[Driven_Magazine]

What are the most common mistakes when writing a business plan? Here is my list of the ones to make sure you avoid. While including the necessary items in a business plan is important, you also want to make sure you don’t commit any of the following common business plan mistakes:



Putting it off.

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. “I can’t plan. I’m too busy getting things done,” business people say. 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.



Cash flow casualness.

Most people think in terms of profits instead of cash. When you 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.



Idea inflation.

Don’t overestimate the importance of the idea. You don’t need a great idea to start a business; you need time, money, perseverance, and common sense. Few successful businesses are based entirely on new ideas. A new idea is harder to sell than an existing one, because people don’t understand a new idea and they are often unsure if it will work.



Plans don’t sell new business ideas to investors. People do. Investors invest in people, not ideas. The plan, though necessary, is only a way to present information.



Fear and dread.

Doing a business plan isn’t as hard as you might think. You don’t have to write a doctoral thesis or a novel. There are good books to help, many advisors among the Small Business Development Centers (SBDCs), business schools, and there is software available to help you (such as Business Plan Pro, and others).



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.



One size fits all.

Tailor your 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 also 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.



Diluted priorities.

Remember, strategy is focus. A priority list with 3-4 items is focus. A priority list with 20 items is certainly not strategic, and rarely if ever effective. The more items on the list, the less the importance of each.



Hockey-stick shaped growth projections.

Sales grow slowly at first, but then shoot up boldly with huge growth rates, as soon as ’something’ happens. Have projections that are conservative so you can defend them. When in doubt, be less optimistic.

[Lucas_gm]

Excelent and I would add:
- Organizational and societal problems in the entrepreneur team
When the proyect is conducted by a group of entrepreneurs, may appear some problems in the team, bucause that is important to establish clear legal and organizational commitments.

- Poor estimate of accounts payable and accounts receivable
This is part of the forecasts but special emphasis should be placed.

Greetings
Lucas.-

[bigredtomato]

I would also add failing to review the plan on a regular basis. (at least quarterly) to make sure you're still on track. To help keep you on a track, I recommend to my clients that they keep it to a single page. In fact, I've written a post on it here which you can use as a starting point. Big Red Tomato Company » How to write a business plan on a page

[Scar Tissue]

One of the most common mistake, according US venture capital companies -
was that entrepreneurs were not clear in explaining the opportunity. Why the business made sense, why the business model would be successful.

[andrewlm]

Very useful and informative, thanks for sharing.

[Maxewhite]

Indeed, business plans should be always open for innovative ideas though it shouldn't be all about selling and focusing on only one subject. I would also add these bad business plans commonly experienced by many investors found at PowerHomeBiz.com:

Failing to describe the product in layman's terms
Be clear, in simple language, what you are doing or making. In general, product description isn't tool helpful for running the business, except that it leads you to question how you designed your product, and if it is right for the market. Avoid talking about the product too much, and when you do, avoid using a lot of industry jargon. Lenders will not be inclined to approve a loan or provide financing if they cannot tell what the business is. Pretending that you are explaining your product to a group of 10-year olds will do the trick.

Lack of market and competitor research
You must show where you fit in your market and you must know the details of your competitors' products. List your competitors and identify their strengths and weaknesses. If possible, include estimates of their market shares and profit levels. Everyone has competitors, and to say that "We have no competition" in a business plan is almost a sure predictor of failure. To run a company effectively you have to know them and respect them.

Incomplete financials
Provide financials that are detailed enough that a reviewer can make guesses about your accuracy, including a clear and complete list of assumptions that form your financials. You must show actual figures if you have them. It is also advisable to have monthly figures at least for the first year; while tedious, it shows your foresight in getting through the slow months of your business. Most importantly, make sure that your numbers make sense. Review them thoroughly to ensure consistency in all sections, and back-up with facts and sensible plan every growth assumptions that you make.

Huge appendixes
The business plan should include supporting materials such as brochures, resumes of key managers, technical papers, summaries of market research studies, references from people acquainted with the company or founders. However, the idea that a heavier document is more impressive doesn't work here. Be careful not to go into too much detail.

[maria555]

That's great plans for your business.I think people who are going to make a business plan then they should read your post.It's really helpful information for settling down your business in right way.

[benthomas]

Hi,

Thanks for sharing your knowledge with us,
There are Really very important and useful tips provided.
Keep Sharing such helpful information.

Regards
Ben Thomas