If you’re working on a business project and want to, among other things, solicit help from investors to get started, you’ll need to develop a business plan. But what exactly is it and how should you go about writing it?
- Here’s the program
- What is a business plan?
- What is the use of a business plan?
- What should a business plan contain?
- How to succeed in creating your business plan?
What is a business plan?
A business plan is a file consisting of a multi-page document in which you will have to explain in detail what the content of your project is (a precise definition of the service or product that you propose, the objectives, the strategies, the prospects of profitability, etc.) and who you are (your career path, your skills, your experiences, etc.), and on the other hand, all the data concerning the financing of the project (initial and projected financing plan).
It is usually when you start your activity that you will have to write these documents, and, even if it is not an obligation, it’s still a tool that can be valuable, even indispensable, regardless of the sector in which you operate (industrial, service, craft).
What is the use of a business plan?
The business plan has a dual purpose. First, it allows you to have a global vision of your project and thus to detect any flaws. Then, it serves to prove its consistency and strength and thus to convince of its viability to different actors that you will be brought to cross:
- Your banker if you intend to ask for a loan.
- Potential external investors (business angels, incubators, etc…).
- Suppliers and other business partners to negotiate preferential rates and payment terms.
- Future employees with whom you will collaborate.
This business plan then makes it possible to manage the company, to monitor it, and to evaluate its progress. Finally, you will also be asked for it in case there is a change in your activity (an adjunction or deletion) or if you intend to assign it to a third party.
What should a business plan contain?
In order to succeed in your business plan, it is essential not to omit any element. Here is the information it must contain in detail:
Who are you?
It is important to start by introducing yourself. Explain your academic and university background (if needed), what professional experiences and skills you have acquired so far, and do not forget to leave all your contact details and links to your social networks (LinkedIn, FB, Twitter, etc.).
What is your project all about?
Give as much detail as possible. Describe the project, explain how you came up with this idea, what your product or service adds to the competition or how innovative it is, and so on. No need to tell you how important this section is, so put in the best of yourself.
Who will be your customers?
Describe here to whom your product or service is addressed and the needs it meets. The question is to know the typical profile of your future customers by making a maximum of segmentation.
What is your offer?
Explain what you want to market, what your proposals are to meet the needs of the market, and detail the range of your products or services.
Who are your competitors?
Describe the main competitors already active in your industry and the competitive advantages you have over them. It is crucial to demonstrate here how your company will be able to sell in the same market and to deal with often very tough competition.
What is your strategy?
Explain in this section your plans for your project to be successful, how you intend to generate profit, what your business strategies and your human resources policies are. Also, list the major steps you plan for your project in the short and medium term.
What are your resources and your financial needs?
This last part is more technical as you will need to establish a financing plan. You’ll have to quantify the total amount of the investment. This includes physical costs (purchase of a building, land, machinery, tools, and miscellaneous equipment) or services (establishment, accounting, legal, marketing costs, etc.).
Then, you’ll have to indicate your personal financial contributions and those of possible partners or investors, an estimate of the receipts (profits on the sales, capital gains), and finally, the amount you lack in order to balance your Budget and achieve your goals (the amount you will ask your bank). All this should be calculated for a period that usually extends over the next three years.
How to succeed in creating your business plan?
Here are some tips that will help you succeed with your business plan:
1Do not omit anything: The people who read your plan will probably ask a lot of questions about your project. It is, therefore, essential to anticipate answering those questions. Try to be as precise as possible and do not forget anything.
2Get help: If you do not feel comfortable or think you do not have the capacity to complete this task, then ask someone with experience (an accountant or a chartered accountant, an editor or business leader, a business lawyer, a consultant specialized in business creation). And even if you decide to do it on your own, submit it once completed to a more experienced person to check if everything is okay.
3Be realistic—or even pessimistic: The success or failure of your project depends directly on your business plan, hence the importance of the accuracy of the information indicated therein. It can be very tempting to “arrange” certain data in order to achieve a balanced budget, but if some information is false or biased, be certain that difficulties will easily arise.
And if you’re not sure about some numbers, always choose the low range. It is better to take the most pessimistic option because in case of error, the opposite would be more dramatic.
4Customize the business plan: Do not hesitate to adapt your business plan according to who will read it. For example, a banker may be more interested in information about repayment capacity or the debt ratio while an investor will want to find out more about financial results, the breakeven point, and dividends. There must be as many business plans as recipients to whom it is addressed.
5Look after the presentation and spelling: Although this seems obvious to most of us, it is still worth remembering how important it is to avoid spelling mistakes. If your reader already noticed 2 errors when he has not finished the first sentence, be sure he will easily get an opinion about you (and I’m afraid it won’t be super positive).
Same for the presentation: it must be irreproachable. Air the text by structuring each section well into paragraphs with sufficiently large spaces and prominent title bars. There is nothing more tiring and uncomfortable than reading an ultra-condensed text written in small print. To help you, I advise you to use a business plan software.
6Keep it simple: Avoid complex technical terms. If, for example, you develop a revolutionary “ionic motor with intergeometrical variation” (which doesn’t mean anything, but it’s just to illustrate my point), try to explain the concept and principles of operation with words that all the world can understand. Instead of saying that the tightening of such an element is as much as one hundredth of a newton-meter and is done with the aid of a dynamometric wrench (that one really exists), say that the tightening is of surgical precision.
That’s it. I hope you know a little more about what a business plan is now. Keep in mind that it will help you refine the financial and commercial balance of your project, but more importantly, it will help you convince your banker and potential investors to lend you money to start and grow your business. So, it’s up to you now. Good work!
One last thing, I suggest you read this article from nasdaq.com which lists 50 questions your business plan should answer.
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