Business Plans – Avoid the common Pitfalls!

Business Plans – Avoid the common Pitfalls!

Business plans can be tricky or uncomfortable things to write, balancing the obvious concerns of the bank manager against your own over whelming confidence can be a real balancing act. Appear too confident with your sales predictions and the banks may fear that you haven’t considered or allowed for any contingencies, be too pessimistic with your sales predictions and the profits may not be forthcoming in your plan and further concerns are raised.

Easy Offices is going to look at the common mistakes and pitfalls of writing a Business Plan throughout this week,  we’ll try and help you understand the views of the banks, what they may look for and how you can address those concerns. We’ll also point out the importance of the Business Plan for any business, start up or established, and how it should be a dynamic entity, evolving with the business and the business environment. The plan needs to be flexible but resilient enough to not only cope but conquer the current challenges all businesses face in today’s marketplace.

What Makes Business Plans Fail?

Over confidence is without doubt the main reason for failure! Whilst it’s obviously important to be optimistic and confident it’s essential to be able to temper one’s enthusiasm long enough to be honest and realistic.

‘Fudging the numbers’ when applying for a loan or when raising funds may appear better on paper or potentially even to your bank manager but what happens when the figures aren’t realised or forthcoming?  Whilst fixed costs such as rent, loan repayments or hire purchase agreements are as the name implies, not changeable, they will need to be paid at a set date.

Flex your sales forecasts up and down by 10,20 or even 40% to reflect how your cashflow will be affected. This will provide an insight into what you have to pay with limited funds and can help you organise how and what you can cut back on to balance the figures. It’s essential to update your cash flow forecast when you have started trading so that actual sales figures can be entered alongside the projected figures to see how your plans are affected.

Market research – Don’t even consider skipping this step!

This is probably the most important step any potential new business owner can take but it’s amazing how many companies miss out this vital step. Check out the competition, scan websites for information, check out the Facebook, Google + pages and Twitter feeds to see how companies that are actually trading do things.

What do they sell and for how much, what quality are the products that they sell and do they offer value for the customer? Perhaps you’re in a service industry where the direct comparison of products isn’t relevant, check out the companies that they do business with – what size and scale are they? You need to ask yourself as a potential business owner the questions your potential customers are asking your competition.

Two great questions to ask yourself in regards to Market Research:

1.     If I was approached to invest in this business, as you are approaching the banks, would I invest my hard earned money?

If not, why not? You may have identified potential weaknesses in your planning.

2.     Is this a product or service I would purchase or pay for?

If not, why not? You may have identified potential weaknesses in your planning.

 

We’ll continue this series tomorrow and will conclude it at the end of the week. If there are any questions you may have or anything you want us to cover please let us know.