I was asked to give a presentation recently and one of the topics was what are the most common mistakes entrepreneurs make? There are a number of them and I will address them over the next few weeks.
The most common and most dangerous mistake people make is not planning properly. This can manifest itself in a number of ways. The entrepreneur may not put enough time into the business plan. A business will need a plan if it is getting a bank loan but if the start up is self-funded, many owners skip this step. All start-ups need a business plan and neglecting to create one often results in failure.
The process of writing a business plan forces the entrepreneur to deal with all the potential problems the start up may face. Who will their customers be? How will they find them? How long will it take to reach break even? How much money will the business need before it is self-supporting (at break even)?
All these questions are answered in a well crafted business plan. The marketing portion will address all the customer issues and the pro-forma financial statements (budgets) will address the break even and capital needs (money needed to support the business until it reaches break even). These are important issues and they need to be answered even if a bank loan isn't needed. The entrepreneur may find that a bank loan is needed when completing the financial projections for the start-up. Business owners often underestimate the costs of starting up a business and overestimate how quickly they will generate a profit.
If you are considering launching a new business, take the time to plan properly and create a business plan. If you have already started your business, it isn't too late to write a business plan. There are software programs to help you do this, SCORE can help you do this or you can hire someone to assist. Just make sure that you do your planning so you don't fail do to a failure to plan.