Entrepreneurship: Key Lessons from a Business Plan Competition

Posted on July 14th, 2014
Business Planning Start

The biggest mistakes made by entrepreneurs

Recently I judged a business plan competition for a large international non-profit organisation. The plans were submitted by youth entrepreneurs, from under-resourced rural and peri-rural areas, who had gone through a process of training and the competition was part of the evaluation process to select those that would receive seed funding and mentorship.

Participants presented their business concept to a panel of judges and were then interrogated on their business plan – a plan of which we had a copy.

I was impressed with the presentations by most participants. However, the following common themes came up for me, and most of the other judges, and these are areas that challenge prospective and current entrepreneurs that I work with too.

Lack of thorough research

There was a general lack of evidence that the business model would be successful. It felt more like a bakery would be successful because it is a bakery not because of an explicit measurable need from the target market.

Lack of information on product costs and profits

It is vitally important to know what your product or service costs, yet I battle to find entrepreneurs who know the actual cost of the items they sell. I can only surmise that they don’t know how much profit they are making then and, therefore, are not in control of their business.

Lack of provision for funding of working capital

When working out the starting costs of a business, as judges we found that the participants were accurately adding all the items that needed to be purchased for their venture to commence operations. However, they did not include running costs. Therefore the businesses would have a negative cash flow from inception and no funding to mitigate this. A non-starter.

Lack of knowledge of personal financial plan

A question I ask entrepreneurs often is what is the salary that they are taking from day 1 and what are their costs? This generally turns into a debate, with the entrepreneur explaining that they will not take a salary in the beginning or ensuring me that the amount they have budgeted as a salary is adequate for their needs. However, they cannot tell me what their needs are. A business cannot survive if its income is less than its expenses and neither can you.

Download: Business Plan Template for Small Businesses

Adequate distribution planning

If your business requires transport to collect your stock or distribute your product to customers, you need to have developed a strategy for this and have arranged the necessary resources. This may mean buying a vehicle and having a licensed driver or arranging transport and knowing the cost of this transport as well as having a reliable schedule.

And most importantly the X-factor

This was the most important component of the competition for most of the judges. Are you the person to make this happen? Are you the person to make this happen now? Are you excited and passionate about your business idea? Can you answer the questions specifically? Do you have any experience in that field?

Funders fund people, not ideas as it is people who implement and execute ideas and strategies.

Practice before you pitch your idea and don’t be afraid to let judges, funders or investors see your passion and belief in your idea and your ability to make it happen. If this is backed up by research and facts, you will be successful.

About the author: Stephen Read is the founder and CEO of FIELD an incubator programme working in rural and under-resourced areas including Katlehong, Vosloorus and Thokoza. Stephen is also a life-long entrepreneur and now a teacher.