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Common Business Plan Flaws

Over the years, we have been presented with a number of business plans claiming to address issues ranging from the mundane to the earth shattering. While many include some insightful kernels, more often than not, the writers have failed to answer the fundamental questions that business plans should address.

A June 22, 2009, article published in The Wall Street Journal, “Why Business Plans Don’t Deliver” by John W. Mullins, addresses this issue. Mullins provides a detailed list of five common business plan flaws (listed below) based on his review of hundreds of business plans. It should be noted that while the article focuses on start-ups, the same issues relate to developing a plan to secure financing, extend your existing business or enter a new business.

• Here I Am, Never Mind the Problem We often refer to this phenomenon as technology in search of a market. Have you identified how your technology solves the problem at hand?
• A Coke for Every Kid in China The market is huge, and therefore anyone who sells in this market will have sufficient share to succeed. Have you identified how you will get the share you indicate that you will capture?
• Just Look at Our Paper Profits Do the product and market realities back up the financial assumptions made?
• Our Team Walks on Water Are you just dropping names and boasting of past successes or you addressing the critical success factors in the business with the team that you have assembled?
• Everything Is Wonderful Have you identified the pitfalls or simply attempted to gloss over them?

In addition to detailing these flaws, Mullins identifies three key questions that must be answered in an effective business plan:

• What is the problem and how does the plan attempt to address it?
• What are the risks involved with addressing the problem in the ways identified?
• What are the gaps and other assumptions that might be proven wrong?

Are You Ready to Create an Effective Business Plan?

We have been suggesting over the last several months that while the current market presents significant challenges, it also provides great opportunities for aggressive investment in people, products and businesses.

To that end, here are some questions to consider, whether you are planning for a new business or extending your current one:

• Can you articulate the problem you are attempting to solve? Can you do it in a way that someone outside your business would readily understand? What makes you think the customers appreciate that they have, and are actively looking to solve, this problem?
• Do you know what you don’t know? In other words, have you identified any gaps you need to close in order to succeed? Can you explain the gaps to potential stakeholders and customers? If you don’t believe you have any gaps, it’s worth asking yourself if you might be overlooking something. Every venture has at least a couple small gaps.
• Do you understand the impact of any of the plan’s assumptions being incorrect? How will you mitigate them?
• Do you have the people, processes, technologies and money to execute the strategies? If not, can you articulate what you need?

Whether extending your existing business, entering a totally new line of business or planning a start-up, addressing these questions upfront should help accelerate the move from planning to execution.

This publication is part of Blackman Kallick’s marketing of professional services, and is not written tax advice directed at the specific facts and circumstances of any person and/or entity. Contents of this publication are of a general nature, and you should not act on this information without obtaining professional advice from your business advisor that is appropriately tailored to your individual needs and circumstances. This written advice is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.