Business Plans: The 5 Most Common Reasons Why They Fail

March 20th, 2014

Business plans have been around for centuries, and the basics haven’t changed all too much. Nevertheless, crafters of business plans still often do things to blow their chances before the plan is even finished. Drawing on our years of experience working with IT companies, we have complied a list of the 5 most common reasons that business plans fail. 

If you take these 5 reasons into consideration, the chances of your business plan working out will be much higher. Reason 1: The CEO or other C-level executives are not totally invested in the business plan. They might be too afraid of failure or too isolated to know how the business plan is of benefit the organization. Additionally, their egos may become real hurdles that are not easy to overcome. Such leaders are serious obstacles that need to be overcome for successful business planning because their behavior, attitudes and lack of commitment can be contagious, infecting the whole workforce. Thus, always remember the axiom: structure follows strategy. Reason 2: Roles and decision-makers are unclear. Although your business plan might be ready, it hasn’t assigned responsibilities. Ask yourself these questions: Who is accountable? Who will make the tough decisions in a timely manner? Unclear or unassigned responsibilities will negatively affect the execution of your business plan. Neither a results-orientated culture  nor success will come from a plan that doesn’t clearly describe roles and responsibilities.

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Reason 3: It is based on too many assumptions and obscurities. Unrealistic financial projections with no explanation, an overly fluffy defined target market, a lack of focus on competitors or underestimating their impact, widely unknown distribution channels – failing to fully consider these factors is one of the most common mistakes made when business plans are written. Be sure to substantiate your assumptions, outlooks and projections by quantifying and explaining your plan based on solid and sound research. Reason 4: Your plan is “etched in stone” instead of a living document. It is a common belief that business plans are only used by start-ups to get investors’ to buy into the company, making them fool’s gold. Regular and effective planning keeps companies on track after they have been established. Unfortunately, business plans often lack often a proactive system to track and revise the plans spontaneously as new situations arise. Reason 5: Failure to communicate the business plan. When writing a business plan, it is crucial to involve anyone who could be affected by the plan. Make sure to take expectations and opinions into account and make sure everyone is on board with your business plan. Furthermore, communicate the business plan to your workforce so that they understand what success will look like and how the company is going to get there. Communication needs to be frequent, consistent, and honest. These are just five of the most common reasons for business plan failure that we have experienced during our time working with IT companies. But keep in mind that there are other obstacles, too. These can come in various forms: a lack of strategic focus, the goals not being in line with the strategy or the plan is left unfinished.  Sometimes there is even a lack of planning of specific tasks or the way that a plan is carried out might be insufficient. In our Business Planning Workshop, we will offer you more information about these hurdles and how you can overcome them. Additionally, all who attend PDAgroup’s training will be provided with our exclusive software-based tool that guides you through the process of business planning. This tool is only for those who attend our training.  For more information on the workshop and the tool itself, get in touch with us.

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