How to write a business plan

 

A business plan is a plan for how to run a business. It is useful and even necessary when starting a business from scratch. For a certain line of activity or for preparing a new project.

Who might need your business plan?

1. Potential investors. They will want complete information about the investment of their money so that they can conclude the viability of the investment.
2. Banks. Without a business plan, you cannot expect to get a loan for your business.
3. Partners. A well-written business plan can help convince a company or entrepreneur to embark on a new venture.
4. For you personally. A clear and nuanced action plan is essential when starting a new business. The business plan writers will come in handy first and foremost.

The document has two main functions: programming and presentation. On the one hand, it Contain a list of indicators and a sequence of actions necessary to implement the business idea. On the other hand, it presents the attractiveness of the idea to potential partners, investors or creditors.

Some experts recommend dividing your business plan into internal (for yourself) and external (for others). However, in reality, such differentiation is quite controversial. In this case, one version of the business plan may conflict with the other and thus jeopardize the achievement of the stated objectives.

A business plan can be considered optimal if it is equally realistic and convincing for the future business owner, partners and investors.

Preparation of a business plan

To prepare a good business plan, you will need to gather and analyze a lot of information which must then be structured, organized and presented in a document.

It is best to start by asking yourself questions and finding answers.

Who is the target audience for your future business?

When you plan to start a business, you must be clear about to whom you will sell your products or services. To do this, you need a complete and accurate portrait of your target audience:

• age,
• social status,
• income level,
• problems and needs,
• product awareness – do prospective customers know they need your product?

You can better position your company in the market by understanding these questions.

What is the level of competition in your chosen industry?

You need reliable information about potential competitors. When preparing your business plan, you should create a competitive landscape checklist and do a structured analysis of the following points:

• competitor list,
• the extent of competitors,
• the price level of competitors,
• the quality of the product it offers,
• the quality of their services,
• territorial location,
• logistics,
• the level of innovation.

The necessary information can be obtained by using data from open sources, monitoring, mystery shopping, etc.

Well-known methodologies, such as Porter's Five Forces or SWOT analysis, will help you systematize and analyze.

As a result, you will formulate a competitive strategy for your future business.

What is the concept of your advertisement?

Even if you are confident in your product, it does not mean you will have a consistently high demand for it.

You must arouse the customer's interest and draw his attention to your store and product. It can be a unique store concept or an interesting marketing move that draws customers' attention to the product. A correct and interesting product presentation plays an important role in sales.

A good store location, a coffee or a small gift for each customer, loyalty programs, bonuses and promotions. These are all marketing elements that play an important role in attracting and retaining customers.

By outlining the ideal purchase or product concept, you will answer the question: «Why should the customer buy your product in particular?

What will the organizational structure of the business look like?

Here, we outline the business's organizational needs at every stage of its creation and growth.

• Management composition.
• Quantity, functionality, and interplay of structural units.
• Staff number. Several employees and outsourced positions.
• Premises – for production, offices, retail, etc., their surfaces depend on the number of employees. Equipment required.
• Labor costs, rent, and other mandatory payments.

All these parameters should be forecasted considering the time stages of business creation and development.

Step-by-step action plan

To avoid wasting time, effort and money, you need to make a step-by-step plan for setting up your business. For example, register a business entity, open a bank account, obtain the necessary licenses and permits, rent an office, hire people, sign contracts for raw materials or products, order a website, advertise, and start selling.

Each of these steps will be effective if done promptly. First, collect information on all organizational stages' time and financial costs and simulate their implementation.

Transfer the results to a timeline, and you will have a clear organizational plan.

The financial plan: how much we invest, how much we spend, how much we receive?

The financial model is an essential section of the business plan. Here you must present a forecast of all sources of financing and income, as well as all costs (periodic, one-time and recurring) for organizational, marketing and operational activities.

If you are preparing a business plan for a small or micro-enterprise and do not intend to get money from external sources, you can do the necessary calculations yourself.

If you're starting a business, experts recommend hiring a consultant and generating projections for the company's three main ratios in the business plan:

• Profit and Loss (P&L) Statement.
• Cash flow statement.
• A balance sheet.

It is desirable to have a financial plan based on three possible scenarios: optimistic, realistic and pessimistic.

This is the decision point in starting a new business.

Based on the forecast results, we ask ourselves: Is the business idea viable? Do we believe in it or not? What risks and threats can affect the implementation of the business idea? Are we ready to start, or should we stop?

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Creating a business plan: turning information into a structured document

You will need a structured business plan if you intend to get funds from investors or lenders for your idea.

The classic structure of a business plan:

1. CV business plan,
2. marketing strategy,
3. organization plan,
4. financial model,
5. Risk analysis.

CV business plan

This is the first section of the business plan, but it is usually written at the very end. It is essentially a concise summary of your plan that outlines the business idea and what is needed to implement it, the purpose of the pitch to the investor or partner, and the benefits of the partnership.

How professionally written your executive summary is can determine whether or not an investor will want to read your business plan in its entirety.

Experts recommend using the "Elevator Speech" technique when writing your CV and business plan. You can use this short speech to "ignite" your idea.

Marketing strategy

This block contains market structure, product features, promotion logic, customer attraction and loyalty channels. How will knowledge about the product be created, how will the interest of potential customers be generated and stimulated, how will it be converted into sales transactions, and how will the brand and corporate identity be developed?

The organization plan

Here you need to outline everything you will need to launch the business. Organizational structure, premises, equipment and IT equipment, automation, staff, communication channels with key partners and suppliers, logistics, etc. Each domain is mandatory, with a link to the corresponding implementation phase.

The financial model

This section must contain projections for the main financial indicators of the enterprise, formulated in three scenarios: optimistic, realistic and pessimistic. In addition, it should specify which influencing factors will ensure the occurrence of one or the other scenarios and how the business conduct will differ in each case.

What else can be added to the business plan?

All of the above is the basic part. In addition, you can add any information you consider important.

For example, the educational or environmental value of the future enterprise and its positive impact on local development or social issues.

Scope of the business plan, planning period, formatting

• There are no clear guidelines on the length of a business plan. It is important to strike a balance between being comprehensive and concise. It is not worth putting a lot of unimportant details in the document.
• A business plan is usually developed for the period between preparing to start the business and reaching break-even and sustainable financial performance. As a rule, this is 1-3 years.