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1.11.2010

Pitfalls in planning a new venture

I'm currently writing a business plan to give an affordable second chance to college dropouts. As I develop the details of the plan, I am also critiquing it. There are many ways for a business plan to be inadequate, ineffective or simply flawed. I intend to write up these pitfalls over the next two weeks, to clarify my own thinking about them and make sure I hold my evolving business plan to these standards. I hope you'll find them useful in any new ventures or projects you're considering.

Here are the design pitfalls I have in mind and will explore here:
  1. Inventing a new product/service that buyers see no use for that's worth the trouble of adjusting to it - see Doing the Wrong Thing Correctly
  2. Lacking feature/benefit differentiation that makes the new business compare unfavorably to established enterprises with more experience and customers - see Making the Same Difference
  3. Assuming the rivals won't copy or surpass every improvement which then results in getting ambushed by the imitators - see Assuming we have no imitators
  4. Over-estimating increasing revenue and under-estimating soaring costs which yield shortages of cash and loss of ownership control - see Underestimating the cost of growth
  5. Pricing the offer beyond what the market will pay or so low it fails to cover costs which makes customers wary of being manipulated - see Undercharging the customer
  6. Attacking incumbent positions that provoke their retaliatory strikes and wars of attrition to quickly eliminate the start-up from the market space - see Provoking the incumbents to retaliate
  7. Getting a bubble of press coverage that quickly fades without generating customer loyalty and  a steady stream of repeat business - see Flaming out before catching fire
  8. Resorting to pressure sales tactics which results in seller reluctance, buyer remorse and negative reputations - see Creating jobs from hell
  9. Locking into a long shot trajectory that fails to make adjustments to hit the moving target and steer clear of unforeseen obstacles - see Too smart to succeed
  10. Introducing a single innovation with no upgrade path which has the effect of destroying the long term sustainability - see Drop kicking our innovation
After writing up all these pitfalls, I took the opposite approach of developing a framework of success strategies - see A process of growing a new venture.

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