8 Common Business Plan Mistakes 42

What are the most common mistakes when writing a business plan? Here is my list of the ones to make sure you avoid. While including the necessary items in a business plan is important, you also want to make sure you don’t commit any of the following common business plan mistakes:

1. Putting It Off

Too many businesses make business plans only when they have no choice in the matter. Unless the bank or the investors want a plan, there is no plan.

Don’t wait to write your plan until you think you’ll have enough time. “I can’t plan. I’m too busy getting things done,” business people say. The busier you are, the more you need to plan. If you are always putting out fires, you should build firebreaks or a sprinkler system. You can lose the whole forest for paying too much attention to the individual burning trees.

2. Cash Flow Casualness

Most people think in terms of profits instead of cash. When you imagine a new business, you think of what it would cost to make the product, what you could sell it for, and what the profits per unit might be. We are trained to think of business as sales minus costs and expenses, which equal profits. Unfortunately, we don’t spend the profits in a business. We spend cash. So understanding cash flow is critical. If you have only one table in your business plan, make it the cash flow table.

3. Idea Inflation

Don’t overestimate the importance of the idea. You don’t need a great idea to start a business; you need time, money, perseverance, and common sense. Few successful businesses are based entirely on new ideas. A new idea is harder to sell than an existing one, because people don’t understand a new idea and they are often unsure if it will work.

Plans don’t sell new business ideas to investors. People do. Investors invest in people, not ideas. The plan, though necessary, is only a way to present information. So make sure you’re ready to wow your prospective investors with your knowledge and leadership skills, and don’t expect your business idea—or the business plan you explain it in—to do the work for you.

4. Fear and Dread

Doing a business plan isn’t as hard as you might think. You don’t have to write a doctoral thesis or a novel. There are good books to help, many advisors among the Small Business Development Centers (SBDCs), business schools, and there is software available to help you (such as LivePlan, and others).

5. Spongy, Vague Goals

Leave out the vague and the meaningless babble of business phrases (such as “being the best”) because they are simply hype. Remember that the objective of a plan is its results, and for results, you need tracking and follow up. You need specific dates, management responsibilities, budgets, and milestones. Then you can follow up. No matter how well thought out or brilliantly presented, it means nothing unless it produces results.

6. One Size Fits All

Tailor your plan to its real business purpose. Business plans can be different things: they are often just sales documents to sell an idea for a new business. They can also be detailed action plans, financial plans, marketing plans, and even personnel plans. They can be used to start a business, or just run a business better.

7. Diluted Priorities

Remember, strategy is focus. A priority list with 3-4 items is focus. A priority list with 20 items is certainly not strategic, and rarely if ever effective. The more items on the list, the less the importance of each.

8. “Hockey Stick Shaped” Growth Projections

Sales grow slowly at first, but then shoot up boldly with huge growth rates, as soon as “something” happens. Have projections that are conservative so you can defend them. When in doubt, be less optimistic.


About the Author Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry. Follow Tim on Google+ Read more »

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    • http://www.virtuallyyours.web.officelive.com Althea

      This article has been a help for me in writting my plan.

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  • http://CommonBusinessPlanMistakes Joseph Hadden

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  • K. A. Williams

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    “You don’t need a great idea to start a business; you need time, money, perseverance, and common sense.” Great advice. Thanks Tim.

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    Reading through vaious articles on your site gave me a graet relief about different hassles have been struggling with in growing my bussiness.I really appreciate you effort in proferring solution to the different problems associtaed with writing and growing a business.
    “You don’t need a great idea to start a business; you need time, money, perseverance, and common sense.”
    That was a great one

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    Just reading your article I feel so confident that I can get my business started amidst the harsh economic climate..Thank you very much

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    your articles has built my confidence in writing a business plan as a project.thank you for your good work.


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  • Joan

    This is excellent advice some of which I’ve heard before. Great reminder. Thanks!

  • Sam

    I especially appreciated the section on hockey-stick shaped projections. I have been told I am a negative thinker, but this justifies my rational thought. The world is business is not always butterflies and rainbows ;).

  • tommy vo

    Thanks very much for Tim berry has puting this out to the community .
    It is so much help for the project that i’m in.

  • samiea

    Thank you very much. My brother is starting a business and he thinks he’s got a great idea. I will educate him about the other things.

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    I don’t know why I am stuck and cannot move forward. There is so much information available to help me and I keep asking myself, “What is your problem?”

  • http://www.squidoo.com/business-plan-mistakes Adam Hoeksema

    Great list. I recently wrote an extensive list of the Top 50 Business Plan Mistakes Ever at http://www.squidoo.com/business-plan-mistakes. I have copied just a few of them below.

    These are 5 business plan executive summary mistakes.

    1. Executive Summary is Too Long – 2 pages or less
    2. Fails to Compel Reader – Your executive summary needs to intrigue the reader to read the rest of your business plan.
    3. No Contact Information – Imagine your executive summary does its job and excites the reader, but then they have no way to contact you to learn more
    4. Crammed in Information – You don’t need to stuff every detail into your executive summary. Focus on the quality of information not quantity
    5. Summarizing your Business Plan – The purpose of your executive summary is to sell not to simply summarize your entire business plan.

  • Neha Uppal

    It gave an edge to my knowledge and I can confidently now start working on my business plan.

  • Nikkisha

    Hi thank you for the great advice on how to write your own business plan, you have really helped me to overcome my doubts. I like the line “plans don’t sell a new business idea to investors, people do”. This has given me some confidence in myself to go ahead and and sell my idea to my investors. Thank You

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  • http://www.myshoppinggenienorge.com Abdullah

    Yes, many think that a business plan is plan of a new idea/invention. But business ideas don’t have to be a new invention.

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  • Darrell Baldwin

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  • http://www.swiffer-coupons.us Swiffer

    Good point on the ‘idea inflation’ ! Probably 99% of businesses out there are not really new or that creative. In the US alone there are 480,000 restaurants… sure there may be a ‘twist’ to some but really no great idea required in order to be successful!

  • Lang Katalang

    Am getting into business the most proud CEO ,thanks to Tim for the educative and inspirational business tips.Just need to register my company and get started.

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