We love to help aspiring, and ambitious entrepreneurs turn their dreams into reality. There’s nothing that gives us greater satisfaction than seeing an entrepreneur embark on their business journey with our support.
However, unfortunately, some prospective entrepreneurs fail before they start, for lack of planning.
More often than not, this isn’t due to the quality of the entrepreneur or the potential behind the idea – rather it is because the entrepreneur usually needs to further develop one or two specific areas within their plan
So with this in mind, we are sharing some of the common pitfalls seen in business plans – and more importantly. how you can avoid them.
Not giving enough information
Business plan templates can differ from one another, but they typically follow a similar structure. Within these templates, you’ll be expected to articulate your idea, product, target customer, competitive positioning, pricing, business model / key processes / logistical matters, launch strategy and marketing plan, team backgrounds etc. Depending on your idea, there may be some areas you focus on more than others – however, do make sure to complete all sections. Doing so provides colour for the reader, enables them to better understand your business, how it operates, how it will be positioned and what it will take to get it off the ground. From a funder’s perspective, the more you can provide in terms of relevant detail, the more you’ll have de-risked the plan – and the more faith they will have in you.
The elevator sinks, after your elevator pitch
Most business plans have an executive summary section, where you sum up what your business is all about – treat this very much as a Dragon’s Den-style elevator pitch. This is your opportunity to succinctly and compellingly convey what your business does. Make sure your audience comes away knowing what your product is, who your customer is, why this opportunity is exciting and why you’re going to win. And ideally do this as efficiently as possible – a few rapid-fire bursts – so it’s quick and painless for the reader!
There is a nuanced difference between an idea and an opportunity. But very few actually test their idea via a Proof of Concept (POC) and gather sufficient information to make an informed decision about their next steps. An idea is abstract, and at times, hypothetical – often communicated with a heavy dose of subjectivity. An opportunity is an idea that is backed up with facts. The trickiest part of any startup is to prove the market for its product, and similarly, the trickiest part of any funder is to believe there is a market for the product. The nice thing is that, if you can prove there is a market, funders will be more inclined to believe there is one too – so your job it, you got it, prove it! Evidence that is particularly useful includes pre-orders, expressions of interest, an existing community of interested parties, positive feedback from recognised industry parties, successful crowdfunds, awards or prior product versions, etc. These will really set you apart from the crowd, turn your idea into an opportunity, and bring real-world context to the reader.
Being unrealistic about your cost base
It’s one thing to come up with a fantastic idea but another to get the true costs of delivering that idea right. How many times have you caught yourself saying “Well, these costs are ballpark – they should be fine”? Investors never want to know a ‘ballpark return, they want accurate forecasts of returns, so they can calculate their risks. So ditch the ballpark cost base as much as possible when business planning. Whether you’re dealing with costs associated with manufacturing, hiring a PR agency or taking out rental premises, there’s no substitute for doing your research and getting quotes in. From a funder’s perspective, referencing or evidencing through quotes not only provides us confidence in your cost base, but it also demonstrates that you have a sound grasp of your figures and know how to assess and interact with potential suppliers to get your business going.
Moving too fast, too soon
On the one hand, you need to describe your vision – but on the other, you need to outline the reasonable steps that you need to take to get there. Sometimes it’s easy to get carried away by the grand vision, but make sure your plan is always grounded in reality and based on facts and evidence wherever possible.
It’s also vital to make sure you never lose sight of your first target market. For example, you may plan to launch a regional offices of a successful national recruitment agency who provide nurses, doctors and dentists. If your starting point is the centre of the top 10 cities in the UK, you’d be wrong. But if your starting point was the 10 largest teaching hospitals, then you’d be right as they have the highest churn of qualified nurses, doctors and dentist. So your first target customer front of mind first and figure out were they are, before you steam in too fast.
Not meeting compliance and regulation requirements
Whilst not having the right paperwork may not permanently dent your startup aspirations, they will delay them. For your chosen industry, make sure you have a clear understanding of certification and regulatory and compliance requirements. By the time you receive funding, all these requirements should be satisfied and hopefully you’ll be all systems go!
Not communicating why you’re the best person for the job
Wherever possible think about the key capabilities, knowledge and assets needed to make your business a resounding success. These should be things the business can’t do without, and which also differentiate you from the competition. Then think through what you bring to the table and cross-reference against this list. Hopefully most will be covered – and if so, shout it from the rooftops!
In cases where the business you aspire to launch is radically different from your current day-job or current skill-set, it’s time to hustle – get to know your chosen industry well, get to know its participants, experiment with lean business models and product prototypes. Start making a name for yourself and collecting experiences, so that in time you can demonstrate that you are the right person to launch your business. Here at Accentis, we work with entrepreneurs that have do things radically different from their industry, but they’ve demonstrated to us why they’re the right person for their business and more important why they’d be the best to disrupt their market.
Skipping over numbers
Numbers, financial models and spreadsheets can all seem daunting, but they’re our forte
They’re just a way for you to communicate your startup story, we do this, we do that and this is what our financial returns look like. After all, this is what business is all about, having fun making your chosen numbers.
During planning you should look at splitting apart some or all of your numbers so that you and your audience can tell the story of your journey, what you provide and how it benefits them. For instance, when I look at a startup’s marketing expense line through the size of the figure and how it rises and falls over time, I may be able to tell – for instance – that the startup is jump-starting itself with a big launch and then tailoring down to a more steady mix of social and traditional marketing. I may be to deduce that during its launch event, it’ll be inviting all the people on its mailing list who have registered interest and that it expects higher customer conversions – as evidenced by a spike in sales compared to other months. And so the story builds…
Not thinking long-term
The most important thing to us is that entrepreneurs are able to build a sustainable business, one that can last the test of time and isn’t a flash in the pan. From this perspective, make sure the end point in your business plan represents a state of sustainability and is based on sensible assumptions. The business should be able to fund itself and hopefully produce financial returns and cash-flow profiles aligned with your aims. Unfortunately a business that needs to crowdfund itself in 6 months or else run out of cash may not exist in half a year’s time. Don’t end your business plan with a cliff-hanger!