Business plan is not just a document that outlines the main stages of the company's development. This is a whole economic and mathematical model capable of solving many problems. A business plan demonstrates to the business owner and potential investors what the company is like at the moment, how it will develop in the future, how it will achieve its goals and avoid risks.
Today, an entrepreneur cannot do without a carefully thought-out business plan. Such a document is an integral part of a successful business, an essential element of strategic planning, because it can bring even a small unprofitable enterprise to a serious level. How does a business plan do this? What does a good business plan look like? What other questions does this model solve? We will talk about this further.
What is a business plan for?
A well-established, professionally drawn up financial plan implies the use of a certain system by the enterprise, which is aimed at stabilizing and increasing the profits of the business owner. The goals that a business plan fulfills can be divided into internal and external. Let's list first internal:
- A business plan shows the entrepreneur how effective his business is at a given time. A clear definition of the financial condition of the company shows where it is moving - towards loss or towards profitability.
- A business plan helps an entrepreneur determine the goals that he needs to achieve at different stages of the company's development. This is the vector in which the business must move.
- The financial plan in most cases captures marketing, production and organizational issues. Thus, it serves as a source of information for all persons involved in the implementation of the project, in addition to the business owner himself. In this case, the business plan is also a guide for the execution and control of tasks.
- The business plan fixes the items of foreseen and unforeseen expenses, determines the periods when additional external financing of the project may be required. That is, this document helps to anticipate risks: if such costs do not come as a surprise to the entrepreneur, then losses will be minimized.
This is how we slowly approached external purposes that fulfills the business plan.
- Attracting investments. We have just noted that at different stages of the life of an enterprise, additional financing from outside (investments, resources of financial support funds) may be needed.
External financial injections may also become a necessity in the case of the development of a new direction in business, the introduction of the latest technologies, the launch of a line of new products and everything related to the cardinal expansion of business, production, with access to other markets. So, without a financial plan, no serious investor will consider your proposal. In this case, the business plan will already be an investment project. Its goal is to convince investors, partners of the profitability of the project using various performance indicators.
- Opening a credit line. Based on this document, the lender gets an idea of the current state of affairs and prospects for the borrower's business. Thus, the decision to issue a loan is made.
What should a business plan look like?
So, we have determined that a business plan is a detailed modeling of all the operations that have to be performed on the way to the project. This document is ideally compiled by professionals. In general, it should contain information about the company, its services / products / products, sales markets, marketing activities, and the effectiveness of achieving the intended goals. The most common standards by which a business plan can be drawn up are:
- Standard of the European Union within the framework of the program to promote the acceleration of the process of economic reforms in the Commonwealth of Independent States (TACIS);
- United Nations Industrial Development Organization (UNIDO) standard;
- Standard of the International network of firms providing audit, tax and consulting services (KMPG);
- Standard of the European Bank for Reconstruction and Development (EBRD).
These standards give us the general structure that a sample business plan should contain:
- Title page
- Introduction
- Analysis of the state of affairs in the business segment
- The essence of the project
- Marketing plan
- Production plan
- organizational plan
- Financial plan
- Risk assessment
- Applications
A business plan is drawn up for several years, and strategic points are broken down by year. Often the first year contains detailing by month.
So let's recap. Business plan is a document with a brief and understandable description of the business, which helps to choose the most promising way for the development of the enterprise to achieve its goals. Justification of these goals, expected financial indicators are also recorded in the business plan. This tool is needed to manage the company, control the implementation of tasks and to attract investors, creditors.
Soon we will publish a material in which we will tell you in detail how to write a business plan. Follow our updates!
Why do you need a business plan?
Having chosen your business, you need to plan how you will organize it. Everyone needs this plan: those from whom you are going to ask for money for the implementation of your project - bankers and investors; your employees who want to understand their perspectives and tasks; and most importantly - to yourself in order to carefully analyze your ideas, check their reasonableness and realism. Without a business plan, it is generally impossible to take on commercial activities, otherwise the possibility of failure will be too high. A business plan is a document that describes all the main aspects of the future enterprise, analyzes all the problems that it may face, and also determines how to solve these problems. Therefore, a properly drawn up business plan ultimately answers the question: is it worth investing in this business at all and will it bring income that will pay off all the effort and money spent? It is very important to do this on paper in accordance with certain requirements and to carry out special calculations - this helps to see future problems and understand whether they can be overcome and where it is necessary to “lay straws” in advance.
The personal participation of the head in the preparation of the business plan is so great that many foreign banks and investment firms generally refuse to consider applications for the allocation of funds if it becomes known that the business plan was prepared from the beginning to the end by an outside consultant, and the head only signed it. Involving himself in the work, he, as it were, models his future activity, testing both the idea itself and himself for strength.
Business plans are usually drawn up for the following reasons:
1. For external use. To present the case in the most favorable light to people from the outside, for example, investors.
2. For internal use. Here the case is presented with all the strengths and weaknesses. This business plan is used constantly as a management tool.
You can achieve significant benefits if you start with a business plan for internal use. In the process of writing it, you will consider many issues that may never be written on the outside. However, investors are likely to ask questions like this to "feel" the seriousness of the study. Those who are not prepared for these questions will be at a disadvantage.
For example, it may turn out that the question of whether an investor is really needed or whether it is better to concentrate on increasing productivity has not been worked out. Attempting to attract an investor may be a chance based on the perception of him as Santa Claus, and not a well-considered strategic decision.
When you eventually realize that you could survive and succeed without having to give 30% of the income to the investor, you will feel cheated and exploited, and the investor will not understand what the problem is.
All options and development strategy should be worked out in advance when writing an internal business plan. And if attracting an investor proves to be justified, then both the investor and the firm will have a solid basis for the transaction. Thus, drawing up, first of all, an internally oriented business plan is in the interests of both parties.
The great sin in business is deceiving oneself. And a business plan written for external use only often embellishes reality. Belief in one's own propaganda can be a destructive factor.
