The business plan is a concise and precise outline of a business proposition with a focus on the financial aspects. The summary over approximately 20 to 30 pages should be both very informative and short and succinct, and besides the business idea, it should say something about the target market, the business strategy and the portfolio of products and services. Factors such as marketing, distribution and organization are also described. One thing that should by no means be left out is the financial planning for the next three to five years – this is the centrepiece of any business plan.
What Is The Purpose Of A Business Plan?
It is always a good idea to develop a business plan in order to clarify the chances of success and the specific course of action in implementing the business idea and model. For fledgling businesses, a professional business plan is almost an obligatory requirement if they are reliant on partners in carrying out their plan. Entrepreneurs must be able to communicate their project to potential partners in a convincing manner and inspire confidence by showing them the basis for their decisions. Preparing a business plan has proven worthwhile in this context. For professional investors and increasingly for banks, loan guarantee cooperatives and other lenders too, a business plan is a basic requirement that must be in place before they will even look at a business idea.
A business plan provides a valuable service not only when preparing to set up a business, but also when expanding, securing financing, attracting collaboration partners or dealing with the authorities (e.g. applying for authorization), to name just a few examples. A business plan helps to:
- optimally prepare and plan forward-looking projects
- more conclusively assess the financial consequences of the project and – by drawing on risk evaluations – its chances of success
- continually develop and improve the project based on identified risks and weaknesses
- convincingly “sell” business ideas and projects to potential partners (banks, shareholders, collaboration partners, suppliers) and win them over to a collaboration
A Business Plan Makes A Winning Impression By Virtue Of Its Logical Structure
Preparing a business plan is a demanding task. Experience shows that the project often matures significantly in this phase. The original idea often undergoes substantial adjustment or is discarded completely. To convince potential partners (investors, VCs, business angels, banks, collaboration partners, suppliers) and give them the assurance they need in order to collaborate, the project summary needs to be logically structured. Following a brief description of the initial situation and the basic idea, the people behind the project are of particular interest. The main strategic decisions need to be derived based on the most important findings of the analyses in the form of opportunities/threats in the market environment and the company’s own strengths/weaknesses. In doing so, the company must define clear priorities as regards target audiences, offerings and clear objectives. It also needs to outline appropriate marketing and infrastructure measures to achieve the objectives. Based on the stated sales and growth targets and the investments and costs associated with the measures, it must then plan and explain the financial consequences in detail. Based on these findings, it must articulate clear requests to (potential) business partners.
Financial Plans Are The Centrepiece Of The Business Plan
Potential investors and lenders are particularly interested in the financial consequences of the strategic objectives and thrusts. The requirements in terms of the level of detail and the consistency of the financial plans with other concepts and plans are therefore high. The myriad interconnections show that drawing up accurate financial plans is no easy task, so it seems advisable to involve a specialist. For a fledgling entrepreneur, however, it is imperative to understand the interconnections and have an overview of them in their day-to-day work.
Important Enclosures To The Business Plan
Everything that is instrumental in winning over the partner should be enclosed with the business plan. Besides detailed forecasts, in-depth analyses, concepts, action plans, CVs, and extracts from debt enforcement or criminal records are also helpful. An entrepreneur’s manual (folder), in which all important concepts, plans and budgets are systematically organized and filed, conveys professionalism and integrity.
A critical examination of a business plan looks specifically for inconsistencies. The focus is thus on questions such as “Can the sales and contribution margin targets that have been set be achieved by means of the defined marketing measures?” or “Is an attempt being made to largely pass the risk on to financial partners?”. In the event of any uncertainties or additional detailed questions during the negotiations, it is essential to demonstrate competence. This can be achieved if the entire business plan has been systematically thought-through and there are already detailed plans for the main core elements.
The Business Plan Is Merely A Model For Success
Besides a structured business plan, unique products and/or services and a willingness to carry out intensive sales and marketing activities are also important for a company’s success. While a business plan may work “on paper”, good “bottom line” results ultimately depend on orders being successfully acquired on the basis of clear concepts. In this sense, the business plan is much more than just a “strategic cloud”. Financial planning and ongoing target/actual comparisons must always be one of the company’s core competencies.
