Your new small business is likely to succeed if it is backed by a proper business plan. Unfortunately, the task of creating a proper business plan is not as easy as it looks. There are numerous things you need to keep in mind while creating the business plan. More importantly, there are several mistakes you need to avoid while creating a small business plan. In this article, we will be focusing on those mistakes (and also highlighting what you need to do to avoid them). And without any further ado, the mistakes you need to avoid while creating a small business plan include:
1. Making unrealistic projections
In the process of creating a business plan, you have to make several projections. Those include projections on how much money you will need to launch the business. They also include projections on how long the business will take to break even and start bringing in a profit. Further, they include projections on how much money the business will be bringing in and how much money will have to be spending to keep the business running. The problem tends to arise when the projections made in the business plan are unrealistic. Entrepreneurs are known for their aggressive optimism. It is usually the said optimism that causes them to come up with unrealistic projections while creating the business plans. To avoid this mistake, you simply need to ensure that each and every projection you include in the small business plan is realistic. Thus before putting down any projection, you need to ask yourself the question as to whether — given the reality on the ground — that projection is actually realistic.
2. Using business plan templates blindly
There are templates that people who want to create business plans are expected to use. But these templates are only supposed to serve as indicators on the kinds of things to include in a business plan (and what a real-life business plan should look like). Unfortunately, some people opt to follow the said blindly, leading to dysfunctional ‘run-off-the-mill’ business plans. Whereas such a business plan may be good enough to help you secure financing for the business, it is unlikely to be a useful guide to you in the process of launching and running the new small business. And that would be a huge issue, because a business plan is not just supposed to help you secure financing. It is also supposed to serve as a step-by-step self-guide in the process of launching and running the new business. This mistake is especially common among people who view the preparation of the business plans as a mere formality. The way to avoid this mistake is by changing your perspective: and viewing the preparation of the business plan as an integral part of the business startup process – much like the procurement of the business equipment and the hiring of staff for the new business. Therefore just as you take the tasks of procuring equipment for the business and hiring staff for the new business seriously, so should you take the task of creating the business plan.
3. Not undertaking proper research
One of the most challenging aspects of business plan preparation is that of research. Ideally, every detail in the business plan should be informed by real-life research. You should avoid making assumptions that are not supported by research. Take, for instance, when coming up with projections on how much money you need to start the small business. What you need to do (in terms of research) is visit the vendors of the respective capital items you need, and get first-hand information from them on what they actually cost. Then you visit the real estate agents, to know for sure what the business premises are likely to cost. Then you visit the websites (or offices) of the appropriate government agencies, to know what the various licenses you need to have would cost you… and so on. A similar approach would apply when it comes to figuring out how much money you would be needing to spend on salaries. So what you would need to do is make engagements with folks who are working within the industry, and understand what real-life salaries within the industry are like. When it comes to figuring out how much revenue you would be expecting from the business, you would need to talk with at least several industry insiders, to come up with realistic figures… This approach is surely better than simply guessing figures and putting them into your business plan. See, if you make a business plan that is not backed by research, it is likely to crumble once it is hit by the real-world reality. Thus, whereas the research may be very time consuming and quite expensive, it is nonetheless something that you can’t afford to ignore or take lightly. It is important, at this point, to mention that you need to avoid creating a business plan based on what you think you know. What you need to do instead is create a business plan based on the reality on the ground. And the only way to know what the reality on the ground is like is by undertaking proper research. You also need to understand that a business plan that is not based on research tends to have certain tell-tale signs. Thus, if you are using the (un-researched) business plan to search for financing, chances are that the people to whom it is submitted [potential financiers] will quite easily tell that it is not based on proper research. And on that ground alone, you may be denied funding – because the fact that you are unable to undertake proper business plan research surely shows that you are not serious about the whole venture.
4. Including too much or too little information
It is not easy to figure out how detailed a business plan should be. Remember, the business plan is supposed to serve as a guide in the process of launching and running the new business. And it is supposed to be a ‘live’ document — one that is not cast in stone, but is capable of being amended from time to time in line with emerging realities. Against that background, if you come up with a business plan that has too little information, it surely won’t be an effective guide. There will be too many gaps in it. And if you are using it to seek financing, the financiers to whom it is submitted may get the wrong impression of you. That is where, on account of having submitted a business plan that is very thin on details, they would be inclined to view you as a person who is not very thorough. And those would be enough grounds to deny you funding. On the other hand, if you come up with a business plan that has too much information, it is likely to confuse you. And if you are using it to seek financing, the financiers to whom it is submitted may find it off-putting. The challenge is therefore for you to figure out which details need to be included in the business plan [and which ones should be left out]. Then you need to ensure that the business plan you come up with includes only the required details – but it doesn’t go beyond that.