So, the purpose of a business plan is that it helps entrepreneurs to solve the following tasks:
1. To study the capacity and prospects for the development of the future sales market;
2. Estimate the costs for the production of the products needed by the market, commensurate them with the prices at which it will be possible to sell their goods in order to determine the potential profitability of the business;
3. To discover all kinds of "pitfalls" that lie in wait for a new business in the first years of its implementation;
4. Determine those indicators by which it will be possible to regularly monitor the state of affairs.
It is worth mentioning in particular that a business plan is usually written for the future and should be drawn up about 3 years in advance. at the same time, for the first year, the main indicators should be broken down monthly, for the second - quarterly, and only starting from the 3rd year should be limited to annual indicators.
Unfortunately, such planning in the conditions of our economy is not yet possible, since the economic situation is changing very quickly. Planning for an intermediate time of more than a year will be inherently erroneous. Many now limit themselves to writing a plan for the year.
What is included in a business plan?
Any proposed form gives only a general idea. Any business has its own characteristics, therefore, there can be no "standard" plan that is acceptable in all cases. There is one tried and tested principle for any business plan:
IT SHOULD ALWAYS BE SHORT.
True, sometimes, in order to adequately reveal the essence of the problem, it is made quite lengthy, but at the same time, so that the reader's interest does not weaken, he should not be overly overloaded. Most projects should be limited to 10-20 pages. The presented content of the business plan is nothing more than a diagram, so you can use it when drawing up your business plan at your discretion. However, it contains all the main points that need to be considered, so treat it with sufficient attention.
Purpose of the plan
The need for finance, its purpose and for what purposes it is needed Brief description of the business and its target client What makes your business different from the business of your competitors
Extracts from major financial proposals
Goals and objectives
Idea Analysis
Main directions and goals of activity Characteristics of the industry sector Product (service)
Description of products/services and their application
Distinctive qualities or uniqueness
Technology and skills required in your business
Licenses/patent rights
Future Potential
Market analysis
Buyers
Competitors (their strengths and weaknesses)
Market segments
Market size and growth
Estimated market share
Composition of your clientele
Impact of competition
marketing plan
Marketing arrangement (ensuring competitiveness
products / services) - the main characteristics of products, services in
comparison with competing
Pricing
Goods distribution scheme
Sales promotion methods
Production plan
Location of premises
Equipment
Sources of supply of basic materials and equipment
Use of subcontractors
Management staff
Key management team
Executive Remuneration
Brief conclusions on planning the number and composition of personnel
amount of funds required
refund deadlines
Main points of the financial plan and risk assessment Sales volume, profit, cost price, etc.
Risk and how it can be avoided
sales forecast
profit and loss estimates
cash flow analysis (monthly for the first year and then
quarterly)
annual balance sheet
Your business plan should start with conclusions. You write them last, but they should be the very first item in your business plan. Conclusions should be short - no more than 1-2 pages. A resume is an independent promotional document, because it contains the main provisions of the entire business plan. This will be the only part that most potential investors will read. And the investor will first of all want to know the following information: the amount of the loan, for what purpose, the expected repayment period, who else is going to invest in the project, what own funds are.
Goals and objectives
An analysis of the idea should be given here. Don't forget about the planning hierarchy. The plan should disclose the stated goals and objectives of the enterprise
Analysis of the prospects of the idea (swot-analysis)
SWOT is an abbreviation of English words:
strenth - strength
Weafness - weakness
Oportunitis - opportunities
Troubles - threats
This analysis is also called situational analysis. The strengths and weaknesses of the idea are those characteristics of the idea that can be controlled by the entrepreneur, which he can influence. They usually refer to the present.
The following factors need to be considered here:
Organizational (organizational and legal form, availability of own or rented premises);
Marketing (location, marketing complex, market, its segment; competitors: how the product (service) will differ from the competitive one);
technical (production assets: condition and resources);
Financial (availability of own funds);
Personnel (skills and professional shortcomings, how much the idea corresponds to the ideas, knowledge and skills of the entrepreneur).
For example, Strong:
cheap raw materials;
high professionalism;
cheap product (service);
novelty of the product (service);
good packing.
no warehouse;
high costs -> high price;
Opportunities and threats are those characteristics that are beyond the control of the entrepreneur and may affect the outcome in the future.
Here it is necessary to take into account the following factors:
economic environment (state support for small forms, tax legislation); political environment; social and cultural environment; technological environment; demographic environment.
It is necessary to analyze the factors that caused the emergence of the idea and its attractiveness. (Electricity problems in Russia - the need for "windmills", the progress of technology, the study of demand, government policy, the behavior of competitors) How will they develop in the future?
Possibilities:
improve professional level;
there is a chance to get a new product;
use of new materials, new raw materials; favorable tax and credit policy.
customs clearance; the emergence of competitors (but can also be a strength).
Goal setting.
Success in the business world is critically dependent on three elements:
Understanding the state of affairs at the moment;
A clear idea of the level you are going to reach;
Planning the process of transition from one state to another. After analyzing and evaluating the idea, you thereby determined your state (strengths and weaknesses, opportunities and dangers) at the moment.
After completing the assessment, it is necessary to start formulating goals and objectives. This process consists of 2 stages. First, you need to establish what kind of business you are running - a task that is more difficult than it might seem at first glance, and then determine the main, quantified goals for the future that reflect your business aspirations, and determine which of them are realistically achievable .
Having solved the problem with goals and objectives, it is necessary to determine ways to achieve these goals. To do this, it is necessary to develop a strategy and formulate operational plans.
The business goal statement should first of all contain the main activities of the company. They outline the boundaries of your business, defined by its strengths and weaknesses. The formulation of your main lines of business should be, on the one hand, narrow enough to give a specific direction of activity and focus on the main thing, and on the other hand, cover enough area to leave room for growth.
Ultimately, this should contain something that would fundamentally distinguish you from your competitors. You should also include certain elements here that reflect how you want your business to look in the future. These elements may include growth, profitability, some other indicators. They should convey a certain image of the business, to which you and your employees could aspire.
