Over the years as a SCORE volunteer mentor and as an MBA business professor I have reviewed hundreds of business plans. The following is a compilation of the most common business plan mistakes. Avoiding these mistakes before you write your plan will make the task a lot easier – and give your new business venture a much better chance of success.
The most common business plan mistakes are:
This is far and away the most common mistake. Entrepreneurs are doers so it’s natural that they want to get on with things and get them done – especially when they have an idea that they’re excited about buzzing around in their heads.
But who hasn’t heard the adage “He who fails to plan plans to fail?” And that’s the fate of almost every business someone starts without a business plan; failure. So yes, you need to write a business plan.
Too often, businesses put off writing a plan until they are told they need one. Don’t put off writing a plan until you have the time, if you are busy, then it is more likely that you need a business plan. A business plan is not only useful when you want to raise finance; it should be an important planning and measurement tool used to help direct the business to success.
Many find writing a business plan a daunting task, but the process is a lot simpler than you may think. There are numerous ways of getting help from websites, books to business plan agents. Our SCORE website offers an uncomplicated way to obtain a high quality plan that is perfect for your needs. It is there for you to use and it is free. SCORE mentors are also available to guide you through the process.
A business plan is essentially a solution to a problem, the problem being how you are going to turn your vision of a successful business into a reality.
So why are you preparing a business plan? To figure out if your new business idea could actually be turned into a viable business? To serve as a blueprint for your successful startup?
Is it to persuade a potential lender to give you a business loan? Attract investors? The purpose of your business plan will affect everything from the amount of research you have to do through what the form of the finished plan will look like and what you will do with it.
If you have an idea, don’t overestimate its importance. Generally you don’t need a great idea; you need time, money, management skills and common sense. It is a lot harder to sell new ideas than an existing one which is planned, presented and performed well. It isn’t just the plan that sells a business idea; it is the person presenting it as most investors invest in the people behind the business and not just the ideas.
Although there are many business plan samples and templates out there, do not simply copy and paste because every business is different, meaning that every business plan will also be different. Using standard documents may save you time, but the end result will not be tailored to your business and as a result the plan may not meet your needs. Be precise in your plan and don’t put in any unnecessary verbiage that fills up space or builds up hype falsely. At the end of the day, it isn’t the quantity of your plan; it’s the quality that matters.
Many newcomers to business will think in terms of profit instead of cash. When it comes to business, we think of it as sales minus costs and expenses, which will give profits. Unfortunately in business, we don’t spend profit, we spend cash. Therefore understanding cash flow is important. After all, many businesses fail because they don’t have the necessary cash to operate, not because they are ‘bad’ businesses.
Be realistic with your projections and bear in mind that very successful companies often take many years to get to a point where they succeed. These are just a few of the many different mistakes that many people make when it comes to business plans. Whilst you can prepare a plan yourself, you may wish to ask a SCORE mentor to help you ensure you get the highest quality result.