the common business plan mistakes

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13 Common Business Plan Mistakes to Avoid in (2024)

• May 31, 2024

Do you remember the first mistake you made creating a business plan? 

If you smiled a little, great. It means you’ve overcome it, and you understand that entrepreneurs make business plan mistakes all the time—and continue to learn from them.

However, there are certain mistakes no business owner should make in their plan to achieve their dreams.

So, in this article, we’ve listed 13 common business plan mistakes you can avoid to get ahead in the game. But before we dive in…

What is the biggest mistake when creating a business plan?

One of the most grave business plan mistakes is having no business plan!

With no business plan, what’s your purpose, and how will you let the world know your intentions? 

You don’t necessarily need to put it down on paper. But there has to be some kind of planning. Much like a north star, planning will give you direction.

Moreover, investors or clients will want to see a plan sometime down the line. Clearly, planning and documenting the plan is inevitable.

So, create a business plan. It can be a one-page business plan or a detailed one—either way, it’ll capture the essence of your vision.

13 common business plan mistakes to avoid

Now that you know you can’t escape a business plan, let’s check out the mistakes you can escape while creating a solid business plan:

1. Poor planning

The business of business planning is no joke. You can’t have a business plan in place just for the sake of it.

It has to have value—information that shows product or service viability, company details, projections, etc.

Why? Poor business planning can imply that:

• Your great idea isn’t so great because you haven’t thought it through.
• You don’t care enough, which can be unattractive for investors and banks. (You don’t want to miss out on the money.)
• You’ll witness scope creep, where stakeholders may want to add new objectives even when the project is underway. ( Not fun, is it? )

So, spend time planning, and you’ll naturally make fewer mistakes.

2. Poor executive summary

You and your business have 7 seconds to make an excellent first impression. Since an executive summary is the first impression, you don’t want to gamble with its quality.

A poor executive summary will instantly make clients and investors disinterested in your business plan—a big mistake.

So how do you fix it?

First, make it straightforward so anyone without a business background can get a clear understanding of your business idea.

Second, ensure it’s concise. Briefly mention all the important information, including:

• Business purpose
• Company description
• Market analysis
• Business goals, competition
• Financial plan

This will keep your clients or investors interested in learning about the rest of your business plans.

Lastly, don’t be shy about your intentions.

Is your focus on securing enough money for business operations? 

Ensure to include your cash flow table, the money you wish to borrow, and the financial projections to back up your success claims. This way, investors know you mean business and appreciate transparency right off the bat.

A bad executive summary can be worse than having any executive summary

3. Targeting the wrong audience

Obviously, your business doesn’t target everyone in this world. So, define your target market and potential customers. This way, you can write using the vocabulary and tone that best resonates with them.

After all, you want them to understand what your business is about.

However, that’s not enough!

When you write a business plan , you also want to show your work on how you decided on your target market and how you plan to appeal to them. This is more to impress your potential investors.

4. Not doing enough research

When you create a business plan without enough research, you’re hampering your success even before you’ve started your business.

• Imagine being unaware of your target market or closest competitors.
• Imagine having yet to think of the most obvious and effective marketing strategy.
• Imagine having an outdated sales technique.

Now, imagine potential customers or investors realizing these research gaps in your business plan.

One word: Nightmare!

It only shows you’re not prepared.

Hence, remember to carry out in-depth research so there’s nothing that can discredit your business idea.

5. Unrealistic financial projections

Another common mistake is to be unrealistic or overconfident about your earning projections.

Being unrealistic shows that you either don’t understand your business or aren’t qualified enough to make accurate projections.

The result? Banks and lenders won’t trust you or your business idea.

Moreover, unrealistic financial projects are also your one-way ticket to bankruptcy.

So the point is: Be as realistic as possible to gain inventors’ trust and launch a successful business.

6. Ignoring the competition

A good, detailed business plan never ignores competition because there can be serious consequences.

Here’s everything you can’t highlight without proper competitive analysis:

• What makes you unique?
• What strategy will help you beat your competitors?
• How will you grow your credibility?

These aspects are important for your business to avoid becoming complacent and convince investors and partners that you can survive in this saturated market.

7. Poor marketing strategies

Poor marketing strategies can hurt your own company in many ways, including:

• Reduced sales or profit
• Increased expenses
• Market your product or service to the wrong audience
• Confuse customers about your brand and business idea
• Drop in product or service prices resulting in financial loss
• Lose customers to competitors

Scary list, isn’t it?

These pitfalls are why you shouldn’t make the mistake of creating lousy marketing strategies.

8. Not highlighting your team’s unique skills

Many entrepreneurs make this mistake because they often forget the company isn’t just them but their team and what they bring to the table.

So, it’s only right to mention the experience and skills of their top team in a business plan. They should also include how their team plans to achieve the business goals and overall success.

9. Poor writing and presentation

Imagine presenting a business plan with serious ideas, ambitions, profit predictions, etc. But uh-oh . You notice the spelling of ‘projections’ is missing a ‘j,’ and the color scheme is off on one of the pages.

This is a major red flag and an embarrassing mistake that can cost potential clients!

Don’t worry, it’s fixable. Just double-check your spelling and proofread like your life depends on it.

10. Incomplete or missing information

A business plan is your business’s backbone. Missing any important information is like missing a disc in the spine. You’re bound to crumble.

The solution? Check your business plan multiple times to spot such mistakes.

Let others take a look as well. A fresh perspective can spot more missing information.

11. Adding too much information

Less is more. A cliche you want to employ while writing a business plan.

Investors want a clear understanding of whether you understand your business thoroughly. They can do that with just a few crisp pointers in your business plan.

In fact, visuals speak more than words. So, incorporate charts and graphs to reduce the wordiness and get your point across.

12. Being inconsistent

Focus on the consistency of your business plan’s key elements and all sections.

You don’t want to say your company predicts x amounts of profit in the executive summary only to mention y amounts of profit in the financial projections section.

Such inconsistency will only show under-preparedness to your investors—a major red flag.

13. Unclear exit strategy

A clear exit strategy is almost like a medical cover you ought to have.

When things go south (business struggles), you can’t limit your losses without a clear exit strategy.

There’s also an upside to this strategy. If your business booms, you profit significantly by selling your company shares. Either way, you’re covered!

How a business planning tool helps you avoid mistakes

Let’s just say a business planning software like Upmetrics makes everything so much easier and faster. Here’s why it’s a powerful tool:

• It helps entrepreneurs start with a basic business plan structure so they don’t miss the most important sections in their plan.
• The AI automates your business plan creation so you don’t have to worry about inconsistencies across the different sections.
• The AI can auto-write the different business plan sections in your preferred tone and style so you sound professional.
• AI-powered financial forecasting tool helps prepare accurate and realistic projections, ensuring you don’t under/overestimate them.
• Industry-specific business plan templates ensure the inclusion of industry-relevant research and marketing strategies.

Making mistakes during the planning process is only natural. But now that you know some common mistakes, you can speed up your process without making the most common and critical ones.

But what if you could speed up your business plan creation in under 10 minutes? It’s possible with an AI business plan generator .

A modern tool like Upmetrics can simplify business planning with its intuitive user interface, AI-powered features, and step-by-step guidance.

Try Upmetrics and don’t make mistakes that others do!

Frequently Asked Questions

Can business planning software help me avoid mistakes.

Yes, absolutely. Business planning software like Upmetrics offers industry-specific business plan templates, saving you countless hours and avoiding errors like missing information and inconsistencies. Upmetrics’ AI can also fine-tune your content, creating a professional and factually accurate business plan without grammatical errors.

Where can I find templates or examples of successful business plans?

The first option is Google search, where you’ll find many business plans and templates to write a successful one. The second, more effective option is to try business plan software. They typically offer numerous business plan example options and templates so that you can pick and customize them depending on your business type.

How long should my business plan be?

Typically, a good business plan is between 15-30 pages . However, depending on your purpose, product or service type, and target audience, you can have a one-page business plan or a 100-page one.

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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17 Key Business Plan Mistakes to Avoid in 2024

Posted december 6, 2023 by noah parsons.

If you’re like most people and you’re writing a business plan for the first time, you want to make sure you get it right. Even if you follow the instructions in one of the popular business plan templates out there, you can still make mistakes. 

After having spent countless hours reading thousands of business plans and having judged hundreds of business plan competitions, I’ve assembled a list of the biggest business plan mistakes that I’ve seen.

What is the biggest mistake when preparing a business plan?

The absolute biggest business plan mistake you can make is to not plan at all.

That doesn’t mean everyone must write a detailed business plan. While you should do some planning to figure out what direction you want to take your business—your plan could be as simple as a one-page business plan, or even a pitch presentation that highlights your current strategy.

Your strategy and ideas will certainly evolve as you go, but taking a little time to figure out how your business works will pay dividends over time.

17 common business plan mistakes to avoid 

Assuming you’ve at least decided that you should do some business planning, here are the top business plan mistakes to avoid:

1. Not taking the planning process seriously

Writing a business plan just to “tick the box” and have a pile of paper to hand to a loan officer at the bank is the wrong way to approach business planning.

If you don’t take the business planning process seriously, it’s going to show that you don’t really care about your business and haven’t really thought through how your business is going to be successful. 

Instead, take the time and use the planning process to strengthen your understanding of how your business will be successful. It will improve your chances with lenders and investors and help you run a better business in the long run.

2. Not having a defined purpose for your business plan

Why are you writing a business plan?

Is it to raise money? Are you just trying to get your team on the same page as you so they understand your strategy? Or are you planning a new period of growth?

Knowing why you are writing a business plan will help you stay focused on what matters to help you achieve your goals, while not wasting time on areas of the plan that don’t matter for what you’re doing.

For example, if you’re writing an internal business plan, you can probably skip the sections that describe your team. 

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3. Not writing for the right audience

When you’re putting together your business plan, make sure to consider who your readers are. This is especially important for businesses that are in the technology and medical industries .

If your audience isn’t going to understand the specialized vocabulary that you use to describe your business and what you do, they aren’t going to be able to understand your business.

On the other hand, if your audience is going to be all industry insiders, make sure to write in the language that they understand.

4. Writing a business plan that’s too long

Don’t write a book when you’re putting together your plan. Your audience doesn’t have time to spend reading countless pages about your business. Instead, focus on getting straight to the point and make your business plan as short as possible.

Start with a one-page plan to keep things concise. You can always include additional details in an appendix or in follow-up documents if your reader needs more information.

5. Not doing enough research

You don’t need to spend endless time researching, but your business plan should demonstrate that you truly understand your industry, your target market, and your competitors. If you don’t have this core knowledge, it’s going to show that you’re not prepared to launch your business.

To keep things simple, start with this four-step process to make sure you cover your bases with an initial market analysis.

6. Not defining your target market

Don’t assume your products are for “everyone.”

Even a company like Facebook that now truly does target “everyone” started out with a focus on college students. Make sure you take some time to understand your target market and who your customers really are.

Investors will want to see that you understand who you are marketing to and that you’re building your product or service for a specific market.

7. Failing to establish a sound business model

Every business needs to eventually have a way to make money. Your business plan needs to clearly explain who your customers are, what they pay you, and have financial projections that show your path to profitability.

Without a real business model , where income covers your expenses, it will be difficult to show that you have a viable path to success.

8. Failing to showcase current traction and milestones

Great business plans are more than just a collection of ideas. They also demonstrate that you have early traction — a fancy way of saying that you have some initial success.

This could come in the form of pre-orders from a Kickstarter campaign or initial contracts that you’ve signed with your first customers. Traction can be as little as expressed interest from potential customers, but the more commitment you have, the better. The companion to traction is milestones. Milestones are simply your roadmap for the future — your next steps with details of what you’re going to do and when you’re going to do it. Make sure to include your best guess at your future timeline as part of your business plan.  

9. Having unrealistic financial projections

Everyone dreams of sales that start from zero and then just skyrocket off the charts. Unfortunately, this rarely happens. So, if you have financial projections that look too good to be true, it’s worth a second look.

Investors don’t want you to be overly conservative either. You just need to have a financial forecast that’s based in reality and that you can easily explain. 

Keep in mind that when first starting out, you may not have exact numbers to work with. That’s perfectly fine. You can work with general assumptions and compare against competitive benchmarks to set a baseline for your business.

The key here is to develop reasonable projections that you and any external parties can reference and see as viable.

10. Ignoring your competitors

Not knowing who your competitors are , or pretending that you have no competition, is a common mistake. It’s easy to say that you have “no competition,” but that’s just taking the easy way out. Every business has competition, even if it’s a completely different way of solving the same problem.

For example, Henry Ford’s early competition to the automobile wasn’t other cars — it was horses.

11. Missing organizational or team information

When you’re starting a business, it’s likely that you haven’t hired everyone that you’re going to need. That’s OK. The mistake people make in their business plan is not acknowledging that there are key positions yet to be filled.

A successful plan will highlight the key roles that you plan to hire for in the future and the types of people you’ll be looking for. This is especially vital when pitching to investors to showcase that you’re already thinking ahead.

12. Inconsistent information and mistakes

This almost goes without saying, but make sure to proofread your plan before you send it out. Beyond ensuring that you use proper grammar and spelling, make sure that any numbers that you mention in your plan are the same ones that you have in your financial projections.

You don’t want to write that you’re aiming for $2 million in sales, while your sales forecast shows $3 million. 

13. Including incomplete financial information

You may have a great idea, but a business plan isn’t complete without a full financial forecast. Too many business plans neglect this area, probably because it seems like it’s the most challenging. But, if you use a good forecasting tool like LivePlan , the process is easy.

Make sure to include forecasts for Profit and Loss, Cash Flow, and Balance Sheet. You may also want to include additional detail related to your sales forecast.

For example, if you run a subscription business , you should include information about your churn rate and customer retention.

14. Adding too much information

Don’t fall into the trap of adding everything you know about your business, your industry, and your target market into your business plan. Your business plan should just cover the highlights so that it’s short enough that people will read it.

A simple and concise plan will engage your reader and could prompt follow-up requests for additional information. 

Focus on writing an engaging executive summary and push non-critical, detailed information into your appendix — or leave it out altogether and leave the details for those that ask.

Remember, your business plan is there to serve a purpose. If you’re raising money, you want to get that next meeting with your investors. If you’re sharing your strategy with your team, you want your team to actually read what you wrote.

Keep your plan short and simple to help achieve these goals.

What should not be included in a business plan?

Here are a few things to leave out of your plan:

• Full resumes of each team member. Just hit the highlights.
• Detailed technical explanations or schematics of how your product works. Put these in the appendix or just leave them out completely.
• A long history of your industry. A few sentences should be enough.
• Detailed market research. Yes, you want market research but just include the summary of your findings, not all the data.

Make sure to include:

• Executive summary.
• Financial projections.
• Market research (just a summary)
• Competition overview
• Funding needs (if you’re raising money)

15. Having no one review your plan

As with any work that you do, it’s always helpful to have a few other people take a look at your work as you go. You don’t have to please everyone and you don’t have to implement every comment, but you should listen for themes in your feedback and make adjustments as you go. 

A fresh pair of eyes will always help spot pesky typos as well as highlight areas of your plan that may not make sense. You can even explore having a plan writing expert review your plan for a more in-depth analysis.

16. Never revisiting your business plan

Business plans are never 100% accurate and things never go exactly as planned. Just like when you set out on a road trip, you have a plan to reach your final destination and an idea of how you will get there.

But, things can change as you go and you may want to adjust your route. 

Planning for your business is often the same as that road trip and your plans will change as you grow your business. Keeping your plan updated will help you set new goals for you and your team and, most importantly, set financial goals and budgets that will help your business thrive.

Incorporate your plan into regular review meetings to be sure you’re consistently revisiting it and integrating the time spent reviewing into your current workflow.

17. Not using your business plan to manage your business

Revisiting and revising your business plan is how you use your plan to manage your business. If you aren’t updating your goals and following a budget, you’re flying blind. Your plan is your ultimate tool to help you manage your business to success. You can use it to set sales goals and figure out when and how you should expand. 

You’ll use your plan to ensure that you have healthy cash flow and enough money in the bank to handle your growth. Without managing your plan, you’re left to guess and live with a level of uncertainty about where your business is headed.

How a business planning and management tool helps you avoid mistakes

Writing a business plan can seem like a daunting task. Sure, you can do it yourself with free templates and advice like you find on this website . But, doing it on your own can just slow the process down, lead to mistakes, and keep you from actually working on building your business.

Instead, consider using a planning tool, like LivePlan, which features step-by-step guidance and financial forecasting tools that propel you through the process.

