Writing a business plan: Avoiding common mistakes

Oftentimes start-up entrepreneurs and businessmen will get a lot of advise on a good many things from how to handle employees, how to cut costs, and especially how to write a business plan. But these advice givers fail to give tips on how NOT to write a business plan.

Well, here are some pitfalls that you must avoid when writing your business plan:

Delaying the plan. You must not wait until the very last minute to write a plan. Many businesses write their business plans only when they have no choice about it. For them, unless someone (the bank or investor) asks for one, then there is no business plan.

No time for making a business plan. Other businessmen may say that they don’t have time to write a plan. But it is precisely this lack of time that makes a business plan all the more important. A ready business plan will make the rest of your team aware of your business goals so that they can implement it even without your physical presence.

Making light of cash flow. The most important part of the business plan is not sales or even profit – it is cash flow. But for most people they can only think in terms of profits and not cash. People have the mistaken notion that business is sales minus costs and expenses is equal to profit. But profits is not the same as cash. You do not spend profit you spend cash. A thorough understanding of cash flow is important. If you will highlight only one figure in your business plan, make sure it is the cash flow.

Selling the idea, not the person. People sell ideas, not business plans. Business plans are a way to present information to investors but it is not the be-all and end-all of enticing investors. Investors look at the people behind the business and their capacity to deliver.

Dazzling with vague phrases. Eliminate the tendency to write bombastic phrases that do nothing in presenting the ideas in your business plan. Be specific and detailed in supporting the goals that you want to achieve.

Making a generic business plan. Always compose the business plan based on its real purposes. Business plans can be used for very different things: They can be used as a “sales document” to sell a new business idea, it can be used as an action plan, marketing plan, financial plan, and personnel plan, among others. Write the business plan based on what you want to use it for. A generic business plan is ineffective and just a waste of your time and effort.

Unfocused priorities. A focused approach to business is always more effective. Don’t oversaturate your business plan with so many goals and objectives that it will not only be impossible to achieve all of them, it can also be impossible to pinpoint which ones need to be achieved first. Just list a few items that you think are the most important and focus on these.

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