A Business Plan is the Best Strategy to Avoid Business Failure
It is common thought that more than half of new businesses fail during the first year. According to the Small Business Association (SBA), this isn't necessarily true. The SBA states that only 30% of new businesses fail during the first two years of being open, 50% during the first five years and 66% during the first ten. The SBA goes on to state that only 25% make it to fifteen years or more.
Through my experience as a business coach, the main reason new businesses fail is poor upfront planning. With the right planning, funding and flexibility, businesses have a better chance of succeeding. In this article I’ll go through some of the biggest mistakes that entrepreneurs make and why having a business plan is the best strategy to improve your chances of success.
Mistake #1: Not Doing Market Research
Many of the aspiring entrepreneurs starting businesses are doing so because they want to do a particular thing or love a particular product. I can’t stress this enough…it's not about you, it's about them – your potential customers. If you concentrate on you and not your potential customer, you will fail. Creating a business plan will help you stay focused on your potential customer. When you work through your business plan, you’ll have to investigate the market and find out whether your product or service is feasible.
Mistake #2: Not Having Enough Money Allocated
Before starting your business, you need to figure out how much money you need to live and how much money is needed to run your business. You can't ignore the money and just assume that somehow enough of it will come in each month. Nor can you ignore your bills. This is again where a business plan can be a handy tool. Your business plan will give you an idea of what it will take financially to operate and price your products or services. Be realistic at the beginning, and start with enough money that will last you to the point where your business is up and running, and cash is actually coming in.
Mistake #3: Poor Location, Internet Presence and Marketing
Location, location, location is everything if your business relies on foot traffic. Just as important, however, is internet location. These days, your web and your social media presence can be just as important as your business's physical presence. People shop, search and research online for everything. So, if the need is already there, the virtual availability and visibility of your business is crucial. Working through your business plan will reveal your target market, where they live online and how to connect with them.
Mistake #4: Becoming Complacent
Once you've done the planning, established your business and gained a customer base, don't get complacent. The need that you're fulfilling may not always be there. It is important to monitor the market and know when you may need to alter your business plan. Being on top of key trends will allow you lots of time to adjust your strategy so that you can remain successful. It is a good practice to revisit your business plan at least annually to ensure you are still in alignment with your mission, values, vision, and goals.
Mistake #5: Expanding Too Fast
Now that your business is established and successful, it's time to expand, but you must treat the expansion like you're starting all over again. This is where you your business plan acts as a living blueprint and will evolve with your business. If you are physically growing, make sure that you understand the new areas and markets into which you'll now be reaching. If you're expanding the scope and focus of your enterprise, make sure you understand your new products, service and intended customers as much as you do with your current successful business. When a business expands too fast and the entrepreneur doesn't revisit and revise their business plan – taking the same care with research, strategy and planning as they did when they first started, the financial drain of the failing operations can sink the whole enterprise.
A well thought out business plan is the foundation of any successful business. In the plan you will identify the soul of your business or MV3 – your mission, values, vision, and voice. You will outline realistic goals for your business, how your business can meet those goals and possible problems and solutions. The plan will figure out if there's a need for the new enterprise through research and surveys; it will figure out the costs and inputs needed for your business; and it will outline strategies and timeline that should be implemented and met. Your business plan is your ultimate planning tool and the best strategy to safeguard against business failure.
Want to avoid these common mistakes and improve your chances of success? I help entrepreneurs build a clear, concise, and customized business plan they will use as a living blueprint throughout the life of their business.
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