If you have the unusual times thinking of running your own business, there is no room for doubt, you can have an entrepreneur spark in you, which you should not switch off. There will be lots of challenges to face up throughout your pathway to be a successful businessman, particularly at the beginning. It is more likely than when you have visualized your start up, you have considered making a Business Plan and you are not clear about it. This is why, in this article we lay out some of the basics of a right Business Plan construction, from understanding the concept and uses, to giving you easy techniques for improving how to make it. We hope after you read the article, those brilliant ideas in your head overtake your imagination and the defining planning stage to come true.

When we heard about a Business Plan, many doubtful concepts come to our mind, and that is because businesses schools and people all the time use all the following terms alike: strategic plan, feasibility study, plan’s assessment and business plan. These concepts, seemingly equal within business and executive technical jargon have slight differences. Whereas the project’s assessment focuses on liquidity and profitability of an investment plan, the feasibility study is aimed to assess the viability of the plan in operating and technical aspects. On the other hand, a strategic plan, establishes the long term plan for the smooth running of the company. Finally, the business plan approach is the analysis of opportunities, and the economic, technical and market’s viability. As you note, it is easy confusing the terms and tangle in their meanings, approaches and purposes.

What is exactly a Business Plan?

It is a document written in a clear, succinct and simple style to describe the business idea, objectives and daily activities and strategies for achieving them. It is a guide to understand how the company will work. The friendlier it is in its construction as a whole (structure, writing and illustration), the more likely to be effective in showing the idea’s quality. A Business Plan can be created whether for new companies or for businesses which are already running. In this article, we will focus specially on its construction for new businesses.

Which are the previous stages to a Business Plan?

Once you have got an opportunity to exploit into the market, you must elaborate a precise business idea, which is possible by answering every single question below.

Imagine we want to run a Pizzeria.

Which products and/or services will I offer?

Our main product will be the pizza. However, currently is too much appreciated the innovation and pizza is perfectly flexible for creating new flavors and sensations. We could go from the classic Pomodoro style to crazy Nutella Pizza concept. We have the choice to combine lots of ingredients. Besides, we must offer desserts and drinks, and invent exotic alcoholic and non-alcoholic cocktails. We should choose between a pizzeria to take away, sit at a table and eat and both kind of services. We can provide customers the experience of watching how the pizza is made.

Who will my potential customers be?

After making a market analysis and detecting the unsatisfied needs, we will guess who my clients will be. More comprehensive studies to forecast the demand potential such as linear regression, multiple regression, structural econometric methods, and others provide more accurate information. By using simple methods we could identify our customers as the local people who live in the neighborhood of the future pizzeria location, as example. Later, we could expect to attract more customers that will depend on brand positioning and actions to increase our market share.

What unsatisfied needs would I fulfill with my enterprise?

A non-covered need can lead to a sort of business that have never existed before or the great improvement of another one which is already in the market. While answering these questions we should ask ourselves too:

With this business idea, which new business am I creating? Or how am I improving an existent one?

In this case we could identify:

  • The wants to try something new in pizzas and the customer’s choice to create their own pizza style.
  • The exclusive experience of eat and learn about cooking at the same time.
  • What is the added-value of my offer with regards my competitors?

Added-value is going beyond the expectations limits of the customers to a right combination of the benefits and attributes of our offerings. In this particular case, we could list many features of our product/services which would make attractive, unique and genuine the business idea. Among them, the possibilities to customers come in our kitchens and create their own pizza, are one of the most interesting. They would watch how the pizza is made and they would receive a kind explanation about pizza cooking process, best ingredients and special suggestions. Another factor may be a recreation space for children, this would allow adults better enjoy the moment while children play. All the facilities we introduce in order to offer more comfort enrich enormously the product, for example a closed door area and a terrace too.

  • Which will my income sources be? And how high are they going to be?

The direct source of incomes will be the sale of food and beverage whether at the location or at home delivery service.

Apart from the questions above, the entrepreneur should make a forecast of financial, economic, technological and human resources which will be required. Furthermore, the business model statement is another deciding step, after conceiving the business idea. The company’s model is something similar to the income sources: Where will the company get revenues from?, which is a determining factor to survive and moreover, generate profitability. At this moment, a financial analysis is done, by applying different investments appreciation methods to ensure the project will be profitable.

If the project is accepted, the entrepreneur should pass to acquire the financial resources to go ahead. They are frequently family or friends who support the entrepreneur as they can. Nevertheless, it is often needed higher investments only reachable by investors and financial institutions support.

What is a Business Plan used for?

The usefulness of a Business Plan can be explained from two points of view: the internal and the external or financial.

The Business Plan searches for describing and detailing the business idea, the company processes and its integration in the better possible way to be attractive and captivate future supporters.

