WHY BUSINESS PLANS FAIL?

Generally a poorly prepared business plan can be blamed on one or more of the following factors:

• Goals set by the entrepreneur are unreasonable.
• Goals are not measurable.
• The entrepreneur has not made a total commitment to the business or to the family.
• The entrepreneur has no experience in the planned business.
• The entrepreneur has no sense of potential threats or weaknesses to the business.
• No customer need was established for the proposed product or service.

Setting goals requires the entrepreneur to be well informed about the type of business and the competitive environment. Goals should be specific and not so mundane as to lack any basis of control. For example, the entrepreneur may target a specific market share, units sold, or revenue. These goals are measurable and be monitored overtime.

In addition, the entrepreneur and his or her family must make a total commitment to the business in order to be able to meet the demands of a new venture. For example, it is difficult to operate a new venture on a part- time basis while still holding on to a full- time position. And it is difficult to operate a business without an understanding from family members as to the time and resources that will be needed. Lenders or investors will not be favorably inclined toward a venture that does not have full- time commitment. Moreover, lenders or investors will expect the entrepreneur to make a significant financial commitment to the business even if it means a second mortgage or a depletion of savings.

Generally, a lack of experience will result in failure unless the entrepreneur can either attain the necessary knowledge or team up with someone who already has it. For example, an entrepreneur trying to start a new restaurant without any experience or knowledge of the restaurant business would be disastrous.

The entrepreneur should also document customer needs before preparing the plan. Customer needs can be identified from direct experience, letters from customers, or from marketing research. A clear understanding of these needs and how the entrepreneur’s business will effectively meet them is vital to the success of the new venture.