As a rule, the company feels most confident when answering the question about its activities, affairs: what we do and how we do it. It is more difficult to talk about who we are, what business we are in, why we do it.
Firms with the first ("do") orientation see the question "who we are" as simply a description of something obvious, while firms with the second ("be") orientation see the question as a chance to be creative and gain competitive advantage.
If a firm decides, for example, "We are committed to supporting young mothers" (and not just "producing disposable diapers"), then the range of possible future products is greatly expanded. This image must be supported by some quantitative characteristics, otherwise no one will know when it will be achieved. It must be realistic, otherwise no one will strive for it.
Goals should also be quantifiable and reflect not only WHAT you would like to achieve in the business, but also what CAN be achieved in a given economic situation.
The goals you set should be: specific, quantifiable, achievable, realistic)
By comparing these goals with the performance results, you will be able to judge the effectiveness of your activities.
The main directions and goals tell you WHAT you want to achieve. The next stage is to formulate them in such a way that they show HOW you want to achieve this, while defining the tasks that need to be solved. A coordinated set of tasks aimed at achieving the set goals constitutes a strategy. It is necessary to consider several options for the strategy, evaluate them and choose the necessary one that can help you achieve your goals. these options should include different approaches to product pricing, work with personnel, financial issues. You need to choose the most suitable strategy for your business. The strategy should not be too complex and overloaded. it should consist of a series of simple tasks.
However, if you want your goals to be really achieved, then these tasks must be broken down into even whiter smaller components. This level of detail is called an action plan.
Product (service)
In this section, you must clearly define and describe the types of products or services that will be offered to the market. Here you should indicate some aspects of the technology required for the production of your products or services. It is important that this part be written in clear, concise language that is understandable to the layman. Don't use professional jargon.
Describe the main characteristics of your product, while focusing on the benefits that your product brings to potential buyers.
It is very important that you emphasize the uniqueness of your products or services. This can be expressed in different forms: new technology, product quality, low cost, or some special advantage that satisfies the needs of buyers. It is also necessary that you emphasize the possibility of improving this product (service).
Investors rarely choose to partner with a company that specializes in a single product without evidence that it can be improved. Describe your patents or copyrights for inventions, or give other reasons that could prevent competitors from entering your market. Such reasons may be exclusive distribution rights or trademarks. Investors prefer a healthy lack of competition.
Market analysis
The market and marketing are decisive factors for all companies. The most ingenious technologies are useless if they do not have their customers. Market research is one of the main challenges of new business. Thus, the marketing and marketing section of a business plan is often the most difficult to write. You need to convince the investor (and see for yourself!) that there is a market for your products, that you understand it and will be able to sell your products.
The failure of most of the failed commercial projects was due precisely to poor market research and overestimation of its capacity. You need to pre-collect and process a large amount of "draft" information. A typical market research process involves 4 steps:
determining the type of data you need; search for this data; data analysis; implementation of measures that allow using this data for the benefit of the enterprise.
The very first information you need is: who will buy from you, where is your niche in the market? In addition, it is necessary to predict the market and find answers to the question of who, why and how much will be ready to buy your products tomorrow, the day after tomorrow and in general over the next 2 years.
Such a search should be carried out in stages.
The first stage is an assessment of the potential market capacity, i.e. the total cost of goods that buyers in a particular region can buy in, say, a month or a year. This value depends on many factors - social, national, cultural, climatic, and most importantly - on economic ones, incl. on the level of income of your potential buyers, the structure of their expenses, inflation rates, the presence of previously purchased goods of a similar or similar purpose, etc.
The second stage is an assessment of the potential amount of sales, i.e. the market share that you can hope to capture and, accordingly, the maximum sales amount that you can count on.
As a result of such an analysis, which is called MARKETING RESEARCH, you will be able, in the end, to determine the approximate number of customers per month that you can count on. But in order to really get them, you need a third stage, a third step towards assessing real sales volumes. At this stage, you have to assess how much you can actually sell (receive for the provision of services) in the specific conditions of your activity, with possible advertising costs and the price level that you intend to set, and most importantly, how this indicator can change month by month . Preparation of such a forecast is possible using various methods. For a small business, it is quite possible to limit yourself to expert estimates based on your own professional experience or the experience of specialists who can be paid for advice. If you turn to specialists for help, it would be nice to discuss with them the price at which buyers will agree to buy your products, not paying attention to competitors' offers and not refusing to buy this kind at all. If you manage to make such an assessment, then we can say that you have completed your program - the maximum in the field of market research. Naturally, at the same time you will collect information about your possible competitors: their products, product quality, approximate prices and terms of sale. And this should also be reflected in the business plan so that the investor can assess the completeness of your understanding of the market situation and the thoughtfulness of your project.
You must answer the following questions:
Who is the largest producer of similar goods?
What is the price level for their products? What is their pricing policy?
You must refrain from varnishing reality. It would seem, would it not be better to keep silent about the advantages of competitors, to say a glimpse of them, but to stick out their weaknesses?
Don't give in to this temptation. First, the most valuable thing is your own reputation. Secondly, if you manage to deceive the investor, and the project fails, you will no longer see a loan, at least the percentage will be much higher.
Therefore, it is better to evaluate your competitors extremely soberly. But do not be afraid of them, but point out those gaps in their strategy or product quality characteristics that open up a real chance for you to succeed.
marketing plan
In order for potential customers to turn into real ones, a small business needs to have a marketing plan. This plan should show why customers will buy your products. If, when evaluating sales volumes, all the smallest details of how it will be achieved are not given, then this will inevitably cause distrust on the part of a potential investor.
Here you need to think over and explain to potential partners or investors the main elements of your marketing plan: pricing, distribution scheme, advertising, sales promotion methods, after-sales support, image building. If you do not have a special education, you should read books on marketing, seek advice from a specialist.
Pricing. How to set the right price for a product? Here are the basic principles:
The price of the product must be higher than its cost.
The price is determined by the possibilities of the market.
