The business plan: an indispensable element of modern companies
Without a plan, everything is difficult - and this is especially true when it comes to setting up a company and running it for the long term. In this article we therefore discuss the topic Business plan: What is it, how does it work and how does it help my business to be more successful?
What is a business plan?
Basically, a business plan is a structured(!) summary of a business concept. It contains several points. They sound simple and self-evident, but it is nevertheless necessary to explore them in detail:
Strategy
How should your business idea work in detail? We can all dream - it's the implementation that usually fails. A strategy development helps to counteract this potential failure.
Risk analysis
There is no such thing as a "beast of burden". No matter what your business concept looks like: You will always have to deal with risks (and associated opportunities). These are summarised in this step.
Target group
There are no products that are suitable for everyone without exception. With a new piece of sports equipment you will not reach very old people - and elegant clothes do not appeal to teenagers. So analyse your target group as precisely as possible.
Finances / Financial plan
An idea may be good - but is it also financeable? How much does it cost to produce your product or offer a service and for how much money can you (realistically) sell it on?
The implementation of a business plan often stands or falls with the economic part of it. This is especially true if you want to implement a project that is close to your heart - because the bitter reality of inefficiency then hits particularly hard. The capital requirement may be so high that you can bury the project at this point.
So in the end, your priority will be to draw up a business plan to put the ideas, goals and finances of the start-up under the microscope. Be sure to get as independent an advisor as possible on board (or a friend with a healthy dose of scepticism). You don't need yes-men at this stage, but people who are not afraid to ask uncomfortable questions.
It can't hurt to look at a business plan example. This turns abstract ideas into a tangible process.
If you do everything right, you will end up with a small guide shop that will help you along the way.
Sense and purpose of the business plan
One thing is clear: without a business plan, it will be difficult to convince banks and other investors of your plans. If you sit in front of an advisor at a bank who asks you some typical questions for company founders and you answer evasively and unprepared, your chances of receiving a capital injection dwindle drastically(!). By the way, this also and especially applies to internal stakeholders, such as division managers or board members.
One could therefore argue: I need a business plan template to satisfy investors.
This is true in essence, but the reality is that you are working on it mainly for yourself. It may seem exhausting and certainly you will hardly be able to wait to get started with the actual day-to-day business. But without a plan, you will also quickly realise that you simply cannot answer important questions - and then the whole project comes to a standstill.
One of the main reasons for the failure of young enterprises within the first three years is the lack of planning. Many inexperienced entrepreneurs make assumptions about a static world: I open a clothing shop at location A, because there are always many people on this street, so there will be customers.
However, the dynamic reality is that your competitors might come up with the same idea, that road works might slow down the flow of customers, that your target group might withdraw from the district in the next few years and so on. Are you able to provide for all eventualities? Of course not! But you can plan your finances so that there is a certain buffer - so that you can get through "bad times" without having to close the business.
A business plan is therefore first and foremost an instrument that you use to protect yourself against risks. If you simply "go for it", you will not be successful. The plan is therefore also a signpost that you can rely on if the terrain becomes opaque and it is raining cats and dogs.
How do I create my business plan?
It is tempting to simply take a sample business plan, swap the existing name for your own and hand the plan in. This idea is so tempting because the preparation of a business plan is so time-consuming. How much easier it would be to outsource this work completely!
In practice, we strongly advise against this: Most good investors know existing business plan examples well enough. This would cast you in a bad light, as the person would - probably rightly - immediately realise that you are not fully committed to your idea. "If a person already can't create a plan, how can he run a business?"
At the beginning, it is an enormous challenge to create this business plan: You sit - perhaps alone, perhaps with business partners - in front of a blank sheet of paper. The emptier the sheet, the more intimidating it looks.
Excel or Word for business plan creation
It's very easy with programmes like Excel or Word. You simply start writing and create the plan over the course of the next few days and weeks. Even if this method is considered somewhat outdated today, the following applies: If you do your thing convincingly and are passionate about it, there is nothing to be said against it.
