Your business plan is a blueprint for how your company is going to turn out. Write a solid, detailed business plan, and you’ll have a clear idea of how your first few years of operations will go — you’ll even be able to use it as a tool to round up funding and attract new partners and hires. The flip side of that is, of course, that a bad or weak business plan could wind up compromising an otherwise feasible organization.
The problem with business plans is that entrepreneurs are usually so excited to get started, they rush through the planning process and never seek third-party feedback, leaving their business plans riddled with numerous flaws.
These seven flaws are painfully common in early-stage business plans, so hunt them down and weed them out immediately:
1. You’ve neglected cash flow. Most early-stage business plans focus almost exclusively on profitability — the ability to generate more revenue than you’re spending in associated costs. But even more important to consider is the idea of cash flow, which dictates how much cash your business has on hand at any given time. Technically, a business can be “profitable” on paper, but still have cash flow issues; for example, imagine a scenario in which the bills are piling up and your customers aren’t paying their invoices on time. Negative cash flow can result in bankruptcy and collapse, so make sure a cash flow management strategy is part of your business plan.
2. You put too much value on your central idea. Yes, your idea is important, but it isn’t the most important thing in your business plan. If you’ve put your idea on a pedestal and skirted around some of the finer details thinking “the idea’s good enough to work on its own,” you’ve created a flawed business plan. Even the best ideas need some practical groundwork to succeed. Your focus here should be less on the “what” and more on the “hows,” “wheres,” and “whens.”
3. You aren’t specific enough. When setting goals, describing scenarios, or making long-term models, you need to get specific. Most new business owners skip the details in favor of vague descriptors, like “significant growth over the first few years,” instead of “40 percent increase in sales during year one, and 30 percent in year two.” There are two reasons for this: laziness (or lack of desire to offer more specific information), or a fear that your numbers might be wrong. It’s okay to be wrong, but you have to be specific if you want measurable, actionable targets.
4. Your models aren’t realistic. That being said, specific goals often aren’t enough to make your business plan actionable. You also need to set realistic figures and expectations. Most business owners think optimistically, projecting a course of exponential growth — they’ll plot out a period of little to no growth, followed by a “tipping point” in which sales explode. The fact is, most businesses don’t grow this way, and setting unrealistic expectations will only hurt you in the long run.
5. You haven’t prioritized. If you have a list of 30 priorities, you might as well have a list of zero priorities. The word “priority” implies that an item is taking precedence over another, which demands that you filter some of your tasks out entirely. If you want to be effective in building a business, you simply can’t do everything at once. Your business plan needs to reflect this.
6. You haven’t done enough research. How much of your business plan was written off the top of your head, and how much was based in actual quantitative data? If you’re like most new and aspiring entrepreneurs, your business plan will lean toward the former. If you have lots of experience in your field, you may be able to come to significant conclusions on your own, but it’s never a bad idea to bring more research to the table.
7. Your plan is sloppy or disorganized. Remember, you aren’t the only one who’s going to read your business plan. Investors, partners, and even new team members will be reviewing this before they come down on their final decisions. If your work is sloppily written or if your sections are improperly organized, it will leave readers with a bad impression (even if your idea is, in theory, sound).
Individually, these seven flaws won’t destroy your business, but cumulatively, they can have a substantial impact on the practicality and impressiveness of your plan. Your business plan won’t be perfect, and can’t predict everything (no matter how many times you go back to tweak it), but fixing these egregious mistakes will help you build early momentum when you launch and grow your business.
For more content like this, be sure to check out my podcast, The Entrepreneur Cast!