Do you want your business to be one of the over 500,000 that will have started by the end of 2021?
If yes, you’re certainly excited about starting your entrepreneurship journey. However, it’s likely that you are also afraid of what lies ahead, especially if you’re familiar with the high small business failure rate in the United States.
It’s true that a small business is more likely to fail than succeed, but there are steps you can take to enhance your chances of building a successful business. One of these is proper business planning.
But did you know entrepreneurs are prone to making some business planning mistakes? If you want to learn more about these mistakes, keep reading!
1. Failing to Validate an Idea
Some entrepreneurs don’t consider the phase of coming up with a product idea an active part of business planning. They start planning when the product is ready to hit the market.
This is a big mistake!
The process of opening a business starts the day you start thinking of a product idea. Without a product, you don’t have a business. Yet, so many entrepreneurs fail to validate their ideas before starting a business.
Idea validation enables you to establish whether you’re launching a product that has strong market demand. Not only that, but you’ll also be able to establish the nature of competition in the market. A product can have great marked demand, but if there are several similar products in the market, you might be unable to make sales that can sustain your business.
There are a couple of ways to validate a product or business idea, but conducting market research is the most reliable. You can even hire a market research service to gather all the market information you need to make smart decisions.
2. Failing to Write a Business Plan
Drawing a business plan is an integral part of the overall business planning.
This is a document that fleshes out various aspects of the business you intend to start. For example, on a business plan, you can find information about the owners of the business, proposed location, type of business model, target market, and whatnot.
Failing to write a business plan is planning to fail. Without a written reference point, it’s difficult to steer your business in the right direction. You won’t have a clear picture of important things, such as your ideal customer. And when this is the case, you won’t be in a position to develop and run effective targeted marketing campaigns.
Most entrepreneurs know the importance of having a business plan, so they don’t fail to write one prior to starting a business. However, they make the mistake of not drawing a detailed business plan.
As we’ve already said, a business plan has many key sections. If you write a plan that lacks some of these sections, you will be in the same position as someone who didn’t write the plan at all.
People who commit this mistake rarely do it out of choice, though. They do because they don’t have sufficient expertise to write a business plan. If you don’t know what should be in a business plan, you shouldn’t be writing it in the first place.
A good way to beat this mistake is to hire a small business consultant to write the business plan on your behalf.
3. No Clear Goals
What are your business goals?
Of course, your primary objective is to make a tidy profit. Besides that, do you have any other goals? If not, you’re making a big business planning mistake.
In today’s business climate, being profit-focused isn’t going to take you there. You need goals that can help your business make a profit.
For example, if you’re looking to start a solar power company, it’s easy to aim at making as many solar installations as possible. There’s nothing wrong with that. However, a better goal would be to help people build sustainable homes.
When your goal is purpose-driven, the profits will follow. The modern consumer wants to do business with companies that have relevant values.
If you need help setting and achieving business goals, be sure to discover more here.
4. Inadequate Financial Planning
Starting a business costs money, though the required amount varies depending on the size and nature of the business.
Before you start a business, you obviously need to know the capital you need. Unfortunately, most entrepreneurs fail to secure adequate capital before starting up. As long as they have just enough to open the doors, they assume they’re good to go. They also hope that the business will start generating profits quickly so that they can get the money to fund other areas of the business.
Yet, it can take a business several months or even years before it starts generating revenues, let alone make a profit. If this happens to your business, you’ll run out of cash sooner than later. Without adequate working capital reserves, you won’t be able to keep the business running.
This isn’t the only financial planning mistake some business owners make. They also fail to develop proper financial projections. If you don’t have a clear picture of what your business will be making across a five-year period or longer, you might be unable to make smart financial decisions.
Avoid These Business Planning Mistakes
Proper business planning is the key to starting and running a business that can be wildly successful. With this guide to common business planning mistakes, you now know some of the missteps you should be careful to avoid.
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