A business plan is a key and fundamental instrument for the success of entrepreneurs. Today more than ever it is necessary to have instruments and methodologies that allow entrepreneurs or those responsible for promoting investment initiatives to have the most accurate forecast of the profitability of a new project.
A business plan is a series of interrelated activities for the start or development of a company or project with a planning system aimed at achieving certain goals. The plan defines the stages of development of a business project and is a guide that facilitates the creation or growth of it.
It is also a cover letter for potential investors or to obtain financing. In addition, it reduces the learning curve, minimizes the uncertainty and risk of starting or growing a company, in addition to facilitating the analysis of the viability, technical and economic feasibility of a project. The business plan must convey to new investors, shareholders and financiers, the factors that will make the company a success, the way in which they will recover their investment and in the event of not meeting the expectations of the partners, the formula to end the partnership and close the company.
The business plan must justify any future goals that are set. Example: If an increase in the size of the market and in the participation of the company in it is forecast, the reasoning must be explained and supported with logical and convenient information. It must be very dynamic, so it must be updated and renewed according to the needs of the moment. Likewise, it must provide an overview of the market and the requirements of the new company, product, service or, where appropriate, its growth. The plan can be drawn up for a start-up company or one that is already operating and has development plans.
- When the company is operating and growing, a plan serves to restate objectives, goals and needs, as well as to request additional credits or investments for expansion and / or special projects. After a certain period of operation of the business plan, it is recommended Compare the results obtained with the original plan to know the possible deviations, the reasons for them, the consequences and the corrective measures to be taken.
Each business plan is different because it has the personal touch of the person responsible for its preparation and is designed based on the size and line of business of each company, which makes it impossible to establish an identical format for all cases, although it can be stated that most are similar. The veracity of the information included in the business plan is of vital importance for its success. Investors and financiers should know the projections that were used to estimate the forecast profit. They also need to know and understand the assumptions, logic, and supports that were used to make the projections. To make the business plan more objective and easier to analyze, it must include historical and comparative information, with statistical data and graphs from the last five years,in money and percentages, on different aspects of the company and / or the market.
Importance of planning
Most entrepreneurs do not give importance to the importance of plans in the initial phase of a business, but it is important not to ignore it if you want to be successful. Usually, the plans applied during the initial stage determine failure or success. It is a very valuable opportunity to make a calm analysis of the way in which you plan to manage and operate and how to comply with the master plan related to the mission of the company. Planning can mean the success and peace of mind of entrepreneurs. You have to be fans of planning precisely because nobody can anticipate all the possible contingencies that arise. The learning curve can be much more expensive, complicated and painful if you don't have a well-conceived business plan.
Features of a plan:
A business plan must:
- Define various stages that facilitate the measurement of your results. Establish short and medium term goals. Clearly define the expected final results. Establish measurement criteria to know what your achievements are. Identify possible opportunities to take advantage of them in your application. Involve your preparation for executives who will participate in its application. Appoint a coordinator or person responsible for its application. Anticipate any difficulties that may arise and possible corrective measures. Have programs for its implementation. Be clear, concise and informative.
Characteristics of the goals
Most entrepreneurs do not consider the importance of setting goals, but these are essential to define the course you want to follow and assess whether the path is correct or must be corrected.
The main characteristics that the goals should have are:
- Contemplate goals and means. Be quantitative and measurable. Be concrete, realistic and consistent. Have a defined time for achievement. Be set by the participants. Be in writing. Individual goals should be related to those of the group.
Content of a business plan
Different formats can be used to develop a business plan, since there is no universally accepted content for its development. The content presented below must be adapted to each company, since the business plan differs when starting a company that is already in operation and wants to grow. Of course, it must also be adapted to the size and line of business. Taking into account the above, the business plan presented below is intended to serve any company. Therefore, all the points that large companies must consider are included.
The content of a business plan is as follows:
Introduction
This should mention what the company does or will do and the characteristics of the business plan.
Company Background
- Company seniority - Articles of incorporation, statutory reforms and legal representatives - Details of the history, evolution and outstanding activities - General information on shareholders and the board of directors - Relevant data on management - Company directors and advisers - Structure of the company legal capital Strengths and weaknesses in general.
