Many business owners don’t often recognize the importance of having a business plan. Some even consider it a waste of time and resources. The truth is, a business plan is a strategic tool that helps entrepreneurs prove the viability of their business, set expectations, and priorities, and increase the likelihood of business success and future financing.
Think of a business plan as a road map. While you may be able to go on an excursion or a trip without one, there’s a greater likelihood that you’ll take a wrong turn and lose your bearing along the way. A well-written business plan serves as a guide to entrepreneurs, allowing them to create an action plan and make crucial decisions that will ensure the success of their business goals.
According to the Journal of Management Studies, the business planning process creates a 30 percent greater chance of business growth and success. Furthermore, entrepreneurs who finish their business plans are twice as likely to find the right investors, get financing from lenders, and successfully start and grow their enterprises than those who don’t. The role of a business plan in entrepreneurial success and business growth can’t be overstated.
If you don’t know where to start, there are many business plan writers who can help guide you through the process. Whether you’re crafting a business plan for a new target market, using it as a tool to raise money, simply trying to navigate through a business crisis, be wary of the following mistakes:
Vague Goals and Objectives
Ask any successful business owner and they’ll tell you setting clear, realistic, and attainable goals is a foundational step that keeps a company moving forward towards success. If you’re looking for results, then forget about vague goals and phrases such as “enter new markets this year,” “increase revenue and sales next year,” “release new products next month,” or “be the best in X area.”
Remember, the business planning process is supposed to help you layout SMART business goals and track your progress as your company begins to grow. However, tracking progress is only possible when you have relevant, specific goals that can be measured and are deadline-oriented. Take the time to thoughtfully create specific goals that will produce measurable results.
Guessing the Cost of Your Overheads
It’s not uncommon for business owners to overlook their overhead costs as they focus on business costs that are directly tied to the company’s income and profits. Unfortunately, they start paying attention to these expenses only after they’ve become a drain on generated revenue. You don’t want to make this mistake during your planning process.
Overhead costs, also known as indirect costs, are critical to your company’s day-to-day operations and there’s no way you can avoid them when creating your business plan. They often include costs such as licenses and permits, utilities, rent, insurance, depreciation, administrative costs, professional expenses, marketing fees, etc.
List all the indirect costs you’re likely to incur and contact potential suppliers for quotes which you can then include in your business plan. If the goal is to attract potential investors, these quotes will serve as proof that you’ve taken the time to research your project and you know what you’re talking about.
Unrealistic Projections and Plans
If you’re somehow “convinced” that your product or service is going to sell, yet you have no way to prove it, there’s a greater chance your plan is unrealistic. If this is the case, you’re just about to sabotage your startup before it even begins to operate.
You’re likely to make unrealistic projections and get the numbers wrong when you don’t conduct proper market research and competitive analysis. Take a look at successful marketing strategies in your industry. It’ll be almost impossible to determine your business’s potential share in your target market if you don’t understand the market demand. Make all your forecasts based on the market’s capacity for your service or product after conducting in-depth research and examining quality data.
Making the Business Plan About You and Not Your Customers
Your business exists to serve a specific market segment and its profitability and/or success are dependent on how well you meet the customers’ needs. This is why you must conduct market research to gain a deep understanding of your target customers and their purchase behavior, demographics, location, preferences, lifestyle characteristics, etc.
Your ability to cater to their needs is what will determine whether your new business makes progress towards success or fails. Your business plan should, therefore, clearly define who your potential customers are and what your business will do to meet their needs. Not the other way round.
Making Your Business Plan Too Detailed
No lender, venture capitalist, or angel investor has the time to patiently read through a 150-page business plan. And you won’t capture anyone’s attention with a barrage of technical details about your industry or startup—save any supporting research and technical details for your appendix. Keep lengthy text to a minimum and only focus on the most crucial elements of your business.