From the internal point of view, a Business Plan can be considered a self-assessment tool for the daily company performance because looking at the plan, we can identify the existence of breaches regarding processes and standards. It is good to say the Business Plan is not a one-off activity. Despite it is conceived at the starting point of a business, it can be a powerful management instrument in everyday business life. Due to these important features, there are different sorts of Business Plans depending on its target public: investors or managers.

Internally the benefits to create a Business Plan are:

  • Attracting people who wants to participate in the work team.
  • Analyzing the potential demand and its variation.
  • Estimating revenues and the period of time required to recover the investment.
  • Developing a strategic plan with short/long term objectives and strategies.
  • Describing the operations of functional areas and the combination of their activities as a whole.
  • Estimating the budget for each functional area.
  • Simulating different scenarios where the company could be in the future, which means imagining company working upon different conditions due to environment changes.
  • Establishing strategies for each proposed scenario.
  • Detecting risks (legal, political, economic, financial, and operational) whose occurrence probabilities and effects could be reduced or totally removed. The right writing of a Business Plan leads to external or financial benefits. Among all these external benefits below, the most important is financing.
  • Acquisition of financial resources by informing investors or others funding organizations (banks and credit institutions) about the project profitability expectations.
  • Gaining potential customers and suppliers as a first step to tie up long term relationships between them and the company.
  • Presentation of the business idea to the overall society and convince it about project viability.
  • Arising the interest, confidence, and liking towards the business idea described.

Although there are lots of models of structure for a Business Plan, the following is a summary with the most important factors included:

Formulation and description of the business idea

The business idea should be formulated by answering the questions above as the Pizzeria example given before. The idea should be detailed as much as possible to achieve a public right understanding.

Opportunity study or external analysis (competitors study, demand forecast, micro and macro-variables analysis)

The goal here is forecasting the demand the business will have, who will my products/services buyers be? And how many will they be? Which is the current demand of my product? Looking for the answers to these questions we face up to the current offering of the product we want to launch, it means the companies who sell actually these products. The competitor’s analysis will allow to identify the strengths and weaknesses of the rivals, their good practices and the breach they leave. The data collection about rival companies will allow to estimate the demand by simple and/or complex techniques which can be applied in qualitative and quantitative methodologies. In this external analysis the Michael Porter’s five forces model and PESTLE (Political, Economic, Socio-cultural, Technological, Legal and Environmental) analysis are advised to be used, the first one to study the company micro-environment and the other one to scan the organization macro-environment, respectively.

Internal analysis (strategic plan and a SWOT matrix)

A strategic plan states the mission and the vision of the company as well as defines its generic strategy to follow: leader in costs, differentiation or niche player. Short and long-term objectives are defined with their correspondence strategies. At this stage it is good to make an analysis to distinguish the market position of the new company through a SWOT matrix. It could determine the strengths, weaknesses, opportunities and threats the company has. It is an internal business analysis.

Operational Plan

This step implies a technique study of which it will be estimated the equipment, infrastructure and tools required to make the business activities. This plan will list all the processes involved and its integration to get a final product with the quality requirements established.

Financial Plan

This plan will consider three main budgets: sales, investment and expenses which have been estimated with the information obtained in previous steps. The financial plan defines if the idea proposed is the enough profitable to constitute a business. The most commonly used methods to assess a project investment are the NPV (net present value) and the IRR (internal rate of return). Both indicators will determine if the project is acceptable and the investment payback time.

Marketing Plan

This plan will create the basis to commercialize a product/service by combining four P’s: Price, Product, Place and Promotion. In the initial stages of the product life cycle, marketing dollars are allocated towards to create customers and that is what this plan will do at this point.

Human Resources Plan

This plan will establish the sort of employees needed in the company team, their duties, responsibilities and qualifications as well as the salary policy and others essential factors related to human resources: the most important asset of any company.

Below are some tips on how to draft an effective Business Plan:

  1. The language throughout the document should be clear and unambiguous.
  2. We should not only make a passionate speech about the business idea. Each idea should be justified in terms of finances, logistic, operations and legal aspects.
  3. It is not necessary to end an analysis area to continue to the next stage. For example, it is not necessary to stop developing the logistic scheme of the business if the financial analysis has not ended yet.
  4. Each amend in the drafting will bind the remainder of the document. Make sure you review the effects of every change included.
  5. Business Plan precedents are often used to assist with the drafting of a new one. If you are using a precedent make sure you do not follow it slavishly and you do not bend the facts to fit the precedent. The goal will be to amend the precedent ensuring it covers the all requirements of your present idea.
  6. Use creativeness and give details of information.
  7. Illustrate the text with diagrams, charts and schemes.

This article lays out some of the basics of a right Business Plan construction, from understanding the concepts and uses, to giving you easy techniques for improving how to make it.


Imagen de mohamed Hassan

M
10 months ago

good article, entertaining to read and well explained, I hope more like this;)

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