What is a business plan and why write one? A business plan is a way of putting our project down on paper: the future of our business, based on the resources we have today. In this article we’ll go through all the points it should cover and, in the last section, you’ll find examples and can download free business plan templates and models.
We need to define the business idea we want to pursue and, basically, why we think it will succeed. In our business plan we should set out:
- The budget we need
- Our objectives
- The strategy we’ll use to meet those objectives
As we said, a business plan has no set format, but we can recommend a few rules to keep in mind.
It should be aimed at, and written for, more than one reader, so use language that different groups can understand: advisers, banks, general managers and so on.
What is a business plan for?
Above all, a business plan helps us assess objectively whether our future business will be viable and profitable.
As a planning and evaluation tool
In it we set our objectives and minimize risks.
As a financing tool
A good business plan lets us show banks, financial institutions and lenders that our business idea is worth investing in and that we’ll have no trouble repaying our debt.
For tracking objectives
Once the business is up and running, we can check whether the results match the plan we made at the start. If we’re falling short of those objectives, we can look for a solution right away.
There’s no set format or structure to follow when drawing up a business plan. Always put enthusiasm and objectivity into it, and present it to lenders with even more enthusiasm.
See also: Profitable business ideas for the future
The business plan structure we recommend
- Business description
- Market study
- Commercial description
- Technical description
- Purchasing plan
- Organization and human resources
- Legal structure
- Economic and financial study
- Risk assessment
- Final summary
1. Business description
In this section we give the company’s name and address, whether it is still a project or already incorporated.
Include a brief summary of the nature of the business. This summary gives the reader a first idea of what the business plan contains:
- Number of employees
- Products sold
- Services offered
- Activities or sectors in which the company operates
2. Market study
Give a brief description of the company and how it differs from competitors’ products. Then set out the business model and the expected revenue model, and mention the measures that protect the product and the rights over it:
- patents
- trademarks
- logos
- type approvals
3. Commercial description and marketing plan
The aim of the marketing plan is to set the sales strategies needed to reach the revenue figure proposed later in the economic and financial study.
- Set our sales strategy. How we’ll reach potential customers; pricing, quality, distribution.
- Scope. Whether we’ll operate regionally, nationally or internationally, and plans for future expansion.
- Selling prices. Compare them with the competition’s, along with profit margins and any resulting cost savings.
- Promotion and advertising. The methods and media we’ll use to promote our business and make it known, as well as the sales team we have.
- After-sales service. Highlight how we follow up with customers and the guarantees we’ll offer on our services and products.
- Distribution channels. List all the distribution channels we’ll use.
4. Technical description
We need to describe in detail the procedures and technical requirements we’ll rely on to provide specific services.
- Operating cycle. Include the number of units to be produced and the number of shifts needed, as well as the staff for those shifts and the days required to meet production forecasts.
- Location of our production facilities, and the availability of skilled labour to run them.
- Estimated cost of our facilities.
- Equipment needed to manufacture the products or sell the services.
- Strategy for the production process, including subcontracting options and the qualifications and cost of subcontractors.
5. Purchasing plan
List the materials needed to produce and sell our product or service:
- Estimated cost
- List of possible suppliers
- Raw materials for the business
- Payment terms
- Supplier payment periods
- Purchase discounts
6. Organization and human resources
Include a description of the management functions and positions, the profiles required, and a description of the people involved with a list of their responsibilities.
For each person in a position of responsibility, detail their experience and professional qualifications.
7. Legal structure
State the legal form the company will take and why it was chosen, as well as the tax regime and the choice of partners.
If we have, or plan to have, advisory services, specify their specialty, qualifications and estimated cost.
8. Economic and financial study
In our business plan it’s essential to assess the economic potential of the project and present viable financing alternatives:
- Analysis and working capital
- Financing needs and plans
- Choosing the most profitable option for the project
- Projected balance sheets for 5 years, with monthly forecasts for the first year
- Projected income statements for 5 years, monthly for the first year
- Source of the funds raised
- Use of the funds raised
When negotiating with investors, we should use valuation methods that let us work out the value of the contribution we’re asking the investor to make.
9. Risk assessment
Like any business launch or venture, ours involves multiple risks, which we should address in our business plan:
- New technologies
- Competitors’ reactions
- Changes in demand
10. Final summary
In this section, summarize the main strengths of the business or business project, along with its weaknesses, advantages and opportunities, threats and risks.
I’d stress that a business plan is essential when it comes to raising outside financing, so it’s worth taking time over it, or sitting down with a specialist adviser to do it professionally.
That said, the structure of the business plan will vary with the business itself, since many of these points won’t be needed for certain types of business.
11. Examples and free business plan templates to download
Through this link you can download all kinds of business plan models for a wide range of industries: livestock farming, carpentry workshops, vehicle sales, wholesale trade, intermediaries, cafés, bars and more.
Featured image: Answir, CC BY-SA 4.0, via Wikimedia Commons.
