The 11 biggest mistakes in business planning — and how to avoid them
Need to write a business plan but don’t know where to start? SmartCompany Plus explores what — and what not — to do.
There is a lot of hot air expelled about business plans. At one end of the spectrum, commentators say they are a waste of time, while others are business planning converts.
The truth is there is no disputing that business plans play an essential role in the journey and are key to getting accreditation, investors and loans. Where utilised, business plans can transform a small business from a trial-and-error business management style, to one of clarity and certainty. The benefits of disciplined planning can be significant.
So whether you are creating a plan solely for yourself or need it to submit an application, a killer business plan can make a difference. Unfortunately for many small businesses, the process is often quite a haphazard and unprofessional practice.
Here are the most common business plan blunders, and the easy solutions to overcoming them.
The 11 biggest business planning mistakes
Not taking it seriously
A business plan — if you want it to mean anything — is not just a collection of regurgitated data and information cobbled together as an afterthought.
If your plan is being used for an application, it is going to be turned inside out, so you need to make sure it is accurate and a strong representation of your business. Those approving your application will have seen many plans before, so it’s essential they get a sense of you and your business immediately when reading your plan.
Don’t rush it: business plans take time, effort, research, review and lots of thinking. If you don’t have time, get help or don’t bother.
Not written for the target reader
Your plan will be read by others, so before even starting to work on the plan, take some time to think about who it’s for, as varying audiences will have particular (and different) interests in your business.
For example, a plan written for internal purposes has a different style and structure to that for a bank loan, migration, licence application or NDIS.
Leaving out critical information
For some applications, specific templates can be required for the plan itself when financial projections, business compliances, or other content must be included. If you then submit the plan as part of your application and don’t address the criteria, you increase the chances of being refused from the get-go.
Before you start writing, find out what your audience wants.
A lack of research
Often business plans are developed by directors who have just written what they know with information off the top of their head, without any external research. In plans where there is research, it’s often from low quality sources and not referenced.
But there is an easy fix to makes your business plan look much more professional: look at industry reports, media, get quotes and find out about regulations, for example. And then make sure all sources are referenced.
Poor formatting
Surprisingly, the level of proficiency in creating professional documents is quite low. Commonly there are inconsistent fonts, styles and sizes, with broad margins, spelling mistakes and hard-to-read tables. Before any reader even tries to understand what you are saying, they will be offput by sloppy presentation.
As part of your business planning process, have someone else review the plan to check spelling, grammar and formatting.
Incorrect assumptions
As you live and breathe your business, you know exactly what is going on and have a lot of assumed knowledge.
However, it’s essential to assume that an external reader of your plan knows nothing, and then explain everything very clearly. Your plan needs to be easily read by someone who knows nothing about your business so that they can clearly understand your business.
Again, an external reviewer can quickly point out the areas that need editing and clarification before you finalise the plan.
Inconsistent or incomplete narrative
Business plans tell a story about the business, and that story needs to be complete and consistent. For example, assumptions in your projections must be consistent with the organisational chart; marketing budgets need to match the marketing initiatives.
As you write the plan, cross check each section against each other so it matches. Remember: you’re telling a story.
Not explaining your assumptions
Business plans aim to peek into the future, looking at what your business will be doing in the next one to five years. That means you have to make assumptions about a whole range of factors, including sales, your team, marketing, costs, investment, premises and so on.
Explain these clearly in your business plan so the reader doesn’t have too many questions. Missing information raises red flags with the reader, alerting them that you have not considered all factors.
Unreasonable assumptions
Keep the description of your future business reasonable and on the conservative side. Your reader has already seen all sorts of crazy ambitions and over-hyped projections, but these are seen as unrealistic — causing the whole plan to lose credibility.
Look at some industry reports or talk to some people in a similar business to see what expectations and assumptions are normal for the industry.
Lots of irrelevant content
Some of the commonly available business plan templates — in particular the Australian government templates and some from the banks — have sections that are not relevant to all businesses, like a sustainability plan or social responsibility plan.
For most small and startup businesses, you will be wasting time agonising over creating content that you won’t even think about for the first few years, and are simply distractions for the businesses that need to generate revenues and profits first.
The solution? Find a simpler template.
Not being persistent
Business planning, like anything you want to do in business, requires skills and knowledge to get the best outcome. If you are struggling, don’t have time, don’t know what to do or aren’t doing any planning at all, get help.
There are professionals out there that write plans every day and can simplify the process, produce a significantly better product and increase your chances of the outcome you are seeking.
