Writing a Business Plan? Five Mistakes to Avoid

The idea of writing a business plan seems daunting to many. In reality, if you start with a solid framework, or outline, you will find that it goes much faster than you thought possible. Better still, you will learn a lot about your own business as you go through the process. This article focuses on common mistakes to avoid. By avoiding these common pitfalls, you will create a better business plan that helps your business to succeed and one that resonates with bankers and investors.

Mistake #1: Trying to write the business plan with just an idea.

Bam! You have an idea. In fact, you have a great idea. It is to your credit that you want to put your thoughts to paper and create a business plan. Yet, you will improve your idea and ultimately your business plan, if you let your idea incubate. In this fast-forward age, some things are still better developed over time. Think of your business plan not as microwaveable meal. Rather, as a stew with many ingredients. Each one must be added in its own time. Sample the stew and see what to add next. All along you had the recipe, but you must let it come together over time. In the end you will know when it is ready to be served.

Remember that it is a ‘business plan’, not an ‘idea plan.’ Your plan needs to reflect that you have thought through all of the aspects of turning your idea into a business. Yes, get to it early, but not before you have thought through all the critical factors.

Mistake #2: Outsourcing the writing of your plan without learning anything in the process.

There are plenty of services that will write your business plan for you, for a fee. In fact, you can even buy a pre-written plan for any type of business. There is nothing wrong with getting help. Keep in mind that in the end, you have to execute the plan. If your plan is to serve any purpose you must truly understand it. Reading a document that was written by someone else won’t qualify as truly understanding the plan. In a business plan, there are inputs and outputs, causes and effects, actions and outcomes. It’s important that you understand these relationships.

Get the help you need, but also take the opportunity to learn what you didn’t know before. For example, let’s say that you needed to go to an outside source for help with the financial projections. When they are complete, have your service provider walk you through every aspect of the financial statements so that you would be able to explain them to someone else with confidence.

Mistake #3: Claiming you have no competition.

There is big trouble ahead when a business plan includes the words, “We have no competition.” To a banker, investor, or experienced business person this translates to, “I have no idea who my competition is.” It is very important for you to understand who your true competitors will be. Your true competitors are those organizations where your future customers are spending their money today-money they will instead be spending with you in the future. That might or might not be a business just like yours. For example, the motorcycle shop’s biggest competitor might be the boat dealer.

In addition to your direct competitors, be sure that your plan addresses all of those organizations that will be competing for the same dollars you will be going after.

Mistake #4: Outrageous financial projections.

It’s impossible to know if your financial projections will prove to be accurate. Yet, it’s fairly easy to tell if they are realistic. Understand that your financial projections are more of a reality check than anything else. Accordingly, make sure they are within reason. More than one wide-eyed entrepreneur has thought they had the next Google on their hands. Even if they were right, the more likely reaction to seeing a sky-high revenue forecast would be a total loss of credibility.

The source of most unrealistic financial projections is the “top down” forecast. A top down forecast sounds something like this: “There are $1 billion of widgets purchased online every year. If we get just 2%, we’ll have a $20,000,000 business.” These forecasts rarely go on to say how the business will get to 2% market share.

Instead, take the bottom up approach. Show the number of sales that can be made by each sales person (or per site visitor), and build it up. Then make sure your plan accounts for all of the right resources that will be required to generate and deliver the sales figures. The reality of your forecasts will start to come into focus much more quickly with a bottom up approach.

Mistake #5: Not having the right team in mind.

Finally, keep in mind that new businesses are nothing more than the wisdom of the people behind them. They have no current customers, contracts, or sales backlog. The new business is totally dependent on the team. Collectively the team should be fully experienced in all aspects of the industry and markets your business will serve. Yet, when you are at the business plan stage, it is unlikely that you will be in a position to hire your full team. There are two steps you can take early on that will provide fuel for your business and your business plan.

First, map out the key positions for which you intend to hire. Clarify their roles and the qualifications. Prioritize your list of early hires, recognizing that sometimes things fall into place due to timing. If possible, identify specific individuals who are enthusiastic about joining your company when you have funding or reach a certain milestone. With their permission, incorporate their information into your business plan.

Next, work to assemble a board of advisors who have relevant experience. Advisory board members, depending on the formality of the arrangement, often work at no cost in the early stage of the company. Identify individuals who could provide mentoring in specific areas. Again, with their permission, list these advisors in the team section of your business plan.

