A Business Plan Template will not help you on your business journey. A business planning template can do more harm than good.
Having a new business idea is great! But, without a business plan or a generic, cookie-cutter business planning template, a business is essentially rudderless, and day-to-day activities are likely to be haphazard and reactive. This is in stark contrast to those businesses implementing a well-thought-out business plan.
Unfortunately, several “business plan consultants” promise the world when they merely use a Generic Business Plan Template or Business Plan Software to generate an off-the-shelf document, which merely takes the consultant a couple of hours to complete. Now ask yourself this question: “Is this true value to you as an entrepreneur”? Your answer should be a resounding No!
So be careful when deciding which Business Plan Consultant to contract to complete your business plan. Unfortunately, several individuals operating in the South African market are out to make a quick buck with minimal effort! Do you want a Business Plan Template? You will pay for a Business Plan Template. Be careful, and remember that you get what you pay for. Don’t let a business plan template stop you from achieving your business goals.
Business Plan Template ― Danger #1
The individual/company is not willing to provide testimonials from previous clients they worked with (to support their claims of excellent service). Partnering with a consultant with recent (up-to-date) client testimonials is better than partnering with a consultant with few or very few testimonials. And yes, as the client, you have all the right to contact these past clients as part of your due diligence. Unfortunately, once again, false testimonials are sometimes used by individuals/companies to sell their services.
Do your homework and remember; that the transparency of the individual/company is key. You are more than welcome to view the 5-Star Reviews we have received on Google and the 40+ Professional Recommendations on LinkedIn.
Business Plan Template ― Danger #2
The individual/company claims excessive years of experience in the marketplace, e.g. can a consultant/individual that claims 100+ years of experience substantiate this? Is this the combined experience of the team members or the individual? Ask yourself the question: “If there are 2 team members, and they claim 150 years’ experience, it means, taking into consideration that both team members completed their schooling and university studies, they are 90+ years old! It is simple mathematics.
Business Plan Template ― Danger #3
The individual/company consistently use discounts and “being the cheapest service provider” as their claim to fame and marketing message. Or, they “will beat any quote out there”. Are we selling a new washing machine or a world-class business plan service here? Are we in the markets of Marrakesh where it is normal to haggle for the best price, or are you looking for a business plan company that will improve your chances of success?
Buying a service is different from buying a product. The age-old saying “if you pay peanuts, you get monkeys” has never been more relevant. Writing a business plan with a consultative approach and truly partnering with a client to reach a mutual goal takes time, extensive experience and know-how. And this comes at a cost.
Business Plan Template ― Danger #4
Review the client portfolio of the individual/company. Having experience in working with small, medium and large JSE-listed companies carries more weight than only having experience in working with micro-companies.
Business Plan Template ― Danger #5
Review the industry experience of the individual/company. If you are starting a new business in the South African Hospitality Sector, why would you use a consultant with only retail experience? It doesn’t make sense and comes down to your value as the client.
Business Plan Template ― Danger #6
Review the credentials, qualifications and experience of the individual/company/team members. Having an MBA doesn’t necessarily mean you will get world-class service. On the other hand, having very little or no Business Consulting/Management Consulting experience or experience in a non-related field will only cost you money, with no value to you whatsoever. Once again, transparency is key! If the individual/company can substantiate/prove the claims made with factual transparency, you are partnering with an ethical organisation. Many scam consultants are operating in Southern Africa. We have written a cautionary article on this topic to help our clients. Take a look at Afraid of SA’s Scam Consultants. Save R15K!
Business Plan Template ― Danger #7
Is the individual/company willing to meet with you face-to-face (even at a nominal consulting fee)? If not, why is that? Are they situated in Utopia, and will it be difficult to catch a flight to South Africa? Some clients prefer face-to-face, personal touch and interaction. And there is nothing wrong with that!
With this said, the increased cost of fuel and electricity and the time it takes sitting in traffic will justify having a production client meeting via Zoom or MS Teams. Why waste 2 hours each way to the meeting and R300 in fuel if you can have the same (or even better) meeting outcome in less than an hour?
