Developing a business plan is a stage through which all must pass when starting a business.
This allows us to test the feasibility of the business (and thus save time and money if not feasible), serves as a guide to get it started and then manage it (and be more efficient, reduce uncertainty and minimize the risk) and if you seek financing, it allows us to demonstrate the attractiveness of our idea and we will be able to repay the debt timely. I suggest you to have a cup of coffee as this article is quite long enough than you might expect. In this case, this article is one of the best ones that will lead and teach you to a best way of understanding the Business Plan
Developing a business plan is not a simple task that can be done from one moment to another or in one day, but one that requires time and dedication, since a business plan has several parts and requires a wealth of information, it may be necessary for the performing one or more previous research to obtain.
However, neither it is a complex task for which it is necessary to have previously read several books that tell us how to do it, or writing more than 200 pages that nobody will probably read, but one that anyone can always perform as familiar with your project or business, and know the steps.
The following is a complete guide that will show you step by step how to prepare a business plan through the development of each of its parts.
1. The cover and table of contents
The cover is the cover and first page of the business plan. This should include the name of the project or business, the name of the author or authors, the year in which it was drafted and business logo should own one. The cover is the first thing the reader sees on a business plan, so we must make sure to give a professional look and thus cause a good first impression.
While the table of contents or index is a list of parts or sections of the business plan and next page of the same. It aims to let the reader know what they will find in the plan and quickly find the part or section you want to read.
You can see the samples below.
2. The executive summary
The executive summary is a summary of the most important points of the other parts of the business plan, so despite going to the top of it, should be prepared after having completed the other parties.
The purpose of the executive summary is that the reader has a general and concise overview of the business plan, can understand in one reading what the business is about, and be or not be interested in it as it is generated by the project and to deepen reading other parts of the plan.
That is why the executive summary should be effectively a summary (it is recommended to cover not more than three pages), you should be able to explain clearly what the business for more complex it may be, and should be able to generate interest by the project and invite reading (for example, using positive language, highlighting the factors that enable the viability and sustainability of the project, not covering many pages, etc.).
The part or section of the executive summary should include the following elements:
- The core business data : the name of the project or business, its location, type of business, etc.
- Business description : a brief description of the business and the product or service that is being offered.
- The distinguishing characteristics : the characteristics of the business, product or service that will allow us to differentiate or distinguish ourselves from the competition.
- Competitive advantages : the aspects that will allow us to have some advantage over the other competitors.
- The vision and mission : the mission and vision of the business.
- The reasons for the implementation of the business : the reasons I found attractive business idea or why they think they will succeed.
- Business objectives : the main objectives which seek to achieve once launched the business.
- Business strategies : the main strategies used to achieve the objectives.
- The team : people who carry out the project and subsequently administer the business.
- The required investment : investment of the project, the amount they already have and the amount that will be required.
- The profitability of the project : the results of the profitability indicators used.
- The environmental impact of the project : a summary of the environmental impact of business including how to decrease or control.
- The findings of the project : the conclusions that have been reached after completion of the development of the business plan.
At the time of writing the executive summary we must take into account the objectives, and often the reader of a business plan (for example, a potential financier or investor), one decides to read this part to make a decision, so we must pay special attention in its preparation.
You can see the samples below.
3. The definition of business
Following the executive summary, the next part or section of the business plan is the definition of the business. It describes the business that is to be performed, as well as basic aspects related to it, such as the reasons for its implementation.
The purpose of the definition of the business is that the reader understands what the business is to be performed, and learn why it is considered that this will succeed.
The part or section of the business definition should include the following elements:
The core business data
The project name or business and other basic data such as business location, the type of company under which will be legally constituted (EIRL, SC, SA, etc.) and the type of economic activity that will be dedicated (production , marketing or provision of services).
A description of the business that is to be performed and the product or service to be offered (what the business, what the product or service that is being offered, what their main features or benefits will, etc.).
The distinguishing features
The features that will have the business, product or service, and that will allow us to differentiate or distinguish ourselves from the competition.
Examples of differentiating features may be a special attribute in the product, low prices, good customer service, etc.
The aspects that will allow us to have some advantage over the other competitors.
Examples of competitive advantages could be a distribution system already in place, good location, partnering with a supplier, etc.
The target market
The target market which will lead us, the main characteristics of consumer conforms, and the reasons why we have chosen this market.
To choose the target market may be necessary to previously perform a market segmentation help us with this task.
The vision and mission
The vision (where it is headed in the long run) and mission (purpose or rationale) of future business.
The reasons for the implementation of the business
The reasons why it has found attractive business idea or why it is considered that the project will succeed.
Examples of these reasons could be an unmet need or an unsolved problem on consumers, a growing market, a competitive advantage that we have and we want to seize, etc.