LivePlan will help you include only what you need in your plan and reduce the time you spend on formatting and presenting. You’ll also get help building solid financial models that you can trust, without having to worry about getting everything right in a spreadsheet.

Finally, it will transform your plan into a management tool that will help you easily compare your forecasts to your actual results. This makes it easy to track your progress and make adjustments as you go.

So, whether you’re writing a plan to explore a new business idea, looking to raise money from investors, seeking a loan, or just trying to run your business better—a solid business plan built with LivePlan will help get you there. 

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Noah Parsons

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Common Business Plan Mistakes

Many startup business plans have the same errors. It seems new business owners have gone through a list of common business plan errors and checked them off! Here's is a list of what to avoid, so you don't make the same mistakes.

What a Lender Wants in a Business Plan

A lender wants to know only two things:

• How much money do you want?
• How will you pay it back?

That's it. Everything else is just fluff. You don't need a 200-page business plan to tell a potential lender this. Remember KISS - Keep it short and simple. In the thousands of business plans that have been reviewed over the years, these are the most common errors:

Not Using Third Person 

Write as if you were not the business owner, but a hired writer talking about the business. Saying, for example, "XYZ Corporation will open its doors on September 1, 2010...." not "We will open our doors ...." The third person (he, she, it, they) sounds more professional and business-like and banker-friendly. If you use the first person, you tend to sound like a cheerleader and less like a reasonable person. I know it seems picky; just trust me on this one.

Not Checking Numbers 

If your executive summary states you want $158,000 and your financial statements show you need $190,000, your banker will question your competence. Every number must match in every section of the business plan. 

Another example, if you discuss having three employees, but your cash flow shows only salary/benefits for one, you have consistency errors. Have someone go through the plan before you send it out, just to look at all the numbers and make sure they match every time they are used.

Another problem with numbers is being vague with numbers. Don't say, "We'll make a profit soon." What does "soon" mean? In a year? Three years? Some experts say six months to make a profit is a minimum, while others state that three years is a minimum . Of course, it depends on the type of business. In advertising, don't say, "We will spend money on advertising." You should know how much you will be spending over the first year at least. Include details in your narrative as well as in your projections. 

If you can't be specific, skip the sentence. 

Not Making Sure Everything Is Perfect 

I have caught lots of typographical errors, misspellings, sentence fragments, and other small and large mistakes in business plans. For example, one plan I viewed switched fonts several times, back and forth from Arial to Tahoma; another plan changed from the first person to the third person. In another document, photos or graphs were on the wrong pages from what the narrative said they were. Having errors in your business plan sends a message to your lender that you don't care about the details.  

Being Too Optimistic 

A lender wants realistic, not overly optimistic. For example, over-estimate your expenses and underestimate your income. A lender wants to see what will happen if your "worst case" scenario happens. Use meaningful charts, graphs, financial statements, or spreadsheets to show what your cash flow will look like. Include a break-even analysis , so the lender can see how and when you will start making a profit. Don't spend pages telling how wonderful your business it; talk about how it will provide a benefit to your customers and how it is different from the competition.

Confusing Cash with Profits

Your business can be profitable and you can have no cash. Without positive cash flow over a period of time, your business will not have solvency (ability to pay its bills) or long-term viability (survival). No cash means that business loan isn't going to get paid back and you close your doors. Show how your cash flow will support your loan payment.

Leaving Questions Unanswered 

Don't assume your lender knows about your business. Pretend he or she is an idiot (not necessarily untrue, in many cases), at least about the business you are going into. Have someone who is not in your business read the business plan and ask you questions. Then put those questions into the plan in the appropriate place. If confused customers don't buy, confused bankers don't lend.

Not Including an Executive Summary 

Business loans often go up the line in a bank, and the higher up executives want to know the "bottom line." Just tell them (1) A sentence or two about your business, (2) How much you need, in numbers or a simple chart, and (3) How you expect to pay back the loan. That's it. One to two pages is all you need for the executive summary. Put it at the beginning, so the reader doesn't have to search for it. 

How to Fix these Errors

Most of these errors can be avoided by having several people read your plan. Ask each person to review a specific item above and tell them what to look for. Get a good grammarian/writer to review the plan. Remember, there is no second chance to make a good first impression.

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Common Mistakes to Avoid When Writing a Business Plan

Crafting a business plan is a delicate balancing act. It demands a deep understanding of your market, a clear value proposition, realistic financial projections, a competent team, and the flexibility to adapt to changing circumstances. 

All too frequently, an entrepreneur or business owner may lean on a business plan template or outsourced freelancer, bypassing the essential strategic work that needs to go behind it. This often results in a business plan that is generic and lacks the specific details and insights that make the business unique.

Remember, a good business plan is not just a document; it's a reflection of your business idea and strategy. It's an opportunity to delve deep into your business idea, understand your market, define your value proposition, and plan for your business's future.

So, whether you're a first-time entrepreneur with a new business idea or a small business owner looking to expand, here are some common mistakes made during the business planning process.

Insufficient Market Research

Market research is the foundation of business planning. It's the key to unlocking a profound understanding of your target audience, offering invaluable insights that can steer your business decisions. Without comprehensive market research, you risk basing your strategies on assumptions about your customers' needs and preferences, a misstep that can lead to expensive errors and overlooked opportunities.

In the rapidly evolving business landscape, the freshness of your data is paramount. Markets are in a constant state of flux, and data that was accurate a year ago may not hold true today. This is particularly relevant in the wake of the recent pandemic, which has caused seismic shifts across every industry. 

Therefore, it's crucial to not only use the most recent data but also understand the context behind the numbers. This involves analyzing the data in relation to your business goals, industry trends, and market dynamics. It's about asking the right questions: What do these numbers mean for your business? How do they impact your target audience? What opportunities do they present, and what challenges do they pose?

The real value of market research lies in your ability to interpret the data, identify gaps and opportunities, and apply these insights to your business strategy. It's about turning raw data into actionable intelligence that can inform your business decisions.

There's a wide array of tools at your disposal for conducting market research , from free resources to premium platforms. Government resources such as the U.S. Census Bureau can offer a wealth of insights into consumer behavior and market trends. However, for more granular and industry-specific data, you might need to turn to premium sources like IBISWorld or paid industry reports.

Artificial intelligence (AI) has emerged as a potent tool for market research. However, it's important to exercise caution when using AI for data collection. Even advanced AI tools like ChatGPT-4, with the aid of browser plugins, can sometimes provide inaccurate data. Therefore, always cross-verify the sources and accuracy of the data obtained from AI. Remember, a single oversight in your market research can undermine the credibility of your entire business plan.

Where AI truly shines is in its ability to analyze vast amounts of data swiftly and accurately, revealing patterns and trends that might be challenging to discern manually.

Beyond online research, don't underestimate the power of direct interaction with potential customers. Conducting surveys or simply engaging in conversations can offer firsthand insights into your customers' needs and preferences, often revealing valuable information that isn't readily available in online data.

Ignoring Your Target Customer

Your target audience is the lifeblood of your business. They are the people who will use your product or service, advocate for your brand, and ultimately drive your revenue. Therefore, it's crucial to understand who they are, what they need, and what they value.

Start by creating customer personas . These are detailed profiles of your ideal customers, including demographic information, interests, pain points, and buying behavior. This will help you understand your customers' needs and preferences, allowing you to tailor your business plan to meet these needs .

However, understanding your customer is only half the battle. The other half is communicating how your product or service meets their needs and adds value to their lives. This is where understanding your unique value proposition comes into play.

Your value proposition is what sets you apart from your competitors and persuades customers to choose your product or service. Highlight the unique benefits that you offer, such as superior quality, convenience, or affordability. Use clear, concise language that resonates with your target audience. Your value proposition should be the cornerstone of all your marketing efforts, from your website copy to your social media posts.

Neglecting Competitive Analysis

In the realm of business, being unaware of your competitors is a recipe for disaster. Overlooking your competitors can leave you unprepared and unable to counter their strategies effectively. As such, a comprehensive competitive analysis should be a fundamental part of your business plan.

Begin by pinpointing your primary competitors. Scrutinize their products or services, pricing strategies, marketing approaches, and customer feedback. This analysis will help you comprehend their strengths and weaknesses, and identify opportunities for differentiation.

Digital tools can be a great help in this regard. For instance, you can use AI tools like ChatGPT-4 to analyze a competitor's website and summarize its products, services, and unique value proposition. This can give you a clear idea of how your competitors position themselves in the market.

Next, delve into what customers are saying about your competitors. Online reviews on platforms like Yelp! or Google Reviews can provide invaluable insights into what customers like and dislike about your competitors' offerings. This can help you identify gaps in their products or services that you can fill.

If the competitor has a brick-and-mortar location, pay it a visit. Use your powers of observation and take note of their customer service, the arrangement of their store, their product presentations, and any other aspects that could provide insights into their operations. If your business offers a service, consider reaching out to competitors as a potential customer. This can provide valuable information about their pricing structure and sales approach.

Numerous entrepreneurs succumb to the misconception that they have no competitors because their idea is genuinely innovative. Even if your offering is revolutionary, your potential customers are currently allocating their resources elsewhere. This concept aligns with the "Jobs to Be Done" theory, which posits that customers "hire" products or services to perform specific "jobs" or fulfill certain needs. Therefore, you're competing with whatever your potential customers are currently "hiring" to do the job your product or service aims to do, whether it's a similar product, a different solution to the same problem, or even an entirely different product that accomplishes the same job. These constitute your indirect competitors, and comprehending them is just as vital as understanding your direct competitors.

By meticulously examining your direct and indirect competitors, you can start to identify areas where you can distinguish yourself. Your competitive edge lies in the unique traits or abilities that make your business outshine others in your market. This advantage could be derived from your groundbreaking technology, exclusive processes, exceptional team, or a strong brand reputation.

To convey your competitive advantage, your business plan must express how you plan to capitalize on it. This could involve showcasing your innovative technology, underscoring your team's expertise, or demonstrating your brand's solid reputation. Remember, business is a competition, and your goal is to win by convincing customers to choose you over your competitors.

Forgetting The Goal

Different stakeholders have different expectations and requirements from a business plan. For instance, a bank looking at your business plan for a loan application will have different criteria than a potential investor considering an equity investment.

A bank is primarily concerned with your ability to repay the loan. They will focus on your financial projections, cash flow, and collateral. They want to see that your business is stable and has a reliable source of income to service the debt. Therefore, when writing a business plan for a bank , you should emphasize your financial stability and risk management strategies.

On the other hand, an investor is looking for growth potential and a return on their investment. They are interested in your business model, market opportunity, competitive advantage, and exit strategy. They want to see that your business has the potential to scale and deliver a significant return. Therefore, when writing a business plan for an investor , you should highlight your growth strategy and potential return on investment.

Your internal strategic plan, however, serves a different purpose. It's a tool for setting your business goals, defining your strategies for achieving them, and identifying metrics for measuring your progress. It's more detailed and operational than a business plan for external stakeholders. It includes specific tasks, responsibilities, and timelines. Therefore, when writing an internal strategic plan, you should focus on your operational plans and key performance indicators (KPIs).

The language and tone of your business plan should also be adapted to your audience. A business plan intended for a bank or potential investors should be formally written and highly professional, while an internal strategic plan can be more straightforward, using bullet points and an iterative approach that allows for adjustments as needed.

Finally, consider how you'll present your business plan. Banks may not require a highly visual presentation and might prefer a more traditional, text-heavy document. Investors, on the other hand, value more impact, such as a pitch deck or a well-designed executive summary that can help them quickly understand your business model and growth potential.

Being Unrealistic About Your Financial Projections

When it comes to financial projections, achieving a balance between optimism and realism is key. It's crucial to demonstrate to investors that your business has the potential for success, but it's equally important to show that you have a clear understanding of the market and your financials. Overly optimistic projections can raise red flags for investors, leading them to question your financial management skills and decision-making abilities. Conversely, overly conservative projections may make your business appear less appealing and unlikely to yield substantial returns.

Thorough research, market trend analysis, and expert consultation are crucial to creating realistic and achievable financial projections that align with your business goals. By doing so, you gain confidence from lenders and investors and increase the likelihood of securing funding for your business.

To estimate your revenue, consider factors like your pricing strategy, sales volume, and market size. It's important to be conservative in your estimates and consider a sensitivity analysis with best-case and worst-case scenarios.

When forecasting your revenue, consider whether to a bottom-up or a top-down approach . A bottom-up approach starts with the unit sales (like a single product sale) and scales up, while a top-down approach starts with the total market size and estimates what portion of that market you can capture. Both approaches have their merits and can provide valuable insights when used together.

Fixed expenses, such as rent and salaries, remain constant regardless of your business activity, while variable costs, like raw materials and shipping, fluctuate depending on your business activity. By accurately estimating your revenue and expenses , you can create a realistic budget that helps you avoid financial pitfalls.

Don't stop with just the financial forecast, because that alone is only part of your financial health. Your cash flow projection should include your expected cash inflows from sales and other sources, and your expected cash outflows for expenses and investments. This will help you anticipate periods of negative cash flow and plan for contingencies.

In your financial planning, be sure to assess the company's break-even point, which is when your total revenue equals your total costs, and demonstrates the point at which your business becomes profitable. 

Neglecting the Importance of Your Team

Your team members are more than just employees; they are the catalysts propelling your business's growth and development. When investors, lenders, and other stakeholders scrutinize your business plan, they are looking for a team that is not only skilled and experienced but also cohesive and committed.

Begin by introducing each key team member. Include their name, role, and a brief biography that highlights their relevant skills and experience. The qualifications of your team should extend beyond their educational background and work history. Emphasize their unique "soft skills" and other talents that make them indispensable to your business. Consider their history of success and how their past experiences can contribute to the growth of your business.

Moreover, the cohesion of your team is equally significant. Illustrate how your team members' skills complement each other and how they work collectively to achieve your business goals.

If you haven't assembled your team yet, discuss your plans for recruitment and training. Outline the qualities and skills you're looking for in potential team members, and explain how you plan to attract and retain top talent. Discuss your strategies for fostering a positive and productive work environment, and how you plan to train your team to ensure they have the skills and knowledge needed to succeed.

Thinking Your Business Plan is Done

Your business plan is a dynamic document that should mirror your evolving business reality and market conditions. It's not a one-off task, but an ongoing process that demands regular review and revision.

To ensure your business plan remains pertinent and effective, it should be reviewed and updated regularly. Establish a review schedule, such as quarterly or annually, and adhere to it. During each review, evaluate your progress towards your goals, identify any shifts in your market or industry, and adjust your strategies accordingly.

Market trends fluctuate, new technologies surface (looking at you AI), and customer preferences change. Keep your finger on the pulse of market trends and disruptions, and be prepared to seize new opportunities as they emerge. This could involve embracing new technologies, penetrating new markets, or pivoting your product or service. By being proactive and adaptable, you can convert market changes and opportunities into a competitive edge.

If your current strategy isn't working, or if new opportunities arise, your business plan should guide you in knowing how and when you need to pivot . This might involve changing your target market, adjusting your product or service, or adopting a new business model. By being flexible and responsive, you can ensure your business remains competitive and resilient in the face of change.

By steering clear of these common mistakes, you can craft a business plan that is comprehensive, compelling, and convincing to your stakeholders. A well-constructed business plan not only aids in attracting funding and customers but also serves as a roadmap for your business's success. Invest the time to do it right, and your business will reap the rewards.

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The Most Common Business Plan Mistakes

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Susan Ward has run an IT consulting firm and designed and presented courses on how to promote small businesses.

Reading through these common business plan mistakes before you write one will make the task a lot easier – and give your new business venture a much better chance of success.

Not bothering to write one.

This is far and away the most common error. Entrepreneurs are doers so it's natural that they want to get on with things and get them done – especially when they have an idea that they’re excited about buzzing around in their heads.

But who hasn’t heard the adage "He who fails to plan plans to fail?" And that's the fate of almost every business someone starts without a business plan; failure. So yes, you need to write a business plan.

You don't necessarily need a full-scale formal version of a business plan professionally packaged in a binder (see the next point about purpose), but you do need to have one.

Not being clear about the purpose of your business plan.

A business plan is essentially a solution to a problem, the problem being how you are going to turn your vision of a successful business into a reality.

So why are you preparing a business plan? Is it to persuade a potential lender to give you a business loan? Attract investors? Figure out if your new business idea could actually be turned into a viable business? Serve as a blueprint for your successful startup?

