sponsored by Palo Alto UK Business Plans
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, banks and various government groups offer advice and there is software available to help you.
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 focused. 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.
John Mackie, former Chief Executive of the British Venture Capital Association (BVCA), when interviewed by Company Partners also gave this advice:
"The area in which the plan is often the weakest is about the market, the competition, how you are going to get the product to market and how you are going to achieve the sales. Far too often this part of the plan is left skimpy and not fully thought out."
Get your plan's timing right. Almost all plans are far too optimistic in terms of how long it will take to do things, to develop product or to make sales. The investors, who after all have read a great many plans and know what is realistic, will find inconsistencies. Your credibility will suffer accordingly."
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