10 ways to screw up your business plan
This is not a question of whether writing a business plan makes sense or not. There are many examples of global success stories without a business plan, and to deny that the business plan is often not a good match for reality would be pointless.
However, "business plan" is a magic expression used by investors of all kinds and even family members who offer you "love money". It is an obligatory step in the fundraising process.
Copper Oak has accompanied several start-ups in the venture up to the first major contract. In each case, the first exercise was that of the business plan. From this experience, we learned that there are many ways to write a business plan, but there are only 10 ways to screw it up!
Mistake number 1: Neglecting the form
Form is the number one communication tool and above all the most complex point of failure of all. In the world of images, form certainly does not give any information about the quality of the project, but it enhances it and above all it demonstrates the value of the team and its communication skills.
Spelling mistakes: Good old spelling. It's one of the most terrible plagues that can screw up a business plan. They do not call into question the quality of the project but that of the team. "I have, however, proofread the text several times. "As one project owner explained to me recently. I can well believe it. However, it is very difficult to write a text as important as the one presenting a project and its economic sense and to do it alone. You need at least two people under the lamp, two people who read the text critically and chase away any typos.
Don't just trust your automatic spell checker: it's just an algorithm. Believe in people and interact with those who support you; and among them, choose the most critical ones.
Too literary: A business plan should certainly thrill the reader, but it is not a novel by John Le Carré either. A business plan must be more demonstrative than descriptive. Everything has to be justified, and the best way to do this is through figures. But don't forget to share a vision and some emotion. However, a business plan without figures is not a business plan, it is an adventure novel.
The communication tool: Depending on the product and the targeted interlocutor, the Word document or the presentation, or even the video can be the right communication tools. Depending on the financial resources available but also on the project, you should not hesitate to use innovative communication tools. Indeed, a Word document to explain that you are going to digitise the world in a disruptive way lacks credibility.
In order to help your reader to take ownership of what you are saying, graphics are judicious tools. But we still see too many business plans that simply juxtapose graphics without explanation, without linkage and sometimes without understanding their added value. A well-explained, well-situated graph with a conclusion per chapter is more than enough.
Mistake number 2: Being too technical
Have you solved the perpetual motion or simply created your line of products that everyone is going to be tearing off? Congratulations. But are you sure that all readers want to understand how it works in the jargon you use every day in your laboratory? NO.
You're talking to a disparate panel that doesn't always have your technical expertise but wants to understand the disruption, the revolution you're proposing. If the investor is interested, then he will probably call in an expert during the due diligence.
Mistake number 3: Information bombing
The business plan is not a way to put everything you want to say on paper. Remember grandmother's encyclopaedia, you would leaf through it but not read it. Well, for investors, it's the same thing! 20-30 pages maximum per business plan, with the right and necessary information.
Stun the reader with a multitude of details about the details.... then you might as well refuse to finance your project.
Mistake number 4: The market study
Often underestimated, market research is unfortunately often botched. Some limit themselves to a few Google searches and a few online studies on the subject with figures that are often out of date.
Nothing beats a real field study, with real clients:
• Going to meet customers - even potential customers - and giving concrete feedback.
• Launch a prototype of your project and write the feedback in your business plan.
These two points will give credibility to the study, without forgetting that any study is biased by the way it is carried out and the objectives pursued. An investor will prefer an entrepreneur who has made 100 face-to-face customer meetings and provided feedback from these meetings a thousand times more than a study by a renowned consultant of 1,000 people indicating the macro-economic trends in your national or regional market.
Mistake number 5: The business model
Not to be confused: the business model is the mechanism by which the company generates its profits, while the business plan is a document presenting the company's strategy and expected financial performance for the coming years. The business model, the central part of the business plan, answers the question: how does the money come into my pocket? Easy peasy.
at what time,
All other data in the business plan revolve around the business model.
Mistake number 6: The assumptions
The turnover and cost figures can be as complete as possible, it will only make sense if they are accompanied by plausible justifications. An investor or banker will not look at the figures in detail. They will more often prefer the justification of these figures, in other words, the assumptions! Rather than detailing a gigantic spreadsheet in your business plan, give your assumptions and JUSTIFY THEM.
Example: "I will make more than 500,000€ in sales in the first quarter because I will have 3 salespeople working full time. And in 8 hours, they can approach 100 customers a day. According to our preliminary field phase, the success rate is 5%, i.e. 5 sales per day per salesperson. With 15 sales per day for 20 days (one month) this gives us 300 sales per month at €600, i.e. €180,000 in turnover per month, or a maximum of €540,000 per quarter.”
Mistake number 7: The top-down approach
A young entrepreneur recently announced to me that the world market for his product represented 1 billion euros and that he would soon capture 1% of this market. Yes, why not, I answered, but how?
It would have been preferable to adopt a " bottom up " approach to explain the development of the turnover and to put it into perspective with the size of the market and the positioning of direct competitors.
Mistake number 8: The team
Often the team section in a business plan is only one page long. However, an investor invests more on a team than on a project. Describe the complementarities in your team. Take the time to describe your strengths, your weaknesses, who you want to recruit, the skills you lack, your networks, the people on your board of directors and the people you have managed to convince.
The most important thing in a project is the team. Better a wobbly project with an incredible team than the other way around. A great team will always be able to lift mountains and make things right. In a nutshell: in your business plan, the first product to sell is you!
Mistake number 9: Customising the business plan
It is not a question of producing a business plan for each interlocutor, but for each type of interlocutor. Don't forget that the different readers are destined to be your partners of tomorrow (whether they take an equity stake or lend money). They will therefore have to work together. The language of your business plan must therefore be common to all these parties.
In addition, the content needs to "speak" to all of them. A banker is not looking for the same thing as an investor. Your discourse cannot therefore be the same. In a business plan for a banker, you will need to outline the risks and your actions (your contingency plan) to mitigate them - the canvas exercise lends itself quite well to this situation. For an investor, it's the adventure - understand the emotion - and the potential gain that will attract him.
Mistake number 10: Writing a business plan
The business plan is great, but don't start with that! With experience we have found that it is better to first launch a little something to test the market before writing a business plan. Be careful, don't get us wrong, we don't advise you to lightheartedly leave for an adventure; however, writing your project on a maximum of 4 pages is enough to get the ideas a little clearer but quickly get into the action. Many people who want to perfect the business plan spend too much time on it and get stuck at this stage. Undertake in the primary sense of the term, even on a small scale, then it will be time to rationalise and put the fruit of your discoveries on paper.
Looking at all our assignments, we were able to identify 10 ways to screw up a business plan. Whether on form or content, remember to pay attention to this list of mistakes to avoid. Have your business plan proofread several times by people who don't know your project. By confronting your business plan with an outside eye, you will avoid many mistakes.
And if you find an eleventh one, let us know!