Compiling a formal business plan can be a daunting task for an entrepreneur.
The reality, of course, is that these documents are a necessity for any company. And, to be honest, they're not as hard to put together as you might think. (There are plenty of good books on the subject and some really great software packages, such as Business Plan Pro.)
Still, there are some common errors entrepreneurs face when writing a business plan.
Procrastination. It's easy to find distractions (such as your busy schedule) to prevent you from creating a plan. Resist them. And realize that without a document detailing plans for the future, your company is likely to become a rudderless ship at some point.
Financial focus. Think in terms of cash rather than profits. Initially, your profit and loss statement should be secondary to your cash flow statement. You'll need to initially ensure you have enough cash on hand on a day-by-day basis to survive.
Cover your bases. Don't focus too much on your grand idea, but make sure that you have all the fundamentals covered. Bold ideas are hard to sell. Rather, stress that you have the available time, common sense and business smarts to succeed. If you are looking for investors, they will be more interested in you and your people than the idea.
Forget the hype. Using colorful language and preconceived notions is an easy trap to fall into, but both are ultimately superfluous. People looking at your business plan want to see hard, solid facts, backed up by very reasonable assumptions. Set milestones, show which tasks you've established and apply sound logic to your reasoning.
Be realistic. Priorities are important, but you don't want to set too many. Potential investors are interested in your focus and will shy away if you try and cast too wide a net.
Don't overreach. While you'll need to project growth, make sure those estimates are realistic and that any growth spurts are tied and referenced to understandable and realistic events. Your projections need to be conservative and you must be able to defend them.
Know the playing field. It's critical to be thoroughly aware of your business competition. If your business plan is too inwardly focused, you lose sight of the big picture, which can be perilous to a small business.
A business plan is based, first and foremost, on common sense. Ultimately, you need to believe in all the assertions and assumptions that you're making. (If you don't, investors never will.) Solid preparation will position you well for the future.