Understanding the importance of well prepared business plans is essential to business success.   Here are a few tips we'd like to share, including   five common mistakes to avoid when preparing a business plan, along with five common myths, which can threaten long-term business success.

Five common mistakes to avoid when preparing a business plan...

1. Underestimating the importance of the first 90 seconds.
   Readers of business plans are busy people, often poring through hundreds, or even thousands, of plans every year.  Unless your plan has immediate, aesthetic attraction and contains an organization scheme, which calibrates the reader and compels the turning of pages, your plan may never be read, much less understood.

2. Permitting inaccuracies, inconsistencies or lack of objectivity.
   You must pray to your lucky star that, if someone is actually reading your plan, that person is focusing on content.  Errors or inaccuracies (however minor), inconsistencies (however immaterial) and non-objectivity (however innocent), will conspire to distract the reader and create a negative bias, from which your plan may not fully recover.

3. Failing to demonstrate sustainable, competitive advantage.
   The reader is keenly interested in whether a market for your product or service exists, and if so, whether you are capable of exploiting long-term advantages over the competitors currently occupying that market space.  Do not succumb to the temptation to underestimate your competitors, overestimate your strengths or rely on a lower-than-market pricing strategy, to claim sustainable, competitive advantage.

4. Underestimating the importance of the management team.
   Many investors feel that a great management team can easily make a mediocre idea successful, but that a great idea rarely survives a mediocre management team.  Help erase any potential doubts, by actively promoting your team and key advisors, articulating strategic objectives and an implementation plan, and providing a critical risk assessment and related plan for dealing with contingent events.  

5. Failing to demonstrate revenue growth and profitability.
   Whether it's the new or old economy, it's important to remember:  top line growth is great... but, bottom line success is essential.  Your plan will not survive scrutiny, unless you demonstrate that it is based on credible financial assumptions, that the quantitative sections reconcile with the qualitative sections, and that financial projections are consistent with generally accepted accounting principles.

Five common myths that...

1. We don't need a business plan.
   If you are in business, or even contemplating a business, you need a business plan.  Success isn't as much about succeeding, as it is about not failing.  A properly prepared plan forces you to think through the big picture and agonize over many of the details, before errors in intuition or judgment cost you or your client money, or even result in  bankruptcy.  Without it, investors won't invest and buyers won't buy. 

2. We need a business plan, but not right away.
   If you are a Visionary or a Start-Up, you need to begin assembling the elements of a business plan, almost immediately after your "business idea" hits you.  The best plans evolve over an extended period of time, and the less time you give yourself, the less likely the plan will be credible.  If you are marketing a business, the sooner you present a credible financial picture, the sooner a buyer will consider your price.

3. We need a business plan, but we can do it ourselves.
   Given enough time, money and the right skill sets, you will probably be able to generate a credible business plan, maybe even a very good one -- but, at what total cost to your business? Your inspiration, energy and vision are essential to the success of the plan, but the cost of becoming a business planning "expert" may seriously erode your ability to meet the challenges of actually staying in business. 

4. We need a business plan, but we can't spend more than "x".
   If obtaining financing or attracting a buyer is critical to the existence of a business, then the potential value of a business plan should be the cost of not achieving the goal (i.e, the cost of going out of business).  Estimates vary widely, but expect the cost of a professionally prepared business plan to be about 1% of the benefit that it is capable of achieving (e.g., $10,000, on a financing request of $1 million).    

5. Thank goodness, we only have to do this once.
   A business plan is really only as good as the results it predicts.  It should be viewed as a living document that requires constant nurturing and revision, as circumstances change and business knowledge improves.  Protect your investment, by periodically comparing actual vs. planned results, analyzing sources of variance and using this information to improve the plan's long-term utility and predictability.