The purpose of your business plan will affect everything from the amount of research you have to go through what the form of the finished plan will look like. If all you want to do is find out if a business idea is a good one that might be worth working up a business plan about, use these five questions to tell if your business plan idea is worth it .

Not having a clear business model.

A successful business has to make a profit. It's astonishing how many people who start small businesses don't seem to grasp this basic fact or are incredibly skilled at ignoring it.

Planning to sell something is not a business model; a business model is a plan for generating revenue over and above your expenses. You can make the best mousetrap in the world, but if it costs you $90 to make each one and people are only willing to pay $10 for one, there’s no point to doing it as a business.

By all means, if it provides you with personal satisfaction and you feel the cost is fair, do it. Otherwise, forget about it and move on to a business idea that does have profit potential. Professional and service businesses can be real dead-end traps if you don't have a clear business model set up.

Not doing enough research.

Not doing enough research to do the job is another common business plan mistake. Your business plan is only going to be as good as the research you put into it. To answer the central question of "Will this work?" you have to find the answers to a whole cluster of other questions, from "What are the current trends in this industry?" to "How will this business counter what its competitors are doing?" And the more complete the answers to the questions, the better prepared you'll be to either start your new business or shelve the idea and move on.

Every section of the business plan will need research except for the Executive Summary. Fortunately, a lot of the required research can be done online, but there’s no getting around the fact that writing a business plan is a lot of work.

Ignoring market realities.

You and what you want to do are only one half of the equation of starting a successful business. The market is the other. You can have the best product or service in the entire world for sale but it doesn't matter if no one is willing to buy it. That is one bedrock, non-negotiable market reality. So it's crucial that you market test your product or service before you try to base a business on selling it.

If you want to sell products, try selling them at local venues, such as farmers’ or flea markets and local trade shows, selling small batches online through eBay or Etsy, using focus groups to gauge interest, or giving out free samples and gathering people's feedback about them.

If you want to sell services, surveys of potential interest or focus groups can work well. Do-It-Yourself Market Research explains how you can do your own market research, including tips for designing surveys and questionnaires.

The competition is another market reality that has to be adequately dealt with in your business plan.

It's not enough to just point out who they are; you need to examine what the competition is doing and explain specifically how you’re going to counter what they're doing to win market share.

You have to make sure you take into account all the competition. Don't just think of those competitors operating exactly the same kind of businesses; think laterally, too, to be sure you identify all competitors. For instance, a prospective flower shop is not just competing against other flower shops in a particular area; it’s also competing with all the other local businesses that sell flowers, including grocery stores and big-box retailers and online flower sellers.

That doesn't mean you have to list every potential competitor in your business plan and explain how you’re going to win the contest with them, but you do have to list and explain how you’re going to deal with the potential threat of each type of competition at least.

Not doing a thorough preparation of financials.

When you look at Writing the Financial Plan Section of the Business Plan, you'll see that you need to put together three financial statements:

• the income statement
• the cash flow projection
• the balance sheet

To do this, you need to figure out how much money you need to start and operate your business and make educated guesses about how much money your new business will bring during its first year of operation.

There are two common mistakes people make when they're tackling this section of the business plan.

The first is not being realistic about their expenses. People often leave out expenses entirely or underestimate the cost of particular expenses. Meticulous research will prevent this mistake.

The second is being overly optimistic about your new business's prospects. You're hoping your new business will do well. You wouldn't choose to start it otherwise, but you mustn't let your optimism lead you to create overly rosy cash flow projections.

Setting your business plan aside after you've written it.

If you write a business plan, use it to get a loan and never look at it again, you're wasting most of its value. A business plan is just that; a plan for how your new business is going to succeed.

Treat it as your new business's first planning document and as you move through the startup period and beyond, edit and add to it as necessary. A pair of good first additions to your business plan is the Vision Statement and the Mission Statement; creating these will solidify your goals and make sure you don't get sidetracked.

Your original business plan will also be a useful reference document when you’re doing the ongoing business planning running a successful business requires. For instance, see Quick-Start Planning for Small Businesses for instructions on how to create an action plan for your small business.

Remember Not Every Business Plan is Worth Finishing

When you're writing a business plan, the answer to the central question, "Will this work?" is not always positive.

And that's fine. It means the business plan is doing its job of showing you whether or not a business idea is worth doing and saving you potentially huge amounts of money and time.

Usually, this discovery occurs during the course of working through a business plan, not at the end. And that's the time to quit developing that particular plan.

If you discover, for instance, that the market for your proposed product is saturated while you're working on the Competitive Analysis section of the business plan, there's no point in carrying on and going to the trouble of preparing financials – your time is much better spent coming up with another business idea that may be more workable.

Perseverance and determination are great traits for entrepreneurs to possess – until they turn into foolish persistence and keep you from accomplishing what you could be accomplishing. That can be the worst business plan mistake of all.

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Common Business Plan Mistakes to Avoid

by I.J. Karam | Dec 7, 2020 | Business Plans

There are many common business plan mistakes you need to avoid if you wish to prepare for a successful startup launch . To help you, we propose in this article to guide you through a list of common business plan mistakes, and show you how you can recognize and dodge them swiftly and easily.

Before we get started, you might be interested to check out our industry-specific  Ready-made Business Plan Templates  with pre-written text and automatic financials which you can easily customize and adapt to your own project, no financial expertise required .

A business plan is an essential document summarizing a business’ strategy and how to achieve it. While this is obvious for startup ventures, it applies no less to established companies. A compelling, up-to-date business plan ensures everyone is working towards the common goals, and not in different directions.

Unfortunately, many business plans are simply not worth the paper they are printed on.

If you are currently writing your business plan or if you are simply wondering how to write a good one, make sure to avoid these common mistakes.

Common Business Plan Mistake #1: An Unexciting Executive Summary

The executive summary is a crucial part of any business plan. It is a section that effectively summarizes your larger business plan while highlighting main findings and takeaways, as well as the recommended course of action.

Investors, bankers, lenders, CEOs, managers, and senior executives are busy — always. This in turn means your executive summary is an important start; the gateway for the full plan to get the desired attention.

Consider this: In case you had a hundred and one to-do things and someone gave you a 90-page document and requested you read it, the first thing you would probably say is: “But why?”

Therefore, it is imperative that your plan should start with a compelling read. Your executive summary should be to-the-point, highlight the most important points of your document, and summarize your action plan.

However, most executive summaries are not only lackluster, but also incompletely summaries the business idea. No wonder, they fail to elicit the desired response from the business plan reader.

Don’t want that to happen to you? Spend time creating an effective executive summary. To help you do just that, we have listed 5 attributes of a great summary.

Mention the desired end-result

In not more than a couple of sentences state what will change if the need is met, the stated problem is addressed, or the desired goal is reached. You should not list the solution in detail here, but using precise KPIs, stats or numbers is highly recommended as shown in the examples below:

Wrong example:

In the first chapter, we describe how getting more inbound links will boost the website’s SERPs…

Right example:

As per our research, getting the website ranked in the top three results in Google search for this specific keyword will improve the bottom-line by 15%.

Mention the recommended solution

This is the most important part of your executive summary. Always describe the solution to the listed problem that will bring about the desired result.

As much as possible, provide a step-by-step explanation in short paragraphs, with each paragraph referring to that part of the document where you have described the mentioned solution in detail. Also, ensure each paragraph is concise and readable. Furthermore, don’t use jargons, needless abstractions, or biz blab.

Leveraging the new infrastructure will maximize existing technology investments, all the while helping us optimize re-training requirements. Improved reliability, in turn, will boost productivity, giving us a significant monetized competitive advantage.

We propose these steps to resolve the mentioned problem.

Step 1 – Install and evaluate a new system . This way we can test the latest software without jeopardizing our everyday operations. The detailed requirements for installing the new system are mentioned in Section 6.

[Step 2… and so on]

Show how you will handle risks

All business decisions involve certain amount of risk. For this reason, make sure your executive summary includes a word or two on the identified risks, and more importantly, show how you plan to handle them.

Keep this section tight, just like the rest of the summary. Avoid technical mumbo-jumbo or fluff and make sure each paragraph points to the appropriate part of the main document.

The recommended risk mitigation solution is not tied to the services or products of any specific vendor. It uses personalized scripts which can be integrated into different system architectures…

To improve customer service, the best strategy is to re-train the entire client service personnel, which will help us bring down the response time. We will also commission a personalized training manual to be used during the training sessions and placed on every desk as a reference CRM handbook.

Spell out the decision you want to be taken

You should also mention as precisely as possible the decision you want to be taken.

In case the proposed resolution involves money, make sure you list the exact amount needed. In case you want the decision to be taken within a specific time frame, mention that as well.

Our concern regarding our website’s consistently low Google rankings continues to negatively impact the company. That’s why it must be addressed without any delay.

To get our online store ranked among the top 3 search engine results and hence boost our sales, we require you to commission a $100K increase in the annual SEO budget.

Common Mistake #2: A business Plan Lacking Focus

Another common business plan mistake. Does your business plan clearly defines your target market, as well as exactly how you services or products serve the customer’s needs more effectively than the offerings of your competitors?

If no, your business plan may fail to elicit the desired response.

Many a business plan fails because of an unclear focus. More specifically, many business plans fail to clearly define the markets or customers they are targeting and, even worse, they omit to mention how their services or products are better than those of their competitors.

Lack of focus hurts startups even more. If new businesses don’t focus enough on well-defined services or products and target markets, their business plans end-up describing a business whose reasons for existence are not justified. This, as you can guess, is a recipe for failure.

Common Mistake #3: Defining Target Customers Superficially

This common business plan mistake can be deadly for your fledgling company. Often nothing hurts a business plan more than a lack of understanding who the targeted customers are. As a result, your venture may fail to get traction if you define target customers in a generalized way.

It is important to have a clear understanding of who your customers are and how the services and products offered by you add value to them. This includes a more granular understanding of your target market and how your offerings meet the varied needs of different segments of customers.

Here is an example to understand this better.

Let’s say you are coming up with a new travel app. Now saying the app is for all those who love to travel may sound impressive, because this means that your potential customer base is extremely large. However, not all travelers have the same needs, and if you fail to define each target group separately, your app may end up offering only those basic functionalities that all travelers need or being overly complex, since pleasing everyone is a herculean task. Both scenarios are not the best way to achieve success in the long run.

Go deep in your market research and analysis to understand your potential customer base. This is a key factor in your future business success.

Common Business Plan Mistake #4: Unrealistic Evaluation of Business Opportunities

Entrepreneurs must think big, but it is just as important to be meticulous and methodical in your planning. Make sure your view of things is not driven by your dreams — but rather by real data and hard facts.  If you have an unrealistic picture of the market size and present the same to the investors, you are not likely to get far. A skewed view of the size of market your company targets typically stems from a superficial or generalized definition of your target customers.

For instance, in case you think that no fewer than 15% of travelers across the world will download your new app, you must have supporting data. Otherwise, your business plan will have dream figures nearly impossible for you to achieve.

Common Business Plan Mistake #5: Not Analyzing the Competition

This is probably one of the most common business plan mistakes. There is a fine distinction between being convinced that your service or product is good and having a distorted view regarding how your offerings measure up against those of your competitors. Some businesses, especially startups, make the mistake of being extremely self-centered, and eventually pay a heavy price for their folly. Another mistake that many entrepreneurs commit is underestimating or completely overlooking the chances of new players entering their market and increasing the competition even further.

If you don’t want your business plan to fall flat on its face, you must put in the effort to thoroughly understand your competition. The one question you must ask yourself is: “Do I really know who my real competitors are?”

Identifying your competitors is crucial to the success of any business, particularly a new one. Precisely for this reason, investors look for a detailed analysis here.

That being said, often identifying your main competitors is not a straightforward task. Here is an example to drive home the point:

Let’s say your company is planning to introduce a really cool salty snack chip product. Your new offering will not only have a unique texture, taste, and appearance but also health benefits.

However, the question is: Do you have it takes to compete in such a highly-saturated and competitive market?

You will not only be competing with all salty snack brands in the market but also against indirect competitors such as salty nuts, popcorns, etc. As you may agree, this looks like a tough ask for any company, especially a startup. When the competition is extremely stiff, it is likely to be extremely difficult — if not impossible — for a newbie to make a mark.

Considering this, you may benefit from targeting a more specific segment, a sub-category where you have more chances of success. For instance, the “healthy multi-grain snacks” sub-category looks more feasible. Here the competition is likely to be far less; hence the higher odds of you being successful.

To sum this point up, if you want to show your business plan readers that you have done your homework well, answer these three questions:

Who are you competing against?

Who are your direct and indirect competitors?

What are the core strengths and main weaknesses of your competitors?

What actions are your competitors planning to take next and how well are you prepared for them?

Common Business Plan Mistake #6: Using Too Much Technical Jargon

It is really natural to be excited about the technical details pertaining to your new service or product, especially if you are a new tech company.

However, the point you must remember is that investors, bankers or lenders are not technical people. So, throwing technical jargons at them right, left, and center may seriously put them off. As a new player looking for funding, that’s the last thing you would want to do, right?

Therefore, keep the technical language to the bare minimum. What your business plan readers are really interested in is the feasibility and marketability of your new offering. So, if you can show them how well your business idea meets the needs of the target customer using a clear and simple communication, you will have them hooked.

Common Business Plan Mistake #7: Underestimating or Neglecting Business Risks

Naturally, entrepreneurs want to spend their energies on finding how to best exploit available opportunities. While this is understandable, ignoring or underestimating business risks can prove fatal.

Business risks will not go away if you don’t identify and tackle them. Instead, in case a risk materializes, your company will be caught unawares. In addition to the risks linked to changing market conditions, demand trends, or increasing competition, you should also factor in regulatory and political risks. For instance, if your business is export-oriented, regulatory barriers, ever-increasing protectionism, and other global trends should be taken into account.  

Common Business Plan Mistake #8: Skewed Financial Projections

When some of your assumptions are false — namely, those related to estimated demand, competitive pricing, financial risks, and market size — it is easy to make unrealistic or skewed financial projections in your business plan. However, investors are smart and experienced professionals, who can see through such gaps easily, and often at first glance.

So how can you avoid making this common business plan mistake?

Research, research, and research. While it’s true that no one can accurately predict the future, but when your projections are based on hard, real facts, you are more likely to come close to the mark.

Final Words

A business plan is a crucial document when launching a new venture, but still many entrepreneurs get it wrong. Consequences of that are almost always severe.

The good news is that you can avoid these serious mistakes. This article shows you just that. If you can stay away from these common yet dangerous pitfalls, you will do fine, and your chances of getting the desired action from your business plan readers would increase.

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Seven Common Business Plan Mistakes

Though every small business is unique, many successful ones start with a common foundation: a business plan. Researching and writing a business plan is an essential step in laying out the road map your business will travel and an indispensable step in securing funding for startup costs or growth. Save time and energy by avoiding these common business plan mistakes.

Seven Top Business Plan Mistakes:

1. not making one.

As an entrepreneur, surely you’re more excited about doing the object you want to do than writing a plan about it. But recall the wisdom of Yogi Berra: “If you don’t know where you’re going, you’ll end up somewhere else.” Without a plan, you’re likely to spend valuable time and energy pursuing fruitless paths and spreading yourself thin. Make completing your project a priority to focus your energy, stay in the right direction, and improve your chances of landing a small business loan.

2. Being Unrealistic

This can happen on a number of fronts if you’re not willing to ask hard questions, do concrete research, and be honest with yourself. Your business plan can’t represent the best-case scenario or the way you hope things go: it has to grapple with the reality of the marketplace, financial truths, and the entrepreneurial landscape. Focus on being realistic in a few key areas:

• Financial projections : Don’t pad or overinflate your future earnings projections. At best, you’ll look like you don’t know what you’re doing, and a bank won’t trust you enough to lend you money. At worst, they’ll lend you the money, and you’ll go into default or bankruptcy.
• Competition : A big red flag in many business plans is a belief that you have minimal competition — or even none. “You’re always competing for dollars,” said RISBDC counselor Manuel Batlle. Even if your product is unique, your target customers still have choices about what to do with their money. You must address how you will persuade your target market to give their dollars to you.
• Market research : It doesn’t matter what you want to build or sell. Someone has to be willing to buy it for a price that makes it worth selling. No business plan is complete without investing time and energy in up-to-date market research to truly understand market trends, customer interest, competitor performance, and other aspects of product or service viability.

