Five fatal business planning mistakes

New or inexperienced entrepreneurs often send business plans to potential investors before their plan is fully completed or vetted. Sharing a plan with obvious errors is one thing, but investors are also alert for common problems that serve as red flags.

Here are the five most common mistakes that business owners make when developing a business plan:

Unrealistic financial projections

Investors expect to see a business plan that paints a realistic financial picture of anticipated company growth. If your plan is overly aggressive and not consistent with growth in the industry, it may not get taken seriously.

You need to be prepared to explain and defend all of the important assumptions concerning your financial projections.

Not having a defined target audience

No business will appeal to everyone. Your plan must define your market and present a clear picture of your potential customers. You should ask yourself why will they purchase your product or service over another.


Too much hype and the overuse of superlatives can be the downfall of an otherwise attractive business plan. You should wow them with the business idea, not hype or buzzwords.

The use of motherhood or blanket statements can also be a turn-off; investors don't want to read a vague, general or overly philosophical business plan.

Poor research

In an effort to get a business plan together quickly, some business owners do not take the time to double-check and substantiate their claims. Make sure your research is accurate, up-to-date, and verifiable.

No focus on your competition

Some business plans claim the business has no competitors, while others indicate only what the competition has done wrong. Investors reading a business plan want to see who the competition is and how you plan to compete with them.

Don't ignore competitors or paint an overly rosy picture- it only shows investors that you haven't thoroughly researched your market. If your idea is brand-new and you truly do not have competition today, if your business becomes successful, you will tomorrow.

These five major mistakes are not the only common business plan errors. Others include dry writing, inconsistencies from section to section, and plans that are too long. It is important to take time to carefully review each section of your business plan and identify as many problems as you can.

When you think it sounds perfect, you should have several other sets of eyes scrutinise it before you share it with investors.


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