The price should provide maximum profit! (not per unit of production, but for some period of time).
Pricing is not just about asking the cost of a product and then just adding profit. Costing production is a matter of course, and pricing is a matter of policy. To attract a buyer, it is not at all necessary to make a product or service cheap. The cheapness of goods is often the main motive for buying, but not always. If the product is too cheap, it can have a very negative impact on sales volumes. Prices can be easily dropped, and then it will be much more difficult to raise them.
production costs. Generally speaking, production costs fall into two categories: fixed and variable.
Fixed costs include costs that remain unchanged relative to the volume of sales of products: for example, rent, telephone charges, administrative and other overhead costs.
Variables include costs directly related to the production of products. These include the cost of raw materials and materials, the cost of packaging and delivery, wages. With the increase in sales volumes, these costs also increase.
The figure shows the characteristic dependences of income and costs on
sales volume. With this method, you can calculate the point
breakeven. This is the point at which the total volume of sales
is equal to the total cost. Above this sales volume
Sales income - Costs = Profit.
Pricing methods.
"Cost plus profit". It can only be used if there are no competitors. Otherwise, the competitor may have a lower cost level than you. Then it will not be difficult for him to force you out of the market.
Another method is "Stupidly Following a Competitor". You choose a company - the leader in sales for your product and set the same price level as his. He has large volumes, he spends on marketing and he knows better. Nevertheless, the word "stupid" is not in vain in the name of this method. The fact is that in this way you lose independence and control over the situation. The leading firm can upgrade and reduce prices. You may not be ready for this.
And finally, the most difficult, but also the most reliable, is the pricing method, which can be called cost-based marketing, as it combines cost analysis and pricing based on your marketing tactics. This method cannot be reduced to a set of formulas - it requires creativity, but on the other hand, the results can be extremely high. An example is the story of the well-known American company "Hublin", which produces vodka "Smirnovskaya".
The stage of setting the final prices is already implemented in the course of specific negotiations with customers, but it is necessary to prepare for this in advance. Here you need to solve the following tasks:
create your own discount system and learn how to use it. determine the mechanism for adjusting prices in the future, taking into account the life stages of your product and inflationary processes.
All discounts from the offer price are aimed at attracting a client. The simplest discount is for cash payment. The reason - the acceleration of the turnover of money.
With regard to adjusting prices over time, taking into account the stages of the life of goods, here it is necessary to recall the theory of the life cycle of a product. Its meaning is that any product, like a person, lives its life on the market, including youth, maturity, aging and death. And at each of these stages, pricing issues are resolved in their own way. For example, when a product is young, then prices should stimulate the growth of demand for it. And here the strategy of temporary underpricing (IBM) justifies itself. It is a completely different matter when the product has reached maturity and the demand for it has formed. At this point, sales growth can be stimulated by cleverly manipulating the prices of modifications to the original product, slightly inflating them for the greatest profit. When the product begins to age and the demand for it falls, and the demand for it falls, then the life of the product can be extended by a sharp decrease in prices (for example, such a decrease in the price of microcalculators led to a sharp jump in their sales volumes and a lot of manufacturers' profits, i. to. at the new price, such a product turned out to be available to any student).
Sales promotion. Before you start planning a sales promotion campaign, you need to clearly define what funds you will allocate for this. The best thing to do in such a situation is to post such expenses under the heading "fixed costs". Good advertising and promotion is not a cost, but an investment, and one that will pay dividends in terms of increased production.
For a long-standing and stable enterprise, it is recommended to allocate sales promotion funds as a share of turnover. If the enterprise has just opened, then funds for the promotion of goods should be allocated specifically.
It is extremely important to determine to whom the activities will be directed and who will carry them out: to persuade a potential buyer to use the services of this enterprise. There are four factors to pay special attention to when planning a sales promotion campaign:
Find potential customers (how?)
interest and stimulate them
meet their needs
To choose the right method of sales promotion for the company's products, you will have to experiment a little. It may be necessary to use several methods. Try to think about what your customer is most likely to respond to. Here are some of them:
special magazines
TV
direct mail
personal conviction
Exhibitions
Exercise
Try to think about what your customer is most likely to respond to. Some of them are: newspapers, special magazines, directories, radio, billboards, advertisements, advertising on vehicles, television, direct mail, personal persuasion, exhibitions.
Production plan
This section should describe all production or other work processes that take place in your firm. Here you should consider all issues related to the premises that you occupy, their location, equipment, personnel. In addition, this paragraph should pay attention to the planned involvement of subcontractors.
Investors are always interested in the question: how will a business guarantee the quality of its products or services? Therefore, you should briefly explain how the production system is organized and how production processes are controlled. They are also interested in how control is exercised over the main elements included in the cost of production (for example, labor and material costs).
You should also pay attention to the location of production areas and the placement of equipment. If you decide to engage in retail, then the first thing you should think about is the location, the second and third too.
Finally, this section should address issues related to lead times, the number of major suppliers, and how quickly output can be scaled up or down.
Management staff
Investments are made in specific people, not in a business plan. Therefore, this section is one of the most important. He should explain how the steering group is organized and describe the main role of each member. It is unlikely that a small firm at an early stage of its development will be able to assemble a sufficiently balanced team. So it makes sense to pay attention to both the strengths and weaknesses of your leadership team. To identify the weaknesses of your management, you should seek the help of consultants.
Often an entrepreneur claims that "everything" will be done by himself. If he does not explain what is meant by this "everything", then it may turn out that he simply did not think through his project to the end. This section should provide information about your partners, their capabilities and experience. make a list of their main achievements - this gives an opportunity to judge their ability to achieve the goals outlined in the business plan.
You should highlight the mechanism for supporting and motivating key executives, show how you are going to interest them in achieving the goals set in the business plan. Therefore, establish how their work will be paid (for example: salary, bonuses, share in profits).
Sources and amount of funds required
In this section, you should present your thoughts on
the amount of funds required:
from where it is planned to receive this money, in what form and to what
the timing of the refund;
The answer to the first question is explored in the following chapters. But the answer to the second question is a topic for a special discussion. In practice, here we should talk about what share of the necessary funds can and should be received in the form of a loan, and what is better to attract in the form of share capital.
