The Business Plan: Why and How to?
The business plan is a document allowing to define a project idea and to understand the transition from a concept to a concrete project. It is composed of 2 main parts: the qualitative and descriptive one and the financial part.
Introduction to business plan
The Business Plan (BP) is the operational, financial, and clear extension of the Business Model (more information on the business model here). It is a formal presentation document of the strategy of the company, the vision of the leader, how the business model will be implemented, the financial situation and the future activities of the company. The BP is composed of two main parts:
The qualitative part composed of the executive summary, the company description, the solutions and/or products to be developed, the competitive and market analysis, the lead team presentation, the marketing and sales strategies, and the legal aspects of the project.
The financial forecast in which are presented the financial data, the financial projections, and the expected funding opportunities.
The business plan aims
The BP is an essential document for the creation of your project. It allows to:
Describe the project, identify the team (mainly the managing team), and the project environment.
Justify the quality of the opportunity and identify the risks that may encounter the project implementation.
Structure and organize the project. The BP is the roadmap of the project.
Communicate and convince the partners and investors.
The information of the business plan
The BP collects the information required to understand the dimensions of the project and measure its potential performances:
Information on project leader and the dedicated team.
Products and markets.
The BP must be highly structured, organized, coherent, and precise.
How to build your business plan
A business plan is a document of 15 pages approximately. It is composed of two main parts: the qualitative part and the financial forecast.
The qualitative part:
This part contents must show:
The executive summary.
The project/company main idea.
The whole team: managing team, scientific/technical team, marketing team, etc.
The solutions and/or the products to be developed.
The aimed markets, their size, their requirements, etc. (market analysis):
o The total available market: how big is the market you aim to address.
o The served available market: how many can you reach with your sales channels.
o The targeted market: who will be the most likely buyers, locations aimed, the percentage of the market you are aiming, etc.
The marketing and sales strategies and channels.
The legal aspects of your projects, regulations, norms, Intellectual Property management, Freedom to Operate, etc.
The barriers/risks (financial, technical, legal) you may encounter and how you intend to mitigate and overcome them.
The financial forecast
It is your financial plan. It translates your business model in forecasts figures. Indeed, it describes your objectives and actions in expected turnover and needed investments and costs to be engaged.
This will allow you to think about the following questions:
What are the means allowing to leverage the development of your project and what are the associated costs?
How are you going to create turnover?
Which costs should be engaged to create this turnover?
What are the required investments?
Thus, four different modules should be investigated and estimated in your business plan: the sales, the investments, the expenses and the Working Capital Requirement (WCR).
Those are estimated thanks to a thorough market analysis, potential customers, first customers/alpha testers, competitors, commercial strategy, technology selection, etc. You should present this in a clear and precise manner showing a good knowledge of your project ecosystem.
Those are all the costs to be engaged to allow the deployment of the developed solution/product/service. These costs are considered as “expenses” in your company accounts but in your BP they must be considered as investments for the company. For example, the expenses related to the research & development, marketing, commercial activity are considered as investments for the company.
These are the sum of your fixed and variable costs. The fixed costs (salaries, rent, leasing, etc.) are independent from your turnover. The variable costs (raw materials, purchase of good or services, depreciation costs, etc.) vary as a function of your turnover.
The Working Capital Requirement (WCR)
It is the amount of money required to cover the lags between the collection of sales (payments from customers) and the disbursement of expenses (payments to suppliers). It can be calculated as follows:
WCR = Inventory + Accounts Receivable – Accounts Payable
The inventory are the stocks of the company.
Receivable accounts can be sales, tax credit for research, recoverable VAT, etc. Those are the money due to a company in the short term.
Accounts payable are amounts due to suppliers for goods or services.
The BP is a tool that formalizes the process of transitioning to the action plan. It allows to translate the project into concrete actions permitting to implement a schedule and financial forecast.
Interested in project management topics? Subscribe to NETO Innovation website to receive our management related posts directly in your inbox.
Follow us on social medias and keep up to date with our latest news: