Understanding the importance of well-prepared business plans is essential
to business success. Here are a few tips that we'd like to
share, including five common mistakes to avoid when
preparing a business plan, along with five
common myths, which can threaten long-term business success.
Five common mistakes to avoid when preparing a business plan...
importance of the first 90 seconds.
Readers of business plans are busy people, often poring through
hundreds, or even thousands, of plans every year. Unless your
plan has immediate, aesthetic attraction and contains an
organization scheme, which calibrates the reader and compels the
turning of pages, your plan may never be read, much less understood.
inaccuracies, inconsistencies or lack of objectivity.
You must pray to your lucky star that, if someone is
actually reading your plan, that person is focusing on content.
Errors or inaccuracies (however minor), inconsistencies (however
immaterial) and non-objectivity (however innocent),
will conspire to distract the reader and create a negative
bias, from which your plan may not fully recover.
Failing to demonstrate
The reader is keenly interested in whether a market for your
product or service exists, and if so, whether you are capable of
exploiting long-term advantages over the competitors currently
occupying that market space. Do not succumb to the temptation
to underestimate your competitors, overestimate your strengths or
rely on a lower-than-market pricing strategy, to claim
sustainable, competitive advantage.
Underestimating the importance of
the management team.
Many investors feel that a great management team can easily make
a mediocre idea successful, but that a great idea rarely survives a
mediocre management team. Help erase any potential doubts, by
actively promoting your team and key advisors, articulating
strategic objectives and an implementation plan, and providing a
critical risk assessment and related plan for dealing with
Failing to demonstrate
revenue growth and profitability.
Whether it's the new or old economy, it's important to remember:
top line growth is great... but, bottom line success is essential.
Your plan will not survive scrutiny, unless you demonstrate that it is based on
credible financial assumptions, that the quantitative sections
reconcile with the qualitative sections, and that financial
projections are consistent with generally accepted accounting
common myths that...
We don't need a
If you are in business, or even contemplating a business, you need
a business plan. Success isn't as much about succeeding, as it
is about not failing. A properly prepared plan forces you to
think through the big picture and agonize over many of the details, before
errors in intuition or judgment cost you or your client money, or
even result in bankruptcy. Without it, investors won't invest and buyers
We need a business
plan, but not right away.
If you are a Visionary or a Start-Up, you need to begin
assembling the elements of a business plan, almost immediately
after your "business idea" hits you. The best plans
evolve over an extended period of time, and the less time you give
yourself, the less likely the plan will be credible. If you are marketing a
business, the sooner you present a credible financial picture,
the sooner a buyer will consider your price.
We need a business
plan, but we can do it ourselves.
Given enough time, money and the right skill sets, you will
probably be able to generate a credible business plan, maybe even a
very good one -- but, at what total cost to your business?
Your inspiration, energy and vision are essential to the success of
the plan, but the cost of becoming a business planning
"expert" may seriously erode your ability to meet the
challenges of actually staying in business.
We need a business
plan, but we can't spend more than "x".
If obtaining financing or attracting a buyer is critical to the existence of a business, then the potential value of a business
plan should be the cost of not achieving the goal (i.e, the cost of
going out of business). Estimates vary widely, but expect the cost
of a professionally prepared business plan to be about 1% of the benefit
it is capable of achieving (e.g., $10,000, on a financing request of
goodness, we only have to do this once.
A business plan is really only as good as the results it
predicts. It should be viewed as a living document that
requires constant nurturing and revision, as circumstances change
and business knowledge improves. Protect your investment, by periodically
actual vs. planned results, analyzing
sources of variance and using this information to improve the plan's
long-term utility and predictability.
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