Deciding to start a new business is a step in the right direction toward financial independence and personal freedom. However, it’s not a decision one should ever make arbitrarily and without several important considerations. One of the biggest reasons many small businesses fail is due to a lack of direction from their leadership. As the owner of a new business, each entrepreneur needs to prepare for the future and not just the day-to-day operations. To do just that, everyone considering this major step should first know these common mistakes when building a business plan.
One of the most dangerous common mistakes when building a business plan is to assume success. Starting a business or even managing to cling to one for years offers no guarantee of a consistent profit — let alone earning enough to pursue growth. Early in the planning, focus on real numbers. Compare your desired niche and target audience to the earning reports of similar businesses.
A baseline for early earnings should appear from the numbers that will give you a starting gauge of where you can expect your trajectory to go — given enough hard work, naturally. In short, setting numbers on goals is a great way to organize, but setting the bar unrealistically high or low often creates stumbling blocks and renders growth maps useless.
Failing to Account for Costs
Many people enjoy casually selling new merchandise and unwanted goods online or through local brick-and-mortar stores. Often those not engaged more deeply with business think starting one is as easy as buying stuff and then selling it. While that is the goal of business, much more financial planning needs to go into it.
Namely, you must track and account for the many expenses inherent in the part of the business that requires sourcing and paying for things. You’ll need to source stock and ingredients, for instance, as well as choose which type of plastic is best for your packing materials. Besides this, you must carefully consider ingredients, utilities and taxes, and keep these expenses at the forefront of cost planning.
Vague Goals and Direction
Again, sadly, “sell stuff, make money” counts as neither a goal nor a direction. Yet, many inexperienced businesspeople have nothing else in mind. When you’re designing a business plan, start by setting attainable goals. Then, as you start to meet them, continue to raise the bar. Using trajectory goals and cost assessments, you can plan for strategic reinvestment. In other words, rather than emptying the coffers after every successful sale, you choose to invest back into your business by upgrading its weak points.
If you want your business to succeed for decades to come, putting money routinely back into improvements is the fastest way to guarantee it. However, the goal is not to buy whatever gadget seems handy at the time. Plan carefully what tools and resources your business relies on, and find strategic ways to alleviate pressure and improve efficiency.