The business objectives , both general and specific, which seek to achieve once launched.
Examples of general objectives might be the leader in the market, being a recognized brand in the market, etc., while examples of specific objectives could be to increase sales by 20% for the second half, achieving a market share 15% before the end of the first year, etc.
The main business strategies to be used and that will achieve the objectives.
Examples of strategies could be to have quality inputs, have outlets located strategically make use of merchandising, etc.
4. Market research
The market study describes aspects of the market such as the industry which will belong to the business, the target market which will lead, and the competition will be.
The objective of the market study is to show the reader relevant information from the market and signaling how it will take advantage of this information, and demonstrate the feasibility largely business.
The part or section of the market study should include the following elements:
The industry analysis
The industry analysis describes the industry or sector in which it is to locate the business, including its history and how it has evolved over time.
At this point we might note, for example, the size of the industry, our position within it, its key players, past, current and future sales growth prospects, trends, etc.
To get this information we could go to different sources such as the Internet, publications, and business journals, or government offices where we can get reports, statistics, trends, etc.
The analysis of the target market
The analysis of the target market is the most important part of the market study. It describes the target market which will run the business (to choose it would be necessary first to perform a market segmentation help us with this task).
At this point we might note, for example, what are the tastes, preferences and desires of the consumer conforms, where buy, when to buy, how often buy, how much you spend on average, what their habits, their customs, are the attitudes, etc.
To obtain this information it is usual to go directly to the consumer and make him a surveywhere you can ask questions such as:
- Do you use this type of product?
- What are your favorite models?
- What features would you add or change?
- Where do you usually buy?
Another common way of getting information to consumers is to go to places where they usually purchase the product or service that will be offered, and observe their behavior, for example, models that are most in demand, questions or objections that often they Ask vendors, etc.
The competition analysis
The competitive analysis describes future business competitors, both direct (companies that produce or sell similar products or services that will be offered) and indirect (companies that produce or sell substitute products or services that will be offered).
At this point we might note, for example, how many, what are the main, where they are located, what is your experience, what is your ability, what materials or supplies used for their products, what their prices are, what their points sale, which advertising media used, what their strengths and weaknesses are, etc.
To obtain this information it is usual to go to places where competitors are located and observe the products or services they offer, their prices, their marketing strategies, etc., or visit their premises and observe the products or services you sell more, its processes, the care they give to consumers, etc.
The demand forecast
The demand forecast or sales forecast is an estimate of future sales business for the period of time that is projected business plan.
The demand forecast is obtained through industry analysis, analysis of the target market, and competitive analysis.
For example, when making the analysis of the target market could try to decipher how willing is the consumer who conforms to acquire our product or service, including in the questionnaire of our survey questions such as:
- Would you be willing to try this new product?
- How much would you be willing to pay for it?
- How much is usually paid for similar products?
- How often acquires similar products?
Or, at the time of the competitive analysis, we could try to calculate the average number of clients have a day which will be our main competitors, and the average consumer that these customers typically perform.
The demand forecast will help us later to develop the sales budget (on the part of the study of income and expenses), so we must try to make it as accurate as possible.
The marketing plan
The marketing plan or marketing plan identifies the key marketing strategies or trading strategies to be used to meet the target market.
Marketing strategies are often divided into strategies for the four elements of the marketing mix (product, price, place and promotion).
Examples of marketing strategies could be:
- Product : innovative features that have the product, including services, etc.
- Price : the price of the product introduction will and the price will be increased once the demand, discount rates to be used, etc.
- Place : brokers that work with the points of sale where the product is sold, etc.
- Promotion : advertising media to be used, sales promotions to be offered, etc.
To formulate marketing strategies should take into account the industry analysis, analysis of the target market, and competitive analysis;for example, one of our strategies could be using the advertising media that is most accessible to the consumer that makes up our target market, or that it is giving better results that will be our main competitor.
5. The technical study
The technical study or business plan describes the physical requirements of the business, as well as functioning.
The aim of the technical study is to show the reader how will the daily operations of the business, and who created a business plan, understand and well planned such operations.
That is why the technical study should provide enough information without being too technical or comprehensive to the point of losing interest to give the reader to read it, or that it can not understand because of its complexity.
Part or section of the technical study should include the following elements:
The physical requirements
Here we list the physical requirements for running the business (buildings, land, machinery, equipment, tools, vehicles, furniture, supplies or raw materials, etc.), including their respective costs.
Here we are a description of the stages comprising the daily business operations, starting with procurement, through processing of the products, and culminating with the storage and distribution of these.
For a better description of the business process or production process, it is advisable to include technical aspects such as purchasing policy, the size of inventory, rates and standards to be used for quality control, etc., and develop a flow diagram or flowchart.
