately know how much money you are looking to borrow and how the money will be used.

4. Too long

For a majority of small businesses, a succinct and well-organized business plan should be 5-10 pages long. An engaging business plan includes visuals, where appropriate, to avoid wordiness when a graph, chart, or map will tell the story more effectively. Additional supporting financial projections or research data can go in an appendix. Plans that are significantly longer don’t necessarily give more or better information, and they risk losing their audience before they’re actually read.

5. Not backing up what you say

Along with being realistic in discussing your projections and your market research, you also need to make sure you’re using data and references — not just anecdotes — to support what you’re claiming.

6. Not focusing on the team, and your role as the head

No small business owner has every skill and personality trait needed to take a business all the way from the seed of an idea, to the world, all by him or herself. It’s appropriate and important to identify and address gaps in your experience and education, and explain how you’ll overcome them. It’s also crucial to briefly introduce your top team members, sell their contributions to your company, and portray how together, your team is well-rounded and ready to tackle the challenges ahead.

7. Sloppy mistakes

Typos, grammatical errors, and poor formatting are completely avoidable enemies, taking the shine off your first impression. Your business plan needs to look professional because it’s going to speak for you. Use spell-check. Re-read your plan. Get lots of sleep and re-read it again. Then, even if you’re a great writer and a stickler for detail, have someone else check it over for things you’ve missed. Never underestimate the value of a pair of fresh eyes.

Though you should be ready to put time and effort into your business plan, you don’t have to do it alone. The RISBDC offers workshops and no-cost, one-on-one business counseling to help you refine your plan and take the next steps toward business success.

10 Common Business Plan Mistakes and How to Avoid Them

There is plenty of information available via books and seminars on how to write a good business plan. And yet, many companies, especially start-ups, make serious mistakes in business plan writing that could have been avoided with more knowledge and effort.

As a business plan contest reviewer, I see a number of typical mistakes coming up again and again. Here are 10 of the most common business plan mistakes I have come across:

1. Boring Executive Summary

Investors, bankers, and other business plan readers usually start looking at the executive summary. It should highlight the most important points of the business plan in a pithy way. The business plan should provide a convincing story on how a a highly competent team will provide products or services to precisely defined target markets based on a consistent strategy. Moreover, it should share the company’s vision on how their products or services will make the world of their customers better in a profitable way.

In reality, many executive summaries are lackluster and incomplete summaries of a business idea whose implementation remains unclear. Sometimes, it is just cut and paste of some sections from the introduction and some other parts.

Losing the busy reader already in this part could mean that investors never care to go through the whole document. They may be missing some hidden gems. However, it is the job of the business plan writer to present these gems convincingly in the executive summary.

2. Lack of Focus

Many business plans are lacking a clear focus in defining their target markets and how the envisage products and services are competitive in serving the market needs better than others. Especially for innovative start-ups there is a risk of not focusing enough on a clearly define product/service segment and target market.

The result are often business plans describing a ‘me too’ business whose reason for existence does not become clear, not to speak of electrifying potential investors or customers.

3. Superficial Definition of Target Customers

Understanding who your target customers are and how your product adds value for them is crucial. That includes a granular segmentation of target customers and how the company’s products and services will satisfy the different needs of these different customer groups.

Many business plans, however, keep the definition of target customers very general. For example, saying that your travel app is aimed for everyone who is traveling may sound great first, because this is a very large number of people. However, different groups of travelers have different needs. Without clearly defining these needs in a differentiated way, the result will either be an app with the lowest common denominator of functionality needed by most, or it may be at risk of becoming overly complex, as it tries to please everyone.

4. Overly Optimistic Evaluation of Market Size and Opportunities

Entrepreneurs need to be optimistic to start a business in the first place. However, there is fine line between being upbeat about your business prospects and presenting a distorted view of the market size which is more driven by dreams than data. It can be related to a superficial definition of the target customers. If you think, for example, that 20% of all travelers worldwide will use your app, you would need to have a lot of supporting evidence to credibly convey how you will achieve that. It is not bad for an entrepreneur to think big. However, if you, for example, overestimate the readiness of people to buy your product, you may end up with dream figures you cannot achieve.

5. Underestimating the Competition

Many start-ups are too much self-centered. Being convinced of your product or service is certainly a good attitude. However, there is risk that this could distort your view of how it matches up against products and services of competitors who have been in the market for some time. In addition, some entrepreneurs also overlook or underestimate the possibility of new entrants who could increase competitive pressure.

6. Underestimating Business Risks

Understandably, entrepreneurs focus on exploiting opportunities. Some, however, underestimate or even neglect serious business risks that could endanger the existence of the company. Ignoring the risks will not make them disappear. Instead, it will leave the company unprepared, if a risk materializes. Apart from risk caused by changing demand trends, increasing competition, or unexpected increase of production there are also political and regulatory risks to be considered. If you have, for example, an export-oriented business, you need to take into account global trends like increasing protectionism and regulatory barriers in your target markets.

7. Too Detailed Description of the Product or Service

Especially innovative technology start-ups, often led by engineers, are really excited about the technical details of their product or service. It is part of a credible story to provide enough details so the reader understands that the product or service is well designed. However, if it drifts into jargon and technical details not relevant for understanding the business impact or innovative edge of a product, then details can become a distraction or even barrier, putting off the reader.

8. Unrealistic Financial Projections

This mistake is related to false assumptions on, for example, market size, competitive pressure, and financial risks. Nobody knows the future, and projections can, thus, not be exact. However, they can be based on real data related to general market trends and past revenue and cost development.

9. Unconvincing Presentation of the Executive Team

Quite often, there are just a couple of portrait photos and CVs pasted into the business plan without explaining to the reader, why exactly this team is complementary in their competencies specifically for running the particular business presented in the plan. Investors can get very critical, if they see that important competencies in an executive team are lacking. For example, if a group of engineers without business experience is launching a start-up, there will be questions on how competence gaps in areas like financial management and marketing will be covered.

10. Lack of Review

A team working enthusiastically on a business plan is at risk of false, overly optimistic assumptions and other mistakes that can easily be overlooked, if you are immersed in the process. Thus, not having a review of the business plan by an experienced consultant or a friendly business partner who has been there can lead to mistakes with detrimental effects. A review can help find flaws in the overall business rationale, market and customer definition, or the financial projections. Even if you are not looking for external funding, not having your business plan reviewed is a serious omission.

How to Avoid Business Plan Mistakes

The simple answer would be to be aware of these mistakes and make sure not to do them. However, it is not that easy. Even if you are aware of potential mistakes, it does not automatically mean you are capable of avoiding them. It is like with people who have bad eating habits. They know all about healthy eating and are fully aware of their mistakes. And yet the still continue making these mistakes.

This is where coaching comes in. You can either try self-coaching in the executive team, which requires a high level of awareness, openness and self-distance. Or you can hire an external coach to help you discover your blind spots, become aware of unproductive habits and attitudes like, e.g., over-optimism, and change them.

I would be interested to receive comments from entrepreneurs on what mistakes they have made in business plan writing and how they fixed them.