You’ve probably heard plenty about the beginning of the year being time to do a Business Plan but you also want to make sure you don’t commit any of the following common business plan mistakes:
Putting it off.
Don’t wait to write a plan until you absolutely have to. Too many businesses make business plans only when they have no choice in the matter. Unless the bank or the investors want a plan, there is no plan. Don’t wait to write your plan until you think you’ll have enough time. The busier you are, the more you need to plan by providing focus. It can be done in as little as half a day.
Cash flow casualness/confusion
Cash flow is more important than sales, profits, or anything else in the business plan, but most people think in terms of profits instead of cash. We are trained to think of business as sales minus costs and expenses, which equal profits. Unfortunately, we don’t spend the profits in a business. We spend cash. For example loan repayments, drawings, capital expenditure and additional working capital do not appear in your profit forecasts. So understanding cash flow is critical. A good Business Plan should be accompanied by a cash flow forecast.
Fear and dread.
Doing a business plan isn’t as hard as you think. The days of 20-40 page business plans that stay in the bottom drawer are gone. Using modern frameworks, a business model may be formulated in as little as half a day. We use the One Page Business Model and the Value Proposition Canvas.
With input from your key team members you will uncover opportunities for growth, discover what’s not working as it should, and strengthen your own understanding of just how your business works. Start with Customer Segments (what is the profile of your ideal customer, what gain and pains are you seeking to address) and Value Proposition (how to make products and services that customers really want).
The end result will be a living document, a one A3 page item on your wall to keep you and your team focused on the things that count and doing it!
Leave out the vague and the meaningless babble of business phrases (such as “being the best”) because they are simply hype. Remember that the objective of a plan is its results, and for results, you need tracking and follow up.
You need specific dates, management responsibilities, budgets, and milestones and KPIs. Then you can follow up. No matter how well thought out or brilliantly presented, it means nothing unless it produces results.
Strategy is about focus. A priority list with 3-4 items is focus. A priority list with 20 items is something else, certainly not strategic, and rarely if ever effective. Remember the age-old 80/20 Rule: 80% of results will come from 20% of efforts, 80% of the profit will come from 20% of customers etc.
Unrealistic growth projections.
Have projections that are conservative so you can defend them. When in doubt, be less optimistic. If you are planning for fast growth, have you got the resources you will need: working capital, staff, systems etc.? Fast growth can kill!
So if you haven’t already done your business plan for this year, stop putting it off! Do it now!
Download this article as PDF – 6 Common Business Plan Mistakes