Mistakes to avoid in your business plan

By Charles Hopkins Published 04/7/2006 | Business and Finance

A business plan is a key document that lays down your goals and strategies. It forces you to think about the strength of your business idea, and draws up the business path that you need to follow.

There are many who believe that it is more important to start a business than to waste time drawing a business plan. They cant be more wrong. You must realize that a plan is essential for the success of your business. If necessary, write a draft plan and keep updating it so that it keeps up with the changes in your business.

Dont mix the cash flow with profits while drawing your business plan. There is a big difference between the two. Cash flow means money available to you to spend on companys activities; profit is only an accounting concept.

You must always assign more importance to cash flow, and make your marketing team go the extra mile to collect anything that is outstanding. This should be a key strategy in your business plan.

Also, dont be carried away by your business idea. An idea by itself does not have any value. You must know how to turn that idea into a profitable business. For this, you need proper planning.

You should avoid trying to do too many things at the same time. A business plan with too many priorities has no focus. It takes away the advantage of planning by spreading your resources too thin. A better strategy is to keep revising your priorities as your business keeps growing.

Also, never try to put down unrealistic figures. A business plan that is based on wishful thinking is a non-starter. It is a waste of time, because none of those figures can be achieved. You need to have realistic production and sales targets as also healthy cash flows if you want your plan to succeed.

Another thing to avoid is ling-term projections. Dont spend too much time on making projections for the next 10, 15 or 20 years. The conditions and sales figures for such distant periods are so uncertain that they become more like guesswork. Focus on your targets for the next 12 months. These are the targets and goals that matter.

Your business plan should be short and focused. It should cover the main points and use bulleted sentences for greater comprehension. However, you shouldnt spend too much time on formatting your business plan. Keep your business plan simple. If you use too many fonts and a complicated layout, you may make it difficult to understand. Just make sure that you include what is really important.

Finally, you should avoid being over-optimistic in your sales projections. Dont think that the investors want to hear rosy tales. They are too experienced in the trade to be carried away by your projections. You should project only that much that you can convincingly defend.