The 5 Worst Business Planning Mistakes You Could Make
December 2016 / By Charlie Howell / Contact Me
What makes a business plan good? The answer will differ according to whoever you ask. But generally speaking, a good business plan is one that is made for a specific purpose and works to achieve that purpose. This means that the plan you show your bank in order to secure funding will not be the same one you show your investors. Business owners need to tailor their plans according to their audiences. However, even after doing so, there are some pitfalls that business owners have a tendency to fall into.
Highlight the Viability of your Business Opportunities
In the excitement over new business prospects, entrepreneurs may fail to highlight the profitability of a certain opportunity, and the road to exploiting it successfully. Ensure that the audience is able to fully understand the details of your plan. Focus on the hows and whys as comprehensively as possible. Make sure that the executive summary, especially, describes the venture in fullest, and readable, detail.
Involve your Stakeholders in Writing the Plan
Do not let any one person write the business plan all on their lonesome. Business plans can easily fail to achieve their purpose if written without consultation with key players. A lone consultant will not be completely aware of all the intricacies of the business, and so it is extremely important to have consultations with key players and stakeholders in the business. If the people most involved in the business are not as involved in the writing of the plan, the odds of a successful execution fall dramatically.
Make your Objectives Clear
As the introduction mentioned, it’s important to tailor your plan according to your objective. However, too many entrepreneurs fail to make their objectives clear within the business plan itself. Do not just have a short-sighted focus on your product or idea. Know what it is that the plan is meant to achieve. Is it to secure investment? If so, detail the risks and returns involved in the investment. Talk about cash flow sources and the timeframe involved. Don’t leave the investor confused about the merits of the investment.
Have a Thorough Financial Model
Make sure your budgets account for your expenses. And keep your revenue and cost assumptions as accurate as possible. This will cause your cash flows to remain steady, allowing the business to grow and securing your stakeholders’ trust.
Do not Downplay the Importance of Good Cash Flow Management
Cash is not the same as profits. Every entrepreneur needs to understand that positive cash flows do not necessarily signify profit. In fact, many businesses actually fail due to insolvency, not lack of profitability. Especially during the initial phase of a business, entrepreneurs need to employ good cash flow management in order to handle the low cash flows coming in when compared to the cash flows going out. The business plan needs to account for the losses likely in the first months of starting up, including figures like overdraft limits.