Business Planning mistakes

Business Plans are a useful tool in managing and growing the business. The complexity of the plan varies with the size and nature of the business but here are a few ideas to avoid in planning.

1.     Don’t delay.

Too many business owners only create a plan when banks or investors insist on it. Find the time even if you are too busy getting things done. The busier you are the more you need a plan. Don’t spend all the time just putting out fires; the entire business may be lost if you focus on one burning issue.

 

2.     Cash Flow insensitivity.

Most business owners seem to focus on profits instead of cash. The reality is that businesses spend cash to operate, not profits. Understanding cash flow is critical. If you only get one report to manage the business make sure it is a cash flow chart.

 

3.     Planning fear.

Preparation of business plan is not that hard. This is not a doctoral thesis or a book that has to be written. Help can be secured from books, small business development centres, local university business schools and planning software from the internet.

 

4.     Undefined goals.

Plans should omit vague undefined goals that are just hype. The purpose of the plan is to define specific goals that are achievable and measurable. Follow guidelines for specific milestones and hold people accountable for results.

 

5.     Lack of priority.

A business plan should provide focus. The plan can include objectives for operations, finance, sales, or personnel but a priority list of 15-20 items will lack focus and importance.

6.     Overly optimistic projections.

Revenue projections that accelerate too quickly create a false impression and unrealistic expectations. Generally more conservative projections are easier to defend with bankers or other potential sources of financing and also may prevent the owners from overspending with the anticipation of generating income that may not occur.

A good business plan presents an overview of the business -- now, in the short term, and in the long term. However, it doesn't just describe what the business looks like at each of those stages; it also describes how you'll get from one stage to the next. In other words, the plan provides a "roadmap" for the business, a roadmap that should be as specific as possible.