Common Business Plan Mistakes

While including the necessary items in a business plan is important, you also want to make sure you don’t make 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. The busier you are, the more you need to plan.
  • 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. Also, 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, although necessary, is only a way to present information.
  • Fear. 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.
  • Vague goals. Leave out the meaningless business phrases (such as “being the best”) because they are simply hype. 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 business purpose. Business plans can be different things: sales documents to sell an idea for a new business, detailed action plans, financial plans, marketing plans, or personnel plans. They can be used to start a business, or run an existing 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.

By Tim Berry, June 15, 2004

About the Author

Tim Berry is a business planning expert, author of several books and planning software packages.


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