Entrepreneurs often ask this question when their small business dreams fail to materialize, or they encountered problems that in hindsight might have been preventable. Often, the problem can be traced to a flaw in their business plan. Critical issues weren’t fully thought out or, even worse, weren’t even considered because the entrepreneur didn’t prepare a business plan in the first place
Veteran business consultant, MBA professor, and SCORE mentor Miguel Orta has reviewed many business plans in his career, and has found several common mistakes that end up short-circuiting even the most promising small business venture:
No clear purpose. A business plan is essentially a solution to a problem, the problem being how you are going to turn your vision of a successful business into a reality. As such, Orta says, “the purpose of your business plan will affect everything from the amount of research you have to do through what the form of the finished plan will look like, and what you will do with it.”
Idea inflation. Don’t overestimate the importance of your idea. “Generally you don’t need a great idea,” Orta says. “You need time, money, management skills, and common sense. It isn’t just the plan that sells a business idea; it is the person presenting it as most investors invest in the people behind the business.”
One size fits all. Every business is different, so every business plan is different too. “Using standard documents may save you time, but the end-result will not be tailored to your business or fully meet your needs,” Orta says. “Be precise, and avoid unnecessary verbiage that fills up space or builds up hype falsely.”
Understand cash flow. Many newcomers to business will think in terms of profits, or sales minus costs and expenses. “Unfortunately in business, we don’t spend profit, we spend cash,” Orta says. “Many businesses fail because they lack the necessary cash to operate, not because they are ‘bad’ businesses.”
Don’t be overly optimistic. Be realistic with your projections and bear in mind that very successful companies often take many years to get to a point where they succeed.
Need help in creating a sound, high-quality business plan? There’s no better resource than Raleigh SCORE. We provide free, confidential business mentoring and training workshops to small business owners. To schedule a free appointment with our experienced counselors, go to http://raleigh.score.org, or call us at 919-856-4739.