This presentation showcases the more common business plan mistakes made by entrepreneurs in new, start-up ventures.

1. Common Business Plan Mistakes
Presented by Bart Greenberg
Haynes and Boone, LLP
Entrepreneurs Forum at UCI
April 7, 2011
© 2011 Haynes and Boone, LLP

2. The “Business Plan”
Executive Summary Marketing/Sales Plan
Mission & Vision Competitive Analysis
Company Description Management Team
Products & Services Operational Plan
Industry Analysis Financial Projections
Target Market Exit Strategy
© 2011 Haynes and Boone, LLP

3. Executive Summary
• Lacking a specific focus
• Failing to outline the terms of the
investment sought
• Getting too involved in the details and
forgetting to sell the sizzle
© 2011 Haynes and Boone, LLP

4. examples
• COMPANY delivers integrated, real-time,
secure ____________ solutions that
provide an immediate return-on-
investment for any size enterprise
• COMPANY is a biomedical start up
company. We have no debt. The
research behind the companies
Intellectual Property is based upon 8 ½
years of study of _____.
© 2011 Haynes and Boone, LLP

5. examples (cont.)
• GIS that are capable of running on mobile
devices (e.g. PDAs, PocketPCs, handheld
computers, laptops, etc) are referred to as
mobile geographical information systems
(MOGIS). Unfortunately, MOGIS have not
evolved to the point where geoscientists can
effectively collaborate in their geospatial
management activities, such as geospatial data
collection, file sharing, and distributed
processing.
© 2011 Haynes and Boone, LLP

6. Mission & Vision
• Don't regurgitate a description of your
business
• Don't make it boring
• Don't claim to be something you aren't
© 2011 Haynes and Boone, LLP

7. example
• COMPANY has already developed the
methods and schematics for its technology
and will be in position to beta test within
four months of funding.
© 2011 Haynes and Boone, LLP

8. Company Description
• Including far too much detailed information
about your business
• Appearing as though you have no
business history or business purpose
• Leaving out important business and legal
particulars
© 2011 Haynes and Boone, LLP

9. example
• COMPANY is a Nevada corporation formed to
develop and administrate a
multimedia/communications enterprise taking
advantage of specific markets and specific
technologies while capitalizing on management’s
experience in IT/telecommunications, marketing,
manufacturing finance, and media production
building and delivering, “A multi-channel
communication broadcasting company” with an
international customer base.
© 2011 Haynes and Boone, LLP

10. Products & Services
• Failing to identify the benefits of the product or
service (focusing instead on the features)
• Describing the product/service in language that
is too technical
• Omitting the specific problem the product/service
addresses and how that problem is solved
• Assuming an improved product/service will "sell
itself"
© 2011 Haynes and Boone, LLP

11. examples
• This kit will improve medicine. Presently, the
gold standard for blood draws is an eight or nine
panel blood test. It is our opinion this is not
enough.
• The main competitive edges PRODUCT has
relative to other similar radiation devices already
in the market are its projected low price,
compactness and inconspicuous design.
© 2011 Haynes and Boone, LLP

12. Industry Analysis
• Not demonstrating a solid understanding
of how your industry functions
• Appearing unaware about the companies
that form your industry
• Lacking understanding as to where your
business fits into the distribution channel
of your industry
© 2011 Haynes and Boone, LLP

13. example
• An indication of the market size can be obtained by
reviewing the current state of _______ monitoring at the
US borders. Customs inspectors increasingly rely on an
array of high tech gadgets, including _______ scanners
and hand-held ______ detectors no bigger than a pager
to see inside shipping containers. A computerized
container tracking system now alerts customs agents to
suspect boxes while the transport ships are still at sea.
Customs inspectors working at overseas ports are
directing local officials to suspicious containers before
they are loaded aboard American-bound ships. About 72
mobile _________ devices have been added to the 40
that agency already had and are deployed at major ports
and border crossings. In the ports of Los Angeles and
Long Beach, the third busiest port complex in the world,
inspection of containers is up 320 percent since the
Sept. 11, 2001, terrorist attacks.
© 2011 Haynes and Boone, LLP

14. Target Market
• Don't assume that everyone is a buyer of your
product/service
– Don't assume you must have a "huge" target market
– A well-defined target market that you can serve is far
better
– Need to explain what is different about the “solution”
you offer
• Don't be unclear about the characteristics that
define who your target customers are
© 2011 Haynes and Boone, LLP

15. Target Market (cont.)
• Don't jump to conclusions about why your
target market needs you - instead explain
how you meet their needs
• Don't underestimate the value of focus
– Sell a specific product/service to a specific
group
– Don't try to attack too many markets at once
© 2011 Haynes and Boone, LLP

16. example
• Historically, customers have proven that
they will pay for what they want, or need,
and it is the mission of COMPANY to fulfill
that need. Thereby giving COMPANY an
opportunity to build strong brand
allegiance while building our company.
© 2011 Haynes and Boone, LLP

17. Marketing/Sales Plan
• Defining your target market too widely, and
assuming success will result from simply
capturing a "small portion" of this enormous
market
– Attempting to attack an entire market instead of a
narrow niche
– Attempting to immediately fill several lucrative but
unrelated markets
• Making assumptions about your target market
without research or concrete support
© 2011 Haynes and Boone, LLP

