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Wednesday, April 21, 2010

Common Startup Misconceptions And Mistakes - Forgetting The Original Business Plan

Entrepreneurs typically spend a lot of time developing an original business plan in preparation for the launch of their business. Some excellent thinking, analysis, research and collaboration goes into this plan. Unfortunately, after the business is launched the plan is usually forgotten. Entrepreneurs get caught up in the day to day operational aspects of their business and rarely stick to the discipline and self assessment associated with the preparation of the original business plan. This is unfortunate for a variety of reasons.

Structure And Discipline - It is extremely easy to become distracted and pulled in many directions during the startup phase of a business. Investors begin to suggest alternative business plans, adding contractors and employees requires personal attention, financial challenges require changes to original planning, day to day operations require time and energy, etc. This plethora of distractions can result in a loss of focus on the overall goals and basic premise of the business. Digging back into the original plan from time to time can bring a business and business owners back into focus and in some cases back on track. The simple discipline of periodically reviewing and possibly changing the business plan is a reminder that the business is based on certain fundamental principles and assumptions. Periodic business plan review will force the entrepreneur to take a step back from operational management and engage in critical business assessment.

The Business Is Not Going According To Plan - A startup very rarely goes as planned. Ironically, entrepreneurs understand this. However, they typically fall into react mode without gauging how the company has diverged from the original plan. Without a baseline it is very difficult to understand where the business is going and what success really means. A review of the business plan and a critical assessment of what has changed will reorient the business owner and the company providing an organizational, marketing and financial assessment of the current business environment and how it impacts the future success of the business.

Setting Goals And Objectives - Without a baseline it is hard to set and measure success goals and objectives. The original plan implicitly or explicitly contains very clear goals, objectives dates and milestones for the business. It is important for a business to maintain this focus. If the business has changed since inception (and it always will) reset the goals and update the business plan with those goals expressed in concrete financial, marketing and operational terms.

Communication Tool - The business plan is a good communication tool to unite the company around common goals and to communicate to employees and to investors how the company is doing. The original plan is the starting point for this process. It is not that difficult to periodically update the plan and use the plan as a tool in regular employee and business meetings. Using the plan as a communication tool will provide continuity and a regular baseline for an audience to assess and contribute to discussions about the state of the business.

Conclusion - In the initial stages of a business a company spends time and energy on developing a plan for a business. When a business gets started this investment can be lost if the business plan is not continually assessed. Leveraging this investment continuously throughout the life cycle of the business will keep the company on track, identify areas that need attention and provide the company with a communication tool to keep employees and investors on the same page.

1 comment:

honorof said...

Excellent points...it is however worth noting that the business will end up morphing as different opportunities will present themselves and the business owner being an opportunist by nature will follow a natural path...bottom line, you can't fall in love with your idea. You need to be flexible, in the early stages in order to maximize value and a quick path to success. IMHO.