What Not to Include in Your Business Plan

June 20, 2024
min read

As a startup, crafting a robust business plan or concept note is essential for securing funding and achieving operational success. However, many entrepreneurs fall into the trap of including unnecessary or irrelevant information in their plans, which can diminish their chances of attracting investment. In this post, we'll delve into what not to include in your business plan or concept note, supported by verifiable sources and links.

1. Overly optimistic projections

Investors seek realistic growth projections, not unsubstantiated claims. Avni Jesrani, a financial expert and business plan reviewer, points out that one of the most common mistakes entrepreneurs make is being overly optimistic in their projections. While enthusiasm for your venture is natural, it's crucial to base your projections on realistic and conservative assumptions.

Consider this: if you were building a bridge, you wouldn't base your plans on the assumption that there will never be a storm or heavy traffic. You would account for all possible scenarios to ensure the bridge can handle real-world conditions. Similarly, overestimating your business's growth won't impress investors; it may lead to frustration and mistrust. Be conservative and realistic in your projections, ensuring they can withstand scrutiny.

Avoid statements like, "We expect to capture 98% of the market share in the first year with a growth rate of 500%." Instead, provide realistic projections based on conservative assumptions and market research. For example, "Our revenue projections are based on acquiring 100 customers per month, with an average monthly spend of $50 per customer."

2. Generic Market Researc

A study by CB Insights found that 35% of startups fail because of a lack of product-market fit. This failure wouldn't be a thing if the startup had truly conducted market research and not based its idea on generic research. Funders want to see specific data and insights that demonstrate your understanding of your particular market. They need a detailed map to comprehend your competition and potential accurately.

The fashion market or industry is wide. There is the clothing, make-up, shoes, and even jewellery segment. A shoe-making business quoting general fashion industry data with no pointer to the shoe segment is generic research. Generic market research will give a rough idea of the market, but not the actual information. 

Market research statements like: 'The African market or African financial market is growing rapidly, and we expect to benefit from this trend' are generic. Instead, provide specific data and insights about your market.  For example: “The shoe segment of the African fashion market is valued at $2 billion, growing at 10% annually. We target urban professionals aged 25-40, who represent 30% of this market.” This will give funders a clearer picture of where you stand. 

3. Unrealistic Marketing Strategies

With many startups going digital, customer acquisition remains a significant challenge. Harvard Business Review notes that merely having a product or service isn't enough; reaching the customer is equally crucial. Funders want to see a clear and realistic marketing plan, not vague social media tactics.

Avoid strategies like, "We will utilize social media, content marketing, and influencer partnerships." These statements are too broad and lack actionable details. Instead, provide a detailed marketing plan with specific channels, metrics, and conversion goals.

For example, "We will leverage Instagram to reach our target audience through influencer partnerships. We aim to achieve a 5% conversion rate from these campaigns, with an expected customer acquisition cost of $1,200." This provides a clear, actionable strategy with measurable goals.

Now that you know what not to include, let’s look at some helpful tips to avoid these pitfalls. 

1. Framework for Creating Realistic Projections

Instead of making unsubstantiated claims about market capture or growth, base your projections on realistic and conservative assumptions. Here’s a framework for creating realistic projections:

  • Market Analysis: Start with a detailed analysis of your target market. Understand its size, growth rate, and trends.
  • Historical Data: Use historical data from similar businesses or industry benchmarks to inform your projections.
  • Assumptions: Clearly state your assumptions. For instance, base your revenue projections on a conservative estimate of customer acquisition and retention rates.
  • Scenarios: Create different scenarios (best case, worst case, and most likely case) to show a range of potential outcomes.
  • Metrics: Use specific metrics such as monthly recurring revenue (MRR), customer acquisition cost (CAC), and lifetime value (LTV) to justify your projections.

2. What Your Business Plan Should Not Miss

To avoid rendering your business plan ineffective or exaggerated, ensure it appears realistic and grounded. Here are key elements to focus on:

  • Avoid vague financial statements: Ensure your financial plans are thorough and include projected income statements, cash flow statements, and balance sheets. Use realistic assumptions and provide clear explanations for your projections.
  • Avoid ignoring competition: Acknowledge your competitors and detail your competitive advantage. Explain why your product or service is superior and how you plan to capture market share.
  • Avoid vague operational strategies: Provide a clear operational plan that outlines your business processes, supply chain logistics, and staffing requirements. Detail how you will manage operations efficiently to achieve your business goals.

3. Key Takeaway Points 

Here is a summary of what should be included and what should be missing in your business plan. 

  • Use realistic growth projections based on conservative assumptions.
  • Create different scenarios (best, worst, and most likely cases).
  • Focus on business goals and strategies.
  • Provide specific data about your market segment.
  • Detail your competition and market dynamics.
  • Outline clear and specific marketing plans.
  • Include details about channels, metrics, and conversion goals.

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