As you develop your business plan, it’s easy to make mistakes or leave out important elements. Here are a few of the most common business planning pitfalls and some tips on how to avoid them.
It's tempting to roll up your sleeves and plunge right into the details of your business: evaluating products, studying market segments and sizing up your competition. Yet it's possible to get so caught up in the process of planning a business that you lose sight of what you're planning for.
Outline a clear vision and a coherent set of values for your company. Develop a mission statement and use it to define short-term goals and priorities. Once you have a clear road map for your business, you can plan your journey with more confidence.
You can't create a solid business plan without a budget and a financial forecast. But a budget should be the product of all the other elements in your plan. If you don't have a clear picture of your industry, customers, competitors and market conditions before you develop a budget, your numbers aren't likely to reflect reality.
This may sound obvious, but too many entrepreneurs assume they know exactly what their customers need without bothering to ask. Take the time to learn about your customers, and build your business plan around their needs and desires.
If you assume your firm will be the only game in town, or if you fail to take existing competitors seriously, you're asking for trouble. Your competitors can be a great source of information about what works and what doesn't.
Creating a business plan isn't about avoiding risk; it's about understanding and managing risk. That's why a good business plan anticipates possible challenges and includes a variety of scenarios for meeting those challenges. There's a difference between a calculated risk and recklessness, and your plan can help you make that distinction.
The most experienced entrepreneur can still benefit from a different point of view. Even if you're the only person involved in your business, find someone who can study your plan objectively and point out possible weaknesses you might have missed.
Every business plan needs some wiggle room to allow for unexpected changes. Part of this involves creating budgets and marketing plans with some built-in flexibility; but adapting to change also requires you to accept that you might have to modify or even abandon business practices that worked well in the past.
A cookie-cutter business plan might help you get started, but it won't help you succeed. And while it helps to look at your competitors, don't model your business after them. After all, you're in business to beat the competition. Learn from your competitors' strengths, but also learn how to spot their weaknesses and use them to improve your own business plan.
Building a business involves hard work and struggle. But it should also include a clear set of rewards, both for you and your employees. When you set goals in your business plan, include some concrete motivation that goes beyond the satisfaction of a job well done.
Of course, the biggest mistake of all is failing to create a business plan in the first place. Planning is hard work, and there's no guarantee it will make your business succeed. But a good plan is still the best way to turn your vision into a realistic, coherent business.
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At Scotiabank, we believe that every customer has the right to become better off. Our partnership with the Richmond Chamber of Commerce enables us to connect with and understand our community; and provide support to hardworking local business owners through financial advice and solutions to help them achieve success.
Christine Lim Branch Manager - Scotiabank Richmond Financial Centre