Business Planning - Avoiding Common Pitfalls

If there’s one mistake new businesses make, it most certainly has to be ignoring the importance of a well supported business plan. While entrepreneurs must remain positive, and committed to their goals, they must also lay the groundwork for supporting their business endeavors. To this extent, the business plan helps to support the business pursuit. It pinpoints those areas of concern, identifies opportunities and ultimately provides the impetus on a “go/no-go” decision. So, what are the most common mistakes entrepreneurs make when looking to put their ideas down on paper?

 Ignoring Marketing

 A business plan is nothing without the marketing data to support it. Simply put, marketing provides new business owners with answers to all their questions about the market’s customers, their needs, the company’s future competitors & their strategies, as well as the essential steps to succeeding in the market. In most cases, the business plan should start with the market feasibility study. While the business plan outlines how the company will approach its market, the feasibility study analyzes the overall health of the market. After all, if the market is on a steady decline, why pursue it? Bottom line, marketing is that one mechanism companies rely upon to determine pricing, interest and ultimately to answer customers’ questions about what the company is and what it has to offer.

 Relying Upon Intuition Instead of Hard Facts!

 A number of entrepreneurs become so convinced of their strategies that they never stop to ask if the business itself is worth pursuing. Granted, it’s important to think positively, but the purpose of the business plan isn’t merely to meet the entrepreneur’s expectations. Its ultimate goal is to support those strategies and ideas by exposing them to factual assertions. In essence, it’s about using the business plan to provide the roadmap to success. The business plan should ultimately poke holes in the business concept, identify issues and expose possible setbacks. To ignore these results is to become blind to risk.

 Ignoring the Plan within the Plan

 Every business plan must provide a roadmap to growth. However, most entrepreneurs limit their growth projections to their first year of operation. Unfortunately, the odds of success past that first year decline significantly. There should always be a plan within the plan. Entrepreneurs must be able to forecast their market share within the first, second, third, fourth and fifth years of operation. A good rule of thumb is to remember that the shorter the timeframe, the more accurate the projection. Market share forecasting forces new business owners to outline their plan for growth by identifying market drivers, future costs, the company’s financing requirements, its operational issues and ultimately, what the company must do to commit to the business plan itself.

 Using Personal Guarantees in Financing

 Entrepreneurs must never allow their own personal credit to be tied into their business credit. If the company isn’t incorporated or a limited liability partnership, then the banks and lending institutions will see the loan as nothing more than a personal loan. There are far too many financing options available today for entrepreneurs to stick with offering a personal guarantee to get their business off the ground running.

 When it comes to discussing the most common pitfalls in business planning, a number of business professionals will argue a myriad of different causes. However, the fundamentals of the business plan is to ensure that it answers the most pressing questions new business owners face: “Will this company work and is the market worth pursuing?”. As long as the business plan answers this question, then success is more likely to occur.

Gina Harris writes on many topics, including how to make money and how to make money online