3. Poor Executive Summary

A lender will read your business plan’s executive summary and “give it the sniff test, then the gut test,” said RISBDC business counselor Josh Daly. The lender may decide whether or not to continue reading based on what their intuition tells them. So the executive summary is worth focusing on. Someone without a deep business background should be able to understand it, and it should make the case that your business is viable in short, straightforward points. Daly recommends 1-3 sentences each on your business background, customer base, market, the competition, your qualifications, and your team. A concise summary should fit into about two pages and convince your audience to keep reading. If your plan is focused on securing financing, prospective lenders should immediately know how much money you are looking to borrow and how the funds will be used.

4. Too Long

For a majority of small businesses, a succinct and well-organized business plan should be 5-10 pages long. An engaging business plan includes visuals, where appropriate, to avoid wordiness when a graph, chart, or map will tell the story more effectively. Additional supporting financial projections or research data can go in an appendix. Plans that are significantly longer don’t necessarily give more or better information, and they risk losing their audience before they’re actually read.

5. Not Backing Up What You Say

Along with being realistic in discussing your projections and your market research, you also need to make sure you’re using data and references — not just anecdotes — to support what you’re claiming.

6. Not Focusing on the Team and Your Role as the Head

No small business owner has every skill and personality trait needed to take a business all the way from the seed of an idea, to the world, all by him or herself. It’s appropriate and essential to identify and address gaps in your experience and education and explain how you’ll overcome them. It’s also crucial to briefly introduce your top team members, sell their contributions to your company, and portray how, together, your team is well-rounded and ready to tackle the challenges ahead.

7. Sloppy Mistakes

Typos, grammatical errors, and poor formatting are completely avoidable enemies, taking the shine off your first impression. Your business plan needs to look professional because it’s going to speak for you. Use spell-check. Re-read your plan. Get lots of sleep and re-read it again. Then, even if you’re a great writer and a stickler for detail, have someone else check it over for things you’ve missed. Never underestimate the value of a pair of fresh eyes.

In conclusion, there are many common mistakes that entrepreneurs make when writing business plans. By avoiding these mistakes, you can raise your chances of success.

Here are some of the most common business plan mistakes:

• Not doing enough research . Before you start writing your business plan, you need to do your research and understand the market. What are the needs of your target customers? What are the trends in your industry?
• You are not being specific . Your business plan should be straightforward. This means outlining your goals, strategies, and financial projections in detail.
• It is not being realistic . Your business plan should be accurate. This means setting goals that are achievable and projecting financials that are based on sound assumptions.
• You are not being persuasive . Your business plan should be compelling. This means writing in a clear and concise way that will convince investors or lenders to fund your business.

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Start » business ideas, 5 common sense reasons to write a business plan and 7 mistakes to avoid.

Still not sure if you need a business plan? We tell you why you need one and how to avoid the most common business plan mistakes.

Whether you're seeking investors, financing or simply keeping a focus on company goals, it's important that you write a business plan.

Here are five reasons you should write a business plan before you start planning to launch your startup. A business plan will help you:

Keep sight of your vision. In the course of starting a business, you might get bogged down by small details and forget some of the larger priorities. Writing a business plan at the start of forming your business helps you capture that vision that can keep as a written reference point.

Obtain an understanding of your market. Exploring the hard data on an industry you are thinking of joining will give you perspective on where you fit into the market and what you have to do to achieve greater market share.

Identify and understand your competition. Doing a deep dive on your competitors may help you realize ways to make your business more successful, or give you ideas on how to improve.

Set goals and benchmarks. A comprehensive understanding of your financials will permit you to set measurable goals and determine what moves you should make at certain times.

Confirm the math. If you have only a vague idea of what you need to be profitable, going through the exercise of putting together a business plan will help you firm up your numbers so you can make smart business decisions.

Writing a business plan at the start of forming your business helps you capture that vision that can keep as a written reference point.

Business plan mistakes to avoid

You want to put your best foot forward when it comes to introducing your business to people who are not already familiar with it. Reading your business plan may be the first interaction that a potential investor, lender or other interested party has with your company. When writing your business plan, you should avoid the following:

Poor grammar and wording. Not every business person is an eloquent writer, but that’s not an excuse for errors in your text. Seek the help of an editor to review the plan, especially if you struggle with grammar and verbiage. Enlist additional reviewers, such as friends, family, business partners, an attorney or a financial advisor to look over the plan for content, as well. An outside observer will help point out where you need to explain things.

An off-putting style. In a professional business plan, you want to show that you know your stuff. This means avoiding conversational, folksy or funny wording. Instead, you want to be authoritative and realistic to prove that you have a handle on your industry and are reliable. Find other ways of portraying your personality throughout the plan, perhaps through your descriptions of key members of your team or in the company description. Don’t be afraid to showcase what sets you apart, but be sure to do so tastefully and professionally.

Sloppy format. Structure the business plan with clear and defined sections that are easily understandable. Font, style, spacing and margins should be kept consistent. Include supplemental materials, like charts or graphs, in such a way that they do not interrupt the narrative you are building.

Being too vague or too detailed. The business plan should display your aptitude and understanding of your business, just enough where you are not burying your reader in detail or leaving something to be desired. This means you need to understand exactly what your reader needs to know. Being too vague will squander that opportunity. If you feel you have too much information, however, you can always attach supporting documents in an appendix.

Assumptions. Business plans are built on facts. Have your research in order so you’re not basing assertions on assumptions. That will make the plan seem thin and will likely not accomplish your goals.

Ignoring risks. Every business plan should address the risks of starting a business head on. Not stating these risks and how you plan to cope with them can make you or your plan seem naive. Include a contingency plan for how to handle changes in the market.

Ignoring the customer. It's important to get across why you love your business, but you have to bring it back to how your business benefits your customers. Not talking about the customer is a huge oversight when developing a business plan.

See our Complete Guide to Writing a Business Plan

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40 Common Business Plan Mistakes to avoid when writing your Business Plan

• EntrepreneursGateway.com Team
• October 29, 2018

This article is part of the Business Planning Hub where you’ll find lots of guides and resources to help you create the perfect business plan!

Would you like to be ahead of your competitors and avoid some the most obvious business plan mistakes people make?

Then you are in the right place.

Be sure to check out the top 40 common pitfalls I’ve listed below, because they are the main reasons business plans fail or are ineffective.

Good business planning comes from experience – and, of course, from trial and error. But not necessarly your own!

By learning from other people’s mistakes, you will be sure to speed up your journey and be one step ahead of your competitors.

Ready? Let’s go.

Unrealistic Financial Projections

One of THE most common business plan mistakes people make is unrealistic financial projections . Investors or lenders expect a realistic picture of where your business currently is and where you expect it to be in the future.

How can you avoid this mistake?

• Be sure to be realistic and not overly optimistic.
• Give clear explanations of your projections.

If you don’t do this, alarm bells will ring, and all your hard work will be rejected!

Not defining who your target audience is

It’s essential that you define your specific target market , as your business isn’t going to appeal to everyone.

Make sure that you present your assumptions and outline how you will target and communicate with your audience.

Unless you can talk to them, they’re not going to listen and your business won’t take off!

The business plan is poorly written

Punctuation, spelling, grammar, style…

They are all very important when it comes to putting a business plan down on paper.

If investors see a plan full of spelling, punctuation, and grammar errors , they will immediately wonder what else might be wrong with your business !

As there is no shortage of people looking for capital, investors won’t wonder for long…

They’ll just move right on to the next plan.

Make sure your business plan is as well written as it could be, then hire a freelancer to go through it and fix any mistakes you might have missed.

Sloppy plan presentation

Once the written part of your business plan is impecable, you need to make sure that the presentation matches .

Investors do not like to see inconsistent margins, charts without labels, tables without headings, or missing page numbers.

A bad business plan could result in an investor moving on to a much more organized plan in the stack!

An incomplete plan

All business plans need to have details on:

• Products and Services,
• Marketing and Sales,
• Operations,
• Competitors,
• Management team.

All plans, at an absolute minimum, must cover all these areas .

A good business plan template should include discussions about the industry, trends and whether the market is shrinking or growing. 

Finally, your plan should also have detailed financial projections; including income statements, monthly cash flows, and yearly balance sheets.

The business plan is too vague

Always remember:

A business plan isn’t a poem, a novel, or a cryptogram!

If a reasonably educated person has difficulty understanding your plan, then it needs to be re-written.

If, on the other hand, you feel you need to be vague because your plan involves confidential material, technologies or processes, then simply present the executive summary first. 

After that, if they are interested in finding out more, you can have them sign a non-disclosure and non-compete agreement before showing them the rest of the plan.

The business plan is too complicated

One of the pitfalls of writing a business plan is making it too technical. This is usually one of the main problems for technology-based start-ups.

You should always keep technical details to a minimum within the main plan.

If you need to include them, you should do so in the appendix. 

A good idea is to break your business plan into three parts . For example:

• a 2-3-page Executive Summary,
• a 10-20-page Business Plan,
• an Appendix, which can include as many pages as required.

The business plan makes unrealistic or unfounded assumptions

Business plans are full of assumptions – the most important being that the business will succeed.

However, keep in mind the following:

• The most successful business plans both highlight the critical assumptions and provide some kind of rationalization for them.
• The bad business plans , on the other hand, just bury assumptions within the plan, leaving investors to wonder where the assumptions actually end and the facts begin.

Many aspects of a business plan to involve assumptions – such as acceptable pricing, market size, and customer purchasing habits. That’s unavoidable. Just make sure that any assumption is made from benchmarks within the same industry, and then tie in your assumptions with facts. 

The plan includes inadequate research

It is important to support your assumptions with facts, but it is even more important to ensure that your facts are actually facts .

When writing a business plan, you need to identify and analyze various sources of information.

Find out all you can about the industry that your business focuses on, including customer purchasing habits and overall market trends. 

Keep in mind that investors will usually check your numbers against industry data , so that any mismatches could be the difference between receving funding or not!

Claims that there are no risks involved within the new venture

Sensible investors understand and know that there isn’t such a thing as a ‘no risk’ businesses.

Naturally, there are always risks.

However, it is important that you understand the risks before presenting the plan. Should any of them be mentioned, you need to be able to emphasize how they will be minimized .

You claim that you have no competition

It is unbelievable how many potential business owners use this statement within their business plans. And this one sentence couldn’t be further from the truth.

All successful businesses have competition, be it direct or indirect.

You should plan for this from the outset.

• Identify and analyze how you can accentuate your competitive advantages.
• Show within you business plan how you can use them to compete.

The business plan isn’t a business plan

Good business plans present an overview of the entire business. This is, surprisingly, something most people get wrong, so… how do you avoid this?

Well, it’s not difficult.

Make sure to:

• Include the present, the short term, and the long term.
• Have a description of how the different stages will be reached – almost like a roadmap.
• Include milestones , together with the major steps that will be taken to complete each one.

You are sorted.

Weak market research

Before asking for investment (or investing any money in the business plan yourself!), ensure that all research is airtight . 

Don’t settle for a quick Google search!

Read books about your industry, download relevant white papers…

This will prove that you have done your research and are knowledgeable within your area – which will make all the difference when pitching to investors.

Not taking general expenses into consideration

One of the pitfalls of business planning is not considering taxes, insurance, utility bills, and other everyday expenses . 

It is all too easy to omit one or more of these bills – and this can cause huge financial miscalculations.

Have you added all your expenses to your business plan?

Limited understanding of cash flow

The bane of most businesses – especially small ones – is cash flow.

It is all too common to see a viable business go under as a result of a temporary cash flow problem; that is to say, a situaion where there are enough customers, but not enough accessible money to pay the bills.

Ensure that your business plan includes the possibility of unexpected expenses, late payments, or short-term losses , as well as a buffer to help if times get difficult.

You will find this extremely helpful when something you weren’t expecting to go wrong actually goes wrong (which, believe me, happens!).

No objectives

Investors need to be given a reason to invest. From the onset, be very clear about the time span necessary for the investor to get their money back, PLUS how much more they can expect to amass.

It is still advisable to include an objective within the business plan, even if an investment isn’t being sought. Perhaps a franchise is in the pipeline, or maybe an expansion within the business…

Basically, success is easier to measure when you know what it is you want out of your business.

Failing to show ‘real’ demand

Just because you think a product is amazing, it doesn’t necessarily mean that there is a market for it.

It is important to see what sort of demand there is for the product. 

What does this mean?

Basically, before pumping lots of money into the idea, it is advisable to test the product on a smaller scale – especially if the business start-up costs are high.

This will ensure you are on the right track and won’t incur evitable losses.

Lack of Experience

Ensure that the individuals running the business have the correct skill set.

If you don’t have the necessary skills yourself, hire someone who does!

This is definitely one of the most common pitfalls that can be avoided when preparing a business plan.

Saving on this point now won’t do you any favour in the long run.

Not updating the plan

It may take a few years for the business to get off the ground, but this doesn’t mean that the same business plan should be relied on every year. 

Consumer markets are ever-changing.

Realistically, your business plan should be re-visited on average every six months , which also allows for new market research to be carried out.

Failure to estimate realistic startup costs

When writing a business plan, a common mistake is to underestimate the costs of running and launching the business. 

It is better to over-estimate costs rather than underestimating them , as this will ensure that the business is adequately covered, especially over the first couple of months.

It is also recommended to:

• Separate optional costs from essential ones;
• List fixed costs as opposed to those that are variable. 

Plans that try to be all things to all people

In your journey to secure an investor, you will no doubt meet different types of people, so don’t make the mistake of using one plan for different investors .

Instead, prior to pitching, make sure to tailor and target your business plan to a specific investor, so that they’ll feel like you are both speaking the same language.

The golden rule is to keep the essential parts of the plan as they are, but to review the industry jargon.  

Not detailing key team members and their responsibilities

The management team section ALWAYS needs to include the following:

• Who the team members are,
• A short biography and outline of their responsibilities.

These need to be tailored around different areas of the company. 

Start-up companies should focus on their management’s success in growing and launching ventures, while mature companies should holm in on how their team members successfully work within the framework.

Asking Investors to Sign a Non-Disclosure Agreement

Generally speaking, this is something that most investors will not do – simply because, typically, a business’s concept/strategy is not confidential.

If the strategy/concept has to remain confidential, then this could imply that no barriers apply to competitive entry; and if competitors are easily able to copy the concept, then this would indicate that the model is most likely not sustainable. 

The financials aren’t pro forma

A good business plan is fundamentally a map of the future – therefore, it needs to be forward thinking.

Pro forma financial statements are similar to forecasts and allow room for creative projections. They can be utilized to show investors how the business should and can perform, but you must also be prepared to back up any projections .

These statements should be used to provide an overall vision of the dynamic of the business as well as what it can expect to achieve.

Assume investors will read the business plan from back to front… or won’t read it at all

Even if investors don’t read your business plan, you still need to produce one. 

A well-researched and constructed business plan is an essential component of any successful business, whether it is seeking investment or not.

Make sure it’s artight and that you know it by heart.

Writing the business plan in one big push

You could think of a business plan as made of blocks and comprised of a set of connected modules.

It is probably best, to begin with, to work on the parts that you find the most interesting or that will provide the most benefit.

That is to say: Don’t try to write a complete business plan in one go.

Break it down into manageable steps and pieces.

Inadequate test procedures and testing

Another common pitfall which must be avoided when preparing a business plan is not carrying out the correct and necessary test procedures .

This could be as simple researching the need for the specific product, or physically testing whether the product actually works or not.

Hiding Weaknesses

Don’t highlight your weeknesses but also don’t hide them.

This is important.

All businesses have weaknesses, and by highlighting or hiding them too much, you risk putting off an investor.

The way forward is to include a strategy, which outlines how any problems will be addressed. In this way they’ll see you are aware of your weeknesses and ready to face them.

Not Knowing the Distribution Channels

A secure plan outlining how the services will be provided or the products distributed is an absolute must .

All possible channels must be included.

If not, it may appear to the investor that the list has merely come off the top of your head.  

It is vital that you articulate the strategy as to how the service or product will reach the client.

Being Inconsistent

Quoting conflicting statistics, highlighting different target markets or even including conflicting strategies within a plan can set off alarm bells. 

These types of errors could result in an investor challenging exactly how well you know your business and market.

Often, different sections of a business plan are written by different people, then pasted into one document – which is the perfect recipe for inconsistency.

Make sure to carefully review each section of the plan to avoid this mistake.

Of course, you will no doubt believe that your business idea is the best thing ever – which is great.

However, these claims need to be backed up .

Over-hyping a business will not substantiate your service or product.

What you need to do instead is to wow them with the business idea supported by an outstanding financial and research plan .

That’s what an investor wants to see.