Business Plan Template ― Danger #8
Is the individual/company providing a Specialist Business Plan Service or is “business planning” only one part of their service portfolio? Why would you partner with an individual/company that offers business plan writing as a service and services that have no relevance to entrepreneurship/business planning?
For example, an individual/company says, “We do business planning, but we also sell fish and chips and can check out your plumbing”. Partnering with a Specialist is better than partnering with a Generalist. Jack of all Trades, Master of None ― is that what you, as the client want?
Business Plan Template ― Danger #9
To claim to be a Leader and Specialist in a specific discipline/service/field is not merely including such a claim on your Website and marketing material. No! Research has shown that to call yourself a Specialist, you need at least 10,000 hours of experience in such a discipline/service/field. To be a Leader, you need to:
- Offer True Value
- Have a Tangible Value Proposition
- Know Your Market Inside-Out
- Lead the Market Through Consistent Quality and Excellent Service Delivery
- Have Substantial Client Testimonials and Recommendations.
So ask yourself: “Do I want to work with a Leader and Specialist or a Follower and Generalist”?
Business Plan Template ― Danger #10
Any financier and investor in South Africa will tell you that Quality is more important than Quantity. I have seen business plans that make a much bigger impact as a 10-page document and business plans that make no impact whatsoever as a 100-page document. An individual/company can promise you a 40+ page business plan, but what is the real and true value of the content?
Will it be 40+ pages that you can use for firewood Friday evening during the Rugby game, or will you be proud enough to present it to an investor? The number of pages in a business plan has no relevance whatsoever. So be careful of an individual/company that uses this as a “hook” to get you to sign with them. For more free advice, why not look at our free advisory article entitled 10 Alarming Reasons Why Your Business Plan Was Rejected?
Something Extra! Critical Mistakes made in the Business Plan Format
Investors see thousands of business plans yearly, even in this challenging economic market. Apart from a referral from a trusted source, the business plan is the only basis they have for deciding whether or not to invite an entrepreneur to their offices for an initial meeting. With so many opportunities, most investors simply focus on finding reasons to say no. This section highlights the Top 10 mistakes your Bankable Business plan won’t have. The Business Plan Format is of cardinal importance.
The Business Plan Format ― Mistake #1: Your Bankable Business Plan Clearly Shows the Problem being Solved
Failing to relate to a real pain or real market opportunity. Pain comes in many flavours: my computer network keeps crashing; my accounts receivable cycle is too long; existing treatments for a medical condition are ineffective; my tax returns are too hard to prepare. Businesses and consumers pay good money to make the pain go away. You are in business to get paid for making the pain go away. Pain, in this setting, is synonymous with market opportunity. The greater the pain, the more widespread the pain, and the better your product or service alleviates the pain, the greater your market potential. The Best Business Plans place the solution firmly in the context of the problem being solved.
The Business Plan Format ― Mistake #2: Your Bankable Business Plan Highlights the Facts
Phrases like “unparalleled in the industry,” “unique and limited opportunity,” or “superb returns with limited capital investment” – taken from actual documents – are nothing but assertions and hype. Investors will judge these factors for themselves. Layout the facts – the problem, your solution, the market size, how you will sell it, and how you will stay ahead of competitors – and lay off the hype. Forget the jargon! Don’t oversell it! And whatever you do, do not make claims you can’t back.
The Business Plan Format ― Mistake #3: Your Bankable Business Plan doesn’t Try to be All Things to All People
Many early-stage companies believe that more is better. They explain how one can apply a product to multiple, very different markets, or they devise a complex suite of products to bring to a market. Even worse, many startups think they can be a large conglomerate from Day 1. I come across many wannabe entrepreneurs (I refer to them as “Wannapreneurs”) that want to offer services across multiple industries to various markets. For example, a Wannapreneur offers Construction Services, Cleaning Services, Farms with Cattle, Install Solar Panels, Transports Coal, Design Websites, and Book Flights and Hotels. This is nothing short of ludicrous.