Use of templates
The second method is to use templates. Templates bring structure and security to the business plan template. This is an advantage because you "only" have to fill in some fields this way. Inexperienced users are more likely to be plagued by other sources of error here, such as complex Excel formulas and formatting. From our point of view, it is therefore almost better to choose the first method.
Special business plan software
Finally, you have the option of using special software for the business plan.
Programmes of this kind are enriched with hints and wizards, formatting and outlines already exist and every tiny detail can be adapted, even if you are not a software veteran. In the end, you can print out the finished business plan or send it directly by e-mail.
The disadvantage of this method is obvious: it costs money. Software of this kind is not available for free, so there is no way around an investment. However, it is probably also the most effective and promising way to present a business plan to investors.
What belongs in my business plan?
In the end, many individual points add up to a complete business plan. One A4 page is not enough - it is more like a small collection of documents that ends up on the investor's desk:
Basic idea and target group
What is your idea, what is your offer and who are you addressing with it? Be as specific as possible and explain exactly what kind of sports shoes (for example) you want to sell to which groups of people.
The competition
How extensive is your market and how will it develop in the future? Which competitors exist both regionally and on the internet and how can you penetrate this (often highly competitive) market? If you go into it naïve, you usually end up with a black eye.
Corporate goals
Listing short- to long-term goals provides direction and strategy and lets investors know that you have thought not only about the here and now, but also about the years to come - and that is what matters most to these people.
Corporate strategy
What strategy do you use to implement the goals you have just envisaged? What benefits do you offer to customers that were not previously present in the market? What is your unique selling proposition? Be as specific as possible here.
Marketing
Without advertising, it (unfortunately) doesn't work. If the customer does not know you, he will not come to you. The marketing budget is often very limited, so you have to use every euro as efficiently as possible. Here you can find out which channels you can use to reach your target group cheaply and effectively.
Legal
Legal forms and permits, anticipated tax burdens, company names and ideas on how to handle accounting: These are all very dry topics that hardly anyone is enthusiastic about - but unfortunately they are necessary.
Organisation of the operation
Where do you work with how many staff and how are they structured? Why are you well suited to implement this project? If you can't answer these questions, you have little chance - because investors love orderly and thus well-plannable teams.
Funding
How much capital do you need and how do you plan to raise this money? Do you have extensive financial resources in reserve or are you practically calculating on a knife's edge? Planned investments and Cash position are topics that investors will definitely shed light on.
Weighing up risks and opportunities
Where are your strengths and major growth potentials and what weaknesses do you have to face? Build a plan here that shows exactly how you can maximise opportunities while minimising risks in the best possible way.
Executive Summary
In the concluding summary (often referred to as the executive summary is often used), you give a holistic overview of all the important statements. Do not underestimate this page: readers often skim over the rest and look at the summary straight away. This is not right, but it is common practice - so pay special attention here.
Done: These essential points are present in a good plan and can also be found in any appealing business plan template. Take as much time and put as much heart and soul into this as you do into your actual, planned business.
Should I get help?
Absolutely! Hardly anyone creates a business plan out of thin air, goes to a bank, gets a million-dollar loan and walks out again. There is a lot of hard work involved in this plan - and you probably won't be able to do it alone.
The easy way is to ask around your circle of friends and acquaintances: maybe you know some founders and can get tips. The only hurdle to consider is the other founder himself - because self-employed people are usually not known for sitting down with you for many hours and discussing problems. Time is money!
An alternative is to make use of counselling services and seminars. Some are free of charge, others (most of them) involve a financial outlay. Here you basically only learn about the basics, because: Of course, you are sitting in a seminar with several participants. Your specific project will not be addressed there.
The crowning glory would be your own coach: with him or her you will create a business plan and thus ensure that mistakes hardly ever occur, if at all. However, this also involves a much higher price than using a simple seminar. Here it is not so much a question of whether the coach is worth the money to you - but whether you can afford it.
In the end, take a look at some business plan examples and then work out your own plan in peace - ideally with your team. It is up to you which path you take. The only thing you should not do is rush into it.
Credits: Photo by Volodymyr Hryshchenko on Unsplash