The main point here is that bankers are trying to reduce their risk, believing that it should be borne by the owners of the enterprise and shareholders. Therefore, financing through loans is preferable for projects related to the expansion of existing enterprises, when there is material support for these loans. For projects that are associated with the creation of a new enterprise, a share or equity capital is preferable. For such projects, attracting loans is simply even dangerous. The fact is that the loan agreement necessarily includes a strict payment scheme that ensures the repayment of debt and interest on the loan within a certain period. We have this period now - six months - a year. For new enterprises, this may not be possible, because. revenues from sales increase gradually. In such a situation, even promising projects that can bring large profits in the future may go bankrupt. Funds received from partners or shareholders do not have these shortcomings. A new enterprise in the early years may not pay dividends at all, and this will not cause objections from shareholders if the profit is not eaten away, but invested in the development of the company. Sometimes attracting funds from partners and shareholders seems undesirable to entrepreneurs because of the threat of losing a controlling stake, the size of which is usually estimated at 51%. But with a highly dispersed capital, this package can be much smaller, 10 - 15 percent. Secondly, the "dog in the manger" psychology rarely leads to success. What's the point if you are the sole owner of an enterprise that exists only on paper? Wouldn't it be better to attract wealthy outside investors to bring your projects to life?
Your main task is to set a fair price from your point of view for the share of the business that you are going to cede to the investor. At the same time, this price should be flexible enough, especially on secondary items, to allow you to take into account the wishes of investors. Remember: this is a negotiation situation! The third aspect of the section is the timing of the return of borrowed funds. This aspect is explored in the following chapters.
Financial plan and risk assessment
The purpose of this section is to highlight the main points from the mass of financial data contained in the following section. For example, the probable value of the company should be mentioned here if everything goes according to plan and what sales volumes and profits will be. However, here it is necessary to concentrate not only on the benefits of potential investors, but also on the degree of risk, as well as the problems that a business may face.
All good business plans include the question "what if...?".
Thinking about a possible risk ahead of time means being well prepared for it.
It is perhaps worth mentioning here the cyclical nature of sales volumes or cash flow. It is important that the major risk points a business may face are conveyed simply and objectively. If the head of the firm does not do this, then it is quite obvious that a potential investor will. Such risky moments include, for example, "technology insecurity" or "heavy dependence of planned sales on the personal composition of regional trade groups." However, simply describing the likely risk without setting out the actions that can minimize it is not only useless, but harmful.
A good way to show the financial implications is "what if...?" - Conduct a sensitivity analysis. This means revising financial projections to see, for example, the consequences of a doubling down or an increase in sales. Another example: How much can we afford to lose in sales profits before we go bankrupt? What is our safe boundary? When analyzing risks, a computer comes to the rescue. The computer allows you to change at least one parameter in the forecast and see how it affects the rest of the parameters. For example, a 10% increase in rent could mean a 50% decrease in profits. Under these circumstances, you should take the lease more seriously.
Detailed financial plan (budget)
You need to include in your business plan a detailed financial
plan, usually it is done for three years. It must contain
sales forecast; profit and loss estimates; cash flow analysis (monthly for the first year and then quarterly); annual balance sheet.
The sales forecast should give an idea of the market share that you expect to win with your products. For the initial period of production, you must have agreements with customers about future sales. Starting from the second year, the sales forecast is based on your assumptions. It is important that they are realistic and not embellished.
Profit and Loss Forecast is a document with a fairly simple structure.
It includes the following indicators:
sales proceeds,
production costs,
total profit,
general operating expenses,
net profit.
The purpose of this document is to show how your profit will change and form.
Each element of the budget tells you different things. Profit is not the same as cash flow. While profit is a measure of the long-term success of a business, cash flow actually pays the bill. You can be profitable and still not have enough cash. This problem is known to many growing firms. The balance of assets and liabilities is recommended to be drawn up at the end of the year. This document is considered less important. Nevertheless, it is impossible to do without it in a business plan. For example, specialists from commercial banks study it very carefully in order to assess what amounts are planned to be invested in fixed assets (assets) and from what sources of financing (liabilities). It is beneficial for the bank that its funds go to the acquisition of fixed assets. If the company goes bankrupt, the bank will take the equipment as collateral. A detailed financial plan is only a quantitative expression of marketing and production plans. It will help you make sure your marketing plan matches your production plan and vice versa.
Example. Let's say, in order to provide better training for our agency's clients (goal) and speed up the process of preparing visual material, a projection device is needed that allows you to project drawings directly from a computer (in accordance with the production plan). The cost of such a device is $7000. This will certainly make our budget shaken and there will be a problem with the payment of wages. As a result, since we cannot yet find ways to solve the problem of cash, we are forced to change the production plan and, to some extent, our goals. It may turn out that your plans do not correspond to your budgetary possibilities, are unrealistic. Then the plans must be changed. In the event that you cannot find a plan that has an acceptable budgetary justification, you should consider changing your goals. You may have to go through the feedback loop several times. A budget will help you manage your business in the future as well as manage the people in your business. It will be the measure by which you can evaluate the work of your company. Control includes three stages. The budget reflects what you would like to receive. In the process of management, you must record what is actually happening and compare it with the budget. Where there is a difference between the two, it is necessary to determine why it has arisen, whether you need to take any steps to correct the situation, or if you could revise your budget. Differences can work both for you (lower costs and more profit than expected) or against you (the opposite). Next, you reduce the unfavorable discrepancies and/or increase the favorable ones.
FOR EXAMPLE: Let's say that your phone bill for the last month is twice as much as it is budgeted. This is a significant unfavorable difference, and you decide to look into its causes. As a result, you may find that your sales person has made a lot of calls in the past month. In another case, it may turn out that your employee had a personal international telephone conversation. In each of these cases, you need to take appropriate action. A budget will also help you decide what actions to take.