Not Anticipating Lenders' or Investors' Requirements

More often than not, business plans barely touch (or miss out completely) the meat and veg of financial planning… and don’t even consider the needs of those supplying the cash!

Here are a few things to keep in mind.

If you are dealing with investors , you must:

• Define the primary objectives within a defined exit strategy;
• Put in place appropriate percentage ownership and prices. 

If you are dealing with lenders , consideration must be:

• Why the funds are required,
• How much is needed,
• Repayment conditions.

Writing the Executive Summary first, not last

The majority of people will read the Executive Summary first and then, based on this, will formulate their initial impressions.

These first pages are critically important and must be strong and well thought out . 

Quite often business people will write the summary first, then support it with a plan. However, you should do exactly the opposite.

Because the executive summary provides you with the opportunity to tie everything together , allowing you to check your assumptions and to ensure that the story matches the data within the plan.

By writing the executive summary first, you are not using the process of business planning to learn, and this will show in your summary.

So don’t jump to the solution, but make use of the process!

In this way you’ll be able to produce a well thought out Executive Summary to wow your investors.

Inability or defensiveness to adapt to Feedback

Always show your business plan to your lawyer and make sure they confirm that it meets all the necessary regulatory requirements. If it doesn’t, you need to revise it.

Most people are unable to listen to advice from experienced advisors – which is a recipe for disaster .

Of course, not all feedback is correct, but a key element of business failure is the inability to adapt to fair criticism.

Hiding the plan from your team

A business plan is a management tool.

Obviously, care needs to be taken when sharing with team members (such as salaries, etc).  However, don’t be afraid to share measurements and goals.

Use the plan to build up team spirit and you’ll soon see the benefits of this approach.

Confusing cash with profits

There is a big difference between the cash and profits. Your financial situation can be crippled by waiting for customers to pay, whereas the profits won’t be affected.

Basically, profits are an accounting concept, whereas cash is the actual money in the bank.

Always keep this in mind!

After all, profits don’t pay bills – money does!

Diluting your priorities

A plan with focus and power is one that stresses between 3 and 4 priorities .

These are easy for people to understand.

Any plan that lists, for example, 20 priorities… well, quite honestly doesn’t have any!

Fudging the details for the first year

You need to take all details into account, not just cash flow . These include the financials, responsibilities, milestones, and deadlines.

Of course, cash flow is really important; but details regarding setting dates, assigning tasks to people, and outlining what is supposed to be done and by whom are just as important!

After all, a business plan wouldn’t be a business plan without them.

Sweating the details for the future years

This isn’t about accounting, but about planning.

Monthly details are important at the beginning, but as time moves on, they become less important. After all, how can a monthly cash flow be predicted three years from now with uncertain sales forecasts?

Basically, monthly details cannot be planned beyond the first year . Nobody expects them, and nobody will believe them if you do; so make sure to focus on what’s really important.  

Overvaluing the business idea

Here’s something very important to keep in mind:

The value of an idea is the business that’s built on it, not the idea itself. 

For an idea to become a business, products need to be built, ordered and shipped; phone calls need to be answered; employees need to be coming to work every day; and customers need to be paying their bills. That’s it. 

Write a business plan that shows that you are creating a business around a great idea – or simply don’t bother.

A great business is not made by only an idea.  

Now, over to you...

Now I’d love to hear from you:

Are you still unsure of which business plan you need?

Maybe you have written a business plan and would like us to review it?

Leave any comments below and I will be sure to answer as soon as they come in!

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10 Common Business Plan Mistakes

Are you thinking about getting your business plan underway? Many elements go into a good business plan. And it often takes time, patience, and many revisions before you get it right. Set yourself up for success by learning how to avoid these ten common business plan mistakes.

1. Unrealistic Financial Projections

Lenders and investors expect to see a realistic picture of where your business is now and where you hope it goes. One of the most common business plan mistakes is overestimating the value of your company. Ensure your plan is pragmatic and explain your projections. This way, lenders and investors are much more likely to accept your plan, knowing you’re thinking logically.

2. Not Defining a Target Audience

You must define your specific target market, present how you’ve made these assumptions, and outline how you’ll target them. No business will appeal to everyone, so think carefully about who your audience is. 

Need help defining your target market and learning about market research? We offer resources such as a Market Research Resources Guide , seminars on market research and one-on-one consultations with in-house experts. 

3. Too Much Hype

It’s essential to believe in your business idea. But, to truly showcase its potential, you should focus on providing backup for this belief. Instead of relying on superlatives like “hottest” and “greatest,” wow them with your well-researched business plan. Let your good ideas and preparation speak for themselves.

4. Poor Research

Don’t let your hard work go to waste. Remember to double-check and substantiate all your research. Using incorrect or out-of-date information would discredit your business idea and plan. If you need clarification, get a colleague, friend, or family member to help you review it.

5. No Focus on Your Competition

Even if your business is one-of-a-kind, there’s no such thing as no competition. It’s important to highlight your competition, but not so much that the investor worries the business won’t survive. Focus on your niche and what separates you from other companies. Highlight how you plan to compete in the marketplace and paint an accurate picture of what the industry is like now and where you see it going.

6. Hiding Your Weaknesses

Every business has weaknesses, but you could risk deterring the investor if you hide or highlight them too much. The best way to address them is to include a detailed strategy for solving them. Ensure you’re being realistic and tackle these weaknesses head-on.

7. Not Knowing Your Distribution Channels

Consider how you will provide your service or distribute your product and create a secure plan. Include all possible channels and explain why they’re correct for reaching your target market. Your ability to articulate your strategy for how your product or service will reach clients is vital.

8. Including Too Much Information

Most investors have a mental checklist of 10 to 12 points they’re looking for in a business plan. The purpose of your plan is not to show the depth of your knowledge but to focus on the key elements of your business. Strive for clear and concise writing. If you have more information you want to include, create an appendix.

9. Being Inconsistent

Take time to review each section of your business plan and ensure it’s consistent. Double-check your highlighted target markets, statistics, and strategies to show investors you’re well-prepared and knowledgeable.

10. One Writer, One Reader

Remember to ask several people to review your plan before submitting it. Since you’re familiar with the information, it’s easy to miss spelling and grammatical errors. Another set of eyes will help your plan look more professional and ensure it reads correctly.

Need Help with your Business Plan?

Get started on your business plan by downloading our Business Plan Template and Cashflow Forecasting Tool.

Small Business BC’s advisors will help review your business plan and provide you with feedback with our Business Plan Review Advisory Service .

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10 Common Business Plan Mistakes and How to Avoid Them

There is plenty of information available via books and seminars on how to write a good business plan. And yet, many companies, especially start-ups, make serious mistakes in business plan writing that could have been avoided with more knowledge and effort.

As a business plan contest reviewer, I see a number of typical mistakes coming up again and again. Here are 10 of the most common business plan mistakes I have come across:

1. Boring Executive Summary

Investors, bankers, and other business plan readers usually start looking at the executive summary. It should highlight the most important points of the business plan in a pithy way. The business plan should provide a convincing story on how a a highly competent team will provide products or services to precisely defined target markets based on a consistent strategy. Moreover, it should share the company’s vision on how their products or services will make the world of their customers better in a profitable way.

In reality, many executive summaries are lackluster and incomplete summaries of a business idea whose implementation remains unclear. Sometimes, it is just cut and paste of some sections from the introduction and some other parts.

Losing the busy reader already in this part could mean that investors never care to go through the whole document. They may be missing some hidden gems. However, it is the job of the business plan writer to present these gems convincingly in the executive summary.

2. Lack of Focus

Many business plans are lacking a clear focus in defining their target markets and how the envisage products and services are competitive in serving the market needs better than others. Especially for innovative start-ups there is a risk of not focusing enough on a clearly define product/service segment and target market.

The result are often business plans describing a ‘me too’ business whose reason for existence does not become clear, not to speak of electrifying potential investors or customers.

3. Superficial Definition of Target Customers

Understanding who your target customers are and how your product adds value for them is crucial. That includes a granular segmentation of target customers and how the company’s products and services will satisfy the different needs of these different customer groups.

Many business plans, however, keep the definition of target customers very general. For example, saying that your travel app is aimed for everyone who is traveling may sound great first, because this is a very large number of people. However, different groups of travelers have different needs. Without clearly defining these needs in a differentiated way, the result will either be an app with the lowest common denominator of functionality needed by most, or it may be at risk of becoming overly complex, as it tries to please everyone.

4. Overly Optimistic Evaluation of Market Size and Opportunities

Entrepreneurs need to be optimistic to start a business in the first place. However, there is fine line between being upbeat about your business prospects and presenting a distorted view of the market size which is more driven by dreams than data. It can be related to a superficial definition of the target customers. If you think, for example, that 20% of all travelers worldwide will use your app, you would need to have a lot of supporting evidence to credibly convey how you will achieve that. It is not bad for an entrepreneur to think big. However, if you, for example, overestimate the readiness of people to buy your product, you may end up with dream figures you cannot achieve.

5. Underestimating the Competition

Many start-ups are too much self-centered. Being convinced of your product or service is certainly a good attitude. However, there is risk that this could distort your view of how it matches up against products and services of competitors who have been in the market for some time. In addition, some entrepreneurs also overlook or underestimate the possibility of new entrants who could increase competitive pressure.

6. Underestimating Business Risks

Understandably, entrepreneurs focus on exploiting opportunities. Some, however, underestimate or even neglect serious business risks that could endanger the existence of the company. Ignoring the risks will not make them disappear. Instead, it will leave the company unprepared, if a risk materializes. Apart from risk caused by changing demand trends, increasing competition, or unexpected increase of production there are also political and regulatory risks to be considered. If you have, for example, an export-oriented business, you need to take into account global trends like increasing protectionism and regulatory barriers in your target markets.

7. Too Detailed Description of the Product or Service

Especially innovative technology start-ups, often led by engineers, are really excited about the technical details of their product or service. It is part of a credible story to provide enough details so the reader understands that the product or service is well designed. However, if it drifts into jargon and technical details not relevant for understanding the business impact or innovative edge of a product, then details can become a distraction or even barrier, putting off the reader.

8. Unrealistic Financial Projections

This mistake is related to false assumptions on, for example, market size, competitive pressure, and financial risks. Nobody knows the future, and projections can, thus, not be exact. However, they can be based on real data related to general market trends and past revenue and cost development.

9. Unconvincing Presentation of the Executive Team

Quite often, there are just a couple of portrait photos and CVs pasted into the business plan without explaining to the reader, why exactly this team is complementary in their competencies specifically for running the particular business presented in the plan. Investors can get very critical, if they see that important competencies in an executive team are lacking. For example, if a group of engineers without business experience is launching a start-up, there will be questions on how competence gaps in areas like financial management and marketing will be covered.

10. Lack of Review

A team working enthusiastically on a business plan is at risk of false, overly optimistic assumptions and other mistakes that can easily be overlooked, if you are immersed in the process. Thus, not having a review of the business plan by an experienced consultant or a friendly business partner who has been there can lead to mistakes with detrimental effects. A review can help find flaws in the overall business rationale, market and customer definition, or the financial projections. Even if you are not looking for external funding, not having your business plan reviewed is a serious omission.

How to Avoid Business Plan Mistakes

The simple answer would be to be aware of these mistakes and make sure not to do them. However, it is not that easy. Even if you are aware of potential mistakes, it does not automatically mean you are capable of avoiding them. It is like with people who have bad eating habits. They know all about healthy eating and are fully aware of their mistakes. And yet the still continue making these mistakes.

This is where coaching comes in. You can either try self-coaching in the executive team, which requires a high level of awareness, openness and self-distance. Or you can hire an external coach to help you discover your blind spots, become aware of unproductive habits and attitudes like, e.g., over-optimism, and change them.

I would be interested to receive comments from entrepreneurs on what mistakes they have made in business plan writing and how they fixed them.

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Every company benefits from an updated business plan. While it seems necessary for start-ups, it applies to established firms, too. An efficiently written business plan keeps the whole business on track in the process of execution of the company’s strategy and reaching its business goals. Business plan mistakes can result in anything ranging from small oversights to fatal errors for your business. It is even more important for the business who are at the funds raising stage, so the information they provide is accurate and none of your ideas are misleading and are in tune with the current market. To help you avoid your business plan from being discarded, here are some of the critical business plan mistakes to be careful with:

• Long and bulky Executive Summary The readers of business plan such as investors, bank institutions and key vendors start considering your business idea from reading the executive summary. Executive summary is a highlight of the most important items of your business plan in a concise but informative way. It should succinctly describe your compelling story on how a highly skilled team will deliver products or services to precisely defined target markets based on a consistent strategy. Besides, it should state the company’s value proposition on how their products or services will change the life of its customers for the better in a profitable way. In fact, many executive summaries are boring and state some business idea whose execution remains vague. Often, it is presented as just cut and paste of some sections from the introduction and some other parts of business plan. Therefore, there are high chances of the busy investor to move on to the next proposal, if executive summary does not provide a clear, convincing, and persuasive overview of the business.
• Attaching your value proposition to dated technology or dwindling markets When formulating in your business plan the opportunity you see for a product or service, you need to question it and can’t just assume that the idea has automatic demand in the real world. A professionally written business plan will assure you are setting up your business for success. This implies that you must develop a value proposition of your product or service that will change an emerging or existing market. Those markets that are shrinking or are being replaced by new industries will make it incredibly challenging for you to get funding. For instance, what would your reaction be if someone developed waterproof ink for typewriter ribbons? You wouldn’t necessarily be amazed, because the number of people looking to buy something like that is miniscule.
• Not knowing the target audience and segments A product or service that is everything to everyone does not exist. If that were so, we would all be using the same phone. In fact, your product or service is specific and advantageous to an ideal type of customer. Without defining your target market, you cannot reason how you will handle the fierce competition. There are competitors who are providing the same product and service. Investors trust their funds to companies that have completed and gained a complete knowledge of primary and secondary market. You must define your target market and outline how you will target this audience.
• Having unrealistic and aggressive growth projections Having read the executive summary, many investors jump straight to the financial section of the business plan. It is important that the assumptions and projections in this section to be realistic. Plans that show sales forecast, operating margin and revenues that are poorly reasoned, internally inconsistent or simply unrealistic significantly damage the credibility of the entire business plan. In opposite, sober, well-supported financial assumptions and projections communicate operational maturity and credibility. Benchmarking is an especially useful tool to use in your financial analysis. By comparing and basing your projections on the financial performance of public companies within your marketplace, you can prove that your assumptions and projections are achievable. Planium Pro makes your life easier in that regard. Finance section of the Planium Pro’s software provides an easy and quick benchmarking tool for a variety of industries so you can efficiently measure your projections and key ratios against your market averages.

• Acknowledging your competitors, but not researching them Many new businesses are too much inward-focused. Being confident about your product or service is certainly a good attitude. But there is risk that this could twist your idea of how it correlates with products and services of competitors who have been in the market for some time. Besides, quite often entrepreneurs also miss or underestimate the possibility of new entrants who could increase competitive pressure. Our recommendation is to learn as much as you can about the people you’re going up against and perform Competitor Analysis, based on their pricing, quality, service and distribution channels. Knowing this information helps you prepare your own strategy to differentiate your business from theirs.

Next Steps • Keep these critical mistakes in mind when writing your business plan. • If you have already started writing your plan, use Planium Pro software to ease your preparation and streamline the process. Join our Planium Pro to see all the benefits yourself. Read More We would be interested to receive comments from small-business owners on what mistakes you have made in business plan writing and how you fixed them.

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7 Common Business Management Mistakes and How to Avoid them

Ray Slater Berry

8 min. read

Updated May 10, 2024

Every successful business comes from a great idea . This idea can be purpose-driven, vision-driven, or both. Bringing it to life in the earliest years of your business can be overwhelming . We’re not all natural-born leaders, mathematicians, business analysts, and at the same time, we’re not expected to be. 

But that lack of expertise in every single business management category means mistakes are bound to happen. And if you’re not prepared to deal with those mistakes, it can quickly derail your business idea. So, if you’ve got a great business idea and are determined to bring it to life, then this article is here to help you avoid the 7 most common business management mistakes.   

1. Failing to track everything 

From day one of building your business, you’re going to be experimenting, creating data and processes , and learning. It’s so crucial that you keep track of everything . Even those things that you don’t deem as vital for your business to flourish. 

It’s hard to predict how quickly your business will grow . Even if you have a business growth plan, it doesn’t mean that your growth will stick to it. Perhaps you’ll boom, win funding, and need to recruit hundreds of people at a time; maybe you won’t. What’s certain is, new staff will come, and old staff will go, and if you’ve not documented the past, you’ll struggle to onboard and manage knowledge for future employees.

