How to draw up a business plan? This question is often asked by most people who are thinking of starting a business, starting a startup or finding an investor. Everyone understands that the answer to the question “how to draw up a business plan correctly and correctly?” Is an integral part of the success of the company and the enterprise. A completed business plan should provide a complete picture of your business from analysis to development prospects.
A business plan is a document that answers all questions related to your business and provides a comprehensive picture of the company’s performance in the long and short term and can be edited along with changes to current plans and strategies.
Outstanding personalities in management and marketing such as Brian Tracy, Stephen Covey, John Maxwell and many others believe that most people give dozens of ideas every day. However, not every idea develops into a successful business idea. In order for a business idea to become feasible, it is necessary to answer the question “How to correctly draw up a business plan?”. How is a business plan written? It is possible to draw up a business plan correctly if you study each section in detail:
- Introductory part or resume of the project;
- Description of goods and services;
- Market analysis and marketing strategy;
- Production plan;
- Organizational plan;
- Financial plan and budgeting;
- Expected results, risk assessment and development prospects.
Below you will find information on how to write a business plan and step-by-step instructions on what data should be specified in the sections.
How to create a business plan yourself and what is needed for this?
Before you draw up a business plan, you must first assess the current situation and work with the information. One of the recognized technologies for preliminary analysis before compiling a business plan, especially for small businesses, is a SWOT analysis, which structures all the information.
What is a SWOT analysis and how is it used in a business plan? A SWOT analysis is needed in order to evaluate the internal and external resources of the company, having compiled an objective picture for the business plan and consists of the following components:
- Strengths – the strengths of a product or service, for example, this may include low production costs, high professionalism of employees, an innovative product component, attractive product packaging or a high level of company service, etc.
- Weakness – weaknesses, such factors as the lack of own retail space, low brand recognition among potential buyers, etc. can be attributed to them.
- Opportunities – business opportunities include factors such as the introduction of new materials and technologies for the production of a company’s product, the receipt of additional financing for a project, etc.
- Threats – threats, for business it can be such criteria as the economic and political situation in a country or region, especially the mentality of consumers, the level of technology development in the territory of doing business, etc.
We recommend reading it: ready business plans
How to make a business plan more informative?
Before filling out the sections in detail, collect the maximum amount of additional information on the topic of your future project. You need to do an analysis of the industry, learn how to promote your products / services, and understand which companies are your competitors in the market. Also evaluate the amount of tax deductions for your company and the resources of the future project, for example, monetary, intellectual, temporary, personnel and so on.
All this will help you understand how to write a business plan effectively and not to search along the way for material for its sections. You will save a significant part of the time by getting good results.
How to draw up a business plan yourself, step by step instructions
1. Introduction to the resume project
In the water part of the resume project, you need to make a positive impression on investors and give a general description of the business plan as a whole, so the following points should be considered in this section:
- company line of business;
- target sales markets and the company’s place in them;
- profitability and term return on investment;
- staff and decision makers;
- planned quantitative and qualitative indicators as a result of work by periods.
In the summary, it is necessary to justify what investors will receive with the successful implementation of the project and what are the chances of losing capital or part of it in the event of unfavorable developments. The resume is written at the very end, when the main part of the business plan has already been written.
2. Description of goods and services
In this section you need to describe what goods and services you plan to implement and understand the portrait of your client or target audience. To do this, you can make photos and videos of your line of goods and services. Carry out a market analysis for similar products or services in your target market and describe a pricing model. Try to answer the question “can you compete with existing companies in your segment?” After such an analysis, you will have a clear idea for whom you produce your products, and also understand the features of your product.
3. Market analysis and marketing strategy
In order to understand the conditions in which your company will work and which competitors can be identified in your environment, you need to prescribe the marketing strategy as accurately as possible. The strategy includes an analysis of the market environment, competitors and your strategy for promoting the product in the current conditions to the final consumer. Studying promotion methods and tools will allow you to competently draw up a business plan and promote your products on the market. After all this, be sure to draw up an approximate sales plan for the quarters in order to understand how much revenue and net profit your company can potentially bring.
4. Production plan
This section can be skipped if your company is going to provide services or sell goods, that is, engage in trade. If your company plans to engage in production, then you need to understand how much production capacity you will need to implement production, in what sequence the equipment will be implemented and prepared for work. Assess the estimated dynamics of production growth over time and the logistics of necessary materials and raw materials. Make a flow chart to see a picture of all your activities.
5. Organizational plan
In this section, it is necessary to reflect your actions on organizing a business, broken down into specific steps with the deadlines for the implementation of each stage, the responsible person and the expected results.
6. Financial plan or budgeting
In this part of the business plan, you make a detailed estimate and plan the budget of the company. Typically, a company has one-time and recurring costs. One-time costs include the purchase of equipment or premises, an advertising sign, and so on. Periodic expenses include consumables, raw materials, rent, utilities, salaries, and the purchase of goods.
7. Expected results, risk assessment and development prospects.
You can consider several options for the development of events regarding your business, assess the risks and development prospects. Based on the expected financial indicators, analyze the business plan and try to evaluate your project. If you were an investor and you were offered to invest in such an enterprise on the basis of this business plan, would you agree?
What the investor pays attention to when choosing a project
Firstly, financial indicators are important for commercial investors. For small business projects, this is the payback period, return on investment, return on sales, break-even level. While for large business projects, it is also necessary to add indicators such as NPV (net present value) *, IRR (internal rate of return) **, PI (return on investment index) ***, risk level, return on assets and asset turnover. For government projects, it is important to talk about the social significance of business, the benefits of products, the impact on the development of target industries and regions, and so on.
Secondly, an investor plan is important for the investor, which considers the following issues:
- how much money is needed to implement the project?
- how much money does the author of the project invest?
- how much money does an investor invest?
- Do you need a bank loan?
Thirdly, the investor draws attention to the cash flow of the project (Cash Flow) or ODDS – cash flow statement, which is the final summary report of the business plan and shows the movement of all cash flows of the company for all types of activities for each period. This is a document which shows whether there are cash gaps, how much money each of the project participants receives, and how the company’s operating, investment and financial activities affect the company’s finances.
We recommend reading it: Web Studio Business Plan
Of course, the main document to which the investor draws attention is the business plan of the project, so it is necessary to approach its preparation competently and professionally. The specialists of the Business Platform company will help you to prepare a business plan in high quality, as well as organize a meeting with a potential investor for you. You can learn more about the services here.
* NPV (Net present value of the project, rubles) – shows the amount of discounted cash that the investor expects to receive from the project, after the income has recouped its initial investment costs and recurring costs associated with the implementation of the project.
** PI (Return on Investment Index,%) is an indicator of investment efficiency, which is the ratio of discounted income to the amount of investment capital.
*** IRR (Internal Rate of Return,%) is that rate of return (barrier rate, discount rate) at which the net present value of the project is zero, or this is the discount rate at which the discounted income from the project is equal to investment costs. The internal rate of return determines the maximum acceptable discount rate at which you can invest without any loss to the owner.