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How to Write Business Plans – Make Your Mistakes on Paper

One of the greatest benefits of a business plan is the opportunity it presents for you to make key mistakes on paper rather than in dollars and cents. The type of thorough research and strategy that a business plan requires for funders requires should also make it the type of internal planning document which will be a great tool for you to manage with going forward.

Here are a few of the potentially costly mistakes that a business plan can help avoid.

Haphazard Marketing

If you have not carefully chosen your customer target markets, you run the risk of marketing too broadly. If you are spending dollars on local TV ads to reach cable-watchers when you should really be targeting select groups or associations, you may be wasting money on ads that have little return for the business. Seeking wider awareness of your business may be useful if you need to achieve a much larger customer base to be successful, or if you have little competition within the vicinity. If you think through your customer niche more clearly on paper, you can be much more cost-effective in your pay.

Hiring at the Right Time

By planning through the schedule of the launch and early operations of your business, you should be able to time the hires you need to make. To do this, work back from when you need a fully trained employee to allow time for training, interviews, and job advertisement. Depending on the skill involved in the job and the availability of that type of employee in the labor market, you may need anything from a couple weeks to a few months of lead time for this process. Without this type of plan, you may hire employees too early, wasting money on excess capacity before you need it, or too late and deal with operational bottlenecks or lost opportunities in the meantime.

Writing Business Plans That Speak to Investors

There are an inordinate number of websites offering free templates for writing a business plan. However they fail to explain to the entrepreneur the intent, or style the business plan should adopt. Structure is important, but the key to writing any effective communication is to never forget your reader.

Copywriters learn early in their careers never to alienate the reader. The reader is king. The reader’s needs and wants are more important than those of the writer. The writer is only a conduit.

I knew some writers who were so fanatical about the reader, they kept a photo representation on their desk during a writing assignment – just so they didn’t forget who they were speaking to.

If you are using your business plan to raise capital, your reader is likely to be an investor. An investor is businessperson, who reads dozens of business plans each week, from entrepreneurs who all believe they are the next Zuckerberg.

So think about how you are going to keep their attention. Investors are big picture people. You have to help them imagine making thirty times their investment, by striking the right notes.

Answer these three questions early and you can hook them to keep reading.

  • Problem. What pain point we are curing? Is it really significantly important to the audience.
  • Solution. How are you addressing the problem? Can you create barriers to prevent competitors doing the same?
  • Payment. Can you get someone to pay for it. Just because you get 1+2 right doesn’t mean you get paid. The right revenue model is crucial. In fact an investor may receive the same value proposition in 1+2 from many entrepreneurs, but eventually settle on the entrepreneur who can best monetise the idea.

Common mistakes made writing business plans

  1. Pitch the opportunity, not the product. Entrepreneurs are passionate about their idea. However this should not be the focus of plan. If it is, your business plan is unlikely to be read by an investor. Limit explanation of the idea and instead punctuate throughout the plan the profitability of the business.
  2. Under estimate costs. Entrepreneurs project their costs without factoring in loading. Loading costs are not immediately obvious, example staff benefits and public holidays. These costs add up and increase salaries by a factor of 1.7 to 3, depending on the industry. Be realistic when calculating costs – you want to make sure you ask for enough funds.
  3. Over estimate price. Entrepreneurs over value what the market is prepared to pay for their product or service. This is because they have not accurately gauged how they will influence the perceived value a buyer will place on a product, or misread the price trend in their industry vertical.

Why Your Business Plan Does Not Work and How You Can Write the an Effective One

There are many people asking me to help them to write business plans. Meanwhile, if you are planning to get financing to start small business, then business plans are mandatory. Yet most people that start a business do not want to utilize them. The reason of this is because business plans are made commonly to run business for the next five years or even more. Once the created business plans, it is very seldom that business owners move to look at the plans again. In this article, I will give you some tips how you can really utilize your business plan so that you can get maximum results.

1) It is important to check and review your business plan quarterly. It is made for you as a guide for your business and thus you need to update the content frequently. It is not intended to be created just as a static note. Evaluate things that are working properly and take out things that are not. Two of evaluation method, which are to define strategies that work and to identify the ones that do not work, are the most basic tools to improve the effectiveness of your business strategies.

2) Write the value as well as culture of your business into your business plan. This is not for financing purpose, but this one is to enhance working productivity within the business itself. State how many hours in a day you want to work in the business, and on the business. Define the schedule of your holiday, so that you will have life balance between family and our work. Again, this information may not be useful for financial institution like a bank or private lenders, but it is useful to increase personal value of your business. Soon you will see that you will need to have strategies to get more human resources to run the business, and design better systems for your business.

3) You need to be able to convert your business plan into action steps. As mentioned that your business plan is made for strategies for the next several years ahead. It represents the blueprint of your business. Thus you will need to convert long term goals into a short term strategies. Short term strategies should represent each of long term strategy and you should also incorporate resources that are needed to have these done. Usually short term plan is set within four to six months period of time. This concept works because your brain will not able to see the whole big picture that your long term goals stated. If you design it with several short term goals, then it is more measurable for your logic to achieve these.

From three I above points, I hope you have general picture on how to design a business plan that works on every business. Evaluate your business in certain period of time and have this adjusted to the real situation.