Process documentation is essential for enabling your business to scale. It will save your hiring managers time, and it will allow future talent to learn from past mistakes. Document everything; even if you don’t see it as necessary, there’s no doubt someone can learn from it in the future. Your documentation will help measure success and set benchmarks for future KPIs .

2. Breaking data compliance regulations  

One thing that you need to have down from day one of managing a business is your data compliance. Yes, we know it’s not the most thrilling of things. However, if you’re not handling consumer data correctly or legally, you could risk coming under fire and facing huge repercussions.

Take the California consumer privacy act , for example. It’s a relatively new privacy law to protect consumers’ personal information. It affects any business operating in California, or even with customers from California — which could be yours, depending on where you’re marketing. 

The act protects every piece of consumer data a business may keep, helping them to sell better. Unintentional non-compliance to this particular act can result in a fine of $2,500 per violation and up to $7,500 per violation deemed intentional. Either way, these fines are something any new business can do without–especially in its earliest years. 

It’s not only financial damage you can do here. A privacy scandal can also tarnish your reputation and stunt your business growth and sentiment. 

• 3. Conducting insufficient research

Research is key — it always will be. Whether you’re doing it with your business data or you’re using public resources. It’s so important before you make a business management decision or change. 

Leaders and ideas people tend to act on feelings. We tend to be very emotionally driven and impulsive. That’s not necessarily a bad thing. However, when handling a business and potentially great deals of money, we need to be more data-minded and back our decisions up with research. 

Use research across every area of your business. Whether you’re researching customer satisfaction, like UX research , or a competitor analysis, or are looking at more internal subjects like internal processes best practices or company structure research, you can take safer steps by doing your research first. You’ll minimize room for error and justify decisions based on data. 

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• 4. Not focussing on branding

No matter your business niche , product, or service. Know that you’re not just building a company. You’re building a brand. 81% of customers say they need to be able to trust a brand to buy from them. 

Every public action you take builds your reputation and your online brand affinity; this also means it can jeopardize it. Ensure that you focus on building a brand and business that people can relate to , understand, and look forward to engaging with. 

Branding does not stop at building a customer base, though. It can also help you attract and retain top talent. 50% of candidates won’t work for a company with a bad reputation — even if it meant missing out on a bigger paycheck. 

Employer branding can drastically help your business to win the talent you need in this massively competitive market. With the 2020’s jump into remote work, it means talent can pick from more employers than ever before and are no longer limited to the businesses in their immediate travel radius. 

This remote work reality means employees are making decisions to work for employers they like rather than those who only pay well. LinkedIn research shows 75% of candidates will research a company’s reputation before applying for a role — time to build a brand that gives them great results.

• 5. Failing to be remote ready

Building on point number four, every business needs to be ready and able to function remotely . Those businesses that only ever operated in static offices really struggled in 2020 and many didn’t live through the transition. 

How can you avoid making the same mistakes? Invest in communication tools and strategies to ensure all of your business communication is online, and your employees are used to speaking using these digital channels. 

However, it’s much more than tools to ensure your business is set up for success in the remote work world. Try to look at ways you can build a company culture remotely and take a look at this home-based business checklist to ensure you don’t miss anything else.

• 6. Forgetting finances

Numbers, to some, are an entirely different language. They can be daunting, and managing finances is certainly not something that comes easy to everyone. New businesses need to take care of everything they spend. The good news is that there are plenty of financial resources and specialists out there to help you get a hold of things from day one. 

Don’t make the same mistake many new businesses do and put finances on the back burner because of a passionate idea. Driving a business with a mission is excellent. Still, you need to be able to support your mission along the way. Whether that comes through investment, personal finances, or another means, make sure you’ve got your financials looked after. 

Ensure the taxman doesn’t come knocking, and your business is set up for financial success as well as prepared for crisis .

• 7. Disregarding the importance of customer service

Lastly, but certainly not least is customer service. 84% of consumers say customer service is a crucial factor helping them to decide whether to buy from a company or not. 

The age-old saying of “ the customer is always right ” should be leading your customer service strategy, no matter your business niche. Even today, with all the forms of paid advertising available, the strongest form and highest conversion marketing tactic is still word-of-mouth — 86% of customers trust word-of-mouth reviews and recommendations.  

So, how do you win peer-to-peer referrals organically and authentically? You focus on honest and rapid customer service . Even if your product is flawed or faulty, or your business makes mistakes, with humble customer service comes forgiveness. 

You’ll be able to turn mistakes into opportunities, build loyal brand ambassadors, and win the hearts of your customers as well as their heads by simply handling situations with transparency. People forgive when we own up to our mistakes. 

At the same time, excellent customer service can help to build higher customer success rates and, in turn, win product referrals from your customer’s micro-communities. You could be a handshake away from your biggest client, but you’ll never know if you don’t treat your current ones well. 

Focus on customer service from day one and every day after you’ll be thankful for it. 

• Wrapping it all up

These seven business mistakes may seem daunting, but there’s a lot you can do to avoid them. Undoubtedly, you’ll make mistakes on your road to success—we’re only human and are bound to encounter problems that we don’t overcome on our first attempt. What’s important is that we learn from our mistakes, and we document them for others to learn from in the future. 

Remember, whenever you are in times of doubt or come across business management problems that you’re struggling to conquer, come back to why you started your business in the first place. 

You started because you saw a problem or injustice in the world that you can overcome. Or you began with a vision of creating a better world with your product or service. Remind yourself of your business purpose , mission, and vision. Stay true to it. Keep striving towards it. Whether you make one mistake along the way or many, what’s important is you keep moving forward.

Ray Slater Berry is a content strategist at Outreach Humans. He has been working in social media and content marketing for nine years. He specializes in the tech, innovation, and travel sectors. He is also a published fiction author with his first title, Golden Boy.

Table of Contents

• 1. Failing to track everything 
• 2. Breaking data compliance regulations  

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Common mistakes in business plans 

A business plan is a written document that details a company’s key business functions, objectives, and plans to achieve those goals. It serves as a guide for how to start, run and grow a company. A business plan allows the company’s management to have a unified vision of the company’s goals and can also be used to secure investment funding. A good business plan should include a description of the company, its objectives, the product or service it offers, a market analysis of the industry and its competitors, a marketing and funding strategy, budget, and a prospective financial projection outlook. 

A good business plan can help the entrepreneur turn his dreams into reality, while a bad one could lead to disappointment, failure and financial loss. 

Here are some common mistakes people make when creating a business plan and how you can avoid them. 

Poorly written 

A business plan riddled with errors such as spelling and formatting errors will create a bad impression of the company. Avoid this by running spell-check or getting someone with the requisite skills to vet the plan. Use clear and concise language and make sure your formatting is consistent. 

Undefined target market and audience 

Entrepreneurs with a product or service without a specific target market have a high likelihood of failing. The business plan should detail how the product or service would be a good match for a specific user demographic, include marketing plans, and propose appropriate distribution channels. 

Bad research 

Using unsubstantiated or outdated data can be detrimental to a business plan. Credible, authoritative and up-to-date resources on areas such as market trends, competitor analysis, size and market share, consumers’ purchasing habits and motivations should be used to help the entrepreneur better position and market his product or service. 

Unrealistic assumptions 

Be sure that assumptions that you make about your business and its industry are realistic. Two common unrealistic assumptions are: 

Financial projections: inflationary projections of future earnings should be avoided. Investors tend to be wary of overly optimistic plans that do not have concrete evidence to back them up. 

Competition: believing that competition does not exist is a fallacious assumption. Emphasise the unique selling points of your product or service to help maximise your company’s competitive advantage.  

Too long, too short or too vague 

Instead of producing a 200-page business plan, focus on the key elements of the business such as marketing strategy and budget projections. Use visuals (graphs, charts, tables, maps) to illustrate your points. Further research data and technical details should go into an appendix.  

Writing a good business plan takes time and effort, but it provides a handy road map to get a business up and running and convince investors to come on board. 

References 

Clarke, Andrew. “Top 10 business plan mistakes”. Entreprenuer. Accessed 17 February 2022, https://www.entrepreneur.com/article/81188   

Hayes, Adam. “Business plan”. Investopedia. Updated 4 May 2022, https://www.investopedia.com/terms/b/business-plan.asp   

Rhode Island Small Business Development Center. “Seven common business plan mistakes”. Accessed 17 February 2022, https://web.uri.edu/risbdc/seven-common-business-plan-mistakes/   

Small Business BC. “10 common business plan mistakes”. Accessed 17 February 2022, https://smallbusinessbc.ca/article/10-common-business-plan-mistakes/

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How to Start an Ecommerce Business: 2024 Edition

With global online retail sales expected to hit $8.15 trillion by 2026, there’s no better time to start an ecommerce business.

But if you’re new to the business world, launching an online store can be daunting. Where do you begin? Should your initial focus be on product selection, website design, or marketing strategy? These questions are common for any budding entrepreneur.

This guide covers all the steps, from the basics to the more advanced aspects of running an online store. You’ll learn how to set up, manage, and grow your business into a profitable ecommerce venture.

How to start an ecommerce business: 5 steps to launch

1. find products to sell.

Being strategic with your product selection is key. Here are some tips to help you choose:

Capitalize on regional products

Identify products unique to certain regions or cultures that might have a demand in other areas. These can be traditional crafts, local delicacies, or specific fashion styles.

Explore niche communities

Look into niche hobbies or interests and find products that cater to these specific groups. These communities often have passionate followers looking for specialized items.

Solve a pain point

Think of a problem you’ve personally encountered and consider if there’s a product that could solve it. Products that address real-life issues can resonate well with customers.

You’ll find inspiration is abundant once you start your search. Google Trends can be a useful tool to help validate your product ideas.

Additional resources:

• How To Find a Product to Sell Online: 13 Tactics for 2024
• 10 White Label Products Ideas for Ecommerce  

How to source your products

When it comes to sourcing products, dropshipping is a solid option to think about. It’s a setup where an ecommerce business sells products without dealing with inventory. A customer buys something from you, and then you order it from a dropshipping supplier who ships it directly to them.

While dropshipping is a popular choice, there are other business models like wholesaling or direct-to-consumer that might suit different business needs. However, dropshipping stands out for several reasons:

• Testing new ideas is easier: With dropshipping, trying out new products is a breeze. You don’t buy a bunch of stock upfront, so experimenting with different items to see what sticks is less risky.
• Geographic flexibility: Run your business from anywhere. As long as you have internet access, you can manage a dropshipping store, making it perfect for those who love flexibility.
• Lower entry barriers: You don’t need a big budget to start. This makes dropshipping ideal for those beginning their ecommerce journey.
• The Ultimate Shopify Dropshipping Guide (2024)
• 11 Best Dropshipping Suppliers and How To Choose the Right One

2. Analyze the competition

Research is integral to the success of your ecommerce store. Once you’ve chosen your products, look at competitors and what they’re doing. Here are a few things to pay attention to when doing a competitor analysis: 

• What is their business model?
• Are they selling multiple items or just one product?
• What social media channels do they utilize?
• Who is their target market?
• How do they push sales? (e.g., paid social, PPC, SEO, email, etc.)

Competitor analysis can lead you to identify better products to sell and give you a good understanding of how to launch an online business. Additional resources:

• SWOT Analysis: How to Create One + Examples to Inspire You

3. Write a business plan

With your competitive research complete, it’s time to write your business plan. This plan serves as a roadmap, guiding your ecommerce journey from start to growth. It’s especially important for aligning your goals and strategies.

Tips for crafting a successful business plan:

• Define clear objectives: Start by setting specific, measurable goals for your business. This could include sales targets, customer acquisition numbers, or market penetration rates.
• Outline your business model: Describe how you will manage inventory, whether through dropshipping or holding stock.
• Detail your marketing approach: Explain how you’ll attract customers. Include tactics like SEO, social media marketing, and influencer collaborations.
• Make financial projections: Include detailed financial forecasts. Show expected revenue, expenses, and break-even point.
• Conduct a risk analysis: Identify potential challenges and how you’ll address them. This could include market changes, supply issues, or technological advancements.
• Include an action plan: Break down your strategies into actionable steps with timelines. This makes your goals more attainable and trackable.
• The 7 Best Business Plan Examples (2024)
• Business Plan Template: The Ultimate Guide for Ecommerce Businesses

4. Choose a name and logo

Choosing a business name.

Choosing the right name for your online business is a critical step. A good name sticks in people’s minds and becomes synonymous with your brand’s identity. Tools like Oberlo’s business name generator are great for sparking unique ideas and checking if a domain is up for grabs.

After picking a few names, see if they’re available on social media. Your brand needs the same name everywhere for people to recognize you easily. Thinking of selling worldwide? Make sure your name works across different cultures. You don’t want any surprises there.

Crafting a logo

Your logo is the visual heartbeat of your brand. Begin with something straightforward yet impactful using Shopify’s free logo maker . This tool is ideal for those new to logo design.

Consider how your logo will appear in different settings. It needs to shine on everything from your website to product packaging. A well-designed logo, aligned with your business name, lays the foundation for a strong brand presence in the online marketplace.

• How to Build a Brand: An 8-Step Guide
• Branding Design: What It Is and How to Do It

5. Build your online store

Once you have chosen a name and logo, the next thing to do is build your store. Choosing ecommerce hosting platforms like Shopify can make setting up your store easy. Shopify has lots of templates to start with and an easy-to-use online store builder that doesn’t need coding input. 

When your website is ready to start taking orders, remember to try a test order yourself to make sure the process is smooth for the customer. Alleviate any additional steps needed to buy something online and ask only for information that is necessary for the checkout process.

• 7 Best Free Shopify Themes For Your Online Store
• 58 Most Inspiring and Successful Shopify Stores in 2024

6. Choose your sales and marketing channels

There are various sales channels available, and selecting the right ones depends heavily on your target audience and the types of products you sell. If you specialize in unique or handcrafted items, niche marketplaces like Etsy are more suitable than broader platforms like Amazon or eBay. 

Here’s a list of marketplaces that cater to different niches:

• Bonanza : A great platform if you’re selling unique and diverse items. From fashionable clothing to rare collectibles, it attracts a wide range of buyers.
• Newegg : If your specialty is electronics and tech gadgets, Newegg is your marketplace.
• Reverb : This niche marketplace is dedicated to musical instruments and gear. It connects sellers with a targeted audience of musicians and enthusiasts.

On the marketing front, balancing cost and effectiveness is key. You want to reach the right people without breaking the bank. Here are some strategies to consider:

• Social media marketing: Engage on Instagram with live sessions, for example—a cost-effective way to connect and show your brand’s personality.
• Email marketing: Interactive emails with quizzes or polls boost engagement without significant expense, offering valuable customer insights.
• Influencer partnerships: Working with niche micro-influencers can be more affordable and effective for targeting specific customer groups.
• Search engine optimization (SEO): Focus on voice search optimization. It’s a smart, future-proof strategy that can reduce long-term marketing costs.

Additional resources

• 10 Best Marketing Channels for Ecommerce Stores
• 9 Marketing Strategies That’ll Level Up Your Ecommerce Store

7. Launch your business 

Now, you’re ready to launch your online business. It’s a big step, and there’s plenty to keep an eye on as you start. First up, watch your key performance indicators (KPIs) closely. They tell you how well your store is doing and what you might need to tweak.

Next, make sure your shipping runs smoothly. Happy customers often come back, so getting orders to them without a hitch is crucial. If something goes off track, be ready with a backup plan.

Finally, keep learning and adjusting based on what your customers say and what your data shows. This way, your business keeps growing and improving.

How much does it cost to start an ecommerce business?

Starting an ecommerce business can be more budget-friendly than you think. Often, you might need only about $100 to get going, mainly for a website subscription and a theme for your store. One of the perks of an ecommerce business is that it typically costs less than a brick-and-mortar store. You won’t have the same overheads like rent for a physical space.

If you opt for a dropshipping business model, the initial costs can be even lower. In dropshipping, you pay for products only after customers buy them, so there’s no upfront expense for stock. However, if you’re making products yourself or working with manufacturers, you’ll need to invest in materials and labor from the start.

Shopify’s research sheds some light on what to expect financially. They surveyed 150 entrepreneurs and 300 small business owners across the US. The findings suggest that new ecommerce store owners might spend up to $40,000 in their first year, covering everything from products and operations to marketing and staff wages. But these costs are usually offset by your business’s profits.

