Why Do Entrepreneurs Struggle So Much With Business Plans?

[Tallat]

The Business Plan is one document that many business owners, or aspiring owners, will have at least a passing familiarity with. However, it is the cause of much discussion and even contempt amongst entrepreneurs who struggle with starting it, or get completely overwhelmed by figuring out what to include and how.

I have built, reviewed, and acted on many business plans in my 12 year career as a business owner, business advisor and investor. For me, some of the characteristics of a successful and relevant business plan stand out. However, in conversations with entrepreneurs, I often get asked a range of questions from the sections that need to be included, to validating assumptions, to the best approach to physically complete a plan.

A truly relevant business plan cannot be created without context and some validation of the business concept. This is true whether you are at the early stage of building a business, or are seeking funding for your business from a bank or an investor. How do you go about validating your business idea so it helps in not only creating a solid plan, but also lends credibility in front of different audiences?

And finally, the weakness of many plans is perhaps the reason why many business plans are shelved soon after they are produced. This puts the business at risk. A well thought out business plan (or excerpts thereof) should be used as a live document that is referred to by senior management and also the wider staff. How do you use your business plan day to day or month to month in your business, and if not why not?

I would be very keen to hear from business owners, or those looking to start a business, about what they struggle with when it comes to thinking about putting together a business plan for their business. What are your concerns? What intimidates you about building a plan? Where do you feel you need more help, and what specific areas do you lack confidence in? Ultimately, what do you want to know more about validating, building, and executing your business plan?

Understanding your experience of working with business plans will help me to understand how I can better help companies who may suffer from similar problems when it comes to validating, building and executing business plans.

I look forward to hearing people's experiences.

Thanks

Tallat

 

[KarF1]

Putting your thoughts on paper in a structured fashion can be more challenging than one might think. Having a great business idea is rarely enough to put together a proper business plan. Some just don't understand the financial aspects behind the business idea. Others do, but are unable to sum up (in words) what exactly they'd be bringing to the table

 

[Mr A P Davies]

A truly relevant business plan cannot be created without context and some validation of the business concept. This is true whether you are at the early stage of building a business, or are seeking funding for your business from a bank or an investor. How do you go about validating your business idea so it helps in not only creating a solid plan, but also lends credibility in front of different audiences?

And finally, the weakness of many plans is perhaps the reason why many business plans are shelved soon after they are produced. This puts the business at risk. A well thought out business plan (or excerpts thereof) should be used as a live document that is referred to by senior management and also the wider staff. How do you use your business plan day to day or month to month in your business, and if not why not?

Tallat

I couldn't validate my business plan. I can now, I can show my bank statements.
Whatever I wrote down in the beginning, anyone could pick holes in it. How do I prove there is a market for my services, or I can charge enough? Is someone really going to believe that I can live on pasta and tinned fish for three years, while I establish the business? Or will they just think I'm off my head?
Five years down the line, I still get puzzled looks that I'm getting enough work.

I don't have a written plan, and never did. I have kit, I need work for it. If I can't do what is offered, I say no, and if I can, I say yes, and give a price.

What I struggle with when thinking about putting down a written plan, is the unknowns.
I have only one real objective, and that is make the most amount of money, in the shortest possible time, for minimum effort. This is not to say I am a corner cutter or rip off merchant, I'm not, I'm a long way from it.
I can plan all I like, but the weather isn't listening.
A broad plan, yes, but reacting to the circumstances is more important to me, than going back to what I thought was going to happen five years ago.

I have ideas that I want to try out, but whenever I think about putting it into writing, it always comes back to the same thing. Just get on with it, and see what happens.

 

[Pish_Pash]

To me, a business plan = jumping through hoops to get finance

Fortunately, I'm self funding so didn't have to jump through hoops.

My business plan is simple....buy something, sell it for more than I paid - rinse, repeat.

 

[Scott-Copywriter]

It really depends on what the business plan is being used for.

If it's for investment, then it usually needs all of the bells and whistles which investors expect to see.

However, if it's for personal use, where no outside audiences will see it, then it can pretty much be what ever the entrepreneur needs it to be.

