Drawing up a business plan
How to make a business plan correctly
A business plan is the main guiding map for your business. Any experienced entrepreneur can confirm that without this document the successful launch of a new enterprise is simply impossible. With the help of the business plan you can outline the objectives and prospects of the project, estimate the amount of necessary cash infusions at each stage of development, and predict profitability. Naturally, the compilation of such a complex document is a rather laborious process. Therefore, the right decision is to delegate the drafting of a business plan to professionals. The company Brodetsky Shmuel Roe-Heshbon helps its clients in the development of business plans on a “turn-key basis” and adapts them for the set goals: obtaining a business loan or attracting investments.
However, for general understanding of the process, below we will describe an example of a business plan for almost any type of business. If you follow this structure, you may create an effective document that will help you in the future to properly organize the enterprise and attract investors. It should be understood that the development of a business plan need not follow this particular template, but if you plan to attract outside investors into your project, it is better to adhere to world standards.
1) What you need to do before you start?
2) Business plan structure:
• Description of the company and services
• Marketing plan
• Production features
• Organizational features
• Financial estimates
First, carefully weigh the pros and cons of the chosen type of business. Try to tentatively assess all potential risks and, at least superficially, analyze the main competitors in the niche. Also, be sure to calculate the number of necessary investments and determine the ways of obtaining them (investors, loans, own funds, etc.). It is also necessary to determine the payback point and the time frame for passing it. Only if after all these calculations your model is profitable, you may go over directly to the compilation of the document.
To begin with, let us note that the breakdown described below is very approximate and corresponds to the UNIDO methodology. It should be understood that there is no officially mandated or approved structure. There are several standard methods for building it — those of the EBRD, KPMG or UNIDO. We will focus our attention on the latter. But even in this format, it may be freely edited and supplemented with other sections at your discretion. Thus, if the business plan is intended solely for personal use, you can considerably simplify it. If the document is submitted for approval by investors, it is better to spell out each item in more detail.
Each business plan must begin with a title page. Marked on it are:
- Name of the project
- Developer of the business plan
- Date of its compilation
The next component of the introductory part is a memorandum of confidentiality. This is not an obligatory chapter, but it is worth remembering that development of a business plan is a very time-consuming process and in order to preserve its copyright and prevent competitors from using your ideas, it is better to protect your intellectual property from the very beginning.
The first part of the document should briefly outline the content and the essence of the future project. Here 6 or 7 simple sentences are sufficient, in which it is necessary to describe briefly the idea of what will be required for its implementation and what it will lead to. Pay special attention to your summary! This is the “carte de visite” of your business plan and it will be read without fail.
Nominally, the information in this section may be broken down into such component parts:
- Line of business
- Company’s position in the targeted sales markets
- Necessary amount of investments and their payback period
- Planned growth indices and profitability for each of the company’s operating periods.
This item of the business plan may provisionally be divided into two sub-parts:
Description of the business sector and general data about the company. Here it is necessary to describe:
- In what economic sector will the project develop and its further prospects
• General information about the company (name, policy, advantages over competitors, etc.)
2) Description of output products or services
• Brief information
• Area of application and analysis of the sales market. Description of the portrait of an ideal consumer of your product
• Comparison with similar propositions, a description of the competitive advantages of your product (service), as well as potential shortcomings
• Permits, certificates of quality, if necessary — subject photography
• Description of the conditions of production and sale of goods (services), as well as pricing models. Comparing them with similar offers from competitors
The main task of this item is to make sure the product (service) is in demand on the market, and also to determine the main actions aiming at its successful promotion.
In order to successfully fill in this section, it is necessary to answer the following questions in the most detailed manner:
- In which market will your project work? How many major competitors are there and what are the main advantages and disadvantages of each of them?
- Who will be your targeted public? What is its age, marital status, social status, material needs, etc.?
- What tools do you plan to use to promote your product for the targeted public (direct sales, offline-online advertising, merchandising, etc.)? Which of these methods are already used by your competitors? Can you do better than them?
