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6 Replies Latest reply: Feb 1, 2012 7:10 AM by Matt Castro RSS

The ONE big wrong assumption in your business plan?

Matt Castro Novice
Currently Being Moderated

Hi, all.

 

In the past few months I have been working with a friend's small start-up, hardgoods business (selling something tangible).  The company, my buddy and another guy, asked me to give them an assessment of their business plan and provide any marketing insight I could because neither of them are marketing or sales guys - one engineer and a statistics major.

 

Well, there were so many issues with the business plan that I've been able to write a lot about it on the blog I run.  Some of the biggies were mis-calling pricing, failure to account for distribution expenses (actually, no distribution plan in the buiness plan), undercalling sales and marketing expenses; to name a few.

 

But it got me thinking, what are some of the ONE big wrong assumptions you or your teams have made at the start of your business (or in your business plans)?  Are there good things to learn from those big oversights?

 

Matt

  • Re: The ONE big wrong assumption in your business plan?
    LUCKIEST Master
    Currently Being Moderated

    Matt, Every business plan is different. There is NO set format for preparing the bus plan.

     

    The bus plan is like a road map to success for the company.

     

    The bus plan establishes goals and enables you to measure progress.

     

    Or to look at it another way, you probably will not succeed without a business plan.

     

    LUCKIEST

    • Re: The ONE big wrong assumption in your business plan?
      CorpCons08 Master
      Currently Being Moderated

      I concur with LUCKIEST. There is NO set format or perfect answer to this question.

       

      Each business plan is uniquely different and has different focal points.

       

      Regards,

       

      Dan

      • Re: The ONE big wrong assumption in your business plan?
        Matt Castro Novice
        Currently Being Moderated

        Thanks for the responses.  I guess I was just looking for specifics from the forum on some big mistakes people have discovered from their business plan to reality.  Given, of course, all business plans are different, but wondering if there are common shortfalls as we build whatever business plan we build.  Pricing, customer volume, specific expenses?

        • Re: The ONE big wrong assumption in your business plan?
          CorpCons08 Master
          Currently Being Moderated

          Matt,

           

          There can be a lot of missed assumptions in business plans. However as a consultant, I believe the business plan should be an endless evolving document that changes as your business changes. For that reason, none of these missed assumptions matter because it is going to be change and evolve as your business does.

           

          Generally, I have noticed that a lot of business owners are way too lean on cash. While most businesses should have enough cash to allow for cash reserves equal to a few months of operating expenses, most business owners operate right down to the last dime. In reviewing these plans, it often leads me to ask "what if this happens...?" Does the business go bankrupt? Do they have to borrow additional financing?

           

          Hope this information helps.

           

          Regards,

           

          Dan

  • Re: The ONE big wrong assumption in your business plan?
    myDealCompass Apprentice
    Currently Being Moderated

    Everything takes twice as long as you think is realistic when you are writing the plan. It helps to remember that it is outdated the moment you close it. At the end of the day business plans are useless, but the planning process is invaluable!

     

    In our specific case it was the turn around time for getting some key contracts in place early on. Thankfully we have, and continue to, streamline every step of the process!

  • Re: The ONE big wrong assumption in your business plan?
    Matt Castro Novice
    Currently Being Moderated

    @Dan:  Thanks.  Yeah, helpful.  This was a bit of a cash situation I was working on too.  Inflated profits were making the cash-on-hand look like no problem at all.  So, nice to confirm that this is common.

     

    @myDealCompass:  Good point.  I can see where underappreciating the time some things take can be a problem.  Generally, I agree that biz plans are good for the planning part, but not only.  They do have value in establishing expectations for the business owner/owners/investors.  In my circles, we often say "we're wrong.  We just don't know by how much."  But that doesn't make our plans or forecasts worthless as soon as we create them.  This gives us a baseline to measure against in order to get better at assumptions/forecasts/etc.  Thanks for the comments.

     

    Matt

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