When the company is going to start operations, the following should be included:
- The potential of the new project. The result of the feasibility study. The convenience of investing in the business (profitability). The way of carrying it out. Analysis of the sector to which the company will enter. General plan of introduction of the company to the market.
Mission
The mission is what the company intends to do and for whom it will do it. It is the reason for its existence, it gives meaning and orientation to the company's activities; it is what is intended to be done to achieve the satisfaction of potential customers, staff, competitors and the community in general. The mission must be precise, comprehensive, motivating and convincing, as it is the basis for all staff actions to move in the same direction.
goals
As a whole, the general short, medium and long-term objectives of the company should be mentioned, as well as the specific objectives and goals in relation to the following concepts:
- Sales, Purchases, Finance, Inventories, Personnel, Production, Profits, Growth
Location and facilities
- Geographical location and strategic benefits for the company. Type of facilities and characteristics of the warehouse, warehouse, premises or office needed to start and / or grow the business. Minimum necessary surface area. Distribution plans for the different areas of the company. spaces for growth and expansion plans. Characteristics of the rental or investment contract for the purchase of the property. Special specifications for machinery and equipment.
Market situation
- Market analysis Market characteristics Market composition (geographic concentration, population characteristics, socioeconomic levels) Market diversification in relation to previous years Market strategy Future expansions Factors affecting the market and how it will function under certain Circumstances. Information on the evolution of demand, supply and marketing. Untapped markets and penetration capacity. Market share by product. Participants and percentage of market share. Market segmentation and apparent consumption. Target market size and the potential market. Market trends.
Products and services
- Market acceptance of the company's products and services. Wideness of the product line. Ability to generate and develop new products. Characteristics, descriptions and applications of the product. Comparison with the competition in quality, economic aspects and market penetration. Availability for the market of new products. Balancing the mix of products and / or services. Projects to develop new products and services. Services offered or offered by the company. Situation of patents. Competitive advantages over those existing in the market.
Sales
- What is the customer base? Who are the most important customers? How much does the company depend on certain customers? How loyal are the customers and how can their loyalty be affected? How is the scheduling of customer orders? How? The customer portfolio will be expanded. Sales comparative for the last five years. Objectives by product and service. Goals for each area and seller for the next two years at least. Goals by distribution channel. Sales forecasts and differences in Previous forecasts with reality. Sales method. Sales by products, services and money (daily, weekly, monthly, quarterly, semi-annually and annually, compared to previous years). Sales divided by sellers (areas and customers). Services costs After-sales. Post-sale complaints.
Marketing
- Marketing plan and objectives. Acceptance of the image of the product and the brand. Strategies to strengthen the image and sales of the company. Strength of the company's brands. Diversification, evolution and launch of new products. Advertising campaigns. Efficiency and costs of the advertising and promotion area. Distribution situation (costs by areas and territories, and network cost).
Main competitors
- Analysis of the competition (main characteristics). Analysis of customer satisfaction compared to the competition. Channels and forms of distribution of products and services. Comparative table of advantages and disadvantages (advertising, promotions, sales network, quality, price, conditions credit, presentation, service, etc.). Distribution of market sales. Strengths and weaknesses in relation to the competition. Possibilities of growth and new business opportunities. Possible entry of important competitors in the market. Who are the most important competitors.
Executives
- Who they are and what they have accomplished to date. What are their motivations and aspirations. Why they are the right staff. To what extent they are committed to the success of the company. Financial commitments and investments they have with the company. group.Capacity to develop the company.Clarity and understanding of corporate philosophy and mission.Knowledge of the company's business.Administrative culture.Effectiveness of information systems and procedures in operation and control.Management style and directive quality. Successes and failures in achieving objectives and goals in previous years. Integration of the objectives of the different areas and hierarchical levels.
Trustworthy and unionized staff
- Coherence between the quantity and quality of the personnel and the objectives to be achieved. Important labor conditions of the collective labor contract. Curriculum of the first-level executives and key personnel. (Strengths and experience). Distribution of functions and responsibilities. The total amount of the monthly payroll and special benefits by area projected to three years. Structure and seniority of staff (organizational chart). Frequency of overtime requirements. Information on the staff of administrative and operational staff by area, mentioning characteristics and income. Future needs of personnel and availability. Plans of wages and salaries, compensation, training and evaluation. Template of base personnel, trust and management, compared to previous years.Rotation of labor compared to previous years. If there was a need to hire personnel, the reasons, in which areas, profile and quantity.
External advisors
- These may be: labor, commercial, civil, tax, external accountant, computer advisors, financiers and other specialists. Type of consulting and contracts.
Purchases
- Supply sources Main suppliers.
Inventories
- Stock levels in the warehouse Optimum inventory levels Stock rotation Control of maximums and minimums (differences, supply periods) Reductions or increases in inventories Inventory value
Operation and production
- Description of constructions and facilities, present and future needs. How the manufacturing process will be done. Installations, equipment and machinery necessary and available if demand increases. Ability to react in case of increased demand. Current state of machinery, when it will need to be replaced and what will be the cost. Growth plans for the production area. Percentage of returns and losses due to manufacturing defects. Personnel capacity. Installed and occupied capacity, and comparison with previous years. Capacity and production levels. Supports of engineering, design and quality control. Efficiency of operating systems and procedures. Structure of production and operation costs (fixed, variable and unit). Current and planned evolution in technology (compared to the competition).Flexibility of operations. Frequency and cost of preventive and corrective maintenance of equipment. Idle rates of machinery and equipment. List of main inputs. Level of returns for damage or low quality. Productivity levels per employee. orders. Preventive and corrective maintenance budget and programs. Problems in the manufacturing process.
Plans, programs and budgets
- Investment plan. Total annual budget and by areas. Annual work program by areas.
Accounting and Finance
- Amount of financial resources needed to implement the business plan. Where, how and when will the financial resources be obtained. Capacity to generate and attract financial resources. Break-even point analysis. Comparative tables of income and expenses, costs and expenses, gross and net profits of the last three years. Short and medium term indebtedness. Financial stability and solidity. General cost structure of the company and by line of business, areas, clients (cost system). Indicators and reasons financial (net profit, return of capital, etc.). Investments in securities and real estate. Liquidity in the short and medium terms. Profit margins. Margins by product. Compliance levels and deviations in budget management. Economic and financial profitability. of credits,under what conditions and with which institutions or people Assets (machinery, transport, computer equipment, real estate, etc.) Accounts payable from the operation Stockholders' equity, paid and social Mortgages General balance and current cash flow (together with the comparison of the last three years). Audited financial statements of the last three years. Updated financial statements (maximum three months old). Projected financial statements (3 to 5 years).Updated financial statements (maximum three months old). Projected financial statements (3 to 5 years).Updated financial statements (maximum three months old). Projected financial statements (3 to 5 years).
Credit and collection
- Analysis of solvency and liquidity of clients. Short, medium and long-term credits. Accounts receivable. Amount and credit conditions to clients in relation to previous years. Percentage of past due portfolio and bad debts. Average collection recovery.
Information systems
- Characteristics of information systems. Characteristics of automated systems. Type of reports and content.
Computing
- Company automation percentage Average age of equipment Average time of use per user
Technology
- Knowledge and use of new technologies. Plans for acquiring cutting-edge technology.
Contracts
- Leases and specials.
New business opportunities
- Strategic partnerships with other competing or complementary companies. Convenience of acquisitions of other companies related to the business. Creation of new complementary companies.
Conclusions
- General analysis of the current situation (political, social, economic and legal factors that may influence the strategy of the business plan). Feasibility of business success. Short, medium and long-term future of the company. Possible risks.
Annexes
- Some of the annexes that a business plan may contain are: General balances, Biographies of key men and advisers, Purchase intention letters, Copies of important contracts, Official documentation (licenses, permits, concessions, etc.) Market surveys. Profit and loss statements. Information graphics relevant to decision-making. Reports to the board of directors. Reports of external advisers. List of potential customers. Tax payments. Staff template and organization structure. Annual budgets. work. sales forecast. money flow projection. financial projections.
