Business plans are often the potential investor’s first impression on the business venture. However, even in the event that you have a fantastic product, staff, and customers, the first impression might also be the last impression the investor receives in case you commit any one or more of these avoidable errors.

Investors see countless business plans every year. Aside from a referral from a reliable source, business plans are the only basis investors have for determining whether or not the entrepreneur is worth inviting to the investors’ offices as a first meeting.

With numerous opportunities, a lot of investors simply revolve around finding reasons to say no to a business plan. They argue that entrepreneurs who are aware of what they are doing are careful enough not to commit fundamental errors. Any mistake will be taken against you.

This report teaches you how you can prevent the most common mistakes in business plans.

Content Mistakes

Struggling to Link to an Actual Pain

Pain comes in several flavors: my personal computer system keeps crashing; my account receivable cycle is too long; present remedies for a medical illness are unsuccessful; my tax yields are too difficult to prepare. Both the businesses and consumers pay handsome money to do away with the pain.

Remember that you are in business, primarily to be compensated for making such pains go away.

Pain, in this particular setting, is interchangeable with market prospect. The greater the pain, the more prevalent the pain, and the greater your product is in relieving the pain, and ultimately the higher the market potential of your product.

A satisfactorily composed business plan for a startup sets the answer securely in the context of this problem or issue being solved.

Value Inflation

Sayings such as “unparalleled in the industry;” “unique and limited opportunity;” or “superb returns with limited capital investment” – gathered from real documents – are only mere hype and assertions.

Investors will evaluate these variables for themselves. Lay out the important facts: the problem/pain, your answer/solution, the industry size, how you will market your solution, and stay ahead of your opponents — and put off the hype.

Attempting to be All Things to All People

Early-stage businesses think that more is better. They describe how their product could be applied to numerous, different niches, or that they deliver an intricate package of products to the marketplace.

Most investors would rather favor a more concentrated approach and strategy, particularly for the early-stage businesses: one, superior product which solves a troublesome issue at a single large marketplace which will be sold via a single, recognized and tested distribution approach.

This is not to say that extra and additional products, markets, applications, and distribution channels ought to be discarded — rather, they need to be utilized to improve and encourage the highly concentrated core strategy.

You have to hold the narrative intact using a solid, persuasive center thread. Identify this and allow the rest to be supporting actors and catalysts.

No Go-to-market Plan or Strategy

Business plans that do not spell out the sales, marketing, and distribution plan are destined to be doomed.

The crucial questions that have to be answered are the following: who will purchase it, why, and above all, how are you going to entice them?

You have to explain how you have generated client attention, acquired pre-orders, or even better, made real sales — and explain how you are going to leverage this via cost-efficient go-to-marketing strategy.

“We Don’t Have Any Competition”

Regardless of what you might think, you always have competition. Though they may not be directly competing — in the sense that a business offering precisely the same product or solution — they may at the very least be a substitute. Fingers are a replacement for a spoon. A coronary bypass is an alternative to angioplasty.

Competitors include everyone pursuing and reaching for the same customer cash.

To say you do not have any competition is among the quickest ways that you can get your strategy to waste. Investors will most probably conclude that you do not have a complete comprehension of your marketplace.

The “Competition” part of your business strategy and plan is the opportunity to showcase your comparative strengths against your direct, indirect and substitute rivals.

Besides, having competition is good. It shows investors that an actual and true market exists.

Too Lengthy

Investors are extremely busy and do not have the luxury of time to peruse lengthy business plans. They prefer entrepreneurs that demonstrate the capacity to communicate the most crucial elements of an intricate idea using the economy of words.

A perfect executive summary is one to three pages long, while that of a perfect business plan is 20-30 pages; many investors admittedly favor the lesser end of this spectrum.

Bear in mind, the principal aim of a fund-generating business plan would be to inspire the investor to pick up the telephone and invite you to a meeting. A business plan is not meant to spell out every minute detail. Document the minute details everywhere: operating plan, research and development program, marketing strategy, white papers, etc.

Too Technical

Business programs — particularly those authored by people with scientific backgrounds — are usually packed with a lot of technical information as well as scientific jargon.

Originally, investors are considering your technology only in relation to the way that it:

  • Solves a big issue or problem that people will actually pay for;
  • Is valuably better than alternative solutions;
  • Could be protected through patenting or similar means; and
  • Could be implemented on an appropriate and reasonable budget.

