Module 14: Preparing Business Plans

14.3 What are the common mistakes in preparing business plans?

Here is a list of the 10 most common problems associated with business plans. These must be avoided.

• No clear plan for progress
• Poor description of service
• Lack of market research
• Incomplete financials
• Huge appendices
• Bad grammar
• Too little detail
• Overall plan is too long
• Overuse of acronyms
• Redundancy

1. No clear plan for progress

It must be made clear to the reader what the business is and that the goals outlined in the plan can be reached. Broad unsubstantiated statements such as “It is a known fact that…” must be avoided. If a statement cannot be substantiated with good solid data, it should not be made. Many businesses describe where the business is at the present, but do not give any step-by-step method to move forward. Vague ideas, circuitous statements and “shot-in-the-dark” guesses should be avoided.

2. Failing to describe the service in layman’s terms

It pays to be clear and to write the plan in simple language. Industry jargon must be avoided as much as possible. Lenders will not be inclined to approve a loan or provide financing if they cannot understand precisely what the partnership is about.

3. Lack of market and competitor research

The partnership must know where its market niche lies and it must know its competition. Where possible, competitors must be listed and their strengths and weaknesses identified. Every business or partnership has a competitor so to say that there is no competition in a business plan is almost a sure predictor of failure.

4. Incomplete financial information

Sufficiently detailed financial information must be provided so that a reviewer can make estimates about accuracy. This information must include clear and complete assumptions that form the financial plan. Actual figures must be shown if they are available. The numbers must make sense and need to be reviewed by the taskforce making the business plan to ensure consistency in all sections.

5. Huge appendices

The business plan should include supporting materials such as brochures, technical papers, résumés of key managers and summaries of market research studies. However, the idea that a heavier document is more impressive does not work here. Care must be taken not to go into too much detail.

6. Bad grammar

Nothing turns off a prospective investor faster than a poorly written business plan. Internal quality assurance needs to be performed on all sections of the business plan to ensure adequate review.

7. Too little detail

Some people write four-page plans and think that there is nothing more to say. Other people think that partnerships or businesses do not need plans and that everything can be done from the head. If a partnership wants to find an investor, the plan must be well written and sufficiently detailed.

8. The overall plan is too long

There is a need to avoid being excessively wordy in the plan. Forty pages or less is ideal for attracting investors; eighty pages is definitely too long, especially if it its essential content can be reduced to just 15 pages. There is a need to stick to the facts, stating them clearly and not repeating them unnecessarily. The goal is to write a good business plan, not a long one.

9. Overuse of acronyms

The use of acronyms in the plan must be limited as much as possible, otherwise readers will have to keep on going back to reread definitions. If the full name is too long and tedious, renaming may be an alternative solution.

10. Redundancy

A business plan must be planned carefully with each fact and sub-plan existing in only one place—the place where it best illustrates what is being said. People who read business plans appreciate brevity and view it as an indication of the ability to identify and describe in an organised manner the important factors that determine the success of the partnership.

© 2004 UNDP,  Manufactured by Margraf Publishers GmbH, Germany