Going Forward

A business plan is a working document that will help you to refine your vision and execute a successful plan. Adhering to the discipline required to write a solid plan will propel your business forward. Start with a solid business plan outline or business plan template. As it is said, nobody plans to fail, but too many fail to plan. Be sure you “plan” to succeed.

Need to Write a Restaurant Business Plan Sample? Here’s What You Need to Include

If you’re about to open up a restaurant then you need to have a restaurant business plan properly written. You probably have a pretty good idea of some or perhaps most of the things you need to include in your plan, but there are probably some things you don’t know you should include. So let’s take a look at what you need to include when you write a restaurant business plan sample.

Overall you need to include five bigger topics in your plan. These five topics are an Executive Summary, History and Position to Date, Market Research, Business Strategy and Operations.

The first thing you need to do when you write a restaurant business plan sample is to write an Executive Summary. In the Executive Summary there are a few issues you need to address. These issues include: a description of the company, a mission statement, products and services you will offer, a financial forecast, and financing requirements. All of this information will help lay the foundation for what your restaurant will do and how you plan to do it.

The next issue you need to write about is History and Position to Date. This will take things a step further and lay even more of a foundation while including more details. While writing this part of your plan you should include: the company’s mission, the management teams and key personnel, services (more in depth), a company history, guarantees and warranties you’ll offer, and your business structure.

The third part of the business plan is arguably the most important. This will help you predict how successful your business will be and how you can make your restaurant as successful as possible. This part should include: economic and social factors, competitive environment, long-term opportunities, geographic area, customer description, target customers, market definition, market opportunities, competitive analysis, competitive advantages, competitive positions, and potential future competition. All of this information should be researched and then analyzed thoroughly. The answers you’ll get during this part will be invaluable to the future success of your restaurant.

The fourth topic you need to address while writing your restaurant business plan is your business strategy. This part should outline exactly how you will attract customers and how you plan to keep them coming back. The topics you should address during this part are: customer incentives, advertising and promotion, sales and marketing, and commission. The information you include in this part will directly lead to how well your restaurant is going to be doing.

Finally you want to outline your operations. This final part will include the specifics of how your business will be run on a daily basis. This part should include things like: how many employees you’ll have, what type of employees you’ll have, what you’ll serve, how you want your menus to look, etc. Basically anything that goes into the daily operation of your business needs to be addressed in this final part.

If you plan to open a restaurant then you need to have a restaurant business plan properly done. Your plan should include the broad topics of Executive Summary, History and Position to Date, Market Research, Business Strategy, and Operations.

Writing a Business Plan – A How-To Guide

Lots of people want to start their own business. One of the first things that stops these would-be entrepreneurs from realizing their ambitions is the seemingly daunting task of writing a business plan. Writing a business plan, though, is a rather easy task if you understand your business, so let’s take a look at what a business plan entails.

Before we jump into drafting our business plan, we should think about why we are writing a business plan in the first place. Most business plans are used to secure financing for a business – whether it be a start-up or an existing company looking for additional capital. This financing could come from a bank, an equity or venture capital fund, friends, family or just about any other potential investor you could think of.

Another reason to write a business plan is to organize yourself, make sure you have thought through all the components of your business and make sure that it makes sense. A great idea for a product or service may not amount to a great business unless you can turn a profit through effective marketing, management of expenses, management of accounting and information systems, etc.

Things to Keep in Mind

As you write your business plan, keep in mind that your audience – whether you’re currently looking for financing or not – is likely to be a potential investor. You need to communicate to investors that your company understands its business and has thought through all the risks, challenges and opportunities involved in its industry.

To communicate this understanding to investors, you should try to provide sufficient detail about your business to demonstrate your knowledge. For example, you could write something like this: “According to the ABC Trade Association, profit margins for our industry average around 25%. With the procedures we have put in place, our business can achieve 30% margins due to the increase in our operational efficiency.”

There is no hard and fast rule for where or how you should add these kind of details, but using them will improve your credibility as a company.

You should also pay attention to your writing style. There is nothing to be gained by using fancy vocabulary or flowery language. In fact, such writing may cause your audience to lose sight of your business. Instead, you should write clearly and to the point so potential investors have a clear understanding of how you run your business.

