“Challenge everything about your (business) plan, then challenge it again. Making unrealistic assumptions and/or kidding yourself – much less others – can come back to bite you.”
What kind of unrealistic assumptions? Hess identifies five.
- Being too attached to a product or idea. Not everyone is going to want what you’re selling. Do your homework about your service or product and be honest about the demand for it.
- Overestimating the market – or rather, your share of the market. Getting even a one percent market share is a daunting feat, says Hess. Don’t estimate your revenues from the top-down (from market share), but from the bottom up (from units, distribution outlets, marketing and so forth).
- Not fleshing out execution details. You need to know the details of how you’re going to bring your idea to fruition – or, if you prefer, how your business is going to do business. As Hess says, “…if you don’t know how to execute your idea (much less if it can be executed at all), or you don’t at least know of specific resources to which you can turn, then it’s just an idea – not a plan.”
- Overestimating financial results. You might overestimate your sales, rate of growth, cash flow or how fast your business will turn profitable. But if your overestimation leads to you running out of cash, then you’ll kill off your business. According to Hess, most startups have long and tortuous routes to profitability that almost never follow their business plans.
- Underestimating costs. Running out of cash from higher-than-expected costs will make your business fail as surely as if you run out of cash from slower-than-expected revenue. Add a wide margin of error, no matter how confident you are in your numbers, says Hess.
This is one article you need to read before you open for business.
Sierra Investment Group Inc. Carson City Nevada is a small business plan writing service and small business funding resource. They can be reached toll-free at (800) 323-6298 from 8 a.m. to 4 p.m., Monday through Friday, or at firstname.lastname@example.org