Questions such as these could be answered without the need of a very technical discussion on how your product operates. The information will be assessed by specialists throughout the due diligence procedure.

Be sure to keep your business plan as simple as possible. Document the minute technical details apart in white papers.

No-Risk Analysis

Investors always balance the rewards as against the risks. A number of the very first things they would like to know and understand are the potential dangers inherent in every business, and what is done to mitigate those dangers.

The main risks of entrepreneurial ventures comprise:

  • Market and Economy Risks: Can people really buy what you want to sell? Do you need to create a significant shift in customer behavior?
  • Technological risks: Can your product or service deliver what you say you can? What can go wrong with production and customer care? Is it within budget and time?
  • Operational dangers: What are the potential risks in the daily operations of the business?
  • Risks in Management: Could you draw in and keep the ideal staff? Can your staff really pull off what your product/service’s offers? Are you ready to step down and let someone else take over management when needed?
  • Legal conflicts: Is the intellectual property truly secured? Are you in any way infringing on another business’ patents? If the solution of your product/service does not work, could you limit your legal liability?

That is, needless to say, only a partial list of dangers.

Though you might believe the risks are negligible, prospective investors will feel differently unless you are able to demonstrate that you have given a good deal of consideration to what may go wrong and have taken sensible actions to mitigate these dangers.

Poor organization

Your business strategy must flow in a pleasant and organized fashion. Each segment needs to build and complement logically the former segment, without requiring the reader to understand something which is presented later in the strategy.

Even though there is no “correct” business plan arrangement, a successful business arrangement is as follows:

  • Executive Summary: A brief one to three-page summary of all things that flow in the plan. It ought to be a standalone document, as most readers will probably make their first decision based solely on the executive summary.
  • Background: if you are in a highly technical and specialized field, you should share some history and background before introducing your product/service, in layman terms, because most investors have not advanced degrees at par with your field.
  • Market Opportunity: You must describe how consumers and businesses are affected, and just how much they are willing and prepared to pay to get such a solution.
  • Products/Services: You must describe what you do, and also how your answer/solution fits in the industry, whether or not there is market opportunity.
  • Market Traction: Describe your success in bringing in clients, marketing and distribution partnerships, and other partnerships which demonstrate that specialists in your marketplace are supporting your solution.
  • Competitive Landscape: Describe and identify your direct and indirect competition and explain how your solution is ahead of the others.
  • Marketing and Distribution Strategy: Explain your current position in the market, the pricing of your product, the demographics of your target market, etc.
  • Risk Evaluation: Identify critical sources of potential risks, your methods and efforts to mitigate them.
  • Milestones: Publish a solid and compelling track record and explain key points in the long run.
  • Business and Management: Supply the basic facts of the business – when and where the business was incorporated, where the headquarters and other branches are located, and short biographies of the core employees.
  • Financials: Supply summaries of the business’ profit and loss, cash flows, as well as the assumptions utilized to develop them. Also, describe your financing needs, how you are going to utilize the proceeds, and potential exit strategies for investors.

As stated previously, there is no “correct” arrangement – you will have to experiment in order to find the one which best fits your enterprise.

Financial Model Mistakes

Forgetting Cash

Revenues are not money. Gross margins are not money. Profit gains are not money. Only money is money.

For instance, you sell a thing for $100 this month and that thing cost you $60 to produce, but you must pay the suppliers in 30 days, while the buyer will not pay you for at least 2 months. In such a case, your revenue was $100, profit was $40 and cash flow was $0. The cash flow will become negative $60 by next month when you pay the suppliers.

Although this example might appear trivial, very small changes from the timing gap between money receipt and disbursement may bankrupt your organization.

When you construct your business’ financial model, ensure your assumptions are practical and realistic so you raise adequate funding.

Insufficiency in Detail

Your financials must be assembled from bottom-up and validated from top-down.

A bottom-up model begins with details, for example, if you expect to earn from sales, or whenever you expect to hire certain employees.

Top-down model ensures that you analyze your general market prospect and compare this to the bottom-up earnings projections.

Rounded out figures, such as a budget of 1 million for R&D in the 2nd year and two million in the 3rd year, are a certain indication you do not operate bottom-up.

Ambitious Financials

Very few businesses achieve at least $100 million sales in only five years from founding.

