Business Plan On Fatal Flaws In A Business Plan
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Flaw #1: inadequate information
The executive summary lacks the most relevant information. It does not state information as whose idea it was to form the company. Furthermore, the section does not state the location of the business nor does it introduce the investors to who heads the operation. There is no description of the product that the company will sell to its customers. Lastly, the executive summary sounds like a guess as the team is not even sure of the firm’s direction after its inception in the business arena.
The executive summary of a business plan short is short and precise. All the details about the business must be in the executive summary. The section must indicate the process of forming the company and state its founder. Stating the author and the process involved in forming the company gives it a personal touch to the business plan. In the executive summary, a short description of the product and what it contains is a must to write. The uses of the product and how customers can use it must be part of the executive summary. Lastly, the section should indicate why the company’s product is the best in the market and why customers will prefer it from all the others.
Flaw #2: Unprofessional work
The work in the executive summary section is random. Pieces and bits of information are not consistent with each other. Random information is in each paragraph. The introduction of the income statement at an early stage in the executive summary is unprofessional. Included in the executive summary are details that the business has no certainty. There are not sure whether the company will get a market. Indication of uncertainty scares potential investors away from a project. A company needs more than just seven employees in order to be successful (Finch 94).
Any good plan must have a detailed executive summary. An executive summary must be presentable, clear and to the point. Professionalism is essential at this stage. Information must align in a chronological manner from the most important details to the least important details. Each piece of information must follow the strategy.
Randomly placing information most likely confuses the investors who will not understand what the business is all about. The first paragraph contains a summary of the company. It states the year of formation and the founder of the company. Then it introduces the readers to the product and its details.
Flaw #1: no team mentioned
The title of the section is the team; however, the section fails to introduce the team. The current team that is running the organization does not appear in the team section. The section rather focuses on the new team it intends to recruit. With no team how will the investors know the team fares own, how operation go own without supervision.
The team section must include the current team that oversees operations of the project. Not mentioning the team show the lack of seriousness that the plan must portray. In the team section, mentioning the names of all those that are in charge is crucial. The section must include the names, the departments, the heads that run different departments and the different responsibilities that each one plays in the organization. In the teams section, however, there should be no mention of subordinate staff as they are irrelevant at the introduction point. The section said a board; it should introduce it and all those that are a part of it as well as the chairman and the responsibility he or she will play in the organization. The business plan should include a clear distinction between the roles that the chief executive officer and the chairman of the board play as it is often confusing (Pinson 89).
Flaw #2: Too detailed
The team section should only contain the relevant data about the team running the organization. In the section, the business plan introduces new information that is not necessary. The introduction of the risks and the challenges that face or will face the business in due time are not part of the team section. The risks mentioned in the section; however, they are not immediate threats to the business
The team section should only contain details about the management team, their names and roles they play in the organization. The risks assessed by the business are not relevant to the investors in the team section. Risks should be in the next section where the business strategies on how to enter and beat the market (Rogoff 82). Although the business plan includes the risks that the business might face, the risks it introduces are not a serious threat to the business. Technological advancement is on the rise, and everyone both young and old are going for cell phones, with that stated there is no way a decrease in demand for cell phone can be a threat to the business.
The marketing plan
Flaw #1: target market not identified
Identification of the target market is inconclusive. The section does not give full details of the business’ target market. It states that the target market of the product is the whole population. It further does not specify the details of the target market: income details, behavioral details of product consumers, gender sensitivity, and age group of the target market. The company has a marketing plan that is only based on demographics and pricing that is not realistic (McKeever 120).
Any product getting into the market must identify its target market. Target identification helps set priorities and objectives of any organization. Target identification is also necessary when strategizing how to enter the market. It is important that the target market section includes all there is to know about the customers. It must state the income levels of the target market as not everyone has the luxury of owning a cell phone.
The preferences of the target market are essential to the project. Not all those that own cell phones use the applications installed in them, the business plan must identify the age group and career line people that use most of the application. It is a new business in the industry thus; it must state the geographical location of its target market rather than indicate that it is the whole population.
Flaw #2: vague marketing strategy
The business plan has a vague marketing strategy that cannot help the firm achieve any objective. First, it does not state the price of the product. Pricing strategy is essential so as to set sales income for profit maximization. The distribution channels of the product are not set thus entering the market will be a challenge it will face. The business plan also does not consider the environment it is entering. No details of how to conquer challenges that always face new products nor does it assess competitors in the market.
