Business Plan
Mistakes
Often you may hear about what a business plan consists of. While including the
necessary items is very important, you also want to make sure you don't commit
any of the following common business plan mistakes:
1. Putting it off
Don't wait to write a plan until you absolutely have to. Too many businesses
make business plans only when they have no choice in the matter. Unless the bank
or the investors want a plan, there is no plan.
Don't wait to write your plan until you think you'll have enough time. "There's
not enough time for a plan," business people say. "I can't plan. I'm too busy
getting things done." The busier you are, the more you need to plan. If you are
always putting out fires, you should build firebreaks or a sprinkler system. You
can lose the whole forest for paying too much attention to the individual
burning trees.
2. Cash flow casualness
Cash flow is more important than sales, profits, or anything else in the
business plan, but most people think in terms of profits instead of cash. When
you and your friends imagine a new business, you think of what it would cost to
make the product, what you could sell it for, and what the profits per unit
might be. We are trained to think of business as sales minus costs and expenses,
which equal profits. Unfortunately, we don't spend the profits in a business. We
spend cash. So understanding cash flow is critical. If you have only one table
in your business plan, make it the cash flow table.
3. Idea inflation
Plans don't sell new business ideas to investors. People do. The plan, though
necessary, is only a way to present information. Investors invest in people, not
ideas.
Don't overestimate the importance of the idea, particularly the importance of
the uniqueness of the idea. You don't need a great idea to start a business; you
need time, money, perseverance, common sense, and so forth. Very few successful
businesses are based entirely on new ideas. A new idea is much harder to sell
than an existing one, because people don't understand a new idea and they are
often unsure if it will work.
4. Fear and dread
Doing a business plan isn't as hard as you think. You don't have to write a
doctoral thesis or a novel. There are good books to help, many advisors among
the Small Business Development Centers (SBDCs), business schools, and there is
software available to help you (such as Business Plan Pro, and others).
5. Spongy, vague goals
Leave out the vague and the meaningless babble of business phrases (such as
"being the best") because they are simply hype. Remember that the objective of a
plan is its results, and for results, you need tracking and follow up. You need
specific dates, management responsibilities, budgets, and milestones. Then you
can follow up. No matter how well thought out or brilliantly presented, it means
nothing unless it produces results.
6. One size fits all
Tailor your business plan to its real business purpose. Business plans can be
different things: they are often just sales documents to sell an idea for a new
business. They can be detailed action plans, financial plans, marketing plans,
and even personnel plans. They can be used to start a business, or just run a
business better.
7. Diluted priorities
Remember, strategy is focus. A priority list with 3-4 items is focus. A priority
list with 20 items is something else, certainly not strategic, and rarely if
ever effective. The more items on the list, the less the importance of each.
8. Hockey-stick shaped growth projections
Have projections that are conservative so you can defend them. When in doubt, be
less optimistic.
This Article Provided by Palo Alto
Software, Inc.
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