We have personally witnessed many businesses that fail or do not have an adequate profit margin because they do not take the time to make a financial and/or business plan. Some of the most common reasons for business failure are:

• Grow too fast without preparing for growth. Management is spread thin, unqualified personnel are hastily hired.

• Expanding into new target areas without knowing regional differences.

• Accepting a big job beyond the firm's resources or capacity.

• Diversifying products and/or services without sufficient research.

• High turnover in key positions.

• Inadequate capitalization.

• Poor job costing.

• Poor accounting: lack of timely, accurate financial data.

• Insufficient cash flow.

• Wasting precious cash on personal expenses - e.g., fancy cars, etc.

Davidson & Maquire "Ten Most Common Causes of Construction Contractor Failures" Journal of Construction Accounting & Taxation Jan./Feb. 2003

If you are a sole proprietor or partnership, plan for your personal life as well. If you take more draw from your company then net income, you will find your business cash poor.

The Small Business Administration has a very comprehensive business plan which we highly recommend you work through at least once before you start your business.

Here is an abridged version for those wanting something less comprehensive. At a minimum, a re-visit to your plan every year, particularly to the business and personal budget, will base your business on solid ground.