When we need to get somewhere but do not know how to go about it we seek a map. It is for this reason that vehicles are manufactured with a GPS system and the very same reason that Google introduced Google maps. They serve the sole purpose of simply guiding us to our destination. This is what is a business plan. A business plan lies in the very same nature as a map but it does not just get us there, it has to keep us there and take us even further. If you have a faulty map or key in the wrong title of your destination in a
Google maps, you are likely to either end up in a different location or worse get lost. The very same applies to a business plan hence why these five stings you cause your business plans while developing it.
The blind eye
The cliche, ‘love is blind’ comes to mind and many agree with this, that is until it stings your blind eye wide open. Your product or idea is dependent on the market for it. It may be accepted or rejected by your consumers. Even if accepted, this may be on various levels. A low acceptance thus low market for the product/idea or versa (high acceptance thus high market). Loving your product or idea too much brings in a blind eye to the reality on how it is going or doing in the market. Love your idea but as a wise person would say, “keep your eyes open. Be brutally honest with yourself, and do as much research as you can.
Overestimating the market
Derivation of the business plan ought to entail realistic achievable goals as well as estimates. Some insist on a SMART plan (Specific Measurable Attainable Realistic and Time conscious). A bottom up approach entails designing the business plan from the least of the business unit to the greater of them. This way you are able to clearly define and generate strong reliable goals and reasonable estimates in your business plans.
Poor translation of an idea to a plan
An idea is simply a notion, a concept present in your mind. Many businesses stem from this, someone somewhere had an idea. However for the idea to translate into a business, it has to be converted into a plan first. How? Simply by execution. You have to execute the idea to make a plan. Execute by developing the idea from its raw state to a process by for example knowing the required resources, outlining an organizational structure that will incorporate the idea. If it is a start up finding viable sources of capital, determining location of setting up the business, drafting business proposals of your idea and together with the above examples drafting a business plan will enable you to convert the idea to a feasible plan. Look at it this way you do not buy a car before taking it for a test drive – the same applies to your business plans.
Overestimating financial results
Business plans often times makes overly aggressive or unrealistic assumptions about sales, rate of growth, gross margin, profitability timing, cash flow, market share and other tangible results.
A financial dilemma is a consequence of this assumption. You need to know the difference a goal and an estimate. A goal is a guideline where you want to be at a certain point in time in the future. An estimate is an approximation or even a formed opinion about something. You have to separate the two in your business plan to avoid any financial crisis stemming from it.
The ‘under’ villain of costs
When one budgets for their week’s expenses one would normally place a higher value in their monetary worth. For instance, you need bread. It costs 46 Ksh but you should budget it as Kshs 50. The extra four Ksh is your margin of error or margin of surprise. Later on should you find the price has changed to 48 Ksh, the change will not affect you nor will it strain you into seeking a cheaper supplement for the bread.
The same applies to a business plan the under in underestimation of costs and expenses is your biggest villain. Give yourself a margin of error, overestimate and when the shock comes you will be in a position to absorb it.
There are generally two reasons for business planning: one is for yourself – to organize your thoughts on paper, make sure you really understand and feel good about what you’re doing, and give you a path forward.
The other is for outside use, which typically means asking for money. There may be some differences in the content and presentation of the plans to suit each purpose, but no matter what, it should be honest, thorough and as realistic as possible.
So challenge everything about your plan, then challenge it again. Making unrealistic assumptions and/or kidding yourself – much less others – can come back to sting you you.
I advise that you look into the above stings as you develop your business plan and it just may work out for you. The business plan is your principal and you are its agent, represent it and it will reward you.
Having a business plan is essential to every business. At the same time you cannot blindly believe the plan to achieve success. Do not overestimate the market and your finances. Keep checking your plan often to check the progress of your company. If the progress is not according to your plan, go for certain changes if required. Simultaneously, efficient translation of your plan is necessary to go in the right path.