A business plan describes how you intend to lift your business off the ground and covers aspects such as:

1. How it’ll be funded.
2. Marketing strategies to increase visibility.
3. Outlining what makes you unique compared to your competitors.

It isn’t a one-time task to check off and forget. It’s a document that evolves with your business, guiding your decisions and strategies as you grow.

In this blog, we’ll discuss the importance of a business plan, the six elements every business plan needs, and eight mistakes to avoid when writing your own business plan.

Why is a business plan important?

A business plan serves the same functions as a map. It:

• Provides clarity on your business goals and how you plan to achieve them.
• Identifies any risks that can stop your business from achieving its goals.
• Helps your business track its progress toward those goals.
• Identifies the resources you need to achieve your goals.

6 Elements every business plan needs

A business plan needs to be a clear document covering the following.

1. Executive summary

Start by outlining the basic details of your trade business, including:

1. Name
2. Services provided
3. Short, medium, and long-term goals
4. Core values
5. Business structure (solo tradesperson, partnership, or an LLC)
6. Date of incorporation and registration number (if applicable)
7. Hierarchy
8. Contact details
9. Links to the website and social media

2. Financials

Cash flow is the lifeblood of any business. If you’re unclear about your finances, your business won’t survive the next 12 months.

Financials need to include the following:

• A break-even analysis determines how long it’ll take for your sales to cover your costs. Most businesses will start at a loss because several upfront costs (known as start-up capital) are to be paid before a sale is even made. The break-even analysis determines when sales will eventually catch up and overtake costs (i.e., profit).
• A cash flow forecast that determines the influx and outflux of money every month. This is where consistent financial tracking becomes critical. Monitoring real-time income, expenses, and burn rate ensures your projections remain accurate and actionable.
• Debt handling. If you offer your products on credit, include a section on how you’ll collect money from your clients.
• Price handles. Beyond stating the numbers, explain how you got to them and how market fluctuations or competitor activities could influence them.

3. Growth plan

This part outlines how you plan to remain active in the long term. 

Consider including the following:

• Supplier agreements. Having reliable suppliers locked in is crucial for sustained growth.
• Describe your skills, training, and experience. This part is more about identifying what’s missing and could hamper growth. It helps you plan for and address any skills gaps.
• Mentor and business support. You could use a mentor to help you with your skills gap.
• An explanation of how you plan to grow.

It’s also important to highlight your current tech stack and any technology you’ll need in the future to sustain your growth. 

For example, investing in contact center software can mitigate the risk of customer service-related issues as you take on more clients. With this proactive approach, you can prevent inefficient handling of inquiries and complaints as your customer base grows. 

The last thing you want is for negative reviews to pile up as you struggle to keep up with growth and provide the best possible customer experience. 

Plus, when you include your ideal tech stack in your business plan, it helps get buy-in from all stakeholders from the start. 

4. Competition

Monitoring your competition has several benefits:

• It alerts you to their strengths and weaknesses.
• It helps you identify your unique positioning.
• It helps you articulate your market position.
• It provides insights into their strategies.

5. Marketing strategy

A marketing strategy outlines how you intend to find work and generate leads. 

In this section, describe the size of your market and include how you intend to leverage online and offline channels to get new customers and retain existing ones.

6. Health and safety/legal/compliance

Make sure to identify any regulations or laws that you need to follow and confirm whether or not this has been completed.

Use this section to identify additionally:

• The environmental impact of your activities and how you intend to address them.
• Any health and safety regulations that need compliance.
• Any other risk and your plan to mitigate it.

Any business plan can have all these elements but still be written poorly. When writing a plan, you need to:

• Ensure every statement is backed by recent, relevant data. 
• Be as thorough as possible.

Essentially, don’t leave anything to people’s imaginations or guesswork. This is crucial for you internally, as it’s your job to lead and guide your team and externally when applying for funding.

8 Business Plan Mistakes to Avoid

With that said, here are eight mistakes to avoid.

1. Not using a business plan template

A comprehensive business or non-profit business plan template is a valuable tool to avoid all mistakes.

By leveraging a well-designed template, you can rest assured that you’ve covered all essential aspects of your business strategy, from market analysis to financial projections. 

Business plan templates provide a structured framework to organize your thoughts and ideas cohesively, reducing the risk of overlooking critical elements or inconsistencies.

2. Not laying the proper foundation with the right business structure

Never overlook the type of business structure that’ll suit your venture best today and in the long run.

Why? 

Knowing the types of LLCs, whether it’s a single-member LLC, multi-member LLC, or series LLC, can profoundly impact your business’s legal and financial aspects.

Failure to consider these options might lead to unnecessary complications or missed opportunities for tax benefits. Take the time to understand the differences and select the most fitting structure for your business’s success.

While a Limited Liability Company (LLC) offers valuable protection for your personal assets, it’s not an impenetrable shield. An LLC separates your business and personal finances, meaning creditors typically can’t seize your home or car to satisfy business debts. 