Most investors prefer a more focused strategy, especially for early-stage companies: a single, superior product or service that solves a troublesome problem in a single, large market sold through a single, proven distribution strategy. That is not to say that additional products, applications, markets, and distribution channels should be discarded. Instead, they should be used to enrich and support the highly focused core strategy. You must hold the story together with a strong, compelling core thread. Identify that, and let the rest be supporting characters.
The Business Plan Format ― Mistake #4: Your Bankable Business Plan must have a Go-To-Market Strategy
Business plans that fail to explain the sales, marketing, and distribution strategy are destined for one thing – the trashcan! The key questions must be answered: who will buy it, why, and most importantly, how will you get it to them? In addition, you must explain how you have generated customer interest, obtained pre-orders, or made actual sales and how you will leverage this experience through a cost-effective go-to-market strategy.
The Business Plan Format ― Mistake #5: Your Bankable Business Plan should Never State that “We Have No Competition.”
All I can say is, Ha Ha Ha!
No matter what you may think, you have competitors. Maybe not a direct competitor – in the sense of a company offering an identical solution – but at least a substitute. Fingers are a substitute for a spoon. First-class mail is a substitute for e-mail. A coronary bypass is a substitute for an angioplasty. A travel agent is a substitute for planning a trip yourself. Competitors consist of everyone pursuing the same customer Rands.
To say that you have no competition is one of the fastest ways to get your business plan tossed or, even worse, get laughed out of the room – investors will conclude that you do not fully understand your market. Your business plan’s”Competition” section is your opportunity to showcase your relative strengths against direct competitors, indirect competitors, and substitutes. Besides, having competitors is a good thing. It shows investors that a real market exists.
The Business Plan Format ― Mistake #6: Your Bankable Business Plan should not be Too Technical
Business plans – especially those authored by people with scientific backgrounds – are often packed with too many technical details and scientific jargon. Initially, investors are interested in your technology only in terms of how it:
- Solves a really big problem that people will pay for;
- It is significantly better than competing solutions;
- Can be protected through patents or other means; and
- It can be implemented on a reasonable budget.
These questions can be answered without a highly technical discussion of how your product works. Experts will review the details during the due diligence process. Keep the business plan simple. Document the technical details in separate white papers.
The Business Plan Format ― Mistake #7: Your Bankable Business Plan should include a Risk Analysis
Investors are in the business of balancing risks versus rewards. So some of the first things they want to know are the risks inherent in your business and what has been done to mitigate them. The key risks of entrepreneurial ventures include:
- Market risks: Will people buy what you have to sell? Will you need to create a major change in consumer behaviour?
- Technology risks: Can you deliver what you say you can? On a budget and on time?
- Operational risks: What can go wrong in the company’s day-to-day operations? What can go wrong with manufacturing and customer support?
- Management risks: Can you attract and retain the right team? Can your team pull this off? Are you prepared to step aside and let somebody else take over if necessary?
- Legal risks: Is your intellectual property truly protected? Are you infringing on another company’s patents? If your solution does not work, can you limit your liability?
This is, of course, just a partial list of risks. Even though you may feel that the risks are negligible, potential investors will feel otherwise unless you demonstrate that you have given a lot of thought to what can go wrong and have taken prudent steps to mitigate these risks.
The Business Plan Format ― Mistake #8: Your Bankable Business Plan must not be Poorly Organised
If you want your plan to be seen as the Best Business Plan, it should flow nicely in an organised fashion. Each section should build logically on the previous section without requiring the reader to know something presented later in the plan.
The Business Plan Format ― Mistake #9: Your Bankable Business Plan should not have Financial Model Mistakes
- Forgetting Cash: Revenues are not cash. Gross margins are not cash. Profits are not cash. Only cash is cash. For example, suppose you sell something this month for R100, and it costs you R60 to make it. But you must pay your suppliers within 30 days, while the buyer probably won’t pay you for at least 60 days. In this case, your revenue for the month was R100, your profit for the month was R40, and your cash flow was zero. Your cash flow for the transaction will be negative R60 next month when you pay your suppliers. Although this example may seem trivial, very slight changes in the timing between cash receipt and disbursement – just a couple of weeks – can bankrupt your business. When you build your financial model, make sure that your assumptions are realistic to raise sufficient capital.
