5 Things That Can Make Your Business Plan Fail — & How to Avoid Them

If you don't believe in your business, how can anybody else?

Creating a business plan is an essential step in getting a new company off the ground. Writing this document helps founders not only evaluate their goals, but also communicate them to other people, especially investors. A good business plan can be the difference between funding your dreams on business credit cards and personal savings or getting support from a financial institute or business partner. Unfortunately, many business plans fail in this aim. Understanding common pitfalls and how to avoid them ensures you get the backing you need to develop your business idea.

Here are 5 things that can make your business plain fail — and how to avoid them.

1. Failing to Define What Your Specialty Is

Thousands of startups and small businesses pitch their business plans, and it’s important to stand out in the crowd to improve your chances of securing an investment. An effective way to do this is by clearly defining what makes your company unique, according to the U.S. Small Business Administration. This requires being clear about what your company offers in terms of products, services, unique skill sets, and experience. For example, if you’re starting a new restaurant, do you cater to specific types of clients, or do you have a renowned chef in the kitchen? When you can identify a niche in which you excel, you improve your chances of success.

2. Omitting Vital Information

The process of writing a business plan is as important as the plan itself, according to SCORE, a nonprofit association that works in partnership with the SBA to provide free services and advice for entrepreneurs. Writing the plan encourages you to think about your business in a systematic way. The SBA recommends covering the following areas:

  • An executive summary to give an overview of your plan
  • A company description, including what makes your business unique
  • Market analysis to show you’ve researched the industry and your competitors
  • Details of your business and management structure
  • Details on what products and services you provide
  • Marketing and sales strategies
  • A funding request, with financial projections to support that request and an explanation of how these figures impact the business

3. Insufficient Understanding of Finances

Investors need to feel confident their money is in the hands of someone who understands the world of business and finance, and not just their particular line of work. If you don’t understand terms such as APR or lack a thorough grasp of sales figures, potential investors will balk no matter how good the business idea is. Solid business plans include significant research and budgeting and cover sales strategies, contingency plans for additional funding, and firm details on how much it costs to start the business and keep it running. Any funding requests need to be backed up with detailed financial projections to help investors understand the sources from which the return on investment will come, and a clear definition of how long that will take.

4. Failing to Maintain a Living Document

A business plan projects three to five years ahead and acts like a roadmap that defines a company’s growth and development. Creating the document is an important first step for a startup, but once the business is established, the plan becomes no less important. The plan can help generate extra funding, develop new business arrangements with other companies, take on high-level employees, or identify and rectify inefficiencies in your company structure.

That’s why it’s necessary to make changes to the plan by creating new goals or correcting mistakes. A truly valuable plan evolves along with the company, according to Harvard Business Review. Making changes when necessary keeps the plan alive and helps to drive the business forward.

5. Lack of Determination

If you want someone to invest in your idea, it’s important to invest in it, too. Giving up the first time a pitch falls on deaf ears doesn’t lead to new opportunities. If an investor refuses to get on board, it’s a good idea to ask them exactly why and then use that information to your advantage in a subsequent pitch. That kind of input can be invaluable to achieving your business goals.

Remember, most business credit cards require a personal guarantee, which can affect your personal credit. You can view two of your scores for free on Credit.com.

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3 Apps That Can Help You Craft an Ironclad Business Plan

Developing a solid business plan is your first step toward launching a successful startup.

The first step on the road to creating a successful startup is developing a solid business plan. This document should map out your plan for growth over the next three to five years, according to the U.S. Small Business Administration. Your business plan is important for getting investors on board so you don’t need to fund your dream entirely on credit cards or loans from family and friends. (Your credit score helps determine how much you’ll be able to borrow. Check two of your scores with a free credit report snapshot on Credit.com.)

Documenting every aspect of your company is a daunting prospect, but there are business plan apps and software programs out there that can make the process a bit easier. Here are few to consider.

1. The Small Business Administration’s Business Plan Tool

Cost: Free

Creating a clear business plan that identifies what makes your company special is one of the most important steps for a startup company, according to the SBA. There’s a lot of ground to cover and knowing where to start is often a challenge.

Using a generic plan template helps focus your thinking by making it easier to define the important aspects of your business, including management structure, product lines, sales strategies and financial projections. SCORE, a nonprofit association established to help small businesses get started, offers free templates.

The SBA goes further, offering its free online Business Plan Tool. You start by creating an account, then the tool provides step-by-step guidance for the creation of your plan. All content is secure, and you have the option to update your plan whenever necessary, which is important as your company grows and adapts. You can save your plan as a PDF file for easy distribution.

2. Business Plan Premier

Cost: $9.99

Business Plan Premier is an app for iPad by AppIt Ventures LLC. It provides features for organizing your ideas into a logically formatted business plan. The interface breaks the plan into sections you can access from a list of tabs on the side of the screen. Selecting a tab brings up a series of questions, edit boxes and instructions for creating a detailed, coherent plan. Every edit box also has an “example” button, which displays a comprehensive example of what the content for that section should include.

When you’re finished, you have the option to export your plan as a formatted PDF or Word document to email to investors and partners. You can also upload your plan to Dropbox.