Personally, I don't see a huge amount of use in them unless they're being used to attract investment or other outside capital. Business is just too unpredictable to try to plan it out and execute it. Some of the greatest, most transformational successes I've had in my business were never in any sort of plan. The opportunities just appeared as time went on, and sometimes they took me in very different (and more profitable) paths.

Plus, business experience can often make initial plans redundant. After many years in this business, I know more now than I did when I first started, so to follow an initial plan is like taking direction from a less knowledgeable and experienced source than who I am today.

If I do have a business plan, it's not some pre-written text in a single document. It's a large mixture of different goals, targets, paths and approaches, which adapt as time goes on.

 

[Mark T Jones]

To me, a business plan = jumping through hoops to get finance

Fortunately, I'm self funding so didn't have to jump through hoops.

My business plan is simple....buy something, sell it for more than I paid - rinse, repeat.

Not picking on you push-pash, but this highlights exactly where most business plans go wrong

Your other posts regarding cash flow show that your formula is flawed A running a business is about so much more than selling at a gross profit

Sadly, most business plans are written to impress - which ironically is precisely why they fail to do so. Your business plan is actually simple - it is about how you intend to run your business - all those 'who, what, how' questions

85% of the plans I see are utter cobblers - which is why I wrote my 'reverse guide' to writing a plan - cutting out the b/s and focusing on what matters.

 

[Pish_Pash]

Not picking on you push-pash, but this highlights exactly where most business plans go wrong

Your other posts regarding cash flow show that your formula is flawed A running a business is about so much more than selling at a gross profit.

Like many, I think you misinterpreted my other post...my business is healthy, sales are growing...more sales means more stock needed, more stock needed means more money needed (or a supplier that will provide ever increasing line of credit), mine was not a lament that it's all gone wrong (it hasn't) or that my business has no money to grow (it does)...I was just pinging others on here to see what they've done in the same situation, but all I got - in the main - was patronized for having a healthy growing business! It reminds me a little of the story George Best used to tell...

The hotel bellboy delivered champagne to Best's room and found him entertaining a scantily-clad Miss World on a bed covered with his winnings from the casino ....the bellboy says to him "Where did it all go so wrong?"

there are only a few possibilities in my situation...

1. Sink my retained earnings (annual profits) back into the company (to buy higher quantities)
2. Cut the 'turnaround time' (time to sell) on stock purchased(not in my case, my stock has a fixed sea freight time)
3. Ask my supplier for credit/more credit.
4. Go to the bank & ask them for money (or more money)

I've always been self funding, so I've gone with option 1 .....I fail to see how a business plan would have helped here? (as I don't want to bring a bank on board)

 

[Mark T Jones]

I'd forgotten how fighty this forum was

My comments weren't about your business - I don't know anything about it

They related specifically to your posts and the dangerous notion it's all about profits - I've seen far too many far too many potentially good businesses fail by following this idea

Business plans are nothing to do with banks or investors, they are about understanding the wider aspects of running a business and pre-emoting things like the cash flow hole that opens when you offer trade terms

 

[Pish_Pash]

I'd forgotten how fighty this forum was

Well, as the phrase goes...."You started it"...

Your other posts regarding cash flow show that your formula is flawed

Or did you just expect me to take that on the chin?

 

[Leather Briefcase Company]

I've never had a formal business plan.
It's trial and error.
If it works,enjoy and do it as often as possible.
If it is failing, recognise that and change it or stop it.
So I've never struggled with a business plan, just struggled with a business - the fun bit.

 

[Leather Briefcase Company]

I've never had a formal business plan.
It's trial and error.
If it works,enjoy and do it as often as possible.
If it is failing, recognise that and change it or stop it.
So I've never struggled with a business plan, just struggled with a business - the fun bit.

 

[Deleted member 255795]

Heh. Lots of questions before starting, that's the problem.

I'm an IT professional. I'm thinking of starting my own business in this domain (mostly server support, security, tuning etc).

I have no idea of where to start. In theory, it's a very simple thing: I solve a customer's problem (website speed, security holes etc), the customer pays for that. But it's the other stuff that's quite discouraging, as I don't know anything about it.

