Fatal Flaws in Your Business Plan




A business plan is the blueprint that guides aspiring entrepreneurs as they build their new business ventures. From 2008 – 2010, I taught a 20-week business plan writing course at an SBA-affiliated women’s business development organization. We met for three hours each week and students wrote their plans week by week, guided by the lessons.

When evaluating a business concept, unrealistic expectations or flawed thinking could crawl in and undermine the planning. Excitement about the idea might distort one’s ability to see possible obstacles. What follows are scenarios that entrepreneurs-in-the-making should beware.

Unrealistic expectations

While it is sometimes true that using yourself as the ideal customer is a smart idea, since you understand the value and availability of that product or service, you might misinterpret the size of the market and the traction that can be achieved beyond a select group of true believers.

Insufficient information

Confirm the need for your products or sets when you research and verify the number of possible customers who have the money and motive to buy from you.

Furthermore, make sure that you understand the buying course of action. Who green-lights the sale? What is the sweet identify price range? Lastly, where do possible customers acquire these products or sets now?

Access to customers

Access to customers is everything and some industries or target customers seem impenetrable. You may clarify the right customers, understand how your products or sets fit their needs and know how to price and deliver. But if possible customers do not have the confidence to work with you because you without an endorsement from a trusted source, you’ll starve.

Overestimating cash-flow

Usually, businesses won’t unprotected to desirable gross sales and or show a net profit in the first year of operations. Businesses that require high start-up costs especially will require long ramping-up periods. The business plan must concede the possible for negative cash-flow and demonstrate how fixed and variable expenses will be met during that time. One must know how inventory will be financed, payroll will be met and office rent will be paid.

When writing your business plan, conservative financial projections are strongly advised. Customer acquisition may take longer than expected and the size of their purchases may initially be small. additionally, it’s possible for a venture to be profitable on paper and nevertheless suffer from cash-flow problems, if customers do not pay on time.

Underestimating start-up costs

Developing a reasonable calculate of how much it will cost to get the venture up and running is basic. You must be prepared to meet the cost of all permits, equipment, inventory and staffing necessary to conduct business. If you plan to hire employees, it’s important to have a good idea of your minimum staffing needs up front (you can hire more as revenues increase).

“Magical thinking” business form

The business form illustrates how your venture will become profitable. Well thought-out interactions between marketing, financial and operations processes will promote and sustain profitability and you must map out how these will occur. The business form describes the chief roles of the venture.

Likewise, the value proposition of your products or sets must be articulated. The overall marketing strategy and chosen tactics and resources that will promote the value proposition—intellectual character, patent rights, meaningful relationships, or capital—will be accounted for. Sales dispensing channels will be detailed.

Getting to Plan B (2009), by Randy Komisar and John Mullins, details the meaningful business form elements and advises business plan writers to part their models into sub-headings:

  • The Revenue form, to describe what you’ll sell, your marketing plans and how you expect to generate revenue
  • The Operating form, to detail where you’ll do business and how day-to-day operations will function
  • The Working Capital form, meaning the business cash-flow requirements. Understanding cash-flow helps you know when money will be obtainable to meet expenses like rent and payroll (it is definite from revenue). A business can generate adequate revenue (sales) and nevertheless suffer from cash-flow problems.

Your business form will keep you organized and your priorities realistic. Matters such as quality control, collecting accounts receivable, inventory management and identifying strategic partners will average much more than your number of Facebook followers, for example. Best of luck to you and your new business!

Thanks for reading,

Kim




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