How to draw up a business plan?

How to draw up a business plan?

To effectively implement any business idea, you will need a business plan. 

A business plan is a feasibility study of an enterprise's activities in a market environment, a program of its activities; it characterizes the model of the enterprise in the future. 

It is needed not only to start a business, but also to expand and develop the enterprise, to obtain a loan, and to attract investors. 

In other words, a business plan should answer the following important questions: Is it worth investing money? Should the bank issue a loan for the project? Should an entrepreneur start such a business? Is it necessary to expand the company and produce a new product?

Business planning goals

The main objectives of business planning:

• determining the level of viability and sustainability of the enterprise
• identifying the strengths and weaknesses of the company
• specifying the development strategy through a system of quantitative and qualitative indicators
• ensuring the support of investors and shareholders
• reducing business risks.

When preparing a business plan, entrepreneurs look for future reserves to reduce costs and increase revenues to ensure the growth of the company's profits. In the process of writing a business plan, strengths and weaknesses are identified (SWOT analysis). In addition, future development plans are drawn up with these aspects in mind to maximize the company's advantages and minimize its disadvantages. This helps to reduce business risks.

Drawing up a business plan

Where can I get a business plan? This is a question that worries many businessmen and future entrepreneurs. There are two ways to get a plan for the development or opening of a company: write it yourself or turn to specialists to help. If you buy a business plan from external experts, you can get a high-quality analytical product, and most importantly, in a short time frame.  

If you prepare it yourself, many professional tips on the Internet can help you create a business plan. Moreover, by developing it yourself, you can study the market in more detail, take into account all the subtleties and specifications of the business. 

You can also use your own labor resources to create it. After all, each employee who is well-versed in his or her area of work can contribute something important to the future development of the company.

Structure of a business plan

We offer you to familiarize yourself with the structure of a business plan according to the United Nations Industrial Development Organization (UNIDO) standard. UNIDO - an organization that offers business planning standards and fights for global prosperity by supporting the industrial development of developing countries through the mobilization of national and international resources.

The structure of a business plan in accordance with UNIDO standards should be as follows:

1. Cover sheet
2. Executive summary
3. Description of the industry and the company
4. Description of services (goods)
5. Sales and marketing
6. Production plan
7. Organizational plan
8. Financial plan
9. Evaluation of project efficiency
10. Guarantees and risks of the company
11. Appendices

Let's take a closer look at each section.

Cover sheet

The cover page should contain the following information: project name, organization, project manager, date of preparation, most important data (amount of investment in the project, amount of bank financing, etc.), information about the plan developer.

Executive summary

This is a crucial section of the plan. After all, many investors and businessmen read the executive summary to determine whether they are interested in the project. The executive summary should describe the business idea as clearly and qualitatively as possible, and should interest the addressees of the business plan: what product or service will be produced or offered; what are its competitive advantages. 

Here you will need to specify the following important calculations:

• amount of investment for the project
• loan terms
• return guarantees
• revenue from the sale of goods or services
• total profit for a certain period (month, quarter, year)
• payback period
• the amount of own funds to be invested in the project
• net present value of the project, etc.

The executive summary does not need to contain the correctness of the calculations; their detailed description should be provided in other sections of the plan.

Based on the issues to be disclosed in the executive summary, it can be concluded that it should be written only when all other sections of the plan are ready.

Description of the industry and the company

Here you need to provide detailed information about the company that proposes to implement the project: details, mission and goals, who is the company's management, its structure, history and achievements, the company's place in the market (depending on the products or services produced, the relevant industry should be described). Describing the market, indicate: who is the main player in the market, what products they produce, what strengths and weaknesses your competitors have, how fast the industry is developing, what new companies have appeared in recent years, what are the prospects for market development, etc.

In addition, in this section of the site, you should make a SWOT analysis of the company - an analysis of strengths and weaknesses, prospects, and possible threats.

Description of services (goods)

In this section, you need to describe your project as well as possible. If it is about production, describe a product or several products, if you are going to provide services, describe what exactly it involves. In addition, it is important to add a photo (sketch) of the product. 

