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Would-be entrepreneurs coming to SCORE plan to launch businesses in very diverse market segments but there are a number of requirements that they often share. If they need to borrow money to launch or develop their businesses, they will need a written Business Plan which they can provide to a potential lender. As these SCORE clients work on their business plans, they tend to make similar errors which will cost extra time and effort to correct. Let’s look at some of them.
Underestimating or dismissing your competitors… Some of our clients will say that their product is different from anything else on the market, and they don’t really have any competitors; or that their product is of a much higher quality than any similar items so there is really no significant competition.
Making assumptions like these is a mistake. The fact is that, in most cases, your potential customers are either already purchasing a product or service that meets the same need, or they don’t need it at all. To be a successful business owner, you do have to take competitors seriously. Even if you don’t have many competitors today, if your product attracts customers, you will have competitors tomorrow. Make sure that your business plan includes data and information about your competitors and that you have plans to continuously improve your competitive position.
Providing unnecessary details… Keep your business plan as succinct and to the point as possible. If you are in doubt about whether to include certain information or data, discuss it with your SCORE Mentor. Items such as licenses & permits, key management CVs, technical specifications, background data, equipment your business owns, supply or purchase contracts, facility leases, etc. can all be put in the Appendix if you feel that they are necessary to your loan application. Keep the main body of your plan as concise as possible.
Lack of market research… Becoming as knowledgeable as possible about the industry that you plan to enter is very important. How large is the market? How fast is it growing? Who are the major players? How do the majority of customers make purchases in this market? Through local retail stores, or online perhaps? What are the major trends in how sales are made? It will be important to have answers to as many of these questions as possible.
You can get information like this from trade publications and business magazines, industry reports, new sites dedicated to your market, statistics websites, blogs on the startups in your niche, and many other sources. Don’t forget that your local library probably has subscriptions to many of the industry publications and trade statistics that could be useful to you. Check with your local librarian, but also visit the SBA website (sba.gov) for advice on how to conduct your market research. You could also check out the website:
https://ciradar.com/competitive-intelligence-blog/insights/2017/10/18/free-market-research-tools
Presenting unrealistic financial projections…When you are starting out, the financial projections for your business will be based on some calculations but also a lot of “guesstimates.” This is understood but at the same time, you must make sure that you are making “reasonable” projections. In most businesses, for example, it would not be reasonable to forecast that you will achieve a 100% growth rate in your business every year for the first three years. On the other hand, a growth rate of only 1 - 2% a year will probably not be enough to keep you in business.
Without knowing much about the specific industry, a potential lender would probably feel comfortable with projected business growth rates of 5 to 15% a year. You will need to support these projections, of course, with some data that shows how you derived this figure or how it is going to be achieved.
Above all, your Business Plan must be your work, not merely a template into which you inserted your business name in the appropriate places. Keep the length of your Business Plan document such that it can be read in 15 minutes or so. Visit the website bplans.com to check out hundreds of completed business plans that are available free for you to review and get some ideas for content and formatting for your own plan. Your SCORE Mentor is ready to work with you when you say the word.
Barry Coates
770-315-8533
barry.coates@scorevolunteer.org
Barry J. Coates
With a background in nutritional biochemistry, business management, and marketing, Barry’s experience includes over 20 years working with major international businesses active in nutritional products, agribusiness, and banking. He held a number of marketing and general management positions serving US, Canadian, and European markets. Barry subsequently owned and operated his own small business for 6 years in Suwanee, GA, so he also has first-hand experience of the challenges of managing a small business. He has been involved in teaching and presenting material on behalf of several organizations. Barry currently serves as the District Director for SCORE in the state of Georgia.