Here is a description of the premises where the business will operate, for example, we note its infrastructure, its size, its location and the reasons why they chose that location, etc.
For a better description of the local business, you should also include in this technical aspects, such as production capacity than will, the ability to be used, the location or disposition of machinery, equipment and furniture (rendering plant), etc., as well as make use of drawings in which your location is displayed and / or in which the distribution of the elements is displayed.
6. The organization
The organization describes how the business is organized and how they relate to each other the different areas, departments or functional units that make up.
The aim of the organization is to show the reader how to split up or have business areas, and that this will be a well-organized business that will have a good coordination between their areas.
The part or section of the organization should include the following elements:
The structures or forms
At this point we note whether the business will be made in the form of natural person or in the form of legal person , whether it will be a sole proprietorship or partnership, and the type of company under which will be legally constituted (EIRL, SC, SA, etc.).
At this point we note the type of organization that will take the business (functional, by product, matrix, etc.), areas, departments or functional units that make up, and hierarchical relationships between them will.
For a better description of the organizational structure of the business, you should represent it through a chart.
Charges and functions
At this point we note the posts or positions will each area, department or business unit organic, general functions that will each and, if possible, their specific functions or tasks as well as their duties and responsibilities.
The requirement of staff
At this point we note the staff that will be required for each position or office.
For a better description of personnel requirements, it is advisable to develop a staffing table, point out where the jobs or positions of each area, the number of vacancies, and the required profile for each position or office (experience, knowledge, skills and skills that a person should have to apply).
At this point we note salaries, wages and benefits will be assigned to each position or office.
For a better description of personnel costs, you should also prepare a table with the screening of all expenses will have on staff for the period of time that is projected business plan.
Here we describe the process input, storage, processing and output of information brought to the business.
For example, he noted how information (shopping, customer data, etc.), who will be responsible for recording the information, where it is stored, processed and organized, and how it will be provided when required (through is recorded reports, reports, etc.).
The profile of management team
Here we describe the team with which already has to start and then run the business (this, especially if the main purpose of the business plan is to present to potential investors).
For example, note the career of each of the team members, who have experience in the type of business, its completed projects, their achievements, knowledge and skills that contribute to the business, etc.
To supplement this information could also include their resumes in the documents accompanying the plan.
7. The study of investment and financing
The study points out the investment and financing investment structure, and describes the aspects related to the financing of the project.
The objective of the study on investment and financing is to show the reader what the capital required to operate the business in which such capital will be used, and how to get or be seeking.
The part or section of the study on investment and financing should include the following elements:
At this point get a list of all fixed assets (tangible elements necessary for the operation of the business that will not be for sale) that will be required, together with their estimated costs.
Fixed assets are usually divided into:
- Furniture and fixtures : includes the furniture and various equipment such as, for example, tables, chairs, desks, shelves, computers, printers, telephones, cash registers, calculators, extinguishers, etc.
- Machinery and equipment : Includes necessary to manufacture the product or service delivery, for example, production machines, drills, lathes, welders, tools, etc.
- Vehicles : includes the necessary personnel for the transport of goods or business vehicles.
- Land and buildings : includes land, buildings, constructions and infrastructure and the investment required for the refurbishment of the premises (remodeling, installations, painting, finishing, decoration, etc.).
Here we list all intangible assets (intangible elements necessary for the operation of the business) to be required, with their estimated costs.
Intangible assets are usually divided into:
- Research and development : project studies, market research, product design, etc.
- Constitution and legalization expenses : legal constitution of the business, obtaining permits and licenses, registrations, etc.
- Start-up costs : search, selection and training of personnel, opening marketing, promotion and advertising, etc.
- Contingencies : amount allocated for emergencies.
Working capital is the money needed to operate the business during the first production cycle (time elapsed since the start of business operations until money is obtained in quantities sufficient to continue operating normally without requiring more investment time).
Here we list all the elements that make up the working capital, with their estimated costs.
Working capital is usually classified into:
- Achievable : made up of everything that can be stored, for example, raw materials or inputs (when it comes to a manufacturer) products for sale (when it comes to a trading company), packaging, stationery,etc. .
- Available : required to pay various services such as, for example, utilities (water, electricity, telephone, Internet), earnings (wages and salaries), maintenance, municipal taxes, etc., after they have been used money.
- Callable : disbursements are made in advance. They are called enforceable because one spends or invests in them, and then demands the right to use. They are due, for example, the advance to suppliers, the advancement of office rent, advertising, insurance, etc.
The total project investment is obtained by adding fixed investment, intangible assets and working capital.
At this point we note the amount that fixed investment amounts, the amount amounting to intangible assets and the amount to which the working capital amount, then the amount that the total investment amount of the project.
The financing structure
At this point we note whether the project will be financed entirely with own capital, or may require some form of external financing.
