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Fatal Flaws in Your Business Plan

Fatal Flaws in Your Business Plan

A business plan is a plan that guides emerging entrepreneurs as they build their new businesses. I taught a 20-week business plan writing course for a women’s business development organization affiliated with the SBA. We met for three hours each week, and the students wrote down their plans for each week, and they supervised the study.

When testing a business idea, unreasonable expectations or misconceptions may come in and undermine planning. Happiness with that idea can impede a person’s ability to see potential obstacles. The following are some situations that entrepreneurs need to be aware of.

Unreasonable expectations

While it is sometimes true that using them as a good customer is a smart idea, as you understand the value and availability of that product or service, you may be misinterpreting the size of the market and the potential benefits beyond a select group of true believers.

Insufficient information

Verify the need for your products or services when researching and verify the number of potential buyers and the motivation to buy from you.

In addition, make sure you understand the purchase process. Who lights up the sale? What is the price of a sweet spot? Finally, where can potential customers find these products or services now?

Customer access

Customer access is universal and specific industries or targeted customers seem inaccessible. You can identify the right customers, understand how your products or services fit their needs and know-how priced and delivered. But if potential customers lack confidence in working with you because you do not have authorization from a trusted source, you will starve.

Excessive cash flow

Generally, businesses will not achieve the desired total sales and or show the full profit in the first year of operation. Businesses that need high start-up costs in particular will need longer hikes. A business plan should inform the potential for negative cash flows and indicate how fixed and volatile costs will be met at that time. One has to know how the inventory will be funded, payments will be met and office rent will be paid.

When writing your business plan, successive financial predictions are highly recommended. Customer acquisition may take longer than expected and the size of their purchase may be small at first. In addition, it is possible for a business to be profitable on paper and have a financial problem if customers do not pay on time.

Estimating startup costs

Establishing a sound budget for starting and running a business is important. You must be prepared to meet the cost of all permits, equipment, inventory and personnel required to run the business. If you are planning to hire staff, it is important to have a good view of your small staff needs in advance (you can hire more as your income grows).

“Magic thinking” is a business model

The business model shows how your business will make a profit. Well-thought-out interactions between marketing, financial and operational processes will improve and save profits and you should plan how this will happen. The business model describes the key functions of the business.

As such, a proposal for the value of your products or services should be stated. The overall marketing strategy and selected strategies and resources that will enhance value proposition — patents, patents, valuable relationships, or capital – will be included. Commercial distribution channels will be detailed.

Getting to Plan B (2009), by Randy Komisar and John Mullins, details the key components of a business model and advises business plan authors to classify their models into sub-headings:

Revenue Model, defining what you will sell, your marketing plans and how you expect to make revenue
Performance Model, for details on where you will do the business and how the day-to-day operations will work
Working Capital model, which means the cash flow requirements of a business. Understanding cash flow helps you know when money will be available to meet expenses such as rent and payroll (different from income). An entity can generate enough (sales) revenue and still suffer from revenue problems.

Your business model will keep you organized and your priorities are realistic. Things like quality control, collecting available accounts, asset management and identifying good partners will mean much more than your Facebook fan number, for example. We wish you good luck with your new business!

By Magazine4Life

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