Avoid these common-but-fatal errors when writing your business plan

BUSINESS PLANNING SERIES   We see a lot of business plans, both here at Tech-Rx and in our alternate lives as angel investors, entrepreneurs and executives.  Over the next few weeks, we will touch on some fatal errors that we frequently see and that will almost certainly cause a potential investor to deep-six you plan, and the actions you can take to avoid these errors. Avoid what we call “Invalid Competitive Advantages.”  The bottom line – it’s not an advantage if anyone claims the same advantage.  Here are some of the more-popular red – or should I say black-flag “advantages” — Blog Head Planning1: We have Feature “XYZ” — Sure you do, but only until someone copies it. If it is really cool or useful, the competition WILL copy it.  Even worse, if it doesn’t work, your competitors will make fun of you. 2: We have the Most Features — No one wants more features, they just want the right ones.  Look no further than Microsoft Word.  The 2003 had lots of features that are never or very-rarely used by very few writers.  I suspect that many features have NEVER been used by anyone!  Yet, Microsoft, in its infinite wisdom, added more useless features in its 2010 and 2013 releases.  Just to compound the error, they completely revamped the menu structure (i.e. Added Feature “XYZ” – See above) in a way that is to this day almost universally-hated – hated so much that a cottage industry of plug-ins that restores (most of) the old menu structure has sprung up.  Critical mass is probably reached when everyone has 80% of the desired features. 3:  We are better at SEO and Social Media — Would it surprise you that well over 80% of early-stage company founders believe that they are “better” than everyone else at SEO and social media?  Just like in Lake Wobegon where “all of the children are above average.”  The truth is that SEO rules evolve as Google and others strive to deliver relevant results to their users.  It’s a losing game.  Just do the basics to make sure that they can find your website and understand what you are about. 4:  We work hard! We’re lean! — You better work hard and be lean.  After all, you are a three-person team working 80-hour weeks for probably zero pay.   What are you going to do when Google decides to take 10 people, give them a $10 million budget, have them work 40-hour weeks, paying them above-market rates? 5: We’re passionate!!! — I sure hope so.  Otherwise, why are you doing this? 6: We’re cheaper. — Sure you are – until Google builds the same thing and gives it away for free. (See #4 above.) What can be learned from all of this?  — 1: Simplify your product scope. — You will never have enough features and your product will never be perfect.  Feature-rich products take too much time and money to build, and they usually turn out to be slugs! 2: Anything worth being copied will be copied. — Plan on being copied and make it a part of your plan.  Answer these questions:  What if some big company copies your idea and builds the same product after you go live? What are you doing now knowing that some big company will copy your idea? What are you going to do when some smart hot-shot startup copies your idea, gets $10M from XYZ-VC and is featured a half-dozen times on TechCrunch? What are you going to do when there are four totally-free open source competitors? What are you going to do when employee #2 takes your code, marketing plan and customer list and starts selling your stuff worldwide for 1/10 the price?

 The Moral – – The only True Competitive Advantage is that which cannot be copied and cannot be bought.

Next time we will talk about True Competitve Advantages that you may not realize you have.

– Steve Hogan

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