It is critical that a business plan includes a marketing strategy. A marketing strategy helps an organization anticipate changes in the market and come up with ways of coping with the challenges. In the marketing strategy, the plan must include the s.w.o.t analysis of the market. It must identify the strengths of the market and how it will manipulate it to the business’s achievement. The business plan must shed some light on the weakness of the market and how the organization intends to deal with it or manage it at a low cost. The business must consider the threats that the business will face once it enters the market. Issues such as competitors must be the priority. Advertising and methods of selling the product are essential to the business. The product is new, so the best way to market the product will be through advertising.
Flaw #1: inadequate market development plan
The operational plan does not contain growth strategies for the organization. The business plan has unrealistic growth projections. Just having a billboard with a brand name of the organization is not enough to attract investors to the project. The steps or activities pointed out in the plan do not show how the business will grow geographical and expand its operations to other areas. It does not mention growth in values that attract investors.
Market development strategy comprises of expansion of the geographical area products of a company covers. An organization that intends to grow its market can go into other countries or in the same state increase the coverage of its products. The business plan should add extra information on how it plans to expand its market. The investors need to know that if they decide to invest in it will bring profits to them. Lack of a market development plan indicates a lack of ambition for growth for the organization. They will spend where they think their money is worth.
Flaw #2: no mention of market penetration
The business being new in the market has to come up with tactics on how to penetrate the market. The business plan miserably fails to mention how it will enter and penetrate the market. It lacks adequate information about the market hence it does not know the weakness of the market and the strengths. The plan requires the Ansoff matrix. The matrix introduces strategies of growth of both the company and the product. Pricing strategies are crucial at this point in a business to ensure that it enters the market and survives the stiff competition. The entrepreneurs have not yet done enough research on the possibilities of competitors in the market (29).
The best way to move through the market is increasing the supply of products that the company is selling. In the market penetration strategy, a company can increase the volume of products their current clients receive. The company alternatively goes deep into the market and gets additional consumers. The business plan must include all the tactics it would take to enter the market. The business must show the investors how far the business is willing to go to win over customers.
Flaw #1: Overly optimistic financial projections
The business gives an image of dishonesty. The financial projections stated in the plan are all constants; there are no fluctuations recorded. Considering market conditions and economic changes the stated values cannot be real. The cost spent on research and development is very high considering the returns from sales do not increase. The asset value of the software is above standard rates considering the software is not complete. The plan also has many expenses that drain the cash inflows of the company. The income statement and cash flows all show positive results although the year, there are times when the market is not performing well, and the profits can be lower (Covello and Brian 105).
The first and most crucial information that the financial plan must include is; revenues must be more than all the expenses of the business. The financial statements must project profits, not a loss. The idea of starting a business is profit maximization. In order for the organization to achieve the objective of maximizing profits for the organization, the sales revenues must increase, and the cost of cash outflows reduce. The business is still new, and no customer can base it only honesty if the sales revenues for the first year reduce. The financial statement overstates the revenues that the business generates during the first trading period. Investors will shift to projects that are realistic.
Flaw #2: no financial growth projections
The business plan has no financial projections for the future. The projections available in the business plan are only for one year. They are short term financial projections. However, they do not show that the business will expand in any way. The sales remain constant all through the year and do not increase. There are no long-term financial projections for the company. It does not indicate where they will be in the next five years. The number of sales has to increase as the business expands as well as the costs of marketing and research and development should reduce.
Investors need to know the business strategic plans. They include the short, medium and the long-term plans. The statements should include long-term financial for the business to show that the business has the potential for growth and expansion.
Abrams, Rhonda M. The Successful Business Plan: Secrets & Strategies. Palo Alto, Calif: The Planning Shop, 2003. Print.
Covello, Joseph A, and Brian J. Hazelgren. The Complete Book of Business Plans: Simple Steps to Writing Powerful Business Plans. Naperville, Ill: Sourcebooks, 2006. Internet resource.
Finch, Brian. How to Write a Business Plan. London: Kogan Page, 2013. Internet resource.
McKeever, Mike P. How to Write a Business Plan. Berkeley, CA: Nolo, 2012. Print.
Pinson, Linda. Anatomy of a Business Plan: A Step-by-Step Guide to Building the Business and Securing Your Company's Future. Tustin, CA: Out of Your Mind & into the Marketplace, 2008. Print.
Rogoff, Edward G. Bankable Business Plans. New York, NY: Rowhouse Pub, 2007. Print.
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