In the first case, you could approve the actions of your employee and find out if he will work at this pace every month, and if so, then put it into your budget. In the second case, you will have to establish a procedure that excludes the possibility of using international telephone communications without permission. There are significant differences that you cannot change. An example is the change in taxes. In such circumstances, you will have to adjust the budget, and probably your own plan of action. If the difference is so great that you are unable to find a plan to eliminate it, then you will have to re-examine your goals. Some people tend to pay too much attention to the details of the budget and forget that the main thing is:
The process of systematically thinking about the future of your firm by planning to take advantage of all the opportunities that come your way. the feedback you get from the budget that forces you to reevaluate and reevaluate your original plans.
Business Plan Tips
Your business plan should look professional. It is a promotional document representing both you and your business. In particular, your competence will be judged not only by the content, but also by the appearance of the business plan. This does not mean at all that it should be complicated and overloaded with a large amount of material or expensively published. A business plan should be simple, functional, clear and easy to use.
Make your plan in such a way that investors can easily find paragraphs of interest to them, since not everyone will want to read the entire business plan in its entirety. Content should be placed on the first page of the plan.
It is also necessary to provide for some functional division of the chapters. The use of tables, charts and graphs usually contributes to a more complete perception of information. When drawing up most plans, spreads are often used to present financial information.
Most often, a business plan contains confidential information about your business, so you should carefully control its distribution. Some businessmen number each copy. Others, when first meeting a potential investor, provide him with a brief overview or summary of data, and only if the investor has expressed his interest, present him with a detailed plan.
Before sending your plan to potential investors, you need to familiarize all your team members with it, and also get confirmation from your accountant that all financial calculations are in order. There is nothing worse if, during a business meeting with a potential investor, and indirectly - through him, he himself will point out to you the mistakes you have made.
Finding funding will take longer than you think. You should schedule your business meetings with potential investors, which should reflect who and when you should see, when you expect them to make specific decisions, and what you will do if investors or lenders reject your proposals. You may set some deadlines for receiving funds. Your investors should also be aware of this.
The goal of any investor, whether it is a profit-sharing shareholder or an interest-bearing lender, is to make a profit. He must be sure that the likely reward is worth the risk he is taking in lending you. A well-prepared business plan will help you convince your investor that your business is attractive.
In the eyes of a potential investor, the most important factor is your personal qualities, as well as the personal qualities of the entire management team of your company. Potential creditors want to see your interest, enthusiasm, sincerity, and many other qualities that would testify to your leadership talent and competence and would be the key to the successful implementation of your plans.
In order for your business to flourish, you must have a true desire to achieve your goal, reaching almost the level of a vital necessity. You must also be willing to take risks - but only moderate risks that you can overcome. Energy and enthusiasm must be combined with a strong sense of reality when assessing the position of the business in the market and its potential. An engineer with a technical background who has a good production idea, but who himself only strives to make and improve prototypes and is not interested in mass production and sale of them, will not be able to find a sponsor willing to subsidize him until he unites with other people who have those qualities that he personally lacks. It is very important to convince the investor of your abilities. For this purpose, you can show him some documents and reporting materials. Competence in technical matters, supported by the presence of official patents, will be the guarantor of the protection of your project from copying attempts by competitors. And yet, the decisive factor that allows the lender to be sure that all your plans will succeed is the combination of talents and abilities of the management team of your company. They can be demonstrated not only directly - by providing personal characteristics, etc., but by the level of competence and professionalism of the plan itself. The business plan goes through an initial sifting process, as a result of which your potential lenders will decide whether to agree to finance your activities or not, so the presentation of the business plan should be a means for you to showcase your best qualities and convince investors of the competence of your team.
Many aspiring entrepreneurs snort and spit at the mere phrase "business plan." They, you know, sitting on the toilet, came up with the most brilliant business idea, like a lightning bolt struck and that's it - now they are absolutely sure that in the near future their name will be on the Forbes magazine lists.
In general, the actions and thinking of many novice businessmen are more often based on emotions, but it should be on cold calculation. Remember:
Success is always where there is a cold balanced calculation. And where there are emotions, there is poverty and disappointment.
Whatever one may say, but a business plan is needed. What is it for, by the way? Let's try to figure this out!
So real, I repeat real A business plan is needed in order to:
- Analyze the prospects of a business idea on real numbers. The key phrase in this phrase is "on real numbers." You can find a lot of various business plans on the Internet, backed up by some numbers. I don't know about you, but I have doubts about their authenticity. And I can substantiate these doubts:
No one will put into public access information bought for a lot of money or obtained by their own sweat and blood.
Excuse me, but if I fed and watered the manager of a plastic window company for three weeks in order to get information from him on monthly sales volumes, then please tell me if I will share this classified data with my potential competitors so easily and naturally, that is , with you? Of course not! After all:Actual numbers received from competitors can tell us a lot, and therefore they have a very high value.
It is these data that form the basis of calculations and analytical studies of this business plan. And, of course, with their help, you can more accurately analyze the prospects of your business idea.You also need to understand that the figures for the profitability of a Moscow company selling plastic windows will differ from those of a company operating, for example, in Bryansk. In general, each specific case is individual.
- Realistically evaluate your strengths and financial capabilities. A novice businessman runs out of the proctologist's office shouting: “Eureka! I know what business has money! We need to build an oil platform in Norway!”…
Y-yes... That's what happens sometimes when blood rushes not to the head, but to the ass...
No, dreaming is not harmful, and nothing is impossible in life. A platform is a platform, in Norway it is the same in Norway - no question. Although, no, there is one question: “How much money will you build?” Or are you planning to start pumping oil into buckets with a hand pump and bring it to the market to sell?
In general, the real numbers in the "Costs" column, they are like a cold shower - they instantly sober up and descend from heaven to earth.
- Evaluate potential risks. Our businessman sits in the bathroom, releases bubbles on the sly under the water and suddenly begins to see clearly: “I understand everything! Big money spinning in the gambling business? Tomorrow I'm going to open a casino!
