“Good fortune is what happens when opportunity meets with planning.”
― Thomas Edison
These words of wisdom can be applied to almost any and every thing in life, and especially so when it comes to emerging startups. As an entrepreneur, formulating a solid business plan should be the very first step you take towards building your enterprise.
A weak business plan can be detrimental to an emerging startup even before it hits the market. It takes a lot to dream big and even more effort to put realistic numbers and plans to connect the dots between those dreams and their fruition. Hundreds of promising ideas and startups do not see the light of the day because of poor planning or lack of planning.
Here are 5 ways in which a poorly thought out business plan can ruin your startup, and consequently the 5 indicators to help you recognise an impractical business plan:
1) Lack of Direction
Have you ever found yourself asking, “Where are we going with this plan?”
An ambiguous business plan can lead to confusion and a lack of direction for the startup. It may not clearly outline the company’s goals, objectives, and strategies, leading to a lack of focus and a failure to make progress.
Unviable business planning might also look something like a lack of cohesion between short-term and long-term goals.
2) Poor Financial Management
Without clear financial projections and budgeting, any startup is bound to hit a brick wall of financial peril and may struggle to secure funding in the future. Additionally, managing the existing cash flow can be a problem which will inevitably lead to bankruptcy, and the startup going out of business one way or the other.
3) Inadequate Market Research
Thorough market research is essential for understanding customer needs and determining the feasibility of the business idea. Inadequate market research makes it impossible to target the right customers and to accurately gauge the potential for success when it comes to your products and services.
4) Failure to Attract Investors
A weak business plan in terms of financials is the one that lacks meticulous and crucial details such as the income statement, the cash flow projection, the balance sheet, and the statement of existing shareholders’ equity. If a startup’s business plan is missing or unclear about all these details during their pitch to attract investors, they will definitely be headed for rejection.
All investors want to see a solid plan that demonstrates the company’s ability to generate revenue and profits. Thus, a weak business plan can raise serious doubts about the founder’s capabilities and commitment to the project in addition to the future of the company. If this happens, your company will lose out to the cutthroat competition, and will be left scrambling for investors and funding.
5) Lack of Accountability
Without clear goals and metrics to measure success, lack of accountability starts seeping into a startup’s system. In the events of mistakes, failures, losses and unforeseen contingencies, it becomes highly difficult to determine who is responsible for what, leading to a breakdown in communication, cooperation and mutual trust.
Bottom Line
A reckless or weak business plan can have serious consequences for an emerging startup. It is absolutely necessary that startups invest the time and effort needed to develop a solid business plan that outlines the company’s goals, strategies, and metrics for success before rushing into business. This will not only help the startup stay on track, but it will also make it easier to attract investors, secure the funding needed for accelerated growth and capture a significant market share through loyal and repeat consumers.
