The initial step of starting a business must be one of the most exciting and most stressful moments. Almost 20% of new businesses fail within the first year. Almost half fail up to year five, so business owners sure they are on top of their game. The best way to achieve success for an organization is writing a business plan. Most common mistakes is avoided. Business owners can ensure they get important funding. This helps get the business off the ground. They can also use money wisely.
Convincing your lender of your business plan’s potential
Seldom is an entrepreneur flush with all the funds needed. This is true for new businesses right out of the gate. Typically, more funding is pooled . There is family or friends, investors, and the bank. Business owners need a solid plan. They cannot get funds from the bank without one. Avoid top business plan mistakes highlighted in this article.
In general, lenders want to know how much money you need. They also want to know how you plan to repay it. The rest of the professional business plan is important. It creates the background for the amount of money you need. From a lending perspective, shorter and simpler plans are better.
Here are the top common business plan mistakes to avoid and the potential suggestions to help your business plan succeed:
Use the third person
Even though you are the small business owner and this is your brain-child, keep the first person out of the document. Using the third person (he, she, it, they) is going to sound more professional but will also add a little distance that helps position the organization as its own thing more—not just you as the proprietor. The goal here is to make your business sound as though it can stand on its own. This is not the time to come across like a proud parent or cheerleader.
Check your numbers
Though short and simple is important, your business plan will still need to contain a great deal of critical information. Your plan should include an executive summary, which is critical for your lender; a description of your organization; a competitive and market analysis; an outline of resource plans, including your organizational leadership structure with roles and responsibilities attached; a breakdown of the products and services you will sell or offer; your marketing plan with an outline of expenses; your sales strategy; and financial projections. All this content, and it’s easy to make any kind of mess with all the many numbers. Therefore, scrutinize that business plan with a fine-tooth comb. Ensure your numbers add up and are in appropriate sections. Echo those financial projections and figures in the executive summary and the request for funding.
Err on the side of no errors
Too many business plans are submitted with spelling and typographical errors and other inconsistencies. At which point, presenting the plan to a lender, the lender is naturally going to think, given all the recent dates on each edit, that this plan was just slapped together and that the plan is not well thought out. If you are not good at editing, then go find a trusted professional or two to make a review for you. And make sure they aren’t just looking for spelling and typographical errors. Of course, published language must be consistent and fully intelligible in terms of cross-referencing. The plan should also contain business ideas along with target market, market research findings, business model, good business planning and business plan template.
Don’t go over the top
You want your business to succeed – that much is obvious – and an element of optimism is necessary. However, your lender is looking for a sense of you not living in cloud-cuckoo-land. Ensure that your plan has built-in financial statements or spreadsheets that paint an accurate picture of your projected costs and the corresponding revenue you will generate and should not have unrealistic financial projections. This is also likely where you will want to present a break-even analysis so the lender understands just when you expect your business to become profitable. After all, you won’t likely be profitable right out of the gate.
Cash vs. Profits
While profitability is crucial, being profitable doesn’t guarantee that you’ll have positive cash flow. It is necessary to have this cash flow in order to make sure you can pay the bills on time and more business from a long-term perspective. If you do not have cash, it means that if your business goes under, you probably can’t pay back the remaining funds on your loan because your loan is just sitting there. The balance sheets should be maintained properly and all the financials should act as a road map for successful business.
Answer questions before they are asked
Your lender will not necessarily understand your business. Remember that your lenders see new business plans and proposals every day previous page required – Think of this as FAQs that you include before the FAQ summary. They are not you and will not be able to fully understand your business and how you plan to make money, unless you make it very easy for them by answering questions before they are asked, directly within the business plan. All lenders will need to have things explained to them in extremely simple terms, and if they are even the slightest bit confused about your business proposition, it is highly unlikely that the lending you the money will take place.
Executive summary
do not underestimate the importance of the executive summary. A well-written, clear executive summary that answers big questions the lender will have is going to increase your chances of that lender approving funds. Keep your executive summary clear and succinct with really just a few sentences about what it is that the business does; what exactly of that amount you need and what you are going to do with it; and how they are going to be paid back —easily done in one to two pages. And if you find yourself needing more than that, this should raise a red flag for you that you are probably overcomplicating your business proposition.
‘Taking time to polish up a business plan,’ she says, ‘will not only help you to guarantee that you have a solid business proposition, but it also increases your chances to get a business loan. With the right funds and the ability to pay on top