Yep, casino. Oh well…
Is it okay that all the casinos in the city are controlled by Vladimir Ilyich, who is called "Lenin" in narrow circles? No, this is not the Lenin who is a monument, but this Lenin, who will use the contents of your scrotum to make balls for his casinos.
In general, the risks must be assessed soberly and carefully. Of course, it is a well-written business plan that will allow you to do this as accurately as possible.
- Attract investment or get a loan. Money is nowhere without them. It often seems to us that if we had a lot of money, then there would be no problems. Actually, we are building a business in order to make money.
It is no secret that investors and lenders carefully study an entrepreneur's business plan before making a decision to enter into a share or give a loan. But there is one important point here:
The business plan for investors and lenders must contain real numbers.
It is now fashionable to draw up business plans to lure out money. The entrepreneur "draws" false indicators of profitability and profitability, receives a loan, and then does not know how to return it.Imagine a situation. Once a bald-headed university professor said that you need a lot of money to start your own business, which you don't have. Then the sly professor smiled and handed you a business card from some bank. With a sly wink, he whispered: “Call this number and say that you are from me - they will help you with money, my friend! Just prepare a business plan in advance, as I taught you - with high rates of profitability, profitability and low risk.
You run home, inspired by the professor's words. Within 30 minutes you draw up a business plan with the “correct” numbers. Then you call the bank, say that you are from a professor, you are politely invited for an interview. True, they ask you to take documents for an apartment and a brand new car with you - in order to issue a deposit. Within an hour, you receive the coveted loan from the bank. And the cunning professor - his percentage of "commission".
Then you start building a business. However, things are not going well - after all, you made a “fake” plan, my friend, and you didn’t have time for real calculations. In general, in a month your business fails. The bank takes all your collateral from you. Now you live at the station. You are a bum and a loser, and the professor is having fun with your classmates in taverns and bought himself a brand new Lexus. He whispers sweet tales into their ears that if there were no gullible mugs in the world, then life would be boring and uninteresting ...
Do you want to manipulate the numbers to get a loan or attract investments? Well, this is the master's business, friends. As they say, to each his own. Here is my opinion, for example:
The business plan of a promising project does not need juggling and adjusting the numbers. Even without this, it looks attractive to investors and creditors.
I recommend that you follow the same principles. In general, business lending is a very capacious topic that should be considered separately.
Actually, these are all the main reasons why you need a business plan. I hope I did not tire you with my reasoning and gave you a portion of useful information. I think it's time to deal with
A business plan is a document that will help you analyze the chosen idea for realism and reasonableness. This document can be read by both external and internal users. The first category includes investors, banks and other financial and credit organizations. The second group includes founders, managers and other employees of the company. For investment purposes, a novice entrepreneur must demonstrate in a business plan the possibility of making a profit, the payback period of the project, possible risks when investing, and other indicators. At the same time, the document can be used as a company management tool. Some successful business people have achieved high results by acting strictly in accordance with the written business plan. This document should also contain calculations that will allow you to assess the feasibility of this type of activity. The entrepreneur indicates in the business plan possible expenses and incomes, that is, estimates the costs of acquiring equipment, manufacturing products or providing services (works). Based on these data, it is possible to calculate the approximate amount of net profit and the payback period of the project. Also, the document should include information about possible risks, problems and possible errors. The document also stipulates ways to solve the alleged problems. In order for the business plan to be a kind of tool for doing business, it is necessary to determine the indicators with which it will be possible to control the work of the enterprise. That is, this document should contain a certain business strategy that helps to survive in the competition. When drawing up a business plan, the strengths and weaknesses of the idea are identified. For example, strong factors include the novelty of the product (service), the cheap cost of materials and raw materials; weak factors include high production costs, lack of experience, etc. This document is drawn up with a perspective of at least three years. It is not necessary to calculate net profit, sales volume and other indicators for each month, it is enough to do it quarterly. When drawing up a business plan, the founder or several should be present, since it is he who models his activity and projects it into life. The document should not “glamorize” the prospects, even if the plan is to get help from investors. Remember that in the future, due to your actions, you may have problems. Since the economic situation in Russia can change dramatically, a business plan is not a guarantee that the activity will be successful. Therefore, with a sharp change, it is worth reviewing the decisions and making some adjustments to the document. A business plan is best drawn up in tandem with a specialist. From the foregoing, you can answer the question “business plan” as follows: this document is a kind of instruction for a novice entrepreneur, a plan is being developed for the purpose of competently organizing and running a business. With it, you can build a certain strategy, plan to expand your business and modernize production.
A detailed explanation of what a business plan is and why it is needed. After studying the article, you will be able to cope with the preparation of the document on your own.
It is worth starting the article with a specific definition, what is a business plan.
So, a business plan is a document that describes the project in as much detail as possible.
They make it up in order to plan a phased implementation of the creation of a company, assess the relevance of the idea, and convince investors to invest.
In general, in order to conduct and develop a business, you need to understand what and why you are doing.
The entrepreneur must decide on the goals set, calculate the amount of necessary capital investments.
This is necessary not only for investors or lenders. But also for the business owner himself.
After all, a plan is a personal instruction for action.
Its presence adds self-confidence and will allow you to make decisions in controversial situations.
To, you need to have certain special knowledge.
They are summarized in this article.
If you carefully approach the study of this issue, you will be able to cope with the preparation of the document on your own.
But even if in the end you decide to seek help from specialists, it is important to understand what exactly they will do.
What is a business plan and why is it needed?
The goals for which a business plan is being drawn up have already been outlined above:
- Serves as a guide for the project manager.
Therefore, you need to return to the business plan from time to time to check: are you following the right course?
- A business plan allows investors to decide: is it worth investing in this company?
Will they pay off and how quickly?
If you specify the tasks that help the entrepreneur to solve the business plan, the list will look like this:
- Determination of the direction in which the company will move.
- Designation of the place that the company will occupy in a niche.
Analysis of competitors and advantages due to which it will be possible to surpass them.