When describing a product or service, you must provide the following information about it:

• name
• field of usage
• characteristics of the product or service (including environmental friendliness)
• availability and necessity of a patent, copyright, license, quality certificate
• terms of delivery and packaging
• warranty and after-sales service
• terms and conditions of use
• how the product can be disposed of.

In addition, be sure to write at what stage of readiness your product is - development, ready for sale, etc.

Sales and marketing

After the product is released, it must be sold.

It is in this section of the business plan that you need to describe how you are going to sell the product (service).

This section of the plan is known as the marketing plan. Here you need to specify who is the consumer of your products, whether you plan to supply them to wholesale buyers or end users (through your stores). Be sure to write down the characteristics of your customers (age, gender; names of wholesale buyers-enterprises, what will be the size of their purchases). In order to create a marketing plan, you must answer the following questions:

• who is the consumer of the product or service;
• what determines the price of your product; how you are going to set the price;
• how you plan to advertise the product or service; what is the advertising budget;
• how you can increase sales;
• whether you plan to provide customer service; what are the costs of organizing it;
• how you can increase the reputation of the product or service, the company.

Production plan

This section of the business plan should contain a detailed description of the production process. In addition, the following important calculations should be provided here:

• What is the maximum amount of high-quality products you can produce (per day, month, or quarter)
• Will you involve subcontractors? If so, who are they, what operations will they perform, and what subcontractor costs are foreseen
• What equipment do you need to purchase or rent; what is its cost?
• Do you need additional storage facilities?
• How many staff will be needed to ensure production; what are the salary costs
• List of required raw materials with prices; who will be the supplier of raw materials and why
• Calculation of fixed and variable costs; cost of production
• Provide graphs of production flow charts.

Organizational plan

This section of the business plan should describe in detail the form of ownership and location of the company, the process of organizing the management team and key specialists of the company, and the shareholders. It is imperative to list the management and indicate the boundaries of their responsibility, a list of tasks and functions. 

On the other hand, describe the organizational structure of the entire enterprise; how different departments interact with each other; provide project implementation timeframes; indicate how you will motivate staff to make the project successful; and how you plan to train and improve staff skills.

Financial plan

This section is very important because it shows the attractiveness of the project. Here you need to provide all the important calculations and explain their correctness. It can be presented in the form of a table of income and expenses. The financial report should reflect such calculations:

• Preparation period expenses
• Expenses of the main period
• Expenses related to loan servicing (if any)
• Expenses for taxes or tax payments
• Calculation of proceeds from the sale of products
• Other receipts and payments
• Income statement
• Real money flow
• Forecast balance sheet
• Payback period
• Financial dependence ratio. This is the ratio of the share of borrowed funds to total assets. A high value of the coefficient indicates a large share of loans in the company
• Operating leverage. An indicator that characterizes the quantitative degree of change in profit in accordance with changes in sales volumes.

Evaluation of project efficiency

In this section of the business plan, you need to calculate the effectiveness of your project. Thanks to the calculations, you will know whether the project is effective, whether it is worth investing in it, etc. 

The main indicators for calculating efficiency:

• Profitability index. It is calculated as the ratio of the net present value of the project to the total investment costs of the project. If the index is greater than 1, the project is worth implementing
• Internal rate of return. This indicator is calculated using a special formula, at which the net value of the investment project is equal to zero and is a model when investments, when paid off, do not generate profit
• Net worth or net present value of the project (NPV). The cost of future cash infusions is calculated by deducting investment cash flows but taking into account the discounted period of return on investment. An investment project is considered effective if the NPV is positive.

Guarantees and risks of the company

An important part of writing a business plan is the company's guarantees and risks. Here, you need to list all possible risks and identify potential threats; actions to mitigate risks; and a plan of action in case of risk situations to minimize the negative impact on the business. In addition, describe all the guarantees that the company has. Calculate the financial risk ratio (the ratio of the company's equity to borrowed capital). The closer this figure is to 0, the more financially independent the company is considered to be.

Appendices

Here, you need to provide tables, graphs, calculations, photographs, sketches, diagrams, regulatory documents, copies of contracts, statistical and other data that complement the main sections of the business plan.