For example:

- would I need a lawyer to draft a contract? Who would do that, at what cost?
- would I need an insurance company? Would potential customers want insurance? I mean, I know I wouldn't break their servers, but they can't know that - not from the start. How much would that cost? What's it supposed to cover? Who'd offer it?
- what about accounting? Who would do that, at what cost?
- how would I get to the customers? I mean, I know what spam is, but I don't want to do that. I don't want to aggressively spam everyone everywhere (email, forums) etc pretending I'm just talking about something else in the meantime. How would I go about it? Would it cost something? If so, how much?

When it comes to a business plan, THESE are my problems. I hope these answers have helped you. If anyone's able to answer some of these questions (here or via PM), please do.

 

[Deleted member 255795]

double post, sorry.

 

[The Byre]

When I look at a business plan, I look for five things -

1. What can we earn here and is the business scalable?
2. What can we lose here, what is the worst case scenario?
3. What is the USP?
4. What is the Plan B if things go wrong?
5. What proof is there of any of the above, i.e. what marketing surveys have they done, or what do the books say?

You can put the above more or less onto one sheet of paper. Some magic and sexy business plan is really not needed. I have seen huge projects be given the go-ahead on the basis of a conversation - it all depends on who is doing the talking!

Put it this way, if Stephan Spieberg wants to make a $100m movie, he could probably get investors with a telephone call or two (he doesn't of course, he is a meticulous planner). If some Cecil B. de Hi-Def wants to make a $1m movie, he could produce a script, treatment, screenplay, story board, shooting schedule and a magic business plan and STILL get the bum's rush!

 

[Mark T Jones]

?

You can put the above more or less onto one sheet of paper. Some magic and sexy business plan is really not needed. !

This!

 

[kathrinalewis]

Writing a business plan on a paper is not enough to get you achieve that plan. First of all you have to think it's Pros and cons. Image or create a scenario in your mind whether you are an effective person or ineffective person when it comes to begin with the end in mind which means that you making your plans or imagine in your mind after that you are implementing it in real life. I always go through these site to improve my business skills and leadership skills that gives me a new way to think out of the box.

<LINK DELETED>
trainingzone.co.uk
businesszone.co.uk

 

[cjd]

There's an awful lot of twaddle spoken about business plans. It's mostly because of big business and finance where in both cases they're used to impress other people so as to allocate budgets and get funding. Even in big business they're mostly a waste - a wise boss once said to me that although I was to do a five year plan he wanted 99% of my effort to go into the first year. "No one is ever in the second year of a five year plan".

Where small businesses go wrong is in a thinking that they need to use the methods of big business for their own tiny businesses. They don't, they need far simpler models, most of which try to answer, or at least expose, the problems or needs that the new business will create - like some of the questions Iba raised above.

It might just be a shopping list of cost questions that finish up having simple numbers attached to them. "How much is rent? What does it cost to ship my products? Etc etc. The starting point is working out how much money you'll need to get started so that you can see how many widgets you have to sell to cover your costs. If you don't need to raise funding, I don't think there's any point going much farther than that - the real business plan is created in your head as you get experience and actually know stuff, rather than have to guess at it.

 

[MOIC]

Why Do Entrepreneurs Struggle So Much With Business Plans?

They don't need one.

It's all in their head and they will adapt as they go along.

 

[Chris Ashdown]

My thoughts are you need to de researce into your dream as much as possible to work out for yourself if it is a viable proposition for you hard earned money and time

Market research is important to all companies, is there a need and do you have compertition, with the prices the compertition charge can I find a position for my company be it better service or maybe a more limited service xtc

How do I sell my business to my expcted customers, be it a shop, factory, e-commerce, and how will I get the sales and at what cost

What will marketing or advertising cost and what will be the best method

What will I need to spend before I start trading, things like equipment, shop fit, insurance, trained staff, methods of delivering the goods to customer, office infostructure

Expected sales each month for at least the first year

If its to work how much money at the start, then how much money estimated to spend each month based upon sales, how much money coming in each month (some may be on say 30 days accounts or part payments) this is cashflow the main killer of any company

With this type of resear h you understand fully the task ahead and have made allowances for most problems

Yes you can fly on the seat of you pants, but honestly what makes more sense and has the better chance of success

 

[Mark T Jones]

Entrepreneurs: Below are some important points to consider before actually starting your business:

1. How viable is your business idea? This is the crux of the plan, the bridge between an idea and the reality of running a business

Check the viability of your business by considering yourself a customer and asking common questions like:

• How will this product/service solve my problem?
• Should I buy from this company?
• Should I check other customers’ review of the business before buying a particular product or a service?
• Do they provide high-quality products at affordable prices?

