From the course: Creating a Business Plan

Business plan pitfalls

From the course: Creating a Business Plan

Business plan pitfalls

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- Once you've finished writing your business plan, go back and check it for quality because I've seen a lot of pitfalls that people fall into once they've written that plan. Some of the major ones include, "Oh, we don't have any competitors." Everybody has competitors. Your customers are looking to spend their money somewhere. It may not be with you. Another risk is when you write "It's a $10 billion market. And if we just get a little bit of that, we'll be millionaires." That's a huge risk because you may not understand what really drives the financial performance of your business. To mitigate it, do bottoms-up financials with unit drivers. Speaking of financials and other risks to look for is that hockey stick with your financials. You don't make a lot of money in the early years, and then it takes off and grows exponentially. That's not really believable. It's a warning sign. Very few businesses hit that exponential growth. You may have ungrounded assumptions. Have some evidence, or at least a sensitivity analysis with a plan to validate those numbers. Your business may be poorly funded, or the founders don't have skin in the game. They haven't personally invested. You can never have enough money to run your business. Plan for the worst case, and make sure you have a plan for the founders to put some of their own money in it. Last, in terms of risks that may be embedded in your plan are investing in non-product or non-sales related items in the early years. Investments in buildings, administration, corporate staff, those are low return investments. All your focus should be on your product or your service, and helping sell it from the beginning. Once you've reviewed your plan for these pitfalls, you'll have a much more robust plan and it's going to be more believable, more credible to investors when you seek money.

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