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Tuesday, May 8, 2012

A business plan does not have to be perfect. It is to be expected that the plan will change over time. However, a well-researched business plan increases a new business' chances for success. Investors read the business plans of any venture they consider giving money to. While these investors are looking for strengths that will give them reasons to invest in the new business, they are also looking for common mistakes that will disqualify a business for their funding. There are five major mistakes that should be be avoided when preparing a business plan.



1. Being too optimistic. An overly optimistic business plan sets the business up for failure. New business owners should have a clear understanding of the business before investing much time or money into the venture. Business owners who do a great amount of research into the industry will be prepared for peaks and valleys in their business. They will be able to predict cash flow and plan for slow seasons. Investors generally appreciate the time that business owners take to research the industry and plan for the future of the business.

2. Underestimating the competition. Every business has competition. New business owners must find the other businesses that they will be competing against for customers and market share. Skipping this step or assuming that the business is so unique that there is no competition is a red flag for investors. Diligent market research will uncover all of the information needed for this part of the business plan.

3. Overstating the financials. Investors read a lot of business plans and they understand financial statements. They also do not invest in business ventures that they have not researched themselves. Therefore, it only hurts a new business when the business plan includes financials that are grossly overstated. While it is impossible to know for certain what the financial state of the business will be in a year, proper research will give a reasonable basis for a prediction.

4. Failing to proofread. Errors in spelling and grammar may cause readers of a business plan to question the professionalism of the business and its owners. It doesn't take much time to read the business plan and check for errors before submitting it to investors. The time spent proofreading may prove to be invaluable in terms of the impact it has on the company's image.

5. Being too vague. A plan to start a business needs to be concrete. The business plan should clearly convey the strategies and projected financials. A good business plan does not have to be long. In fact, a shorter document that covers all of the important points in a concise manner is better than a long business plan with a lot of useless words.

By avoiding these five business plan mistakes, new businesses can increase their chances of success. By spending time researching the market and compiling the information into a useful document, a new company will be well prepared to present the business plan to investors.


This guest article was written by Allison, a financial writer for Pay-Day-Loan.com. Apply for a payday loan to give your small business start-up a financial boost.

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