The business plan must include an executive summary that allows understanding the business in general. Condensed drafting of a business plan is not easy, but it may be the key to acceptance.
Executive Summary
The points that cannot be missing in the content of an executive summary belonging to a business plan are:
- Legal framework and organizational structure. Information on the market that the company will serve. Summary of the sales plan. Summary of the financial situation. Comments on the finances to facilitate the understanding of the commercial factors that affect the historical figures. Show how the results may be affected by changes in the most important risk variables. A description of the past and projected future in financial terms. Demonstrate that the business plan represents an opportunity that cannot be rejected. An explanation of how the investor or financier is intended to deliver the necessary financial resources.
The length of the executive summary should include the minimum number of pages possible, which allow investors to understand and be interested in the plan. The presentation, content, and form of writing and exposition are vital to the acceptance of a business plan by potential investors.
Strategic business planning
Strategic business planning is understood as the design of strategies so that companies have the capacity to adapt to changing conditions and to be able to access, win and stay in new markets. A company's business strategies must be delineated based on the specific needs of a target group defined in the market. Sometimes an outside-in strategy will be employed, where the internal structure ensures effective and successful execution of business strategies. Strategic planning must be oriented to innovation and the generation of new proposals. We are in the era of creativity, marked by the development of technology and knowledge, where research and the generation of ideas are a fundamental part of strategic planning.
A strategic business plan requires answering the following questions:
- What business are you in? What business do you want and should you be in the future? What is the company's current strategic position? What changes are seen as the most viable in the markets? What forces and trends are seen as the most feasible? What critical elements are detected? What business opportunities can be inferred? What probable and possible facts can be configured? How is the future of the company envisioned? What future conditions can be expected? What innovations should be generated? What actions can be taken to redirect operations to achieve the goals originally set? What alternatives are there to have more effective operations?more efficient and with better economy and quality? What preventive and corrective measures should be carried out? How to take advantage of the strengths of the company as a whole? How to have better forms of control? How to make better use of resources and facilities? How to have better marketing strategies? How to get to know the market better and how to beat it to the competition? How to increase sales and what are the new objectives? What type of advertising and promotions are needed? How can future strategies be detected? from the competition? How can detected training needs be corrected? What are the appropriate training courses? How can staff productivity be increased? How can we cover the needs of efficient and responsible personnel? When and how to implement continuous improvement? How can it be generateda culture of total quality? How to improve the service? How to develop integrated administrative systems? How to detect the need for mechanization and standardization? How to define investments in technology, machinery and equipment? How to start the development of new projects? How to have better purchasing strategies? How to decide the strategic acquisitions of other companies? What actions or costs can be shared with other companies? How can future financing needs be covered?machinery and equipment? How to start the development of new projects? How to have better purchasing strategies? How to decide the strategic acquisitions of other companies? What actions or costs can be shared with other companies? How can the future needs of financing?machinery and equipment? How to start the development of new projects? How to have better purchasing strategies? How to decide the strategic acquisitions of other companies? What actions or costs can be shared with other companies? How can the future needs of financing?
The strategic allocation of resources must be related to the key success factors for the company, such as:
- Buy state-of-the-art technology. Hire better staff. Invest in training. Improve the quality of products and services. Improve the way of distribution. Improve the way of obtaining information. Improve productivity. Optimize processes.
Large projects require highly detailed business plans with different scenarios, from the most pessimistic to the most optimistic.
Usual failures in preparing business plans
- They do not contain comparative analyzes of historical figures. The budget is not well prepared. Social, economic and political factors are not considered. Not all costs and expenses required by the project are considered. Feasibility study is not done. Not mentioned profitability and capital payback time. Market research is not conducted. No reliable administrative, accounting and tax information available. No competitor information. Actual and projected sales and financial projections not supported..Lack of presentation and poor writing.
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Next, the business consultant Ada Mier, specialized in SMEs, presents the steps to follow to carry out a business plan effectively.
____Jack Fleitman:
www.ciemsa.mx professional consultants
@jackkmex
