The 10 Biggest Business Plan Mistakes

Former venture capitalist and angel investor Christine Comaford-Lynch has reviewed hundreds of business plans. She explains where many entrepreneurs go wrong

By Christine Comaford-Lynch

It's a crime to work so hard on writing a business plan only to sabotage your chances of getting funded by omitting or shortchanging the key components. When a financier, board member, or key executive assesses your plan, they want to see the 10 topics listed below. The problem is, many businesses plans I've read make the same mistakes. Getting it right conveys that you know where your business is going, and you know how to get there. The following advice applies to a traditional business plan:

1. Company Overview

The Goal: A few concise and compelling sentences describing your company's purpose/goal.

The Mistake: More often than not, the company's purpose/objective is vague, common, not compelling. I stop reading here.

2. Pain

The Goal: Identify the specific market pain you will reduce or remove. At the same time, explain why your product or service is crucial.

The Mistake: Some entrepreneurs feel they don't need to include this topic, but you always have to make a case to convince readers unfamiliar with your product or service.

3. Solution

The Goal: Explain as completely as possible what your solution is to the market pain—and exactly how it works.

The Mistake: Not fully explaining your solution and exactly how it works.

4. Company Information

The Goal: While no one expects you to have a fully fleshed-out team in the early days, you should at least have a skeletal team supplemented with advisers.

The Mistake: One- and two-person teams simply don't demonstrate your ability to enroll others in your vision. As a general rule of thumb, list as many key players as possible in this section.

5. Financial Information

The Goal: Describe your funding history (if you have any), the total amount of money sought, the source, the anticipated use of funds, last year's revenue, a five-year revenue forecast, monthly burn rate, projected cash-flow positive date. Entrepreneurs always ask me why five years of fictitious revenue estimates matter. The answer is because financiers want to know how ambitious you are.

The Mistake: Pie-in-the-sky financials. Be sure to back up your projections with how you expect to achieve them.

6. Product

The Goal: A short paragraph explaining the status of your product. It's okay if you're in early trials or even if you have a killer demo.

The Mistake: Not helping the reader understand how you're going to get to a full-fledged product and when.

7. Defensibility

The Goal: Explain how your intellectual property or market position will be protected from competitors and how you'll mitigate risk for financiers. You also need to answer these questions: Do you have patents in process? What are the key risks with your company? How will you help to mitigate them?

The Mistake: Not demonstrating that you've considered these topics, and have thoughtful answers.

8. Competition

The Goal: Name your competitors, both now and in the future.

The Mistake: Saying you have no competitors—you do. Even inertia is a competitor, and a formidable one at that. A security company I recently met with listed all of their competitors to me, and one by one explained how their solution was better. I love honest acknowledgement coupled with doing your homework. It's rare and compelling.

9. Business Model

The Goal: Show how you'll make money and grow your business. By considering all the angles, you could end up discovering secondary and tertiary revenue streams that you've given cursory thought to. Don't hold back.

The Mistake: Not explaining exactly how your business will make money, when, and what the new revenue streams will be over time.

10. Key Milestones

The Goal: Show the deals/achievements that are accelerating/will accelerate your company's growth—be specific in stating the stage of these deals/achievements. This is where the rubber hits the road.

The Mistake: Not explaining specifically what you have accomplished within a time frame, and what you plan to achieve within a future time frame.