However, there are exceptions: personal guarantees on loans, involvement in wrongful acts, or failure to maintain proper separation between your personal and business finances can pierce the LLC’s veil, exposing your personal assets.

3. Overlooking comprehensive market research

Being lazy in grasping important things such as:

• Target audience profiles
• Competitor’s activities
• Current market trends

If you skip this step, it can have severe consequences for your business.

On the first level, you fail to capitalize on any valuable market opportunities. These could be opportunities to:

1. Enter new markets.
2. Change prices to maximize sales.
3. Respond to changes in consumer sentiment.
4. Reinvent your unique selling point (USP).
5. Capitalize on the competitor’s weakness.

Taking the time to deeply analyze your intended customers’ specific needs and pain points can make all the difference in crafting a successful venture. 

For instance, RV rental companies in Florida may need to account for the heightened demand during peak winter and spring break travel seasons. In this case, they may need to provide specialized support for clients navigating the state’s diverse terrain and the abundance of coastal campsites. 

Integrating these nuanced market insights into the business plan for an RV rental in Florida can help position the company for long-term success by: 

• Informing strategic fleet management decisions
• Preparing for customer service spikes
• Securing ‌proper funding

On the second level, you’re giving competitors an open window to take advantage and overtake you by having your eye off the ball.

And, lastly, you won’t be internally prepared to deal with things like:

• Regulatory compliance issues
• Supply chain disruptions
• Business continuity
• Emerging risks

4. Underinvesting in marketing and promotional activities

A comprehensive marketing strategy is crucial for any business to reach and engage its target audience effectively. 

The most savvy businesses understand the importance of leveraging diverse marketing channels to amplify their brand visibility and drive customer acquisition.

Take StudioSuits, a prominent men’s clothing brand renowned for its high-quality wedding suits. 

StudioSuits has expertly woven together a multi-faceted marketing approach by seamlessly blending: 

• Strategic partnerships with wedding planners and venues
• Engaging in social media campaigns
• Organic search engine optimization
• Targeted pay-per-click advertising

This holistic strategy enables any brand within the trade business to:

• Reach its ideal customers at various touchpoints (website, social media, and offline means).
• Drive significant sales and brand loyalty.
• Command a strong online presence.

5. Creating unrealistic financial projections

It’s tempting to make the financials look healthier than they are, but it’s the equivalent of brushing the problems under the carpet.

If your financial plan is unrealistic, you’ll:

• Be putting the business’s viability on the line. If the business fails, it’ll be difficult to return money to lenders, notwithstanding the difficulty in making staff redundant–all because of irresponsible finances.
• Be putting your credibility in the spotlight. Being the business owner means the buck stops at you, which is beneficial when things are successful but can be challenging in the opposite situation.
• Make decisions based on the wrong information.
• Have cash flow problems and budgetary constraints.
• Fail to account for unexpected business expenses.

All roads lead to debt, insolvency, and bankruptcy.

6. Underestimating financial planning and cash flow management

A common mistake entrepreneurs make is underestimating how critical financial planning is to the stability of the business. Beyond forecasting expenses and revenue, you also need to map out how you’ll manage day-to-day cash flow, especially during early growth stages. 

Establishing access to flexible funding options is part of this foundation. For example, many small businesses consider applying for a business credit card to help separate expenses, manage operational costs, and build business credit. 

When used strategically, it can provide short-term liquidity, cover essential purchases, and support smoother financial operations. All without disrupting long-term planning.

7. Setting vague or unclear business objectives

When you set vague or ambiguous business goals, you’re essentially working towards nothing. 

This is because:

• Neither you nor your staff know how these goals translate into daily, weekly, and monthly activities.
• There are no KPIs or benchmarks that evaluate performance.
• You don’t know how to record progress.

It’s like walking in the dark. 

• You don’t know if you’re walking in the right direction.
• You can’t see or detect any roadblocks.

This causes:

• Wasteful expenditure because you’re throwing money at something too abstract.
• Low morale due to lack of clarity.
• Confusion among staff.

The lack of clear, measurable objectives and strategies not only stalls immediate tasks but also jeopardizes the organization’s overall strategic direction.

8. Failing to review and update the business plan

You might make the best business plan — except you lock it away and never look at or update it again.

A business plan is only as relevant as its ability to help you meet today’s challenges and opportunities. 

There’s little value in working off a plan that’s three years old.

Imagine trying to run your business according to a pre-COVID plan during the height of the pandemic. It just wouldn’t work.

A business plan should evolve as new information becomes available.

Ignoring valuable feedback or fresh insights can lead to the persistence of outdated strategies that no longer serve the company’s best interests. 

In the long term, failing to update a business plan can stunt the company’s growth and diminish its relevance in the industry.

Wrapping up

A business plan is a document that guides your business throughout its lifecycle. It outlines the overarching aims and objectives, strategies to achieve them, and threats that can prevent success.

As a result, it gears you to thrive in the market.

It’s important to treat the business plan seriously and dedicate ample time to ensure it’s comprehensive. Avoid these common mistakes and turn your business ideas into a profitable company for years to come.

Good luck!