7 common business plan failure but no one remembers

business plan failure

A fundamental element for the start-up and growth of a company, the business plan must be studied in detail: here is a list of errors that can cause it to fail.

 An effective and artfully designed business plan is the foundation stone for the future of your business. However, if your business plan has gaps or errors, they will ultimately affect the management of your business.

The business plan should not be considered a dogma, but it can and should be updated and optimized as your business develops, comparing what were your expectations with periodic data and measurements (monthly, quarterly, yearly).

The business plan then plays a key role in the start-up phase of a company simply by opening a bank account, and above all to convince and engage investors and lenders.

These people continually review projects and requests for funding, and one mistake will suffice for your business plan not even to be taken into consideration and trashed without being read.

In short, the business plan depends on the life, or even the birth of your business idea. You cannot afford mistakes.

Here are the 7 main reasons why a business plan is not successful …

business plan failure

#1 – A wrong business idea

Nobody likes to admit it, but the first cause of the failure of a business plan is simply because the business idea is not the right one. Often many projects seem to be winning on paper, but how many times, once applied to reality, have turned out to be a flop?

Those who have to invest know it well, and if the idea does not convince it, it will not risk.

To prevent this from happening, the Research & Development divisions of companies rely on UDD (User-Driven Development), or a product development oriented to the user.

Does this product solve a problem for end users? If the answer is yes, how can we present it to you? Will they immediately understand that it can be the solution to their problems? How easy will it be to get it? Will it be easy to use? This and other questions should be related to your business idea.

When it comes to developing a product, companies often encounter a sample of potential end-users, illustrate the product and collect their impressions. Then they report the acquired feedback and calibrate the product accordingly.

In the same way, you will have to test in advance the potential of your idea, its appeal to the public, the way it is received. Expose it to the people closest to you, friends, relatives, colleagues. Listen to their opinions and their criticisms, and use them to improve your project.

#2 – The compensation for employees is not enough incentive

Business plans can fail because employee premiums and salaries are not in line with the company’s goals. That is, if an employee has a premium or a short-term growth path (for example, annual) but the company has three-year goals, the risk is that the employee works only by focusing on achieving the year goal, not caring about the achievement of the objectives in the long run until it even creates barriers with its work aimed at the short term.

Startups and small businesses can count on greater flexibility compared to large companies, and offer personalized remuneration packages, offering, for example, “tailor-made” benefits to employees.

For example, instead of proposing a standard remuneration package that offers everyone the same conditions in terms of vacation, sickness, maternity, retirement and retirement, we can offer each employee a package tailored to their real needs.

Predicting wage increases or premiums based on seniority will also stimulate employees to think and engage in your project over the long term.

#3 – Do not provide an exit strategy for any members

When starting a business together with other people we cannot rule out the possibility of conflicts and disagreements, or more simply of new roads that arise. A good business plan must also include how to address and resolve internal disputes, starting with a precise assignment of roles and responsibilities. Who does not respect the deadlines, does not adequately perform his own or at least with his own attitude puts at risk the whole project must be subject to consequences defined from the beginning.

Choosing the right partner is extremely important, since, at least for the first years of activity, you will share more time, resources, and energy.

First, you must be well aware of your strengths and weaknesses, and try to choose a partner that is as complementary as possible, so that your different abilities and attitudes compensate each other.

Sometimes the co-founder of a start-up is a friend, a study or work partner with whom you have developed a common project, but it could also be a stranger. For example, of a person you have turned to convince him to invest in your project and who has proposed you to join the company with you. In this case, before accepting as much as possible informed about his background, his previous work and entrepreneurial experiences, on what were his relationships with the previous partners and why they eventually stopped.

In any case, defining roles and responsibilities in a precise way will be easier to remove those who repeatedly demonstrate that they are not able to perform their duties. The important thing is that everything is put in black and white in the business plan, so as not to leave room for internal disputes that would end up damaging society even more.

business plan failure

#4 – The team is unbalanced

A badly balanced team can be a major cause of failure of a business plan. In fact, it often focuses on the presentation of the idea or product, and forgets that because the business plan can then be put into practice and therefore work, we need the right people.

Put yourself in the shoes of an investor: would you give credibility to the business plan of a smartphone app, however innovative, original and competitive it may be, if there were not even an expert mobile application developer within the team?

Investors pay close attention to these details , and this is why often even the startup business plans in which there is a single founder are often rejected a priori, believing that only one person cannot have the resources and the skills to manage all the aspects – technical, financial, commercial, tax … – of a winning business.

#5 – Little detailed financial projections

The first thing that interests an investor are the numbers. A business plan must necessarily include an accurate economic-financial plan , which includes a preliminary balance sheet, a cash flow forecast, a projection of expenses and profits, the definition of a break-even point and the ROI, or the return of the ‘initial investment.

We must also take into account taxation, legal and administrative expenses , those related to training updates, acquisition of software and equipment and other elements that may accompany the development and growth of the project.

These are estimates and projections, of course, but they are the variables of the path that will lead you to control and optimize the progress of your activity based on the achievement of the objectives set.

#6 – A poorly written writing and / or containing errors and typos

The substance is fundamental, but you cannot afford to overlook even the shape of your business plan. It is a document that represents you, which speaks for you to your interlocutor, or to those who will read it and examine it. You must be absolutely sure that it is written in a clear, accurate and flowing way. Reread every single sentence several times, check grammar, terminology, technical vocabulary, every single detail.

Do not hesitate to contact an external professional to review your document before presenting it. Or even consider taking advantage of an expert in business plan. It may seem like a luxury for a few, but it is actually a small investment that can greatly increase the chances of your business plan being approved.

#7 – Do not improve the business plan after receiving feedback

After completing a business plan, it is a good idea to submit it to at least three people before presenting it to potential investors.

Please note that these people are your advisory board. Ask him to review the business plan and identify any flaws, shortcomings, inconsistencies. If someone criticizes you, do not ignore them, but subject them to others and discuss them with them.

Edit and optimize your business plan, taking advantage of their considerations and using them in a constructive way.

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