When my kids were little I would often complain that they didn’t come with an instruction manual. Each age or phase brought new challenges I was unsure how to handle. So like most parents, I simply followed my gut and muddled through.
Being a business owner, like being a parent comes with new challenges all the time. But unlike my parenting days, I do have an instruction manual. It is my business plan. And although it doesn’t cover everything that might occur, it does give me a starting point to build on.
Do you have a plan? If you are thinking about writing one, be sure to avoid these 10 common business plan mistakes.
- No Plan – Maybe you think you don’t need one, you do. Potential investors are going to want to see a plan. Even if you are self-financed, bankers will want to see a plan before they extend a line of credit and even landlords may be unwilling to lease a property to you without a plan. Start today. As you get business you will find your plan is helpful to guide and simplify your decision-making process and automate day-to-day operations.
- No Clear Audience – Who are you writing for? Sure every plan contains the same basic elements, but your audience will define which sections will need in-depth analysis and which can simply be an outline. Bankers are most concerned with projected financials, investors want to know about the market for your product and the people behind your company. If you are writing for you, the most important sections will be the milestones and operation plans.
- Poorly Defined Customer – Repeat after me. “Everyone is not your customer.” It is impossible to write a cohesive plan if you can’t define who your target customer is.
- Too Much Detail or the Wrong Type of Detail – This is a working document, not the next great American novel. Simplify the history and description of your business, no one needs to know the month by month journey from concept to launch. Describe your product as a solution to a specific problem faced by your target customer. Include unique features, save the technical specifications for the appendix and the jargon and industry slang for your sales material.
- Limited Market Research – Does anyone really want your product? (By “anyone,” I mean anyone other than your mom, spouse, or best friend.) Just because you think it is a great idea, doesn’t mean other people will. Broccoli is good for you and you should eat it. But lots of people don’t like and won’t buy broccoli. Do the research to understand who will (and more importantly who won’t) buy. Also be sure to ask how much they are willing to pay for your product
- Inadequate Competitive Assessment – Everyone has a competitor. No matter how unique and innovative you think your product is, you have competitors. They may not be offering the same type of solution, but they are solving the problem of your potential customers.
- No Meaningful Goals and Milestones – A good business plan outlines goals which are challenging but attainable, specific and measurable. How many units will you sell? How much revenue? And by when. Building a pro forma financial statement and timeline gives you something to help you track your progress and figure out if you are on track for a successful year.
- Activities Not Tied to Goals – Your goals form the basis of other decisions. Eliminate activities which do not move you closer to your goals.
- Unsupported Financial Projections – Unrealistic financial projections with a hockey-stick-shaped growth curve, set up a business for failure when owners spend too much too soon without enough cash reserves to help the business through the startup phase. As you develop financial projections, consider two scenarios: a best case and a worst case.
- Inadequate Consideration of Pitfalls – Stuff happens! Things go wrong. When the worst happens, will you be prepared? Having an adequate assessment of risks is not being negative — it is being prepared.
- Failure to Communicate – This was supposed to be a list of the ten most common mistakes. But this is an important item because poor communication can have a detrimental effect on your business. As you write your plan, involve anyone who could be affected by the plan. Seek advice from people you respect. Talk to employees, family members, business partners, and advisers, such as your accountant and lawyer. Ask their opinions and communicate your goals. It is easier to steer a boat if everyone is rowing in the same direction.
Ready to start working on your plan? Sign up for our self-paced program to write a business plan in ten weeks. Start today![su_business_map]