In case of using external financing, we note what percentage of the total investment will be covered by equity and what percentage will be covered by foreign capital (for example, could finance the project by 40% with equity and a 60% with external capital).
In case of using external financing and know in advance the source (s) of which will be obtained at this point we describe the source (or sources) and point out the characteristics of the credit.
For example, if you have obtained a loan from a bank, a brief description of the bank and note the characteristics or conditions that will give us the loan (amount, maturity, cost, etc.).
Also, at this point it is advisable to draw up a table where we point out the fees to pay for the period of duration of the loan (which later will serve to establish the budget for the payment of debt on the part of the study of the income and expenses).
8. The study of income and expenses
The study of income and expenses indicates future business income and expenses for the period of time that is projected business plan.
The time is projected a business plan often depends on its objectives and the type of business to be done. The usual practice is to make a projection of 3-5 years making monthly projections for the first 12 months and then yearly projections for the next 2, 3 or 4 years.
The objective of the study of income and expenditures is to show the reader the projections of revenues and expenditures that will have the business and the relationship will be between them.
The part or section of the study of income and expenditure should include the following elements:
At this point we develop the budgets of income for the period of time that we will project the business plan.
Unless there are no other types of income, revenue budgets are basically the following:
- Sales budget (for processing must be guided forecasting demand we previously developed in the part of market research).
- Budget receipts.
The expenditure budgets
At this point we develop the budget expenditures for the same period of time in which we have projected revenues.
The expenditure budgets are basically the following:
In a producer:
- Production budget.
- Budget requirement of raw material.
- Quote from raw material purchase.
- Budget payment of raw materials.
- Budget direct labor.
- Budget indirect manufacturing expenses.
- Budget production costs.
- Administrative budget.
- Sales expense budget.
- Amortization of intangibles.
- Budget debt repayment.
In a trading company (dedicated to the purchase and sale of goods):
- Shopping budget.
- Budget payments.
- Administrative budget.
- Sales expense budget.
- Amortization of intangibles.
- Budget debt repayment.
At this point we find the balance point of the business (point of sales activity or where revenues are equal to expenses).
The projected cash flow
At this point we develop projected cash flow or cash budget.
The profit and loss forecast
At this point we develop the projected profit and loss or operating budget.
The projected balance sheet
And at this point we develop the balance sheet projections.
9. The evaluation of the project
The project evaluation shows the development of the financial assessment of the project.
The aim of the project evaluation is to show the reader that the project is profitable, how long the investment will recover, and how much is to be gained by it.
The part or section of the project evaluation should include the following elements:
The period of payback
The payback period of the investment marks the time it will take to recover the capital invested.
To find it, we must take into account the investment project (study of the investment and financing) and the results of the projected cash flow (study of income and expenses).
For example, if the total investment is US $ 12,000 and the first year we will have a cash flow of US $ 4,000 in the second year of US $ 5,000, and the third US $ 6,000, we could say that the payback period of investment is 3 years.
The return on investment (ROI)
The rate of return on investment (ROI by its acronym in English) is a financial indicator that allows us to measure the profitability of the project.
The formula for ROI is:
ROI = (Utilities / Investment) x 100
For example, if the total investment is US $ 20,000 and total profits to be obtained during the period of time that is projected business plan is US $ 4,000, applying the formula of the ROI:
ROI = (4000/20000) x 100
It gives us a ROI of 20%, which we could say that the project is profitable and offers a yield of 20%.
The NPV and IRR
The NPV and IRR are other financial indices commonly used when evaluating the profitability of a project.
Net Present Value (NPV) measures that will gain the investment project by discounting the total future cash flows (which are previously updated through a certain discount rate).
While the Internal Rate of Return (IRR) is the maximum discount rate the project may have to be considered profitable.
If the project involves obtaining financial credit, for a better evaluation is usually divided NPV and IRR NPV and economic IRR (for which takes into account the economic cash flow), and NPV and Financial IRR (for which we take into account the financial cash flow).
10. The action plan
The action plan describes the program and timetable of the main activities to be undertaken to implement the project or start-up business.
This usually includes, in addition to the description of such activities, controllers and each of these, the dates will begin, and the time they will have.
11. The conclusions and recommendations
The concluding section outlines the conclusions and recommendations that have been made in developing the business plan, and recommendations are provided as a result of each of the conclusions.
Finally, the annexes or documents are documents that provide additional information to the reader, which are included at the end of the business plan so as not to overburden the main part and finish making reading difficult.
These documents are usually made up surveys in market research, the lease of the premises, contracts with key suppliers, agreements with partners, promotional material (advertisements, brochures, catalogs, etc.), specifications production techniques, the details of the cost structure, the resumes of the members of the management team, among others.
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