- Why should a consumer choose exactly your product? What are its competitive advantages? (Here it will be very appropriate to refer to the previous section).
In order to properly compose this part of the business plan, it is necessary to carry out a series of studies:
- Monitor the needs of a potential targeted public in the proposed sales area to determine the relevance of the project.
- Perform a detailed analysis of the main competitors in the niche.
- Do a SWOT analysis. This study helps to examine all the weaknesses of the project and analyze the potential threats to its successful implementation.
Eventually, all the obtained data must be stated in a logical order with short conclusions.
This item of the plan is necessary only for enterprises that plan to deal directly with the manufacture of products. If you plan to engage in the provision of services or intermediary trade — the section may be omitted.
In this part, you need to describe in detail the whole “life cycle” of your products, starting with the purchase of raw materials for their production and ending with their sale to the final consumer.
A structural variant for the section:
- Production data. Here it is necessary to describe everything concerning industrial capacities, the necessary raw materials and options for its delivery, the technologies used.
- Spell out the process of creating the product. Here, a good solution will be the use of special visual diagrams describing each stage of the production process.
- Calculate the costs for the necessary purchase of equipment and initial procurement of raw materials. Analyse the number of necessary personnel to start the production line and their qualifications.
- Describe the planned volume of production, as well as provide a detailed calculation of the self-cost of production.
- Define the process of checking the quality of output products. What will be its criteria and how will the audit be conducted.
If you are developing a business plan for a non-production project, in this section you can describe the ways of selling the product, the methods of procurement, the main suppliers, the storage locations, etc. For service-oriented enterprises, you can focus on the staff, the location of the organization, and the features of the service.
First of all, it is worthwhile to indicate the legal form of organization of the enterprise.
Next, the elementary secret of how to correctly make out this section of the business plan, just imagine that your potential company is already functioning and then proceed from this fact. What departments do you have? How do they interact with each other? Briefly describe all the necessary duty assignments. What will each employee do? Describe briefly the staff regulations. How will the payments be made? What system of motivation and fines will be in effect in the company?
Also in this section, it is necessary to identify all partners in the enterprise, their shares and organizational responsibilities. Another good solution for this section will be a description of all the steps that may be necessary to create a new enterprise (legal arrangements, recruitment of staff, collection of customer base, etc.). All this can be done in the form of a table.
This item is the main one in any business plan. Here you must estimate in a most detailed way all your necessary expenses for each stage of your enterprise’s life, and also indicate the expected profit. Also, do not forget to describe the nuances of taxation for the chosen type of company, the peculiarities of contracts with partners, suppliers, etc.
A structural variant of this section:
- Preparatory budget. This should include all non-recurrent expenditures — the purchase of equipment, advertising signboards, premises, etc.
- Budget for activities. This includes all the regular expenses — depreciation of equipment, salaries to staff, purchase of raw materials, rent, etc.
- Loans and investments. Here you need to describe the necessary number of third-party injections, the expected amounts and time limits of payment on obligations.
- Particular features of taxation for your type of business.
- Financial Risks and Insurance.
- Preliminary calculations of project pay-off period.
- Monitoring the flow of funds and ways of accountability.
At this point, you have to summarize all the information and calculate the payback point of the project and the projected profitability. It is desirable to produce several different options for the development of the enterprise at each stage: from pessimistic to optimal and to estimate the probability of such outcomes as a percentage.
All the required handouts are taken out to this part. Do not neglect this item. On the one hand, graphic materials are better perceived by potential readers of the business plan. On the other hand, this will significantly reduce its volume.
In the appendix, you can supplement productional and organizational charts, certificates, permits, diagrams, photo materials with product images and much more.
The structure described above is just one of the possible options for making a business plan that will be useful to you and will appeal to the investor. This option is ideal for setting up an enterprise within the territory of one state. To enter the international markets, you should look at an example of business plans with a more complex structure and an abundance of details.
In any case, it is worth remembering that drawn up correctly, this document will guarantee 30% of your company’s success already. Further on, everything will depend only on the competent implementation thereof.