- 10 Common Business Plan mistakes to Avoid in 2020
- Change comes upon you quickly during a business crisis. That means that good business planning is crucial to your company's survival and success. However, it's easy to make mistakes that can prove to be costly for your business even if you're not navigating through a crisis.
- When writing a business plan, what are the most common errors?
- Some common errors are classics. Others are reflections of the increasing need for planning as instruments for steering and management. But all of those are common pitfalls to avoid. Do your planning right and it's a powerful tool for fast decisions, quick adjustment, and management optimization.
- So, when writing a business plan, what are the most common mistakes? My revised list is here, new for late 2020.
- 1. Not scheduling
- Too many companies only make business plans when they do not have a choice in the matter. There is no plan, unless the bank or investors want a plan.
- Do not wait until you think you'll have enough time to write your plan. I'm unable to plan. I'm too busy getting stuff done,' say business people. The busier you are, the more planning you need. You should construct firebreaks or a sprinkler system if you are always putting out fires. By paying too much attention to the individual burning trees, you could lose the entire forest.
- In less than 30 minutes, you can actually put together a Lean Plan. To help, here is a free downloadable Lean Plan Template.
- 2. Using a Static Single Plan
- Now, more than ever, stop thinking of the business plan as just a plan as we deal with the crisis of 2020. That conceptual error, with regular review and revision, blocks you from the enormous advantages of planning as a process.
- Things shift overnight. Assumptions vanish into the wind. Your business planning is where you keep track of all the links between tasks, expenditure, goals, assumptions that change, and markets that change.
- A successful business plan is never completed. Your business is done when your plan is done. Make a tight plan and keep it fresh.
- 3. Losing concentration on cash
- In terms of profits instead of cash, most people think. 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 company as sales minus expenses and expenses, equivalent to profits. Unfortunately, we're not spending our profits on a company. We're spending cash.
- Understanding cash flow is critical. In your business plan, if you have only one table, make it the cash flow table. To help you get started, here's a free cash flow template.
- 3. Validation of Skipping Idea
- Don't overestimate the concept 's importance. In order to start a business, you don't need a great idea; you need time , money, perseverance, and common sense.
- Few successful businesses are based entirely on new ideas. A new idea is more difficult to execute than an existing one because a new idea is not understood by individuals and they are often unsure whether it will work.
- Plans don't sell investors fresh business ideas. Plans just summarise the prospects and accomplishments of business. Investors invest, not ideas, in people and their businesses. Investors buy into a company; not just ideas, with milestones met and traction and validation.
- The plan is only a way of presenting information, although it is necessary. So make sure you're ready with your knowledge and leadership skills to wow your prospective investors. Don't expect your business idea to do the job for you, or the business plan in which you explain it.
- Here's our validation checklist for the concept, which can help you to think about whether your idea is viable before spending a lot of time and money on it.
- 4. Making the process of planning overwhelming
- It's not as difficult to make a business plan as you might think. You don't have a doctoral thesis or a novel to write. As we said earlier, just a few pages of bullet-point lists, tables, and essential projections are the simplest Lean Plan.
- Among the Small Business Development Centers (SBDCs), and through the SCORE business mentoring programme, business schools, there are good books, many advisors, and there is software available to assist you (such as LivePlan).
- Don't make those cosmetics sweat. Concentrate on content. What matters, not how you write about it, is what you plan.
- 5. Spongy, vague objectives
- Leave out the vague and meaningless babble (such as "being the best") of business phrases because they are simply hype.
- Remember that the purpose of a plan is its outcomes, and you need tracking and follow-up for results. You need specific dates, responsibilities for management, budgets, and milestones. You can follow up then. It means nothing, no matter how well thought out or brilliantly presented, unless it produces results. It will help with this article on how milestones make your business plan real and actionable.
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- 6. Supposing one size fits all
- Not every business plan has to be identical. Not every plan should actually be the same. You need to tailor your plan to its true business purpose to find success.
- Different things can be business plans: they are sometimes just sales documents to explain a new business. Flexible Lean Plans, detailed action plans , financial plans, marketing plans, and even personnel plans can also be included. You can use them to start a business, or just to better run a business.
- Develop the plan that best suits your business goals and do not let you get the best from the planning process.
- 7. Priorities diluted
- Remember, strategy equals concentration. You divide your focus if you split your priorities and you will only have difficulty making any progress.
- The focus is to start off with a priority list of three to four items. With 20 items, a priority list is certainly not strategic, and rarely, if ever, efficient. The more items on the list, the less important each of them will be.
- 8. "Hockey stick" shaped projections for growth
- At first, sales increase slowly, but then shoot up boldly with enormous growth rates, as soon as "something" happens. The only problem is that if that's your sole projection, you're going to be in trouble soon.
- It's best to have conservative projections so you can defend them. Be less optimistic when in doubt. In fact, having multiple forecasts operating, one that acts conservatively, one that is more optimistic, and another that reflects your actual performance, may make sense.
- Here's how we suggest you create your sales forecast if you're unsure of where to start.
- 9. Failure to pay attention
- In 2020, we saw it again; planning works best as a process. A lean plan, periodic reviews, and revisions as needed are necessary to navigate volatile environments. It's not about having the paper, the business plan, that's not the objective. It's about a system of planning that works like driving with a GPS.
- The long-term strategy and objectives are the desired destination for you. As a recommended route, you have the main milestones and metrics. And, as the equivalent of real-time traffic and weather information, you have regular progress reviews.
- Steering is a matter of frequent corrections on the course. For you, planning does that. Your plan is worthless if you're not paying attention, and not adjusting to external factors.
- Uh. 10. Sticking to the project
- There is no virtue in sticking to a plan, contrary to popular belief, just for the sake of sticking to a plan. There are many instances in which your initial plan is ill-informed, missing or simply ineffective.
- Having a plan doesn't mean that your options are cut or flexibility is reduced. Having a plan means that you have a tool for the dashboard to show the links and dependencies. It's about being able to quickly make the correct changes. It's more versatile, not less.
- Note from the editor: This article originally appeared in 2007. In 2018, it was revised, and again in 2020.
- The founder and chairman of Palo Alto Software and Bplans.com is Tim Berry. Follow him @Timberry on Twitter.
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