Research has shown that the businesses that survive the longest are those that have a solid business plan. New entrepreneurs hear this information, but it gets lost in a sea of contradicting tips and tricks. The result is that these entrepreneurs either fail to create a thorough business plan or try to make it do too much.
Many things set good business plans apart from bad ones. The one overarching idea is that the business plan should describe what the business does, how it does it and how it can keep on doing it at a larger scale. Below, 11 members of Forbes Business Development Council delve into the most common mistakes that new entrepreneurs fall prey to when developing their business plan and offer advice on what they should be doing instead.
1. Making Unrealistic Assumptions
A common mistake is when the business plan makes unfounded or unrealistic assumptions. Usually, business plans are full of assumptions. Critical assumptions need to be highlighted and some sort of rationalization for them needs to be provided. Assumptions need to be checked against benchmarks from the same industry, a similar industry or some other acceptable standard. – Claudia Wasko, Bosch eBike Systems
2. Not Defining The Problem You Want To Solve
I so often see founders getting fascinated by a solution, but forgetting to define the actual problem they’re trying to solve and for whom. The key to a solid business plan is to get very explicit on who your clients are exactly and what pain point you’re going to address. With this information, you’ll be more accurate on the solution required, on your customer acquisition cost estimates and on your return on investment calculation. – Margaret Jastrebski, Table XI
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3. Thinking The Plan Is Set In Stone
A business plan is your roadmap or a definitive articulation of your vision and the strategy to achieve your goals. But it’s not written in stone. Be flexible. As we have seen in 2020, the environment changes, and you must, too. Leverage your business plan as a tool providing guide rails; revisit it, but don’t get so focused on the plan that you miss what’s really happening. Be open to having to pivot. – Eric Kaufman, Dama Financial
4. Spending Too Much Time On Financial Planning
New entrepreneurs spend too much time on financial planning versus actual customer discovery. They get caught up in the total addressable market without focusing on how to get there. This results in taking wrong bets based on direction from the initial few customers versus the larger ecosystem. These assumptions then drive the business plan, and if the assumptions are not tracked explicitly, it results in a “faulty” business plan. – Mariya George, Cleareye.ai
5. Not Defining Your Brand Identity
Failing to determine your brand identity and brand standard is a grave mistake. Entrepreneurs should know and define what their identity is, who they are, what they stand for and what the purpose or mission is! – Karolina Hobson, Radd Interactive
6. Trying To Do Too Much At Once
I would say trying to do too much for too many people all at once is a pretty common mistake. It can be tempting as an entrepreneur to stretch yourself and want to serve everyone. But in doing so, you will lose focus by trying to accomplish too much! Keep your focus on a narrow and limited goal—this will ultimately lead to greater success. – Tim Conn, Image One Facility Solutions
7. Overlooking Competitor Research
We often overlook competitor research in business planning but it is a huge component of an organization’s success. You need to be aware of your competitors and how they gained their market share. What is their product/service position and how do you position your offering in light of that? Know where they found their target audience—which is also your audience—and be ready with your plan to compete. – Janet Waring, ArtForm Business Solutions, Inc.
8. Analysis Paralysis
A common mistake I see is analysis paralysis. Although a business plan is important, doing is more important. Too many entrepreneurs get trapped in the preparation. Their time is better spent prototyping and talking to potential customers in their market to make refinements to the offering. – Melanie Hicks, MGT of America
9. Overestimating Pace Of Growth
Entrepreneurs are optimists by nature, but business plans are the one place where they need a healthy dose of pessimism. I see too many plans that overestimate how quickly sales will roll in while underestimating operating costs. The result can be a devastating cash crunch. Stress-test business plans with investors, board members and people you trust to bring it in line with an achievable reality. – Chris Yount, Independent Board Advisor
10. Lacking A People Growth Roadmap
A piece often missed or underestimated is the hiring and people growth roadmap. Businesses only come to life and are successful when the right people are brought on board at the right time. The cost of wrong hires and bringing on employees that do not fit into the culture early in the company’s lifecycle can kill your business silently but quickly. – Irina Soriano, Seismic
11. Creating A Theoretical Plan
One of the most common mistakes is creating a theoretical business plan versus an experimentation-based plan. Our visibility into the future is very limited and pure assumptions will frequently be wrong. The most accurate view of the future is created by agile experiments done as close to the customers as possible. See their results and feedback and build a plan based on real proof. – Ilana Golan, Golan Ventures