Writing a business plan could be the most important step you take to ensure the success of your company. The process of creating a plan forces you to think through every aspect of your business objectively and strategically. The result is a framework for starting or growing your business—and a vital component of applications for financing. But writing one is as hard as it is important, especially if this is your first time.
Keep the process moving in the right direction by avoiding these 4 mistakes entrepreneurs make when writing their first business plans—regardless if it’s a restaurant business plan or trucking business plan.
1. Failing to Identify Clear Goals
Starting a business isn’t a single action. It’s a whole series of them, each of which should move you toward a goal. Your business plan is where you define the goal and each milestone you need to reach as you work toward it. Consider building your business plan around SMART goals:
- Specific: Instead of generalities like “increase my store’s sales,” think along the lines of “increase sales 50% in 2020 by building an e-commerce store and selling my products online.”
- Measurable: A 50% increase in sales is something you can measure—either you hit 50% and reach your goal, or you don’t.
- Attainable: Goals should challenge you, but they need to be realistic.
- Relevant: The goal should make sense in the context of your business. In this example, e-commerce is a relevant way for a brick-and-mortar store to increase sales.
- Timely: Setting a deadline to reach your goal—the end of 2020, in the example above—makes it timely.
2. Incomplete Market Research
Your widget might be a great product, but unless there’s unmet demand for it that you can satisfy, it might not make for a viable business. Market research is how you assess the viability of your plan. Here are some of the things your business plan needs to communicate:
- Who your target market is and why
- How you’ve gauged demand, such as through surveys and focus groups
- Who your direct and indirect competition are, both current and emerging
- How you’ll price your product to be competitive and profitable
- A plan for marketing and advertising your product
- Where you’ll sell your product and how you’ll distribute it
3. Ignoring Human Resources
Human resources are the people who work for your company, and human research management involves everything from choosing partners and hiring employees to balancing employees’ needs with the needs of the company.
Here are the business plan sections where HR comes into play:
Executive Summary: List your company’s leaders and their qualifications for their roles. You can include their resumes in the appendix.
Organization and Management: Include an organization chart showing all of your partners’ and employees’ roles and the relationships between their roles. If you have key employees not mentioned in the executive summary, you can add their resumes to your appendix as well.
You might not need a dedicated human resources department yet, but by fleshing out the description of your assets and anticipating future needs, you’ll establish credibility with lenders and potential partners while adding value to your business plan as a tool for launching your business.
4. Basing Assumptions on … Assumptions
From your marketing plan to your valuation and financial projections, you’ll have no choice but to include some assumptions in your business plan. That’s OK if you can back them up with current, authoritative data.
You can get this data from 2 sources. Primary sources include your own customer surveys and your own financial data, the Census Bureau, industry organizations that conduct their own research—anything that comes from the horse’s mouth, so to speak.
Secondary sources present the information they’ve compiled and disseminated from primary sources, such as a business publication that publishes an article using information from one or more primary sources. There’s nothing wrong with using secondary sources. In fact, they can keep you from having to reinvent the wheel, if they’re reputable.
Putting the Pieces Together
Writing a business plan is a painstaking process that can take months—or longer—to complete. And some industries might require more detailed business plans than others. For example, a fix-and-flip business plan is likely to be more thorough than an online business, as the buying and selling of properties can be extremely complex. But done right, no matter the business, the plan will turn disparate bits of your business idea into a cohesive roadmap to your company’s future and its success.