WHY SOME BUSINESS PLANS FAIL

There are approximately 5.9 million SMEs operating in the UK, but making your business successful in the long-term is difficult. Recent ONS data shows that only 42.4% of businesses founded in 2013 were still active in 2018.

So, how can you improve your chances of success? Something all business owners need to do is create a business plan. A good business plan is integral to the success of your business as it:

  • Helps to clarify the direction of your business
  • Sets goals
  • Can highlight problem areas that don’t make sense or need more work.

Many business owners will use their plan to persuade investors or lenders to fund their idea, but a business plan is not just something you write for external funders and then put away in a drawer when you think you no longer need it.

A good business plan should be an invaluable asset and guide to running your business, and should be something you constantly review and update as necessary.

But why do some business plans fail? For some people, it’s simply a matter of not investing enough time and effort into creating it. However, there are some common problems that can prevent a business plan from becoming successful. Here are seven areas where you might be going wrong.

 

1. Pursuing a bad idea

It can be hard to admit this, but sometimes business plans fail because the idea isn’t feasible. However much time you dedicate to creating a detailed plan, you first need to make sure your business idea is viable.

For example, you should make sure there is a market for your product or service. Conducting market research is vital for understanding the industry and your potential customer base, and will help you to create a business plan that is less likely to fail.

As well as having a good idea, you will need to research the competition. You could have a great business plan, but it won’t work out if it’s essentially a copy of an already successful and established business. You should consider how your business is different from anything else out there and why you are unique. It’s especially important to highlight this in your plan if you are looking for funding, as investors and lenders will need to be convinced of your idea’s potential for success.

 

2. Not having the expertise

When creating a business plan, you need to know what you are talking about! So, it’s crucial that you (or a business partner) have the relevant expertise and experience to be able to write a workable business plan, and then put your idea into practice.

 

3. Not being realistic

If you’re writing a plan for your new business venture, it is easy to get carried away and be over-optimistic about how much money you will make. However, this could be a fatal mistake and could cause your business plan to fail.

Business plans should be realistic about future growth and profits. Over-estimating your income is likely to cause problems further down the line, as you could reach a point where your expenditure is more than the money coming in. Being realistic from the beginning will help you to plan your budget accordingly and give your business plan a greater chance of success.

Don’t be afraid to set high targets in your business plan, with both short-term and long-term goals, but make sure they are achievable.

 

4. Assuming everything will go smoothly

Focusing on the strengths of your business plan and assuming everything will go perfectly is a mistake of many businesses. If your plan doesn’t factor in any potential future issues, then when you do hit a problem it will be much harder to overcome.

Good business plans will address the challenges your business may face, and then lay out strategies on how to minimise these risks and prepare for any unexpected events.

 

5. Neglecting the finances

Every successful business plan needs to include detailed financial projections.

Business owners will need to look at costs, trends, and their competitors to come up with realistic and achievable figures for their income and expenditure, which will give direction and structure to their business operations

It is very likely that these figures will change, but it is important to have some benchmarks to aim for. The figures will also highlight any major flaws with your business model (i.e. if you are spending more money than you make), so you can make any necessary changes to your budget.

If you want to use your plan to try to get funding, you will need to show how much money you require and what the funds would be used for.

 

6. Not checking the spelling and grammar

This may not seem as crucial as the other points but, especially if you’re looking to impress investors or lenders, your business plan should be accurate and without any mistakes.

An error-free business plan will make you appear professional, so make sure you review it and double check (and triple check) for any typos or mistakes.

 

7. Not believing in the plan

Finally, you need to be determined and fully believe in your business plan. You could have the best business plan in the world, but if you don’t put the time and work in to bring it to fruition then it will be destined for failure.

Creating a good business plan and not giving up when problems occur will give you a better chance of making your business plan a success!

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