The purpose of this article, is to discuss why some businesses fail, and the relationship of these failures to poor or limited business planning being implemented. We are firm believers that absolutely every business should have a plan. Ideally, if you are going to produce a plan, this should avoid several major mistakes to ensure that it is not a poor quality business plan. Here we will discuss ten common mistakes which can easily be avoided, when writing a business plan.
1) The plan is poorly constructed and written and may contain errors in spelling, punctuation and grammar. A business plan, is a reflection of your businesses and a poorly executed plan can present a poor impression. You must conduct extensive reviews of the document, to make sure that there are no errors.
2) The presentation of the plan is not consistent and lacks a clear structure. The presentation of your overview is as mentioned a reflection of your business, and the following items will convey a negative image to the reader: inconsistent margins, missing page numbers, incomplete charts and tables without headings, or a missing table of contents.
3) The plan is not completed. There are a wide variety of different guidelines and templates which you may use as the basis of your business plan, and these will help to provide a basic structure. There are a number of different areas which should be included: a detailed executive summary, providing an overview of the company. SWOT analysis; detailed information around your customer base, and particular focus on any customer who makes up more than 25% of the businesses turnover. The businesses products and services; marketing and sales information; a profile of your management team; analysis of competition; and detailed financial projections. cash flows, income statements, balance sheets–for a minimum of 3 years.
4) The plan is too vague. The plan should always include specific information.
5) The plan contains too much detail. A sound basis for a plan is as follows: start with an overview, or executive summary of one to two pages, followed by the detailed business plan 10 to 15 pages; this should be followed by a detailed appendix, with further details contained within.
6) Assumptions contained within the business plan are unrealistic. Those assumptions which are critical should be alluded to, and they should be rational for including them. Many poor business plans will attempt to hide assumptions throughout the plan. It is important that you check any assumptions which you make against acceptable benchmarks.
7) The plan does not include adequate research. A detailed business plan should included detailed numbers, charts as well as statistics which will provide detail to any assumptions or projections which are made throughout the plan.
8) You make statements that indicate there is no risk involved in your new venture. Realistically there is always some element of risk, putting this across in the right way is extremely important. There are always risks. Understanding the risks of your business and presenting them with a coherent argument as to how you will mitigate or minimise these should definitely be included within your business plan.
9) You make statements that indicate your business will have no competition. Potential financiers or investors, will know that there will be competition, which may either be direct or indirect. It is therefore extremely important to acknowledge and define the competition in your plan, if you gloss over this, it may reflect badly on your research.
If you avoid these areas and take on board the advice provided when developing your plan, you should end up with a well structured and coherent plan. However, there are a few more actions you can take to ensure the development of a strong plan. It is important to consider the views of other business owners, potential investors and lenders as well as other professional experts. You can find a number of consultants who specialise in developing business plans. There is a toss up between the expense which you may incur in developing the business plan and the time which it may take to complete the plan to the same standards.