Highlights of the business plan
A business plan allows you to keep an eye on your goals more easily and achieve it more effectively. Because without plans, you can easily get lost and just drift.
What is a good business plan for?
A business plan is actually a medium-term plan that breaks down the description of strategic plans over the next 3-5 years. This can be seen as a tactical implementation that facilitates operational implementation.
In everyday life, it’s easy to get lost in the details, but a business plan written 3-5 years in advance will help keep your eyes on the goal, making it easier to achieve.
You may ask, for who do you to create a business plan?
- owners (including yourself, but if there are more than one, for them too)
- employees in key positions (accomplishing the task of the plan is what you expect of them)
- tender judges
Of course, each target audience needs different information, so the business plan given to them should include something different.
The purpose of the business plan
The purpose of a well-written plan is to summarize the information jet on the table. This can affect the whole company, i.e. it involves visioning, but you can narrow it down to a given sub-areas, say what you just want to improve.
The financial plan and risk analysis will also be part of the document, so you will already see in this section whether there is at least a mathematical chance to implement your plan. With risk analysis, you will also see what “price” you will pay for it, i.e. how easy it will be or whether it will be very difficult to succeed.
So if it already turns out here that you are unlikely to pay for your expenses, you have saved yourself a lot of nervousness (and money as well).
In addition, of course, it also gives the bank or investors the opportunity to decide if they see possibility in your business enough to give money to development.
Possibilities of mistakes when preparing a business plan
Since no one anticipates 3-5 years, it is natural that the completed plan and reality will not overlap 100%. The less practice you have in your business, the more mistakes you will face (at least in the beginning).
You are making an overly optimistic business plan
This error is most common when you are entering as a complete beginner or opening a new market. When designing normal operation, it is so unrealistic that I have not heard anyone who has seen it .
Obviously no one is planning a fall, let alone no one posting it everywhere. That wouldn’t even be realistic. But how realistic do you think it is for you to plan for your customers to be standing in long crowded lines at your door after starting just because you’re willing to let them in? Accordingly, your sales volume will grow much faster than your competition, your profits will rise as a comet, and your costs will not change. I know you wouldn’t be planning such a fairy tale plan :). If you don’t fully understand the essence of the business plan, the plan may not be nearly as pink, but it will only make it a rising trend in profits. After all, a super product that’s in your hand and that is surely everyone needs. (I think marketing readers just got screaming.)
It’s easy to fall into this mistake, especially as a beginner. To avoid this, also make a “B” plan, ask what would happen to you if as a beginner (or entering a new market) you couldn’t catch up with the performance of your market environment in the first stage and then “just” follow them later. The question is, is it still appealing to you?
You don’t even look at it
When preparing a business plan, it is important to plan costs. If you don’t even look at it, there’s no feedback in case you deviate greatly from the plan. Then you can be disadvantaged in two things:
- your costs may be higher, but you don’t stop production because other products balance the loss (so it doesn’t seem to be a problem)
- if you write your next business plan, you will do it with the same efficiency, because you have not learned anything from it
It doesn’t really fit your life situation
Whether you’re talking about planning over time or across branches of business, your plan will “hang in the air”.
Creating a business plan is felt a burden by many in the micro and SME sector, and even if they make it, it is either just for a specific function (e.g. a loan) or for firefighting when the house is already burning.
With a business plan for a particular product / activity (e.g., borrowing), if you don’t see the whole picture, you can easily run into the mistake of having to ruin everything else if you implement that plan. So then make a comprehensive picture of yourself (you don’t have to show it to anyone) and be a part of that what the bank gets.
A business plan that can be used over time is somehow structured like this: take the example that you opted for 3-year plans, then the 2017-2020 overlaps with the one prepared for the 2018-2021 stage, part of which joins the 2019-2022 stage to the plan. So you plan the next one every year and review the previous ones, instead of realizing at the end of the plan that the house is burning and you need to move on right away.
Parts of the business plan
The larger your company and the more complex your business, the more detailed and longer your business plan will be. Regardless of the size of the company, however, there are parts that will appear in longer or shorter forms, but in any case.
This section provides a few-page (at most 1-2 pages) summary of the full draft for those who for some reason do not read through the document.
Since this is the very first point, you can write this section at the beginning, but if you don’t want to work twice, you’d better start with it once you’ve finished your plan. Then you will see the whole picture yourself.
Introducing the business: what you do is what your product / service is
You don’t have to exaggerate your business presentation here. While there are many who like to tell you about how the goal came about, here’s more to focus on your main mission. That is, not who you are, but why you are.
