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Business Plan Mistakes
Alto Software, Inc.
Often you may hear
about what a business plan consists of. While including the necessary
items is very important, you also want to make sure you don't commit any
of the following common business plan mistakes:
1. Putting it
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. "There's not enough
time for a plan," business people say. "I can't plan. I'm too busy getting
things done." The busier you are, the more you need to plan. If you are
always putting out fires, you should build firebreaks or a sprinkler system.
You can lose the whole forest for paying too much attention to the individual
2. Cash flow casualness
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.
When you and your friends 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 business as sales
minus costs and expenses, which equal profits. Unfortunately, we don't
spend the profits in a business. We spend cash. So understanding cash
flow is critical. If you have only one table in your business plan, make
it the cash flow table.
3. Idea inflation
Plans don't sell new business ideas to investors. People do. The plan,
though necessary, is only a way to present information. Investors invest
in people, not ideas.
the importance of the idea, particularly the importance of the uniqueness
of the idea. You don't need a great idea to start a business; you need
time, money, perseverance, common sense, and so forth. Very few successful
businesses are based entirely on new ideas. A new idea is much harder
to sell than an existing one, because people don't understand a new idea
and they are often unsure if it will work.
4. Fear and dread
Doing a business plan isn't as hard as you think. You don't have to write
a doctoral thesis or a novel. There are good books to help, many advisors
among the Small Business Development Centers (SBDCs), business schools,
and there is software available to help you (such as Business Plan Pro,
5. Spongy, vague
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. Then you can follow up. No matter how well thought out or
brilliantly presented, it means nothing unless it produces results.
6. One size fits
Tailor your business plan to its real business purpose. Business plans
can be different things: they are often just sales documents to sell an
idea for a new business. They can be detailed action plans, financial
plans, marketing plans, and even personnel plans. They can be used to
start a business, or just run a business better.
7. Diluted priorities
Remember, strategy is 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. The more items on the list, the less the
importance of each.
shaped growth projections
Have projections that are conservative so you can defend them. When in
doubt, be less optimistic.
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