The thought of compiling a formal business plan can be quite daunting to the entrepreneur. Many of us see ourselves as the creative type rather than the formal intellectual and we might have an inbuilt tendency to try and fly by the “seat of our pants”. In spite of the pain, perceived or otherwise, involved in its creation, we must invest the time and effort to come up with a formal business plan. It is not as hard as you think, there are plenty of good books on the subject and some really great software packages, such as Business Plan Pro, for example.

So what are the most common errors people face when writing a business plan? Apart from the obvious – procrastination – you should always make sure that you include the necessary items. Make sure that you do devote time to creating the plan and don’t use any excuses, such as your busy schedule. You must look at the bigger picture, which includes the need to craft a formal projection of where you want to go.

When constructing your business plan, think in terms of cash rather than profits. Even though you may come up with a projection which you like – income being greater than expenses – you must understand cash flow. A profit and loss statement should be almost secondary to your cash flow statement, as you must ensure that you have enough cash in hand on a day-by-day basis to even survive.

Don’t focus too much on your grand idea, but make sure that you have all the fundamentals covered. A bold idea is hard to sell, so you need to stress that you have the available time, common sense and business smarts to succeed. If you are looking for investors, they will be more interested in you and/or your people, rather than the idea.

When you’re compiling a business plan, leave out the hype. Do not use any colorful language or preconceived notions. People who will be looking at your business plan will want to see hard, solid facts, backed up by very reasonable assumptions. Milestones must be set, tasks established and sound logic applied to your reasoning.

Remember that you must focus and not come up with an unachievable list of too many priorities. Your strategies are very important and you will only be kidding yourself if you try and cast your net too wide.

It’s an obvious goal to project growth, make sure that it is realistic and that any growth spurts are tied and referenced to understandable and realistic events. Your projections must be conservative at all times and you must be able to defend them.

Always make sure that you are not living in a bubble and that you are thoroughly aware of your business competition. If your business plan is too inwardly focused, you run the risk of ignoring other companies in your marketplace at your peril.

Don’t base your business plan and your very success on one mega-deal. This is known colloquially as putting “all your eggs in one basket” and should you, or your clients drop this basket, you will be doomed!

Remember, this does not have to be rocket science. A business plan is based, first and foremost, on common sense. You must, deep down within yourself, believe in all the assertions and assumptions that you’re making. Take time to sit down in a quiet room and really think it all through, before committing to paper. Solid preparation now puts you in good stead for the future.

Share your experiences on writing a business plan.

Adam Toren