Projecting greater than this will no longer be credible, realistic and will make your business plan crumble faster.

A company with just $25 million in earnings after five years from founding will probably be too little to attract serious investors.

Financial projections are the litmus test of your comprehension of the way of thinking of the venture capitalists.

In case you have a realistic foundation for projecting $50-100 million in the 5th Year, then you are most likely a candidate compatible in venture funding. Otherwise, look elsewhere.

Incomplete Financial Projections

Financial forecasts basically consist of three fundamental components: Balance Sheets, Income Statements and Cash Flow Statements. All of which must abide by the Generally Accepted Accounting Principles (GAAP).

Investors normally expect to see five years of forecasts. Although no one can accurately predict five years to the future. Investors need to see that the thought process you apply to make long term projections.

An ideal financial model should also incorporate sensitivity analyses, revealing how your projected outcomes will change should your assumptions prove to be wrong. This enables you and the investors to recognize the assumptions which may have a material influence in your upcoming operation, so you can concentrate your efforts and energies on supporting these assumptions.

It should also contain benchmark comparative studies with other businesses in the same industry—such as revenue per employee, gross margin per employee, gross margin as a percentage of revenue, and other expense ratios (administrative, marketing and sales, research and development, and operations as percentage of total operating expenditures).

Conservative Assumptions

Nobody believes that assumptions are conservative, even though they really are.

Formulate practical and realistic assumptions that you can actually support and refrain from using words “conservative” or “aggressive” in your business plan.

Providing Valuation

Business plans usually make the mistake of claiming that their business is worth a particular amount. In more realistic situations, the worth of an organization is set by the marketplace and is dictated by how much potential customers are willing to pay. Unless your business is purchasing, selling or investing in businesses, you likely don’t possess a serious sense of what the market will bear.

If you name a cost, one of the two things can occur: (a) your cost is too high, and investors will probably throw your strategy; or (b) your cost is too low, and investors may benefit from you. Both are poor.

The objective of the company plan is to tell your story in the most persuasive way possible so that investors may wish to visit another step. You could always negotiate the cost afterwards.

Writing Errors

Poor grammar

Should you make absurd mistakes in your business strategy, what exactly does that say about the way you conduct your company?

Use your grammar and spelling checkers, get different people to edit the plan, do anything is required to purge embarrassing mistakes.

Redundant sections

All too frequently, a strategy covers the very same points repeatedly. A well-written plan must cover key points just twice, temporarily, at the executive summary and, in greater detail, in the body of this strategy.


At any time, an investor has dozens or even hundreds of programs waiting to be read. Get to the peak of the heap by making certain the cover is appealing, the binding is professional, the pages are laid out, and the fonts are big enough to be easily read.

On the flip side, you need to control your creativity in this regard. If the material is too distracting, investors may think that you fully rely on style rather than substance.

Execution Mistakes

Waiting Too Late

The funding formation process takes quite a while. Generally, count on 6 weeks to a year by the moment you begin writing the business plan until the period the cash reaches the bank.

Your management team ought to be ready to spend about 500 hours to the strategy. If you are too busy constructing your product, business, or clients (which is arguably a much better use of your time), think about outsourcing the development of the company plan.

Struggling to Seek Out Review

Be certain you have at least a couple men and women examine your strategy before you ship it out — rather people who know your market, sales and distribution plans, the VC market, etc.

Your strategy might appear perfect for you and your staff, but that is probably because you have been looking at it for weeks.

Great, objective reviews from outsiders using a new outlook can help you save you out of myopia.


You could spend hundreds of hours tweaking your strategy from the pursuit of perfection. A good deal of this time could be spent on your product, business, and clients. Sooner or later, you want to pull the trigger and find the plan out before a couple investors. If the response is favorable, and they wish to proceed, great.

If the response is negative (assuming the investor was a fantastic match to start with), then you might have been heading down the wrong route. Get opinions from a few investors, and when an overall consensus emerges, return and refine your strategy.


It is a challenging investment climate, but very good ideas backed by great teams and decent business plans are still getting financed.

Give yourself the best possible opportunity by averting these easy mistakes.

Author Details
Ishan Jetley is the founder and managing director of Go Business Plans. Ishan has helped fund more than 400 businesses. He has helped businesses raise $150 million in business working capital, inventory and commercial property loans.