- Lack of Detail: Your financials should be constructed from the bottom up and validated from the top down. A bottom-up model starts with details such as when you expect to make certain sales or when you expect to hire specific employees. Top-down validation means examining your overall market potential and comparing that to the bottom-up revenue projections. Round numbers – like one million in R&D expenses in Year 2 and two million in Year 3 – are a sure sign that you do not have a bottom-up model.
- Insufficient Financial Projections: Basic financial projections consist of three fundamental elements: Income Statements, Balance Sheets, and Cash Flow Statements. All of these must conform to Generally Accepted Accounting Principles or GAAP. Investors generally expect to see five years of projections. Of course, nobody can see five years into the future. Investors want to see the thought process you employ to create long-term projections. A good financial model will also include a sensitivity analysis. This will show how your projected results will change if your assumptions are incorrect. This allows you and the investor to identify the assumptions that can have a material effect on your future performance so that you can focus on validating those assumptions. They should also include benchmark comparisons to other companies in your industry – things like revenues per employee, gross margin per employee, gross margin as a percentage of revenues, and various expense ratios (general and administrative, sales and marketing, research and development, and operations as a percentage of total operating expenses).
- Conservative Assumptions: Nobody ever believes that assumptions are conservative, even if they truly are. Develop realistic assumptions that you can support, refrain from using “conservative” or “aggressive” in your plan, and leave it at that.
- Offering a Valuation: Many business plans err by stating that their company is worth a certain amount. How do you know? The value of a company is determined by the market – by what others are willing to pay – and unless you are buying, selling, or investing in companies, you probably don’t have an acute sense of what the market will bear. If you name a price, two things can happen: (a) your price is too high, and investors will toss your plan, or (b) your price is too low, and investors will take advantage of you. Both are bad. The purpose of the business plan is to tell your story in the most compelling manner possible so that investors will want to go to the next step. Of course, you can always negotiate the price later.
The Business Plan Format ― Mistake #10: Your Bankable Business Plan and Final Thoughts on Other Mistakes
- Poor Spelling and Grammar: If you make silly mistakes in your business plan, what does that say about how you run your business? Use your spelling and grammar checkers, get other people to edit the plan, and do whatever it takes to purge embarrassing errors.
- Too Repetitive: All too often, a plan covers the same points repeatedly. A well-written plan should cover key points only twice: once, briefly, in the executive summary, and again, in greater detail, in the body of the plan.
- Appearance Matters: At any point in time, an investor has dozens, if not hundreds, of plans waiting to be read. Get to the top of the pile by ensuring that the cover is attractive, the binding is professional, the pages are well laid out, and the fonts are large enough to be easily read. On the other hand, don’t go too far – you don’t want to give the impression that you are all style and have no substance.
- Execution Mistakes: Waiting until too late. The capital formation process takes a long time. In general, count on six months to a year from the time you start writing the plan until the time the money is in the bank. Please don’t put it off. Your management team should be prepared to invest about 600 hours into the plan. If you are too busy building your product, company, or customers (arguably a better use of your time), consider outsourcing the development of the business plan.
- “Over-tweaking”: You could spend countless hours tweaking your plan to pursue perfection. This time would be better spent working on your product, company, and customers. You need to pull the trigger and get the plan out in front of a few investors. If the reaction is positive and they want to move forward, great. If the reaction is negative (assuming that the investor was a good fit), you may have been heading down the wrong path. Get feedback from a couple of investors, and if a consensus emerges, go back and refine your plan.
If you will be presenting to investors soon, here are some Brutal Reasons Why Investors will Reject your Pitch Deck.
It’s a tough investment climate, but good ideas backed by good teams and business plans are still being funded. So give yourself the best possible chance by avoiding these simple mistakes. Remember, the primary purpose of a fund-raising business plan is to motivate the investor to pick up the phone and invite you to an in-person meeting. It is not intended to describe every last detail.