A well-laid business plan can help steer your business in the right direction
You probably know by now that making a business plan is one of the most important components of running a successful business. A well-laid plan can help you navigate your way to where you want to go and tell you what you need to do to get there.
However, utmost care should be taken to make sure you do it right. Otherwise, all your efforts will just be in vain. Worse, an erroneous business plan may even take your business down with it. To prevent this from happening, you need to be aware of the most serious mistakes business owners often commit when writing a business plan. Here are some of them:
Not understanding the true purpose. Most people undergo the tedious task of making a business plan merely to secure financing. If this is the main reason why you are writing one, then you are setting yourself up for failure. Keep in mind that a business plan is more than just a set of documents. It is the planning that matters.
Setting a lot of priorities. Trying to be everything for everybody will take your business nowhere. You need to focus your energy on a limited set of priorities to increase your chances of success. Don’t spread your efforts too thinly.
Projecting unrealistically large markets. Do not try to impress potential investors by inflating the market. While it may look impressive at first glance, potential investors may think that you are trying to trick them by using unrealistically optimistic numbers.
Projecting outrageous profits. Most business owners tend to project way beyond the normal profit (10% to 15%). This cannot be good since it may indicate that the owner is favoring profit over the growth of the company, and underestimating costs and expenses in the process.
Using top-down forecasting. Instead of assuming that you will get a specific percentage of the market share (top-down approach), start with specific assumptions and work your way up. This way, you will get a more realistic sales forecast.
Ignoring the competition. Is there any business that has zero competition? It seems highly unlikely. There will always be some competition, even if your product or service is completely original so take it into account as you write your business plan.
Using technical jargon. Instead of using too much jargon, try to use simple, concrete words and phrases in describing your business.
Lumping details together. Do not commit the mistake of fudging the details for the first 12 months together. Provide detailed cash flow projections, responsibilities, deadlines and milestones on a monthly basis. However, making monthly projections for the succeeding years is not as important and may even be a waste of time.
Keep these tips in mind as you write your business plan and you will surely get it right.