Recently I read the worst ever business plan. It arrived in the mail. Below, in italics, are direct quotations (with spelling corrections) followed by some observations ...
1. UNDEFINED TARGET MARKET
"Our system and product will have an application in every segment of personal, commercial and industrial activities"
Market segments have varying, often contradictory, product requirements and therefore different product specifications. This is the case for product-based industries (e.g. cell phones, computers, furniture, ...) and service-based industries (e.g. corporate finance, legal, estate agency). The impact of market segments can be shown in value curves, market cluster analysis and other tools.
2. NONSENSE REVENUE FORECASTS
"A total yearly revenue of USD 8 Trillion is expected" (based on a percentage of world GDP)
Almost all business have five or fewer key drivers of revenues. Perhaps product volume, customer numbers, market share, or pricing. Explain key drivers, ideally provide scenario analysis. And no, world GDP is not an appropriate benchmark for revenue forecasts!
3. DISMISSAL OF RISK
"Risk is negligible at this point as our technology is 100 years far advanced for our time"
Every business has risk. Suppliers, customers, competitors, product development, key people all have the potential to impact the future success of a business. Best practice is to list known risks and indicate their likelihood, resulting impact and mitigating factors.
4. UNAWARE OF COMPETITORS
"Virtually non-existent [competitors]"
No or insufficient knowledge of competitors either indicates inexperience of the entrepreneur or insufficient insight into the target market (substitute solutions).
5. UNREALISTIC MARKET SHARE
"The system is expected to secure 60% of the total world [XXX] markets in the first three years ... "
Gosh, that's ambitious.
"... and the remaining 40% within three to ten years"
Of course.
6. OPTIMISTIC ADOPTION
"We expect immediate acceptance of our [product] as a complementary [product] to existing ones with a gradual phasing out of existing systems over the next five to ten years."
Products or services that offer absolutely compelling solutions can gain rapid adoption by their target market. Some common channels involve frustratingly lengthy sales cycles. Any claim for 'immediate acceptance' would require a very high level of evidence, such as a list of substantial purchase orders.
7. POINTLESS POLICIES
"Hours of operation: 8am to 5pm.", "Vacation program: 4 weeks spread over the year"
Standard working hours are unknown for entrepreneurs in early-stage
ventures. Is this information relevant to an investor? Nope.
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