Writing a business plan is no easy task. It
forces you to analyze your business from the
inside out and to really think about the need in the industry, what makes this business unique in the market, and most importantly, the financials behind the company.
Because writing a business plan can be stressful enough, it’s always good to know what issues others have encountered so you can avoid the same difficulties. The following is an excerpt written by Tim Berry, president of Palo Alto Software, Inc., which compiles a list of the most common mistakes that people make when writing a business plan.
Top Business Plan Mistakes
To avoid making these common mistakes, you must first become familiar with them. The following is a list of mistakes – in layman’s terms – that people can make when compiling a business plan.
– Misunderstanding the purpose: you shouldn’t write a business plan to simply create a meaningless document; writing a plan becomes part of the management process, which assists you in setting specific goals, establishing measures of progress, tracking your progress and following up with necessary changes
– Writing the plan all at once: you’re never going to be able to write a business plan all at once; instead, try writing it piece by piece (or section by section); if you take the time to focus one step at a time, it will be easier for you to focus on that content instead of thinking two steps ahead
– Finishing the plan: your business plan should be a living document that changes based on changing assumptions and goals; it should not be a finished product, but a work in progress
– Hiding the plan from your team: sharing the overall goals (and measurement process) with your team is important to build collaboration, encourage brainstorming, and can boost team spirit; however, if there is sensitive information such as salaries included, you may want to keep that part confidential
– Confusing cash with profits: because there is a huge difference between the two, it’s important to remember that profits are an accounting concept (cash is money in the bank); waiting for customers to pay you can damage your financial situation since you don’t pay your bills with profits
– Diluting your priorities: when writing a plan, be sure to stress a few priorities (no more than three or four) because it’s easy for people to understand; if you touch on many different priorities, it could cause confusion
– Overvaluing the business idea: a standalone great idea does not necessarily make a great business – the business plan needs to reflect and detail how the components of the business come together as a whole to support the idea
– Fudging the details in the first year: details can include the financials, milestones, responsibilities and deadlines outlined in the business plan; be sure to be specific when writing a plan – include details about what is supposed to happen (and who is responsible for each task)
– Sweating the details for later years: the monthly accounting details are important in the very beginning (within the first year), but due to the changing market, it becomes impossible to project monthly cash flow a few years in the future from when you write the plan
– Making absurd forecasts: if you forecast unusually high profitability, it indicates that you don’t have a realistic understanding of expenses; be sure to project realistic numbers in your financials
When writing a new business plan, or revising an existing one, compare this list to your content and identify any possible problems up front. Be sure to keep your financial projections clear and accurate and review your plan on a regular basis – it should be a work in progress, not a stagnant document.
To read the complete list from Tim Berry, as posted on Entrepreneur.com, visit http://www.entrepreneur.com/article/222547.
What mistakes have you made when writing a business plan? We’d love to hear your tips for avoiding certain pitfalls in the business plan writing process and how you stayed on track during it!
Thanks for reading, and until next time… stay WISE!