- A business plan can help you prep your company for launch, but you can jeopardize your chances of success if you make one of several common errors
- Factors range from sloppy grammar to unrealistic financial forecasts
- For those planning a business
Most small business owners all know the importance of a business plan (if you still have no idea of business plan or don’t know why you need a business plan, check out our article What is a Business Plan and Why Do I Need One? before reading this one). One of the biggest mistakes you can make is trying to launch a company without first planning ahead for how you will manage your finances, find customers, and otherwise increase your chances of success.
However, you can also run into problems if you make one of several common mistakes in crafting a business plan. Thoroughly review your plan once it’s complete to see whether you’ve encountered one of these pitfalls.
Not creating a flexible plan
A business plan shouldn’t involve a “set it and forget it” strategy. Even if you have carefully researched your plan and created a feasible plan, it may quickly diverge from the reality of your operations. Set aside the time to periodically update the plan to account for changes in market trends and other circumstances.
You may start with a lean plan, which has the added benefit of preventing the plan from getting overly detailed. Another option is to create smaller plans for individual aspects of the company, such as your financials and marketing plan.
Not being realistic
Your business plan should fit the market, not envision unrealistic scenarios that will support your vision of success. Entrepreneurs can easily overestimate how easily they’ll be able to grow the company or reach profitability, how long they’ll need to develop the company, and how high they’ll be able to set their prices.
The business plan may also take a rosy outlook on the market, suggesting that your company won’t face any competition or that it’s a risk-free endeavor, but investors will be naturally skeptical of such claims. Even if you’ve found a market gap with little or no competition, you’ll need to anticipate that other companies will enter the field and plan for how you’ll stay resilient. Periodic updates to the plan will help ensure that it is based on the most up-to-date market data.
Lack of focus
The business plan should have distinct goals and a clear purpose that can be conveyed to investors and help guide how you run the company. You should also make sure the plan is complete and doesn’t omit any important information.
One common error is to put too much emphasis on profit rather than cash flow. If you aren’t able to establish a reliable cash flow as part of your financial projections, it’s more likely that you’ll be pinched for available funds during the actual management of your company.
A robust financial section can make your proposal more impressive to investors and help you identify any potential problems you need to work out. The section should include a balance sheet as well as forecasts for your income and cash flow.
It may seem like a minor point, but any business plan should be free of spelling and grammatical errors to ensure that it has a professional appearance. You should also avoid hyperbole, hype, and buzz words in your presentation.