Here’s a rough breakdown of typical first-year expenses: 

• Online store setup: 9%
• Operating costs like legal fees and software: 11%
• Marketing: 10.3%
• Product-related costs: 31.6%
• Shipping: 8.7%
• Team and staff expenses: 18.8%
• Offline costs, like event fees: 10.5% 

However, the actual amount can vary based on factors like your industry, the type of ecommerce model you choose, and whether you hire employees. And you don’t need to have the entire sum upfront. Many entrepreneurs start with personal savings, while others may seek support from friends, family, or personal loans.

4 tips for creating a profitable online store

Launching an ecommerce business is just the beginning. To make it profitable, you need to think differently. Here are some actionable tips for success: 

1. Enhance customer interaction 

Revamp your customer service approach. Implement interactive features like virtual product trials or augmented reality on your site. This will give customers a new way to experience your products.

2. Gamify your shopping experience

Transform your website into an interactive playground. Add elements like scavenger hunts for discounts or fun quizzes that lead to personalized offers. These tactics can make shopping more engaging and increase sales.

3. Personalize with AI

Incorporate AI technology into your store. Use it to analyze customer behaviors and preferences. Then, tailor product recommendations and content accordingly to enhance the shopping experience.

4. Keep your inventory fresh 

Regularly update your product offerings. Use market trends and customer feedback to introduce new items. Consider limited-edition products or collaborations to create excitement and attract repeat visits.

Open your ecommerce store

Building an ecommerce business from scratch has its mix of highs and lows. You’ll be choosing products, gauging their market fit, and handling production. Next comes developing your online store and drawing in customers. It’s a bit like solving a complex puzzle, and the satisfaction of seeing it come together is immense.

Hopefully this article has helped you understand how to start an ecommerce business. You’ve got everything you need at your fingertips to make this the year your store takes off, and we’re happy to help you meet this goal.

Ecommerce business FAQ

What are the 4 ecommerce business models.

There are four primary ecommerce business models, : 

• Consumer to business (C2B): In this model, individuals offer products or services to businesses. An example is an influencer charging a fee to provide brand exposure to their audience.
• Business to business (B2B): Here, one business sells goods or services to another business. For instance, a company might sell wholesale products to another business for their use.
• Consumer to consumer (C2C): This model involves transactions between consumers. An example is selling vintage clothes on a platform like Facebook Marketplace to another individual.
• Business to consumer (B2C): In this common model, ecommerce businesses sell goods or services directly to individual consumers, like purchasing a jacket from an online retailer.

How do I start an ecommerce business without money?

To be honest, you’d need at least a few hundred dollars to start an ecommerce business. That’s because it’s a product-based business that requires you to build an online store, do marketing, and invest in the growth of your brand.

That said, you can start an ecommerce business on the cheap by choosing dropshipping as your business model, tapping into free marketing channels, and creating brand awareness via word-of-mouth strategies. You can also look into funding programs like Shopify Capital to get the money you need to start and grow your ecommerce business.

Is an ecommerce business profitable?

In a word: yes. But realizing your profits could take a while, since an ecommerce entrepreneur’s journey is a marathon rather than a sprint. It could take you 18 to 24 months to see a profit. That’s why we recommend you don’t measure the success of your ecommerce venture by your net profit in the first year.

Want to Learn More?

• How to Start a Photography Business
• 30 Amazing Startup Business Ideas
• The Ultimate Guide to Mobile Commerce
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I've worked on cruise ships for years. I always see passengers make these 13 mistakes.

• I've worked on cruise ships for over six years, so I've seen many passengers make mistakes.
• Missing the ship at port or booking excursions with outside operators could be costly and risky. 
• If you don't set your phone to airplane mode, you may rack up overseas roaming charges.

After over six years working on ships for a major cruise line , I've witnessed tons of travel blunders that prevent guests from having the best possible experience.

Here are 13 common mistakes I see travelers make:

Not reading the fine print can lead to conduct issues later

Passengers usually come on the ship excited for a good time, and for many, this involves a drinks package . And with lots of drinks can come rowdiness. 

I've come across a few troublemakers who had no idea that smashing Champagne glasses in the hot tub could get you booted off the ship.

Every passenger consents to a hefty conduct policy when they book the cruise, so make sure to read through it to know what's prohibited on board.

Make sure to put your phone on airplane mode to avoid expensive roaming charges

Cellular rates at sea can sneak up on you, and you can easily rack up a $500 roaming bill. 

Even if you're not actively on your phone, most are still using data, so make sure to put yours on airplane mode to avoid roaming charges.

Really, just turn your phone off unless you're using it to take photos or access the ship's WiFi.

Many passengers don't take advantage of the different dining options on board

I often see passengers eat all three meals at the buffet every day. I know some people just really love the self-serve option, but it surprises me how many guests have no idea what's included with their trip.

Many times, the biggest shock to most first-time cruisers is that the dining room is included on most ships. Yes, this means a sit-down meal where you can order seven appetizers, five entrées, and 12 extra cookies for a midnight snack.

There are also so many spots with free food around most ships, like a pizza station, 24-hour ice-cream machine, and small cafés. Just be aware that specialty dining, like the steak house , might cost extra.

Leaving your room key behind is more of a hassle than you'd expect

It is not just a room key — it's your onboard credit card, ticket on and off the ship, and identification for the week.

Everything is connected to that card, so make sure to set up your information online ahead of time so you can start swiping the moment you get on board.

Security will scan it when you pass through the gangway to know who is on or off the ship, so it's especially important to have it on port days.

If you lose it, report it to the service desk immediately to ensure that no one else spends your money.

Many guests don't know they can bring their own wine on the ship

While many people think no outside alcohol is permitted on the ship, many major cruise lines allow passengers over the age of 21 to bring a bottle or two of wine on boarding day, so you can stop smuggling drinks in empty mouthwash bottles.

Some terminals will even sell wine to boarding travelers. If you buy alcohol in a port, you'll usually have to check it upon reentering the ship, and it'll be delivered to your room on the last night.

Missing the all-aboard time on port days is an expensive mistake

In my years of working cruises, I have seen more than a handful of guests miss the ship.

Although this is a huge fear for most passengers, it usually happens to avid cruisers — people who have been to the port many times before sometimes assume the all-aboard time is always the same.

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But this time varies by cruise, and it's stated on multiple signs at the exit gangway, in the daily planner, and in the captain's announcement.

Also, always triple-check whether the all-aboard time is based on the ship's clock or the local time.

If you miss the ship, you'll often have to get yourself to the next port, which can be very pricey.

Passengers miss out on discounts by not booking their next cruise while still on the ship

Booking a future vacation while on a ship can get you bigger discounts on cruises , access to new itineraries not open to the general public yet, and a lot of onboard credit.

These booking appointments are usually filled up by the last few days of the cruise, so head there at the beginning of your stay for more deals and no wait.

Booking a tour with an outside operator can be risky

Although it might be a lot cheaper to book your tours independently, it's also a lot riskier. 

Excursions booked through the ship are with verified operators. Most cruise lines will wait for the ship's tour to return before leaving the port, even if it's hours late. 

But this is not the case if you book on your own, and running through the port to find the ship sailing away is probably not the excursion you're looking for.

Immediately removing the automatic gratuity affects many staff members

On most cruise ships, there is a preset daily gratuity charged per passenger unless it's removed at the guest-services desk.

I see so many people come on board and immediately remove the charge, but this fee is usually split between your housekeeping, dining, and cleaning staff. It is essential to their jobs and affects their livelihoods.

I'd recommend waiting until the end of the cruise to make sure you're happy with the service instead of removing it on day one. You can also increase or decrease the amount instead of cutting it. 

Packing prohibited items can lead to a headache

As confident as you are that you can sneak on your portable iron, I seriously advise against packing anything that's not allowed on board. 

Security scans your bags on embarkation day, and if a prohibited item — like an iron, a bottle of vodka, or a candle — is found, they will hold your bag.

Your luggage won't be delivered to your door, and you may have to wait several hours until security contacts you, brings you to the holding area to search the bag, and confiscates the item until the end of the cruise.

Prepare your necessary travel documents to avoid trouble at ports

Cruise ships travel all over the world, so check if you need specific visas or documents based on your nationality.

You are responsible for knowing and bringing your own paperwork. If you don't have the right documents, you might not be able to get off at a port or, even worse, be allowed back on the ship.

I saw this happen when traveling to India with many American guests, a handful of whom didn't realize they needed a visa.

Dressing down on formal night can limit your dining options

Even though walking through the promenade in shorts is your choice, many guests aren't aware that there's usually a formal evening on most cruises.

Most passengers don evening gowns and suits on formal nights, and I've met cruisers who wished they would've packed at least one nice item — besides their Margaritaville shirt, of course.

Passengers not formally dressed on this evening usually aren't allowed to eat in the ship's main dining rooms, though the buffet is open to everyone.

It's worth learning the difference between port and starboard

Different announcements will direct passengers to either the port side or starboard side of the ship, so it's best to brush up on the jargon before your vacation.

Port is the left side of the boat and starboard is the right, always configured facing the front of the ship.

Just remember that "port" and "left" are both four letters. You'll thank me later.

This story was originally published on June 28, 2021, and most recently updated on June 7, 2024.

Watch: Cruise ship captain breaks down 8 cruise ship disasters in movies and TV

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Seven Common Business Plan Mistakes

Though every small business is unique, many successful ones start with a common foundation: a business plan. Researching and writing a business plan is an important step in laying out the road map your business will travel, and an indispensable step in securing funding for startup costs or growth. Save time and energy by avoiding these common business plan mistakes.

Seven top business plan mistakes:

1. Not making one

As an entrepreneur, surely you’re more excited about doing the thing you want to do that writing a plan about it. But recall the wisdom of Yogi Berra: “If you don’t know where you’re going, you’ll end up somewhere else.” Without a plan, you’re likely to spend valuable time and energy pursuing fruitless paths and spreading yourself thin. Make completing your plan a priority to focus your energy, stay on the right path, and improve your chances of landing a small business loan.

2. Being unrealistic

This can happen on a number of fronts if you’re not willing to ask hard questions, do concrete research, and be honest with yourself. Your business plan can’t represent the best case scenario or the way you hope things go: it has to grapple with the reality of the marketplace, financial truths, and the entrepreneurial landscape. Focus on being realistic in a few key areas:

• Financial projections:  Don’t pad or overinflate your future earnings projections. At best, you’ll look like you don’t know what you’re doing and a bank won’t trust you enough to lend you money. At worst, they’ll lend you the money and you’ll go into default or bankruptcy.
• Competition:  A big red flag in many business plans is a belief that you have minimal competition — or even none. “You’re always competing for dollars,” said RISBDC counselor Manuel Batlle. Even if your product is unique, your target customers still have choices about what to do with their money. You must address how you will persuade your target market to give their dollars to you .
• Market research:  It doesn’t matter what you want to build or sell. Someone has to be willing to buy it for a price that makes it worth selling. No business plan is complete without investing time and energy in up-to-date market research to truly understand market trends, customer interest, competitor performance, and other aspects of product or service viability.
• Customer base for brick and mortar businesses:  Your mother may be willing to drive across the state to buy a soda from you, but probably no one else will. For many products and services, your customers are going to be local. Particularly in Rhode Island, customers may be  searching within walking distance, or a 5-10 minute drive. Dig deep into the census information on demographics in your area and be realistic about how many target customers are within buying distance.

3. Poor executive summary

A lender will read your business plan’s executive summary and “give it the sniff test, then the gut test,” said RISBDC business counselor Josh Daly. The lender may decide whether or not to continue reading based on what their intuition tells them. So the executive summary is worth focusing on. Someone without a deep business background should be able to understand it, and it should make the case that your business is viable in short, clear points. Daly recommends 1-3 sentences each on your business background, customer base, the market, the competition, your qualifications, and your team. A concise summary should fit into about two pages and convince your audience to keep reading. If your plan is focused on securing financing, prospective lenders should immediately know how much money you are looking to borrow and how the money will be used.

4. Too long

For a majority of small businesses, a succinct and well-organized business plan should be 5-10 pages long. An engaging business plan includes visuals, where appropriate, to avoid wordiness when a graph, chart, or map will tell the story more effectively. Additional supporting financial projections or research data can go in an appendix. Plans that are significantly longer don’t necessarily give more or better information, and they risk losing their audience before they’re actually read.

5. Not backing up what you say

Along with being realistic in discussing your projections and your market research, you also need to make sure you’re using data and references — not just anecdotes — to support what you’re claiming.

6. Not focusing on the team, and your role as the head

No small business owner has every skill and personality trait needed to take a business all the way from the seed of an idea, to the world, all by him or herself. It’s appropriate and important to identify and address gaps in your experience and education, and explain how you’ll overcome them. It’s also crucial to briefly introduce your top team members, sell their contributions to your company, and portray how together, your team is well-rounded and ready to tackle the challenges ahead.

7. Sloppy mistakes

Typos, grammatical errors, and poor formatting are completely avoidable enemies, taking the shine off your first impression. Your business plan needs to look professional because it’s going to speak for you. Use spell-check. Re-read your plan. Get lots of sleep and re-read it again. Then, even if you’re a great writer and a stickler for detail, have someone else check it over for things you’ve missed. Never underestimate the value of a pair of fresh eyes.

Though you should be ready to put time and effort into your business plan, you don’t have to do it alone. The RISBDC offers workshops and no-cost, one-on-one business counseling to help you refine your plan and take the next steps toward business success.

Instagram Ads Best Practices & Common Mistakes To Avoid: New Guide By Scott Hall

Digital marketing expert, Scott Hall, has released his latest guide for small businesses who are looking to increase their revenue from social media marketing. The how-to guide focuses on creating effective Instagram Ads.

New York, United States - June 6, 2024 —

The new guide, “The Dos and Don’ts of Instagram Ads”, breaks down the tools business owners can use to create effective ads, such as Instagram Boost, Ads Manager and analytics.

Further information is available at https://scotthall.co/the-dos-and-donts-of-instagram-ads

Seventy-one percent of US businesses use Instagram as a promotional marketing tool, gaining access to the platform’s potential advertising reach of over 849 million users, explains Scott Hall. Therefore, the guide is designed to help small-scale businesses gain access to this large digital market.

The broader principles of digital marketing, on which Scott Hall has built his reputation, are applied to Instagram ads. The guide contains details on how to conduct testing and how to target ads for a specific audience and location. Hall asks business owners to take some time to really get to know their audience so that they can create Instagram ads which speak to their interests and life needs.

Advice offered in the guide also includes using high-quality images for the ads and ensuring each ad has a clear call to action (CTA).

Scott Hall encourages small businesses to take an all-encompassing approach to their Instagram ads. Tips for trying a variety of methods and formats are included in the guide, and Hall further reminds his readers not to neglect their website landing pages.

“Creating an effective Instagram ad is achievable for everyone,” says Scott Hall. “However, all your effort is for nothing if your potential customer clicks through to a lackluster, low-fi, or confusing landing page. My guide will teach you how to put yourself in the customer’s shoes and make the buying process as easy as possible from social media scrolling to shopping basket checkout.”

About Scott Hall

Twenty years experience in digital marketing and enterprise software have given Scott Hall a reputation for helping small to medium-sized businesses improve their revenues by using the latest new technologies and marketing methodologies. He is the published author of ‘The Blog Ahead’, a book on social media content marketing. His series of ‘how to’ guides is aimed at educating business owners who are unable to afford a dedicated marketing department in easy-to-follow language, avoiding any confusing technical jargon.

Those interested in finding out more about how to create, test and improve their own Instagram ads can access Scott Hall’s “The Dos and Don’ts of Instagram Ads” at https://scotthall.co/the-dos-and-donts-of-instagram-ads

Contact Info: Name: Scott Hall Email: Send Email Organization: ScottHall.co Address: 60 West 23rd St. Suite 638, New York, NY 10010, United States Website: https://scotthall.co

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What Are Common Mistakes Beginners Make When Investing?

Jun 3, 2024

Navigating the complexities of the trading and investing world can be daunting for beginners, which is why we've gathered insights from seasoned professionals, including CEOs and traders. Starting with the importance of not blindly following investment advice and concluding with the necessity to maintain discipline and avoid emotional decisions, here are the top 15 things that beginners should heed, along with expert tips on ways to gain your stride when learning to invest.

Avoid Blindly Following Investment Advice

One common mistake that beginners should avoid in the trading and investing world is blindly following others' advice or stock picks without conducting their own due diligence. This mistake often arises from a combination of factors, including the temptation of quick profits, social influence, and a lack of understanding of the market.

