No enterprise can operate profitably in a market economy without a carefully prepared business plan. It gives detailed explanations of how the business will be managed in order to ensure its profitability, as well as return on investment. Constant changes in the economic environment in which the company operates require the refinement and revision of the business plan, which in turn requires the development of a mechanism for attracting management personnel to this work.
Success in business is the result of planning. Therefore, before one opens a business, they must have a detailed plan indicating the final goal, the path leading to this goal, and each milestone on the way to it. The plan creating provides an opportunity to think about future actions. The better the plan, the fewer surprises that pop up during the project implementation. This is not a tribute to fashion and not a whim of an investor/lender. There is no business without making a plan for it!
The functions of a business plan are diverse, it:
- can be used to develop a general concept and the strategy of a company (organization);
- can be used to evaluate and control the development process of the main activities of the company;
- serves to attract funds (loans) from the outside (investors, lenders);
- helps attract potential partners to the implementation of the development plans of the company, who can invest their own capital or technology.
Who needs a business plan
First of all, the entrepreneur himself needs it. A business plan writing will help a future businessman come down from heaven to earth and convince themselves that their idea has (or does not have) the right to become a reality. And by convincing themselves, a person can try to convince others.
And there will be a lot of “others” on the way of the entrepreneur. Many people try to start their own business without seed capital and are looking for investors, sponsors, partners, and lenders. One of the objectives of the business plan is to convince the above mentioned potential sponsors, investors or partners, that as a result of the successful functioning of one’s idea, their wallet will also be replenished.
And there is still a large army of officials, to whom a person will inevitably have to turn for a variety of permits and resolutions. And everyone needs to be convinced and convinced again to start a business building. For example:
- This very new cafe will decorate a certain street with its facade;
- An individual will be able to build this business and regularly pay taxes;
- The institution will meet all kinds of sanitary-hygienic and fire safety requirements;
- The city needs it, the cafe.
Based on this rough and simplified example, a future entrepreneur can determine the main task of a business plan: To convince first of all themselves, and then the other necessary people, that this business is the best, necessary, important, profitable, and deserves attention, approval, and funding.
How to make a good business plan? Its inevitable components
Remember! Any business has its own characteristics; therefore, there cannot be a certain “standard” plan, acceptable in all cases.
A business plan can have many options. There are a great many variants depending on the purposes, potential audience, and actual sphere of functioning. Still, its basic key points are more or less the same for all types. Thus, to create a truly good business plan, it’s worth to include these main components to it:
- Frontpage. It contains the name of the company, its address, contact information of the founders, the cost of the project, links to the secrecy of the project.
- Introductory part (resume). It contains general information about the project – products, prices, estimated costs, revenues, etc.
- Information about the product (or service) of the company. It includes product properties (services), set advantages over competing companies, differences from other products, degree of protection of rights to the product with patents, environmental, technical parameters, etc.
- The marketing strategies that necessarily draft estimated prices, sales routes, product advertising issues, analysis of various internal and external sales factors, consideration of the company’s weak and strong market positions, sales forecast.
- The structural plan of the enterprise. It includes information on the full structure of the enterprise, its staffing.
- Information about the leading managers of the company, what role is assigned to them in the management of the company, the required amount of labor, size, and conditions of remuneration.
- Financial planning. It includes estimated expenses and income, information about assets and liabilities. This section of the business plan addresses the feasibility of investments and loans. The sources of financing, the payback period of the project, the need for a reserve of resources, etc. are analyzed.
- Production plan (if necessary). It aims to draw attention to the entire process of manufacturing a product (service). It contains calculations of production capacities, the required production area, the amount of equipment, the complexity of the production process, as well as the cost of production.
- Assessment of possible risks and insurance. Any competent business plan should contain an analysis of possible risks and ways to avoid them. The most commonly used insurance is property, cargo, vehicles, and liability to third parties.
How to effectively plan the business? Useful tips
There are rules, interesting steps, and little secrets in the planning of a business. Here are some of them:
- The simpler the business plan, the greater the chances of its successful implementation. The task of an entrepreneur is to ensure that the business goes smoothly and extremely predictably. Therefore, a business plan should be realistic and as simple as possible.
- Tight cost control. Or, more precisely – very tight cost control is obligatory. Excess spending can ruin any project, you have to remember this!
- Flexible planning. The market is very volatile and unstable. An entrepreneur should always keep abreast of the market and coordinate their plans accordingly. It’s better to do so as frequently as possible.
- One can save a lot of time if they use the existing software for B-plans creating.
The most famous programs in this area are:
- ABS Ultimate Business Planner 5.0;
Also, an individual can go through the presented materials and find an appropriate template or sample.
- Good formatting. The business plan should not only be easy to read – it is important that the reader can understand the essence without going into details. It is important to format the document properly, use headings and bulleted lists, highlight in bold text, or color those key points and indicators that an entrepreneur wants to draw readers’ attention to. One can even use shortcuts and bookmarks in the document (both digital and print) for ease of use.
- Constant editing. A business plan is a “live, breathing” document, which means an individual can develop it in working order. For example, updating a plan a year or two after starting a business before submitting a new funding request.
- Do not waffle. The best business plan requires brevity, but disclosure of all necessary aspects. It is allowed to place additional materials in a separate application of the document. Do not try to turn it into a novel. Having details and full coverage of the topic is good. But only if dry facts are used, and not “water”. Leave artistic momentum for personal correspondence.
- Avoid vivid emotional evaluations in your business plan. To give credibility and realism, one ought to use only numbers and reliable facts.
- Before starting a business plan, be sure to study ready-made examples. Even if your activity is unique in its kind, find the closest analogs. This will help better understand the structure and writing style. But the calculations should be unique and based only on your specific indicators.
- One has to prepare all the calculations for the business plan as accurately as possible. Of course, it is simply impossible to indicate the right amount of future profit to the dime correctly. In this case, an analysis of the sales of the closest competitors and information on the average cost of the most popular of your services are provided.
- No need to write in the business plan the phrases “product without analogs”, “there is no competition”. The market for services is huge and rapidly developing. Due to the long-term planning, no one can guarantee that a product like yours will not appear in the near future. Even if, at first glance, it seems that you are a monopolist, the situation may change tomorrow.
- Exactly analyze the market for prospects, potential customers. The data in the business plan must be written in specific numbers. If you cannot do this, then you are poorly versed in the situation.
- The text of the good business plan should be competent, understandable, and “live”. Your goal is to interest the investor and make them read to the end.
- To find an approach to future investors and get their proposal, study their activities: the history of projects and work with other entrepreneurs.
NOTE! Before one delves into the preparation of a business plan, they should carefully consider what the uniqueness of their business and its small details is. For example, if a person is going to open a brand of sportswear, they need to specify how exactly they stand out among the many other sports brands that are already on the market. It’s inevitable to remember that not just a product or service is going to be sold but also the value and experience interacting with a brand.