As writing a business plan is time-consuming, entrepreneurs has a reason for not completing one. But it is not the only alibi. Most of the entrepreneurs don’t believe the business plan will be useful and they are not sure where to start, and so on. Not making a business plan is a fundamental error for an entrepreneur. In fact, when reviewing an unsuccessful venture, many find their biggest mistake was not taking the time to think through what it would take to make their venture successful. While a complete, well-developed plan is the goal, an incomplete business plan is better than no plan at all. Even an incomplete plan will move you in the right direction and provide something to which others can respond. Readers of your plan will be able to see what is missing and can point out flaws in your logic if they have something to evaluate.
Incomplete Market Research
Many times information about the market for your product or service is the most difficult to gather. Trying to define who wants your product, how much they want, what they will pay, and how competitors will respond is not an easy task. While challenging, the time and energy invested in truly understanding your market will pay off. Your business should be market-driven rather than product-driven. Your business plan should not be built around a product searching for a problem to solve. There are some competitors for every business—you simply must try your best to know who they are and what they bring to the market. In the end, you cannot stint on market research. Your plan must demonstrate knowledge of customer needs and wants, and prove that you have a reachable, and significant, market.
Not Being Objective In new venture planning,
it is easy to be caught up in the enthusiasm of the venture or be overly eager to get to the marketplace. Being critical of the idea, the market, or yourself is difficult. However, not recognizing up front what you need be successful will catch up with you at some point. For example, if you are starting an agritourism venture, you need to be very objective about your people skills. Are you good with people? Will you be an effective host for your guests? You need an honest answer to these questions. Maybe you have these skills and hence possess an important capability for success. If people skills are not your strength, then your business plan must address this gap.
Be objective in your analysis, or it could potentially cost you a lot of money later Making Unrecognized Assumptions Putting together a business plan requires estimates about many things that are not known with certainty—sales volumes, construction costs, competitor response, etc. Such assumptions are a necessary part of the process. The problem occurs when your assumptions about something you don’t know for sure become fact in the business plan. For example, it is easy for the assumption you have made about sales volume or market share to become a fact in the business plan. If you treat this information as a fact, you don’t plan for the situation where actual sales volume or market share turn out radically different than the assumptions.
You need to recognize what you are assuming and separate your assumptions from the things you can state with certainty because they are backed up by facts.in other words, you need to know what you don’t know. Forecasts developed with no substance will get you nowhere. Assumptions that become facts are trouble. Your assumptions must be stated clearly in your business plan to be an accurate road map for your decisions. Providing Useless Information When you start the business planning process, you will likely find more data than you ever imagined possible. And, depending on your personality, you can become infatuated with the business plan itself, treating it as the end point.
A business plan is a tool, it is a step in the process of launching a new venture. It is a road map, and clarity is important. Long, detailed text and “data dumps” are unlikely to provide the guidance you are looking for. Your business plan should state clearly how your business will make money.
Don’t focus on long descriptions of the product over descriptions of your path to profitability.
Your business plan should show that you are aware of buying cycles and adoption rates, have a growth plan, and are not too dependent on others. It should be a selling document that is succinct, clear, and logical; it should contain quantitative rather than qualitative information.
Skipping Steps As the plan comes together,
there is a tendency to spend time on the sections of interest or where the data is “best.” This leads to an unbalanced plan where the marketing plan is spelled out in tremendous detail, but the financial plan gets little attention simply because the entrepreneur is not a “numbers person.” The value of the business plan is that it provides a place to think comprehensively about the future of the venture. That value is severely undermined when you do not discuss all of the important parts of the venture
Another common mistake in business planning is the inconsistent plan. This is a plan where the different stages described above are not interrelated, where the assumptions made in one section are different from assumptions made in another. Your marketing budget should be supported in your marketing plan. The marketing budget should contain the same number used in the financial projections. The pricing policy chosen should be consistent with your market position. Your market research should guide the marketing plan and the financial projections. An experienced lender, venture capitalist, or another reader of your plan will quickly disregard a plan that does not flow. The elements of your business plan should be tied together logically and accurately tell the story of how you will turn your idea into a business.