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5 Business Plan Mistakes

publication date: Mar 1, 2014
author/source: Samantha Cortez
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Anyone looking to start a company should know that the key to successfully obtaining funds for your venture is having a solid business plan. An effective plan describes the mission of your company, explains the finances needed to cover start-up costs and predicts future financial projections. Tim Berry, creator of the best-selling business plan software, Business Plan Pro and www.bplans.com, debunks some common myths about writing a business plan.

5 Business Plan Mistakes

1. I have to make my business plan stand out. Even if your business is a creative venture, your business plan shouldn't be. Your plan should be clear-cut and to the point.

"Uniqueness matters very little. In fact, being unique might even hurt the process because the business plan's function in the investment process is to communicate quickly and easily without getting in the way. Good flow and making information easy to find are factors that matter most and uniqueness might interfere," Berry explains.

2. I should disclose all information in my business plan. Many people believe that all information should be disclosed in the business plan. While this is true for financial liabilities that might negatively impact investors, other portions, such as trade secrets, do not have to be included. After all, KFC wouldn't include their chicken recipe in their business plan.

3. There isn't a difference between a start-up plan and a business plan. Though these terms are used interchangeably, a start-up plan refers to the beginning stages of a start-up, whereas a business plan covers all aspects of the business and is fully-formed.

"I refer to a simple start-up plan as a variation on a formal business plan that might be useful for the early stages of a start-up to reduce uncertainty and map out the main points without going through the effort of a formal business plan."

4. It's better to hire a business plan writer if I'm unsure of how to create one. If you've got the funds for it (professional business plan writers can charge up to $5,000), this can be a tempting easy way out. But there are drawbacks.

"First and foremost, business plans need regular maintenance as assumptions change. Therefore, the business plan the writer creates is obsolete just a few weeks later. The second problem is that there's the tendency for people to think of the business plan as the writer's plan. The client needs to own every word and every number in that plan, and know it like the back of his or her hand. Getting a coach or consultant is only going to work if everybody understands that the plan is an ongoing project," Berry says.

5. I need to have a space rented/purchased before I submit my business plan. If renting is included in the start-up costs, it's easy to feel cornered by a Catch-22 situation. You can't include the exact cost of rent in the plan if you don't have it, yet you need to write an accurate business plan to acquire funds to get it.

"This question is a great example of why a business plan isn't a formal document but just big enough to cover the management required. The business plan reduces uncertainty. The minimum business plan has a rudimentary summary of strategy, plus milestones, plus basic numbers, and you shouldn't go out and rent space before you have a sense of basic numbers. People do because they are enthusiastic and sure of what they're going to do, and it often works. But developing the simple plan is a matter of an hour or two, not days or weeks, and I wouldn't go rent space without having done that."

Did your company start with a business plan?

Photo credit: iStockphoto/Thinkstock

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