The Outline

So with these ideas in mind, how should we structure our business plan? Below is one example of how a business plan can be structured. This outline contains the most commonly-used sections of a business plan but is by no means exhaustive of the areas that a particular business might need to cover.

Executive Summary
Business Highlights
Operational Overview
Market Overview
Management & Personnel

The executive summary of your business plan should be a two to four page summary of your business plan. It should touch briefly on each area that is contained in the rest of plan and give the reader a good sense of your business even if they don’t have time to read the rest of the document. You may also want to touch briefly on the history of your company and its mission and values in this section.

Hitting the Highlights

Next it’s good to jump into the business highlights section. This section discusses what sets your business apart and what will lead to its success. You may want to highlight the experience of your management team, discuss the strength of your position in the market or any other factors that make your business competitive.

You may want to follow this section with a discussion of risk factors coupled with how your business mitigates or addresses these risks. Discussing risks is another opportunity to demonstrate that you understand the business and industry that you’re in.

Getting Down to Business

The next section is a discussion of the operations of your company. The operational overview is usually the longest section of a business plan and usually covers the business strategy, marketing strategy, the product or service offering, management and information systems and any other components that are important to the operations of the business.

An industry or market overview is also a helpful section to have. It will give potential investors who are not familiar with your particular industry or market a better sense of the environment in which you operate.

This section may include demographic information for the market where you sell your products or services. It may include a discussion of the regulatory or legal environment for your industry. You can also include some general statistics on the industry from a credible source such as a trade association. This will lend credibility to some of the assumptions in your financial projections in the next section.

The Bottom Line

One of the last sections in a business plan is usually the financial projections. Ironically, this section might be the section you want to start with when writing your business plan. Building a financial model for your business is one of the best ways to make sure that you’ve thought through all the basic components of your business and that it will eventually make money.

You’ll have to ask yourself several questions in the process: What are my start-up costs? How will my marketing strategy translate into revenue growth? What are my gross margins? What are my fixed costs and overhead? When will I break even? How much money will I need to raise to get started? What will my interest expenses be?

Your financial projects should consist of income statements and balance sheets. A good rule of thumb for a start-up is to show monthly income statements and balance sheets for the first two years of operations and then full-year projections for at least the first five years of operations. Depending on how long it takes your business to reach a break-even point, you may want to go out to ten years.

In addition to these financial projections, your financial section should include a discussion of your assumptions, an estimate of when your business will begin to turn a profit, key margins that you believe your business will achieve, etc. If your business is already up and running, you should include the past three years of financials instead of projections. If you have less than three years of data, you may want to forecast a few years out as well.

Finally, you may want to include an appendix where you can share additional data. You may want to add a few news articles here that highlight how quickly the economy in your market is growing. You may have some news articles on your business itself. Perhaps you have financial statements for multiple business locations that would provide more detail about your business.

How Long Should It Be?

The length of a business plan may vary depending on the type of business that it is, whether or not the business is already operating and what the business plan is to be used for. Some businesses may need a lot of technical description in order to effectively communicate how they will operate – and others are more simple.

Businesses that are already operating will be expected to provide a lot more details about their business such as the kind of accounting software they use, where their company is physically located, pictures of products or facilities, actual financial results, etc.

If a company is simply trying to organize its business and is not looking for investors, they may be able to get away with less details in their plan – although they may seek to dive into greater detail than investors might need.

A typical start-up business plan should probably run about 15-20 pages, though depending on the circumstances mentioned above, it could run a little shorter or quite a bit longer.

Setting Yourself Apart

On a final note, if you’re going to start your own business, you are going pro – and you should act like it. By all means, make your business plan looks professional. It should go without saying, but carefully read and edit your plan several times before sharing it with outside parties.

You may want to consider developing a logo for your company if you don’t have one already. Use pictures of your company or the products that it sells to break up the text of the document and engage the reader.

Again, these may seem like minor details, but sometimes a business plan may be the primary document a bank underwriter might have to go on as he or she is evaluating the credit quality of a loan application.

Having these details in place helps to communicate that you are serious about your business and that your business plan was not just something that you threw together a few days before because you needed it for a loan application. Know your business (or research it well), be as detailed as possible and present your company professionally, and you will have a solid business plan.