Home > Personal Finance > 5 Things That Can Make Your Business Plan Fail — & How to Avoid Them

Comments 0 Comments

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.

Image: Cecilie_Arcurs

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other sponsored content on Credit.com are Partners with Credit.com. Credit.com receives compensation if our users apply for and ultimately sign up for any financial products or cards offered.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.



Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team