3. LivePlan

Cost: $19.95 per month; $11.66 per month if you elect to pay annually

One of the main hurdles when writing a business plan is providing all the necessary information in a structured format that investors and potential business partners can access immediately. Various apps and software applications make it easier to organize your thoughts, but don’t necessarily focus on the most important aspects of your business, making it more difficult to define what makes you stand out.

LivePlan by Palo Alto Software Inc. is a web-based subscription service with a rolling monthly charge. The service maintains the “fill-in-the-blanks” simplicity of many other programs but also provides access to more than 500 business plan templates and examples for creating a plan that accurately defines your business structure and goals.

After setting up a new business, you have the option of using LivePlan Pitch to create a one-page summary of your strategy before making your plan by working through a series of steps with the option to customize sections. LivePlan handles financial projections, generating charts based on your data without the need for spreadsheets and formulas. The tool’s Benchmarks system lets you use real data from competitors to see how your plan stacks up. Once your business is up and running, the LifePlan Scoreboard tracks your accounting information.

It’s important to read the terms and conditions of any app or software platform you’re considering to be sure you understand the costs and if it’s right for you. You can also vet services by reading online reviews or checking out a particular company on the Better Business Bureau website.

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How to Pitch Your Business Like the Pros on Shark Tank

Here's how to pitch your business idea like the pros do on Shark Tank.

For the last few years, Shark Tank has been a hit among the nation’s TV viewers, and it’s easy to see why. Every week, hardworking entrepreneurs go before a panel of business moguls in the hopes of taking their venture to the next level. Each success story leaves the audience with that “anything is possible” sentiment that drives so many inventors to take their idea from concept to consumer. The million-dollar question, quite literally, is “What does it take to make the perfect pitch?”

Of course, this question isn’t exclusive to the televised success of Shark Tank participants. If you own a business, knowing how to successfully pitch it could mean the difference between absolute success and failure. Ultimately, most advisers will tell you that you simply need to be “prepared,” and they’re right.

However, how you prepare and what guides those decisions is what really matters. Consider the following tips to create a strong pitch for your business.

1. Develop a Solid Business Plan

A solid business plan made the top of this list for a reason: It’s that important. In one episode of Shark Tank, Mark Cuban — successful businessman, investor and Shark Tank staple — scolds two contestants for coming in with the “worst presentation ever.” Why? Their pitch didn’t include even a hint of a well-thought-out business plan.

A business plan proves that you’ve done market research and answered the who, what, when, where, why and how of your business. When you pitch your business, you’ll need to be prepared to answer in-depth questions about everything from marketing initiatives to production and delivery plans. If your answers are vague, the chance of success will be low.

2. Address the Need

The pitches that show products or services as meeting a perceived need, as opposed to only a want, are consistently the most successful, according to Bill Murphy, a contributing author for Inc. Magazine, an entrepreneur and self-proclaimed Shark Tank addict who analyzed 377 pitches that appeared on the show.

This is particularly true if you pitch your business as one that addresses a mass-market need such as food or clothing. When it comes to these items, the market is often oversaturated, and you’ll need to distinguish your product or service from the rest. The unique need your idea meets is where you will find your success.

3. Have a Story

If you’ve tuned in to Shark Tank at any point during its eight-season run, it’s likely that you’ve been moved, or at least reacted, to a product pitch or two. That’s not because the entrepreneur hopefuls are limiting their pitches to just the facts. Successful product pitches include the story behind the product, and in doing so, they are in a sense bringing their products to life.

Stories show development, success, determination, market research, credibility, etc., and when accompanying your well-crafted idea, they can add a human appeal that’s needed when you pitch your business.

4. Practice Your Pitch

Never go in without practicing. Ever. Practice in front of a mirror, convince friends and family to lend you their ears (and eyes), recite your pitch in your car on your commute … It doesn’t matter how you practice, just that you practice. You may be the most self-assured, confident, well-researched entrepreneur with a solid business plan and a great story, but if you don’t practice before you pitch your business, you’re doing a major disservice to yourself.

Practicing will help you identify gaps in your pitch, efficiently incorporate any props you have and ultimately increase your confidence during delivery.

5. Be Confident

Whether consciously or subconsciously, people react to the level of confidence, or lack thereof, that someone exudes. When it comes to how you pitch your business, this is absolutely true. Investors at all levels of commerce, including Shark Tank, expend capital to products and services they feel confident about. If you don’t feel confident when giving your pitch, it’s highly unlikely they will either.

Stand up tall, use strong language and diction, keep your head up, smile, use your hands, and be proud. All of these, when paired with the tips above, may help increase the likelihood of success.

In the hunt for the perfect pitch, it’s likely that you’ll find multiple suggestions and tips on how to obtain the funding you need, but at the heart of each and every one of those, you’ll find that preparation is a key component. Though you might not be pitching in front of the Shark Tank audience, you should treat your pitch as if you are because your product’s future depends on it.

[Editor’s Note: Having good credit can be instrumental when it comes to financing your business, because many lines of credit, including business credit cards, require a personal guarantee. You can view two of your credit scores, updated every 14 days, for free on Credit.com.]

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