The business plan is the cornerstone of the entire management operation from the creator of the project to the group of partners, including even bankers.
The business plan or the development plan is a file that the business creator put s together to present his or her project. Generally, between 10 and 30 pages (excluding annexes), it allows him or her to define and explain the assumptions made, summarize and justify the choices made, and present the establishment of the company within 2 to 5 years.
The objective of creating a business plan is to determine the weaknesses and the profitability of the project. It constitutes an irreplaceable piece of all the financial research.
The creation of a business plan has two objectives
Firstly, it allows one to ensure that no element was omitted in the creation of the plan. It forces the creator to take a step back, check the weaknesses of the project, and adopt stricter management.
The second goal is to create a dossier showing what will be presented to business partners: the eventual investors, bankers, fiscal administrators, suppliers, agents, distributors, etc. will read this development plan before meeting the creator of the project. Therefore, the business plan plays a key role in the evaluation of the project and hinges on the creator of the enterprise being incredibly convincing.
How to create your business plan?
Pretend that the business plan is your “spokesperson.” This will allow it be presented better, and to be generally more effective.
A business plan consists of a number of elements, of which the majority require in depth research. Your dossier will be more credible if you pad it for interviews with potential clients and suppliers. So, it is essential to assemble different details before beginning the writing of your plan.
Before beginning writing the plan, many often first send an “executive summary” of only a few pages, summarizing the main points of the project and indicating the key points of research. The complete business plan is then passed to potential clients, who will then consider signing a confidentiality agreement with the creator.
Regarding the layout of the document, there is no model. However, a certain logic is implied. Careful presentation should follow the guidelines listed below.
In this concise and precise introduction, you should present the strength of your company, explaining your objective and how to achieve it.
Presentation of the business and its management
Your business plan should present in detail both its internal structure (organization chart, number of collaborators, location, shareholders), and its environment.
The question of management is of the upmost importance. In effect, you should show that you have the adequate knowledge to direct your company in terms of human resources, financial management, and production. Also, even if the question of succession is not yet necessary, it should be asked.
You can then specify the story of the business, its legal structure, its internal structure (organization chart, location, shareholders, board of administrators, etc.) and its management (the skill of executives, the measures taken in sight of their succession/ replacements).
Products/ offered services
- Presentation of your products/ services and their reason for being
- Current developments and predicted evolution
- How will you adapt to the wants of your clientele?
- What are the determining factors for clients buying your products?
- What is the leading product?
- Is the company dependent upon one or multiple products?
- Do you offer after sale services? What is the turnover?
- What charges does this represent?
To sell your products, your company should know its own market well. You should also know who your potential and actual clients and any future dependencies.
- Have you noticed certain trends or patterns?
- What are your main goals?
- What are your criteria for market segmentation?
Business and competitive products
Competition represents an important base for comparison and strategic reflection. Take time to study your market, to see who the key players are, and how they will evolve. Where you are situated within your industry allows you to evaluate your market.
Describe your actual and potential competition by indicating their name, their position, and their influence. One cannot be satisfied in knowing only their major competitors, but also those who can potentially gain market share.
- What actions do you assume they will make in reaction to your actions within the market?
- What are the main forces driving your competition? And their weaknesses?
- What are their strategies?
- What essential competitive advantages do they possess?
- What is their current turnover situation?
- What product policies have they adopted?
- What is their price level?
Regarding determined target clientele, a precise marketing plan should be made consisting of the production strategy, terms of price and conditions, promotion and communication, as well as distribution.
- At what price do you propose your goods/services be sold?
- What is the strategy concerning price?
- What publicity and advertising strategies do you use?
- What distributors have you chosen?
- Do you plan to expand you distribution points? If so, how and in what amount of time?
- What are the advantages or disadvantages?
- Which infrastructures do you use to fulfill your objectives? Are they well adapted to your needs?
- What machine purchases do you foresee?
- Do you possess vehicles? In what state are they in and what is their date of distribution?
- What are your stock and production capabilities?
- What are the qualifications of the person responsible for accounting and for the preparation of management dashboards?
- What is your current share capital and how is it paid?
- What is the current share of foreign funds?
Think of creating a detailed list for the creditors specifying contractual conditions (interests, amortization, all special clauses, etc.)
Financial and Operational Planning
Establish an operational budget for the three upcoming years to which you can refer. Ask:
- What are the sale objectives of the next five years?
- What are the three products that perform best in your plan?
- What are the three most important clients, existing or potential, who are included in the provisional turnover of the following three years?
- What new acquisitions will be financed? Decide upon your investment budget for the following five years, specifying the planned methods of finance.
- What guarantees can you supply?
- Do you use or envision leasing? Create a list of existing or future contacts.
- Have you evaluated the fiscal implications of different methods of finance? If yes, present your conclusions.
It is normal in the professional world that activity brings a source of risk. Therefore, you should identify the following risks and define applicable solutions.
- Internal risks
- Commercial risks
- Financial risks
What is the probability of various risks occurring? What measures can you take to combat these risks?
It is important to separate the annexes involved in the arguments you present. If a reader is convinced by your argument already, they may continue reading and analyzing other elements of the plan, without feeling that they are losing time.
However, if they are not convinced by your argument, or if they wish to find further information, they will be inclined to study the corresponding annexes and documents, and will consequently be more open to your approach.
Among the different annexes, one will find most notably:
- The marketing plan
- The relative documents regarding the organization of the business
- The financial documents
When you have embarked upon the formation of your business plan, do not hesitate to call the professionals, in particular, business lawyers, as their specific studies, research, and particular knowledge are all necessary for the task at hand. Asking them for help will guarantee your project succeeds thus ensuring the future of your company.