I've come to realize the detrimental role of greed and impatience in leading people to seek shortcuts to wealth in the stock market. It's essential to recognize that successful investing requires discipline, patience, and a serious commitment. Beginners should learn to be mindful of allowing greed to cloud their judgment and remind themselves constantly that investing demands diligent research and a thoughtful approach.

Similarly, I caution against the dangers of following trends or tips from unverified sources. Whether it's friends, social media personalities, or celebrities, blindly following their recommendations can lead to significant losses. I've seen instances where popular individuals such as Twitter character Roaring Kitty or Andrew Tate influenced mass investment decisions, often resulting in regrettable outcomes for those who followed without understanding the underlying fundamentals. Since we don't know these social media figures' motivations and their sources of information may be unknown, it's essential for beginners to educate themselves independently.

To avoid this mistake, seeking education from reputable sources can provide beginners with a solid foundation of knowledge and skills before making any decisions. By cultivating a disciplined and patient approach to investing and resisting the temptation to chase quick profits or follow a herd mentality, beginners can increase their chances of long-term success and mitigate the risks associated with blind speculation.

David Capablanca , Short-Selling Trader

Act on Research, Not Impulse

One common mistake beginners should avoid in trading and investing is acting on impulse rather than research. Often, new investors get swayed by market hype or fear, leading to poorly-timed trades. We emphasize the importance of a disciplined investment strategy based on thorough analysis and a clear understanding of market fundamentals. Beginners can sidestep this pitfall by setting long-term goals and adhering to a well-constructed investment plan.

Adam Garcia , Founder, The Stock Dork

Heed Bondholder Insights, Avoid Falling Knives

Newcomers often catch falling knives, believing that stocks recover from significant price drops by nature. Instead, distressed equities move as a consequence of the underlying story and the likelihood of bondholder recovery.

Let senior and junior non-convertible bondholders be your guides. If you have no idea where the same company's straight (non-convertible) bonds trade versus par, then you have no business buying the stock. Follow the leader. Bloomberg and the FINRA website provide those bond prices.

Deep discounts from par serve as a precautionary red flag. Original par lenders forfeited principal in order to get away from that borrower's risk.

Debt that trades at 85 was sold by new-issue bondholders, who left 15% of their money on the table in order to avoid possibly losing even more. The stock beneath them is at grave risk of tanking and should only be handled by well-informed investors. If lenders are impaired, that subordinate equity claim is not worth much.

Some other topics worth addressing:

If you want a cash flow stream, buy bonds, not stock. Most stocks can move in one day as much as their annual dividend. That should not serve as a primary reason to buy an equity.

Some dividends are leveraged, meaning that a company with insufficient free cash flow borrowed money to make deceptive distributions using OPM, other people's money. Know where your dividends come from.

Sell covered calls against every liquid long position. Getting exercised is a nice problem to have, considering that the writer never expected the stock to hit that price in the first place.

Dennis Wurst , Senior Distressed Credit Analyst

Personalize Your Investment Strategy

People often have a desire to get rich quickly, so they rely on financial experts and online publications for investment ideas without making decisions on their own. Everyone is different. Everyone has different risk tolerances, goals, and time horizons. Are you looking to invest in fast-growing companies that are volatile or in more stable companies that aren't growing as quickly? What do you want to invest for?

Everyone wants to make money, but why? Are you looking for consistent income for retirement? Are you looking for a lump sum to pay down debt or to travel? How long do you plan to invest in the company? Are you looking for a short-term or long-term gain?

Investors need to ask themselves these questions because the answers dictate what company/product they invest in, the account they would invest with, and the types of investments that are most appropriate. Each of these needs to be taken into consideration when listening to outside information. Just because it looks good on the internet doesn't mean it's good for you. Investing comes with risks and rewards, but to ensure you are investing in the best, you have to do research on what's best for you.

Ashley Fox , CEO, Empify

Implement Emotional Discipline in Investing

One common mistake that beginners should avoid in the trading and investing world is succumbing to emotional decision-making. This mistake often occurs because beginners may feel overwhelmed by market volatility or influenced by fear, greed, or FOMO (fear of missing out). Emotional trading can lead to impulsive decisions, such as buying or selling assets based on short-term fluctuations rather than long-term fundamentals.

To avoid this mistake, beginning investors can implement several strategies.

First, they should educate themselves about investment principles and develop a solid understanding of risk management techniques. By gaining knowledge and staying informed about market trends, beginners can make more informed decisions based on facts rather than emotions.

Second, beginners should establish a well-defined investment plan with clear goals, risk tolerance, and a diversified portfolio strategy. Having a plan in place can provide a roadmap for investment decisions and help investors stay disciplined during market fluctuations.

Additionally, beginners can benefit from seeking advice from experienced professionals or mentors in the investment field. By learning from the experiences of others and seeking guidance from reputable sources, beginners can gain valuable insights and avoid common pitfalls in the trading and investing world.

Richard Dalder , Business Development Manager, Tradervue

Embrace Portfolio Diversification Early

One common mistake that beginners often make in trading and investing is failing to diversify their portfolio. Based on my experience, especially during the time I spent at LoanDepot overseeing financial analysis, I observed that many new investors put a significant portion of their capital into a single stock or market sector, hoping for high returns. This approach can lead to substantial losses if that particular investment does not perform well.

This mistake typically arises from a combination of enthusiasm and a lack of knowledge about market dynamics. Beginner investors might be influenced by recent success stories or hot tips without proper consideration of the broader economic environment or the specific challenges that a company or sector might be facing.

To avoid this pitfall, I recommend adopting a diversified investment strategy. During my tenure in corporate accounting, particularly dealing with the complexities of mortgage banking investments, I learned the importance of spreading investments across various asset types and industries. This not only mitigates risk but also positions the portfolio to capture growth from different sectors of the economy over time. Thus, it's crucial for beginning investors to educate themselves on the fundamental principles of asset allocation and to consider seeking advice from experienced financial advisors to tailor a diversified investment plan suitable to their long-term financial goals.

Sean Autry, CPA , Owner, PlushStone CPA

Develop a Solid Trading Plan

A common mistake beginners make in trading and investing is neglecting a solid trading plan. Many newcomers dive in without a clear strategy, driven by the allure of quick profits and the firm's capital. This mistake often stems from overconfidence and a lack of understanding of market complexities. To avoid this pitfall, beginners should develop a detailed trading plan that includes entry and exit criteria, risk management rules, and profit targets. Back-test the strategy using historical data and demo accounts before trading live. Moreover, firms often have specific guidelines, so familiarize yourself with their rules and align your plan accordingly. By sticking to a well-defined plan, continuously learning, and refining strategies based on performance reviews, beginners can build disciplined habits and navigate the trading world more effectively, avoiding costly errors that stem from impulsive decision-making.

Blake Olson , Owner & CEO, Smart Prop Trader

Resist Herd Mentality, Focus on Research

One common investing mistake beginners often make is following the herd mentality. This occurs when investors mimic the actions of others without conducting their own research. It frequently leads to poor timing and financial losses. To avoid this, focus on independent research and develop your investment strategy based on sound investing principles (e.g., diversify your portfolio and think long-term). By making informed decisions and not simply following the crowd, you will position yourself for greater success in the investing world.

Ignacio Ramirez Moreno, CFA , Fixed Income Advisor

Invest Discretionary Funds, Not Essentials

Even the best investors in the world lose sometimes—probably more than we all think they do. The market is volatile, stocks fluctuate, and nobody can predict the future exactly. Unless you're a fortune-teller or are extremely lucky, you will most likely lose quite a bit until you learn how it all works. Dip your toes in the water before jumping into the ocean. Start by putting aside money your livelihood doesn't depend on and learning the ropes. Start with a few bucks in companies you currently know, use, and believe in. Then, when you gain a better understanding of the market, grow your portfolio.

Rani Sweis , CEO, AtticSalt

Conduct Thorough Research Before Investing

Neglecting to conduct thorough research before making investment decisions is a mistake that often occurs due to a combination of overconfidence and the allure of quick profits. This leads beginners to make impulsive decisions based on hearsay or fleeting market trends without understanding the fundamental value or risks involved.

To sidestep this pitfall, beginning investors are advised to cultivate patience and dedicate time to learning about market analysis, investment strategies, and the financial health of entities in which they consider investing. Emphasizing education and due diligence can significantly mitigate risks and pave the way for more informed and strategic investment choices.

Michael Gargiulo , Founder, CEO, VPN.com

Adopt a Long-Term Investment Mindset

Investing should be done with a long-term mindset. If you go into it with a short-term outlook, trying to double, triple, or 10x your money immediately, you are set up for failure, and you might as well just go to a casino and play some blackjack.

Allison Dunn , CEO, Head Business & Executive Coach, Deliberate Directions

Avoid Emotional FOMO and Panic Selling

FOMO or Panic Selling. One common mistake beginners should avoid is letting emotions drive their investment decisions. Many new investors fall victim to the fear of missing out (FOMO) or panic selling during market downturns. To avoid this mistake, beginners should focus on developing a well-researched, long-term investment strategy and stick to it, regardless of short-term market fluctuations. Educating yourself about market fundamentals, diversifying your portfolio, and setting realistic goals can help you maintain a level-headed approach to investing. Remember, successful investing is a marathon, not a sprint, and emotional decision-making can be detrimental to your financial health.

Sean Clough , President, Sales and Marketing, Harmony Lab & Safety Supplies

Resist Hype Train, Practice Rational Investing

One all-too-common mistake that beginners make in the trading and investing world is jumping on the hype train at the wrong moment. It's crucial to resist the temptation and not give in to the fear of missing out (FOMO). An old adage in investing is "buy the rumor and sell the news." However, most rookies tend to buy into a stock after it has already experienced exponential growth, right as the hype reaches its peak.

This mistake often occurs because beginners get swept up in the excitement and emotions of seeing rapid gains, thinking they'll miss out if they don't act quickly. To avoid this pitfall, it's essential to approach investing as a rational decision-making process rather than an emotional one.

Beginner investors should focus on conducting thorough research and analysis before making any investment. Look at the fundamentals of the asset, consider the long-term prospects, and assess whether the current price reflects its true value. Always keep your FOMO in check and strive to make informed, well-thought-out decisions.

Remember, investing should be about steady, sustainable growth rather than chasing after a quick, risky moonshot. Patience and discipline are key to building a successful investment portfolio.

Jonathan Buffard , Digital Marketing Director, Bottom Line Marketing Agency

Prioritize Learning Over Trend Following

As an experienced investment banker who—more recently—founded a company operating in the precious metals industry, I believe that many beginners tend to make a common mistake in trading and investing: they usually get swayed by trends or new opportunities without conducting the right research. This behavior is typically driven by a fear of missing out (FOMO), which leads to hasty decisions based on short-term market fluctuations or sensational news rather than thoughtful analysis.

From what I've seen, this technique can result in significant losses once the initial hype subsides and the market goes through a correction. To mitigate this risk, new investors should prioritize complete learning, consistent research, and careful consideration before committing to any investments. It's important to have a clear understanding of the investment type—be it stocks, bonds, or precious metals—and to develop a strategy that aligns with your financial goals and risk tolerance.

By maintaining discipline and avoiding the search for quick gains, you can gradually build an impressive and successful investment portfolio over time. This patient and informed technique is crucial for long-term financial growth and stability.

Brandon Thor , CEO, Thor Metals Group

Maintain Discipline, Avoid Emotional Decisions

As an entrepreneur, I have witnessed firsthand the common pitfalls that beginners often encounter when diving into trading and investing.

One prevalent mistake beginners should avoid is letting emotions dictate their investment decisions. The stock market can be volatile and unpredictable, and it's easy for newcomers to get caught up in a frenzy of fear and greed. This emotional roller coaster often leads to impulsive decisions, such as selling off investments during market downturns or chasing hot stocks without proper due diligence.

I vividly remember my early days as an investor when I let my emotions cloud my judgment. During a market downturn, I panicked and sold off a significant portion of my portfolio, only to watch the market rebound shortly after, leaving me with substantial losses and regrets. This harsh lesson taught me the importance of maintaining a level head and sticking to a well-defined investment strategy.

To avoid this common pitfall, beginners should adopt a disciplined approach to investing. This involves creating a comprehensive investment plan that aligns with their risk tolerance, investment horizon, and financial goals. By establishing a solid framework, investors can make decisions based on sound reasoning rather than fleeting emotions. Additionally, beginners should educate themselves on fundamental analysis, diversification, and risk management strategies to navigate the market more effectively.

Moreover, beginners must manage their expectations and understand that investing is a long-term endeavor. Unrealistic expectations can lead to disappointment and emotional decision-making. Beginners should be patient, stay the course, and avoid the temptation to chase quick gains or react impulsively to market fluctuations.

Successful investing requires a cool head, a well-defined strategy, and a commitment to continuous learning.

Abid Salahi , Co-founder & CEO, FinlyWealth

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By Ben Quintana // June 6, 2024 //

Ben Quintana

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Starting a Business – Entity Types

Once you decide to establish a business, a primary consideration is the type of business entity to form. Tax and liability issues, director and ownership concerns, as well as state and federal obligations pertaining to the type of entity should be considered when making your determination. Personal and personnel needs and the needs of your particular type of business should also be considered.

The following is a brief overview of various business structures. The information is intended to provide a basic understanding of the different business structures and is not intended to provide legal advice.

Corporation

• Limited Liability Company
• Limited Partnership
• General Partnership
• Limited Liability Partnership

Sole Proprietorship

Frequently asked questions.

Before you establish a business in the State of California, you should consult with a private attorney or tax advisor for advice about what type of business entity will meet your business needs, and what your legal obligations will be.

A California corporation generally is a legal entity which exists separately from its owners. While normally limiting the owners from personal liability, taxes are levied on the corporation as well as on the shareholders. The sale of stocks or bonds can generate additional capital and the longevity of the corporation can continue past the death of the owners. Legal Counsel should be consulted regarding the variety of options available.

To form a corporation in California, Articles of Incorporation must be filed with the California Secretary of State’s office. Forms for the most common types of Articles of Incorporation are available on our Forms, Samples and Fees webpage. You may use the form or prepare your own statutorily compliant document.

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Limited Liability Company (LLC)

A California LLC generally offers liability protection similar to that of a corporation but is taxed differently. Domestic LLCs may be managed by one or more managers or one or more members. In addition to filing the applicable documents with the Secretary of State, an operating agreement among the members as to the affairs of the LLC and the conduct of its business is required. The LLC does not file the operating agreement with the Secretary of State but maintains it at the office where the LLC’s records are kept.

To form an LLC in California, go to bizfileOnline.sos.ca.gov , log in, select Register a Business under the Business Entities Tile, Articles of Organization - CA LLC and follow the prompts to complete and submit. 

Limited Partnership (LP)

A California LP may provide limited liability for some partners. There must be at least one general partner that acts as the controlling partner and one limited partner whose liability is normally limited to the amount of control or participation of the limited partner. General partners of an LP have unlimited personal liability for the LP’s debts and obligation.

To form an LP in California, go to bizfileOnline.sos.ca.gov , log in, select Register a Business under the Business Entities Tile, Certificate of Limited Partnership - CA LP and follow the prompts to complete and submit.  

General Partnership (GP)

A California GP must have two or more persons engaged in a business for profit. Except as otherwise provided by law, all partners are liable jointly and severally for all obligations of the partnership unless agreed by the claimant. Profits are taxed as personal income for the partners.

To register a GP at the state level, a Statement of Partnership Authority (Form GP–1) must be filed with the California Secretary of State’s office. Note: Registering a GP at the state level is optional.

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Limited Liability Partnership (LLP)

An LLP is a partnership that engages in the practice of public accountancy, the practice of law, the practice of architecture, the practice of engineering or the practice of land surveying, or provides services or facilities to a California registered LLP that practices public accountancy or law, or to a foreign LLP. An LLP is required to maintain certain levels of insurance as required by law.

To register an LLP in California, an Application to Register a Limited Liability Partnership (Form LLP–1) must be filed with the California Secretary of State’s office.

A sole proprietorship is set up to allow an individual to own and operate a business. A sole proprietor has total control, receives all profits from and is responsible for taxes and liabilities of the business. If a sole proprietorship is formed with a name other than the individual’s name (example: John Smiths Fishing Shop), a Fictitious Business Name Statement must be filed with the county where the principal place of business is located.

No formation documents are filed with the California Secretary of State’s office. Other state filings may be required depending on the type of business.

Please see our Frequently Asked Questions webpage for answers to the most frequently asked business entity questions.

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