2. Is your business plan ready? If you have done the above then you have the bones of a plan, writing it down will help to put it in order.

Forbes reveals that business plan is the foundation of your startup. So, prepare a feasible business plan that outlines your objectives, target audiences, market research, strategy, competitor analysis and ROI.

3. Are you ready with the finances? Cashflow projections are arguable the most important part of the plan (indeed you can actually create a plan around those projections). The work put in to projections will help you to identify whether you need funding, what type of funding is most appropriate, how much you need and when.

Now that you have a great business plan in hand and you’re willing to launch your startup soon. But have you figured out where will funds come from to run it smoothly for a long time? If not, then start thinking about ways to get your startup financed. Opt the best possible way to get enough funding. Take help from your family members, consider pitching your idea to angel investors or find a trustworthy co-founder to ensure finances and cash flow for your startup.

4. Have you chosen the right business name? The relevance/significance of the name is entirely dependent on the business itself & should emerge from the market research.

Your name is your identity. Similarly, your business name is your brand’s identity in the ever-so-competitive market. In an article published at Inc.com, writer Jessica Stillman suggests you to choose a name that’s easy to get etched in the memory of your target audiences for a really long time. Run a search on the Internet to find a unique, appealing and creative name that you believe goes well with the nature of your business.

5. Is your Website Ready? Again, the marketing plan will identify whether you need a website, what role it will play and where it will fit in your marketing mix.

Now that you have your plan, name and finances ready, it’s time to showcase your product/service to the world. But how would you do that? The answer is simple! You invest in a creative and functional website that shares your passion and drive and resonates well with your target audiences. Don’t settle for anything that’s subpar!

Don't over complicate it - focus on what matters to your business

 

[Ghazi]

This is one part i'm struggling with. I want to put together my business plan and how does one conduct market research on a product which is not on the market and how do you document this?

secondly how do you project financials for something that isn't on the market?

 

[Scalloway]

secondly how do you project financials for something that isn't on the market?

My thought on this is that you can project your costs, rent, insurance, marketing etc. Then work out how much you need to sell to cover them.

 

[Mark T Jones]

This is one part i'm struggling with. I want to put together my business plan and how does one conduct market research on a product which is not on the market and how do you document this?

secondly how do you project financials for something that isn't on the market?

There are no simple answers - this is the hard work that underpins success (or tells you not to do it!)

If your product doesn't exist, where possible it is useful to create a small run and sell/offer them. Often that isn't possible - a professional market research company can help - it might seem like a big outlay but could save you or make you a fortune!

Cashflow projection, again tricky but essential. Firstly, don't worry about being right or accurate - start by putting the numbers you are reasonably sure of in boxes. Then put guesses in the other boxes. Now the important bit - repeatedly go back and question the assumptions around those numbers - gradually they will start to make sense

 

[Chris Ashdown]

Trial is the best solution if possible but this could mean

Contacting some people in the buyers area be it say shop owners, or clubs, companies etx who would be you target market, show them the product and ask them if they would buy it and what price they would expect to pay. This is the market research we are talking about

What are the benifits to the owner in buying it, who would buy it or use it, if for instance it was a very expensive tool for a job that only came up once a lifetime then it may make sense to contact tool hire companies rather than individuals

Regarding numbers you have the purchase price already now think howmany you could expect to sell each month and how much money you need to make to cover overheads, , put it all into a spreadsheet and see if it makes sense. Unless you have something that will fly off the shelfs then dont expect many sales in the first few months whilst you learn how to sell and where to advertise etc