18. Marketing/Sales Plan (cont.)
• Not specifically identifying the mediums
you will use to advertise and promote your
product
• Making the assumption that offering a
lower price will lead to increased sales
– Underestimating the importance of packaging,
brand name and reputation
© 2011 Haynes and Boone, LLP

19. Marketing/Sales Plan (cont.)
• Don’t overemphasize having signed a big
contract with a major company
– Over-emphasis can be perceived as a weakness
– If, for example, 80% of revenues are based on that
contract, what would happen if the deal goes sour
• Instead, highlight that your company is adept at
forging strategic relationships or winning big
contracts and this skill will be used to diversify
client base
© 2011 Haynes and Boone, LLP

20. examples
• The company estimates that at least 14,000 of
the THIRD-PARTY PROGRAM customers (40%
installed base) could use COMPANY’s solutions
to process electronic payments with an
immediate ROI.
• Staying small and utilizing existing companies to
leverage the market will enable COMPANY to
maintain a level of profitability and success
unparalleled by any formidable competitor.
© 2011 Haynes and Boone, LLP

21. examples (cont.)
• We will not have a direct sales force. As acceptance and
validation for the product grows, single orders can be
taken over the website. These orders will be filled from a
small inventory of finished kits
• With security concerns on the rise and a burgeoning
_____ repair market currently costs $8 billion a year
nationally. The U.S. Department of Justice estimates
these costs at $12 billion a year. COMPANY has
identified a large and growing market for it’s existing
__________ technology.
© 2011 Haynes and Boone, LLP

22. Competitive Analysis
• Assuming you have no competition!
– A business does not operate in a vacuum
– Management may not foresee external factors that
can impact the business
• Failing to identify direct and indirect competitors
• Underestimating the strength of competitors
• Omitting the specific competitive advantages
you hold over your competition
© 2011 Haynes and Boone, LLP

23. examples
• In the little time COMPANY has been in the
market, the company already dominates the
THIRD-PARTY PROGRAM segment.
• COMPANY has many competitors in all product
spaces however, there is no one delivering
The total bundled services package and
combined products like that of COMPANY,
affiliate support services, and the patented
products, technologies, unique content and
specialty events, will benefit charities, and
ability to share revenue streams.
© 2011 Haynes and Boone, LLP

24. Management Team
• Depending on unqualified friends or family
• Assuming that previous success in other
industries applies to your current industry
• Attempting to attract top managers without
sharing ownership
• Failing to attract and assemble a knowledgeable
board of advisors
• Lack of financial investment on part of founders
© 2011 Haynes and Boone, LLP

25. examples
• COMPANY takes the same philosophy used in
FOUNDER’S previous companies, that of a
relatively small close knit family of employees
who work together as a unit to a common end.
• While COMPANY uses a small local accounting
firm for bookkeeping services at present,
COMPANY intends to recruit a major accounting
firm for audit purposes upon funding.
© 2011 Haynes and Boone, LLP

26. Operational Plan
• Failing to outline the process by which you
manufacture, distribute and sell your
product or service
• Failing to account for all production costs
(direct and indirect)
• Failing to properly plan for contingencies
to meet production and staffing challenges
© 2011 Haynes and Boone, LLP

27. example
• We are a start-up firm and have limited capital.
We are developing new and virtually unknown
markets. Industry trends and technology effect
demand patterns and hence prices. We are in
the process of identifying a CEO with
experience to compliment our existing
management team; however, there is no
guarantee that will attract this person. We
have not identified a complete Board of
Scientific Advisors. We have not identified our
continued…
© 2011 Haynes and Boone, LLP

28. example (cont.)
our marketing team and are not sure if we can
attract the right personnel to facilitate our
marketing strategy. Our proprietary process and
concept patent applications have not been filed,
therefore, we do not know if we can protect our
proprietary technology. Our cost to develop the
automated _______ Analyzer is an estimated
cost and we are not certain if our projected
development cost will significantly impact our
pricing model.
© 2011 Haynes and Boone, LLP

29. Financial Projections
• Presenting sales and profit projections that
are unrealistic (i.e., “hockey stick”)
• Omitting financial assumptions to explain
where the "numbers" originated
• Underestimating expenses and not
budgeting for unexpected costs
© 2011 Haynes and Boone, LLP

30. Exit Strategy
• Assuming you have a business with the
potential to go public
• Failing to explain how your investor will
specifically recoup their investment and a
sufficient return
• Completely ignoring this aspect of the
planning process, or having no exit
strategy at all
© 2011 Haynes and Boone, LLP

31. examples
• The exit strategy of COMPANY is after
building the company to several million
dollars in sales to sell the corporation to
one of these large companies.
• To either sell out or go public when the
market rebounds
© 2011 Haynes and Boone, LLP

32. examples (cont.)
• Long range financial strategy is to go
public. The IPO market is starting to heat
up again. If the market continues to
improve, IPO is likely to happen 2006.
© 2011 Haynes and Boone, LLP

33. QUESTIONS?
Bart Greenberg, Esq.
Haynes and Boone, LLP
Direct: 949.202.3037
e-mail: bart.greenberg@haynesboone.com
http://www.haynesboone.com
Follow Me on Twitter: http://twitter.com/#!/BartTweets
© 2011 Haynes and Boone, LLP

34. Thank You!
Bart Greenberg
© 2011 Haynes and Boone, LLP