- By compiling a business plan, an entrepreneur can develop a marketing strategy that he will use to promote his services and products.
- Formation of short-term and long-term goals, as well as the ways in which you will achieve them.
You can also assign someone who will be responsible for this.
- A business plan often refers to a specific list of products that your company will produce, or at least a group of products.
- A separate item in the business plan can indicate who will work for you, what salary they will receive, what will be included in their job responsibilities.
- It is important in the plan to assess potential risks and ways to prevent or address them.
- A business plan allows you to calculate how much money will be required for its development in the future.
Business plan: what is a resume?
"Think before you invest, and don't forget to think after you've invested."
Doyle F.
The first section of a business plan is the summary.
This is a business card, the "face" of the company, which potential investors will see when they open the document.
The summary briefly describes the idea of the enterprise.
The interest of a possible contributor depends on how skillfully this text is compiled.
Therefore, despite the relatively modest size of this "chapter", it is necessary to approach its compilation with all care.
The summary will briefly outline what will be discussed on the next 15-30 pages of the business plan.
With all the requirements for the “attractiveness” of a resume, do not confuse a document with an art book.
For words to be truly convincing, they must be supported by calculations and arguments.
But do not get carried away and rewrite all the information that can be read in the rest of the plan.
After all, investors are human beings.
And boring epics will very quickly make them unwilling to continue to get to know you.
It is enough to use several pages and present the information in a structured way.
For your convenience, the tentative structure of this section is as follows:
- a brief description of the concept of your company;
- What goals have you set for yourself?
- the main and most attractive points of your business idea;
- how much, for how long and for what purpose you are seeking financial assistance (if the business plan is written for investors and lenders);
- calculations, graphs, indicators that will prove the potential of the company and its future efficiency.
Business plan: marketing section
This section serves to set goals for the marketing development of the company.Also, of course, ways to achieve them are planned and described.
To determine these points and have data for argumentation, marketing research is carried out.
Their number and depth will entirely depend on the specification of the case.
But the main ones are:
| Target audience analysis | An analysis of the target audience is necessary in order to "see" a portrait of your average buyer. So you will understand the people of what gender and age to target. |
| Niche analysis | In order not to close in the first 2-3 months, you must analyze in advance whether there is a place for you in the chosen niche. There are situations in which it is better not to implement a business idea at all due to the lack of opportunities for development. |
| Competitive advantages | The entrepreneur must not simply determine if there is a free space in the chosen market niche. But also be able to compete. This is not about rumors and intrigues with which you can denigrate competitors. And about the definition of specific strengths that you will use. |
| Marketing policy | Marketing policy is precisely the course of development that the company determines for itself. It is worth dwelling on this point in more detail. |
There are several basic options for marketing policy.
It is worth choosing between them, based on the greatest practicality and profitability for your company.
- The entrepreneur seeks to reduce the cost of production as much as possible in order to produce the most affordable products.
The most common strategy, but with many pitfalls.
- Production of products that have no analogues.
Or at least boasts a rare twist.
- The company can direct its activities to a certain narrow segment of the audience (geographically, demographically).
Business plan: risks and how to assess them?
Risks are negative situations that can happen to your business and should be considered in a business plan.
This is done in order to know how to act in case of stressful incidents.
Also, making a forecast allows you to prevent risks, reducing the likelihood of their implementation, or at least localizing the negative impact.
The larger and more serious the business, the more specific the forecast is.
For large corporations, they even use the mathematical analysis of probabilities and create a specialized department.
Risks are divided into two large groups:
- Systematic - that is, those on the occurrence of which the entrepreneur cannot influence.
For them, you can only prepare a plan of action in case of occurrence.
- Non-systematic - respectively, those that the entrepreneur can warn.
This can include financial risks, production risks (for example, an insufficient volume of products was produced or delivery dates were disrupted), market price fluctuations.
Considering risks is important for two reasons.
Firstly, it will confirm your seriousness and detailed approach in the eyes of investors.
And secondly, for the businessman himself, this section will become an instruction on actions and will help to keep a cold mind, acting in a balanced way.
Business plan: financial section
In addition to the summary, the financial section is the most important part of the business plan.What it is?
This section covers all parts of the plan, but in a financial format.
That is, if the remaining points create a plan for the creation and development of a company for a certain period, then calculations are made in the financial section.
This includes project costs, and the calculation of the cost of products or services, and much more.
It is important both for the entrepreneur himself and for potential investors: how much money is needed to open such an enterprise, and how quickly will it pay off?
The information in this section is not written once and for all.
These data can and should be adjusted in accordance with the real state of affairs during the implementation of the business plan.
The financial section must contain data on the following items:
- how much investment is required to open such a company;
- analysis of the effectiveness of the organization;
- the estimated costs of producing products or providing services are calculated (a one-time contribution to open such a company, as well as the size of regular investments);
- the real cost is calculated (it includes such indicators as wages to employees, the cost of purchasing raw materials, depreciation);
- it is important to make a forecast of how much the company will bring profit and when it will reach the break-even point;
- at the end of the section, the entrepreneur indicates the sources from which the financing will come (state assistance, personal funds of the entrepreneur, leasing, credit, attracting interested investors).
A simple and understandable explanation of what a business plan is and how to write it correctly,
also featured in the video:
To summarize and describe the business plan in simple terms, this is a document that describes what, how and with what you will do.
Of course, doing it on your own is not at all easy.
Especially if you haven't done anything like this before.
This work can be delegated to intermediaries and throw this mountain off your shoulders.
But at the same time, you will get two significant disadvantages - the expenditure of money that could be spent on the development of the company.
Also, you will not be as aware of what is happening in your enterprise as if you were doing everything yourself.
Writing a business plan is not so difficult if you approach this issue with all your attention and diligence.
And be guided by this text.
After all, this article not only answers the question, what is a business plan, but it also tells in detail how to compose it.
Perhaps the process seemed too complicated for you.
But it is worth starting the implementation and it turns out that everything is much simpler.
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