A business plan is a document that presents all the details of an organization. This tool designs, identifies and describes each of the areas necessary for the project to work; in turn, it detects possible future failures. Combine business ideas to bring them to life.
It covers all aspects of the company, from the most private to the most general. It begins with an introduction of the business, its partners, its products, the market in which it operates and the personnel involved, its production system, finances and legal framework, and growth projections for the next two years.
The business plan may change over time, but it will still serve as the basis for doing business.
Why should you have a business plan?
A business plan serves as a blueprint for a business. That way you can place it on a scale and decide if a project is viable or not. It makes it easy to identify areas of risk that may arise in your venture and start thinking about possible solutions. It will also help you anticipate difficulties and examine variables so you can make timely changes and corrections.
Likewise, it is an effective tool for discovering new business opportunities and areas in which company processes can be improved to achieve better results. It will also help you achieve high levels of productivity and performance. Definitely having a business plan will save you more time than you think.
It also serves as a letter of recommendation for partners, employees and investors that you want to include in your venture in the future. A business plan reflects greater reliability, professionalism and commitment abroad, and in turn provides greater consistency in the internal processes of your business.
The development of a Business Plan has two specific purposes:
It allows the project promoter to conduct an exhaustive study of all the variables that may affect it, providing him with the necessary information to help him determine the feasibility of the project. The business plan developed will serve as an internal tool to evaluate the company’s progress and deviations from the projected scenario.
The result of the business plan can be used as a project presentation letter to third parties from whom any collaboration or financial support can be requested: financial institutions, institutional or private investors, venture capital companies, government agencies and other involved agents.
Main Types of Business Plans
There are 5 main types of business plans: internal, or for yourself, for investors, to obtain a bank loan or state support and anti-crisis.
Writing a business plan for yourself.
Such plans are intended solely for internal use, so they are usually drawn up in any form. The main purpose of the work is to understand and assess the prospects and risks of the project.
Writing a business plan for investors.
- The purpose of drafting is to attract external funding for the project.
The main thing for them is to understand and evaluate:
- The scope of the investment.
- The essence of the business.
- The competitive advantages of the project – why it can shoot.
- The payback period and return on investment.
- The profitability.
Business plans for lending to banks.
The form of the document and the requirements for a business plan are better clarified with a credit consultant: methodological recommendations differ from bank to bank.
If you are preparing a business plan in order to apply to several creditors at once, you should be guided by UNIDO international standards. Most of the bank requirements are based on these standards, so you will have a more or less universal document. And if necessary, you can adapt it relatively easily to the requirements of a particular lender.
I advise you to be prepared for a long work ahead of time: most likely the business plan will have to be corrected – and more than once. Consideration of credit deals is often delayed, and conditions change on the fly. You have to adjust the terms of the project, the cost of equipment and raw materials, selling prices, credit parameters and other indicators.
Business plans for state support.
There are many state programs to support small businesses. For example, for agricultural producers, beginning entrepreneurs and unemployed citizens who want to start their own business.
As a rule, in order to receive subsidies, you have to submit a business plan. The requirements to it are to be found in the documentation of the specific state support program. It is important to take all these requirements into account: if you submit the “wrong” business plan, the application for participation in the contest will be rejected.
Anti-crisis business plans are developed for enterprises in a difficult financial situation – pre-bankruptcy or bankruptcy. The main goal is to explain to creditors how the company is going to come out of the crisis and propose variants of solving disputes in court and during pre-trial procedures.
Principles of business planning
1 Principle of unity. The organization is a holistic system, and all of its elements should develop in the same direction.
2 Principle of participation. In drawing up of the plan of development of the company all employees who are in any way touched by one of the stages of planning should participate, irrespective of their position.
3 Principle of Continuity. Continuity is an important aspect of all areas of the business.
4 Principle of Flexibility. It is important to change and adapt the strategy to new conditions in time.
5 Principle of accuracy. The more precisely the plan is made, the fewer problems you will have to face. For this purpose it is important to specify each task and detail the information.
6 Principle of Commitment. The plan is designed to be carried out, even if external factors interfere with it.
Business planning standards
A standard is a norm or pattern that establishes the necessary characteristics and requirements. The best-known international business planning standards include:
– A standard from UNIDO (United Nations Industrial development organization).
– The standard of the consulting firm BFM Group, which is considered the most detailed.
– The standard of the European Bank for Reconstruction and Development (EBRD).
– The standard of the Swiss consulting association KPMG International Cooperative.
The structure of the document depends on the standard followed by business owners and the type (for example, if it is an arbitrary business plan).
To summarize, the document may contain the following sections:
– Cover page – the “cover” of the plan, which reflects the company name, location, contact information, date, owner information and other brief but important information.
– Summary – a concise summary of all the items in the plan. Although this data is put at the beginning of the document, it should be collected after the end of the plan.
– The idea of the project – what is unique about the project, what problem it solves, etc.
– Confidentiality Memorandum – A document that signifies the legality of copying and distributing data in the plan.
– Goals – a description of the most significant goals of the business.
– Market analysis – this section involves a lot of numbers – market size, description of target audience, number of competitors, etc.
– Product or service information – more detailed information about the product: names, characteristics, instructions for use, quality certificates, delivery information, etc.
– Marketing – identification of product advantages, ways to sell the product, pricing, determination of methods of promotion in the market, etc.
– Production plan – hiring personnel, renting space, calculating the cost of goods, etc.
– Organization – definition of documents that will regulate the process of activity (regulations), as well as a plan for organizing the work in a staged format.
– Finance – plan of income and expenses, investments, payback period and project implementation, etc.
– Risk assessment – description of ways to minimize future problems: insurance, bank guarantees, etc.
– Appendices – graphs and reports that are needed for clarity.
Typical mistakes when drafting
- The most popular mistakes in the preparation of a business plan experts include:
– Technical – inconsistencies in calculations, unreliable data;
– not all costs are taken into account;
– a lot of theoretical information not supported by verified data;
– inconsistency with the legal framework;
– Incorrectly calculated, low amount of investment;
– incomplete risk analysis;
– Incorrect terms of project implementation;
– the return of funds is not justified or completely absent;
– lack of data on competitors.
In addition, the creators of the business plan overlook another important point, which can spoil the impression of the document – grammatical errors in the text.