Get the Most Out of Your Business Plan? Common Mistakes to Avoid (Part 1)
Creating a business plan today is almost a prerequisite to creating a business; before you can attain business funding, obtain strategic partnerships or secure key prospects they want to know how well you know your business and industry and business plan can help you demonstrate your knowledge about your market and industry, your business strategy, company finances and your vision for your business. A business plan is a tool that can help you demonstrate your expertise.
Mistake 1: Inaccurate Financial Projections
Creating your financial projections can be difficult; cash flow, revenue or business overhead costs can be difficult to accurately project. Even if you have an accounting or finance background, creating accurate projections can be challenging for a number of reasons. Creating a financial projection means you have to several assumptions and if there is not enough market research to justify the assumptions, then it makes projections more guesstimates then actual estimates. If you have already been in business for three or more years, it helps to make your projections more realistic; but if you are just starting your business you may not have that luxury and have to make a lot of assumptions. The way to make better financial projections is to:
- Evaluate your assumptions: Analyze what assumptions you are making and what research supports your assumptions and if they supporting facts and the assumptions are accurate.
- Update your financials regularly: As you start your business and get more data, you will be able to create more accurate financial projections.
- Seek expert advice: Verify your projections are standard for your industry by talking to experts, finding industry data in trade publications or talking to accountants in the industry your business is in.
Mistake 2: Lack of Research
How much do you know about your business? What do you know about the trends in your industry or your competition? What about the overall direction the industry is going in or about fulfillment of your product or service or some of your industry standards and requirements? Most of us know about the business we want to create and the product and services we want to offer, but what about your competition, industry or the market needs and trends. Often times business plans don’t have enough information, but why would they? You are trying to grow a business; you don’t have time to research each and everything about your business and industry, right? No, the more information you know about your business, industry and competition, the more insight you have to create your business strategy and to carefully carve your niche. Doing the research will help you create your marketing, your competitive advantage and it strengthens your position as an expert in your industry, which will help you when you try to solicit business, talk to suppliers and building strategic alliances. So here are some ways you can help to get the information you need:
- Join professional associations, go to conferences, read industry publications and meet regularly with people in your industry: Building facts and information found from these sources can help you carefully craft your business’ strategy and create a stronger foundation for your business.
- Never stop researching!: As you build your business and learn more, keep adding information about your industry, target market and business to your business plan. Most importantly don’t stop learning, one piece of information can change how you operate your business and put your business in a more profitable position.
Mistake 3: Lack of Information about Your Competition
Creating a competitive advantage is everything in business, without a competitive advantage you may not be very profitable or even worse, stay in business for long time. How can you differentiate yourself in the marketplace without knowing information about your competition? Knowing everything there is to know to about your competition can help you create your competitive advantage by creating a niche for business, having superior marketing or creating products or services that are different from your competition; gathering information about your competition can help you in all these areas. If you’re in a highly fragmented industry, gathering information about your competition can be difficult; if this is the case, then limit your research on the competition that closest to you, which can be the businesses that are closest to you if you offer location based products or services or the businesses that serve the same target market. What key information do you need to know about your competition? You need to know about their target market, the products and services they offer, any strategic alliances they have, and their marketing strategy, in addition to other pertinent information you may find. How do you find more information about your competition?
- Visit their website and research articles or any other information you can find about them: This will help you learn about their product mix, how they market themselves as well as any other information that you may learn about the businesses.
- Talk to Suppliers: Many times you can find information about your competition from their suppliers.
- Talk to people who have used their products or services: Talking to their target market can help you determine who they are targeting and what do people think about their product and services
Mistake 4: Not Knowing Enough about Your Target Market
One of the interesting aspects about creating a business plan is that for most entrepreneurs, it forces them to think about certain aspects of their business in a way that they may have not considered yet. For most, the marketing section of the business plan is an area where the business plans forces you to stretch beyond what you may have thought about previously. A lot of the time information about the target market, market segmentation and market needs and trends can lack market research date; by knowing all the information about your customers as you can, you can create products and services that meet their specific needs and create a market strategy that speaks directly to them. For some target market there is a lot of information available, but for other target markets it is harder to learn the intricacies of that market segment. How do you make sure you have enough data about your target market?
- Talk to the customers yourself: The best way to learn about customers is to talk to them, regardless of what your position is within the company you should have regular contact with the customer. A lot of times people do so much work behind the scenes to grow the business they don’t get to interact with the customer a lot, but if you continually talk to the customer you are able to create better products or services and produce better marketing and promotions.
- Follow the money: The easiest way to learn about your customer is to find out what they are spending their money on. Customers may say they want a particular product or feature but are they willing to pay for it? Your job is to find out what the customers will pay for.
- Talk to Others who interact with the Same Target Market: There are some businesses that have the same target market as you but don’t compete with you. Talk to them, what information does the business have about the target market that can help you?
- Find Market Data Conducted Outside of Your Company: What are some of the things that others are saying about your target market?