The same is true when presenting the product(s), although there you should already be more detailed.
- what is your product
- who is your target market
- why should the buyer choose you, how does your product differ from the others?
- how do you position the product?
- what problem and how does the particular product or service solve it?
Introducing your business model
How you create value and thus how you will have sales revenue. Since a lot of things stand or are failing at this point, banks and tender judges are particularly sensitive to this part.
Precisely because the business plan is the engine of your entire operation, if they don’t like what you describe (i.e., they don’t see your product and model as profitable), they will not only call you for the gap to be filled, but will be rejected in 99% of cases without a second chance.
At this point, answer questions like
- what pricing do you use?
- what does the sales process look like? Starting from finding each other with the buyer (describe the process of this as well) until the buyer gets the product and you get the money.
- what your customer gets for their money and what tasks it means to you (either on the execution or cost side)
Presentation of the industry situation
At this point, you present your operating environment. Also how you are affected by current competitors and environmental influences, and how you fit into the picture.
There are basically two methods of analysis:
- PEST analysis: focuses primarily on external factors (political, economic, technological and social factors)
- SWOT analysis: focuses on internal factors (strengths, weaknesses, opportunities and threats)
Describe the most important tasks that arise during operation. You have already described 2 paragraph ago what problem your product solves. At this point, you explain what you need to do within your company to make this happen. So what you need to produce, what, and how much you need to use to achieve this.
Production and development plans are also displayed here, ie you have a brief overview of whether you can keep up with the described plans at all (procurement, warehousing, delivery capacity).
Achieving the goals may also require growth, you can specify them here as well. Eg a 3% increase on a monthly basis compared to the previous month / same month of the base year.
Specific numbers are important, they make your plan measurable.
Product, price, promotion :).
Whatever plan you want to accomplish, it won’t have just revenue. The results are definitely preceded by the costs you absolutely need to plan.
The financial plan is a relatively more breathtaking part of the business plan, after all, here you will describe when and from what you plan to implement it, as well as what impact it will have on your business.
Cash flow plan
It shows when and how much revenue and expenditure will be expected in the next period. The Cash Flow plan helps you forseen if significant expenses are ahead of revenue somewhere in time. Then you can prepare for it in time and you can make sure that liquidity is not a problem for you.
Income statement and balance sheet plan
In it, you show what changes are expected in the company’s assets and liabilities compared to the current situation (ie compared to the base), and what kind of results they aim to achieve.
Although everyone likes to see growth, but at this point be realistic. There is no problem if you see that due to the construction of a larger plant, your balance sheet result will be negative in one year (possibly two), i.e. you will make a loss in that year. After all, it’s natural. The trouble can start there if you see that the whole thing remains unprofitable, so be very strict with yourself here.
It’s easier to cross out a loss-making plan on paper than to change it in reality.
There are many questions at this point. Among other things:
- What do you want to achieve and from what source?
- What is the timetable for implementation?
- Does it require an external source, e.g. investment loan?
The calculation of the break-even is important in several ways.
At this point, you can already see what the task of production is and from what source of supply you realize it. So you will know your costs. From a well-prepared marketing plan, you will have at least one plan on how much sales volume you are expected and at what time of year it will occur (especially if the product is seasonal).
In the break-even calculation, you see wether at least the break-even will occures and, if so, when. So you filter out that you do not plan and produce more than you can still produce economically, and do not start with less than what returns your costs.
If you are still alone, this part will be the easiest. But in order to grow, you already need to know when you are wearing which “cap”.
In the case of companies with a more complex structure, you present here who is responsible for what. It’s easy to have the right structure for your business, and it’s especially hard if you haven’t paid enough attention to it so far and everyone has done everything.
You know that something is wrong within your company, that you are scratching your head here and your employees are pointing at each other when a problem occures. With a clearly defined and respected area of responsibility, this is very difficult to imagine.
In this section, a separate presentation of the description of tasks and responsibilities is more important than the identity of the executor.
Here comes all the attachments that help understanding, but with which it is not practical to stretch the main parts as strudel. Be sure to use it to keep your plan clear.
- Do you create a business plan? If so, only for a given project, or to help the normal operation?
- To what depth do you see the need to design each part?
- Do you see a need to plan different outcomes? (eg “worst case scenario”, “normal operation”, “best case scenario”)
You can contact us here with your questions. Write down your question and we’ll see how we can help you effectively.