The business plan

The business plan: an indispensable element of modern companies

Without a plan, everything is difficult – and that applies in particular to starting a business and running companies over the long term. In this article we therefore discuss the subject of the business plan: what is it, how does it work and how does it help my company to become more successful?

What is a business plan?

In principle, a business plan is a structured(!) summary of a business concept. It contains several points. They may sound simple and self-evident, but examining them closely is nevertheless necessary:

Strategy

How exactly is your business idea supposed to work? We can all dream – it is the implementation that usually fails. Working out a strategy helps to counteract this potential failure.

Risk analysis

There is no such thing as an all-purpose miracle solution. No matter what your business concept looks like: you will always have to contend with risks (and the opportunities that come with them). These are summarised in this step.

Target group

There are no products that are suitable for absolutely everyone. You will not reach very elderly people with a new piece of sports equipment – and elegant dresses do not appeal to teenagers. So analyse your target group as precisely as possible.

Finances / financial plan

An idea may be good – but can it also be financed? How much does it cost to manufacture your product or offer a service, and for how much money can you (realistically) sell it on?

Above all, the implementation of a business plan often stands or falls with its economic part. That is especially true if you want to realise a project that is close to your heart – because then the bitter reality of unprofitability hits particularly hard. It is possible that the capital requirement is so high that you may as well bury the project at this point.

In the end you will therefore primarily draw up a business plan in order to scrutinise the ideas, goals and finances of your start-up. Be sure to bring an adviser who is as independent as possible on board (or a friend with a healthy dose of scepticism). At this stage you do not need yes-men, but people who are not afraid to ask uncomfortable questions.

It cannot hurt to look at a business plan example. That turns abstract ideas into a tangible process.

If you do everything right, you will have created a small guide for yourself that will help you along the way.

The purpose of the business plan

One thing is clear: without a business plan it will be difficult to get banks and other investors excited about your project. If you are sitting in a bank opposite an adviser who asks you some of the typical questions put to founders, and you answer evasively and unprepared, your chances of a capital injection shrink drastically(!). Incidentally, that also applies – and quite particularly so – to internal stakeholders such as division managers or board members.

You could therefore argue: I need a business plan template in order to satisfy investors.

That is essentially correct, but the reality is that you are working on it primarily for yourself. It may seem exhausting, and you will certainly be impatient to get started with the actual day-to-day business. Without a plan, however, you too will quickly notice that you simply cannot answer important questions – and then the entire project comes to a standstill.

One of the main reasons why young companies fail within the first three years is the lack of planning. Many inexperienced entrepreneurs base their assumptions on a static world: I open a clothing shop at location A, because there are always plenty of people out and about in this street, so customers are guaranteed.

The dynamic reality, however, is that the competition could have the same idea, that roadworks in the street could slow the flow of customers, that your target group could move out of the district over the next few years, and so on. Are you able to make provision for every eventuality? Of course not! But you can plan your finances so that a certain buffer is in place – so that you also get through “bad times” without having to close the business.

A business plan is therefore first and foremost also an instrument that you use to protect yourself against risks. Anyone who simply “muddles along” will not be successful. The plan is thus also a signpost you can rely on when the terrain becomes hard to read and it is pouring with rain.

How do I draw up my business plan?

The temptation is great to simply take a business plan sample, swap the existing name for your own and submit the plan. This idea is so tempting because creating a business plan is such hard work. How much easier it would be to outsource the job completely!

In practice we strongly advise against it: most good investors know existing business plan examples all too well. It would put you in a bad light, since the person would – quite rightly – immediately recognise that you are not fully behind your idea. “If someone cannot even draw up a plan, how are they supposed to run a company?”

At the beginning it is an enormous challenge to create this business plan: you are sitting – perhaps alone, perhaps with business partners – in front of a blank sheet of paper. The emptier the sheet, the more intimidating it seems.

Excel or Word for creating a business plan

It is very easy with programs such as Excel or Word. You simply start writing and create the plan over the following days and weeks. Even if this method is regarded as somewhat outdated today, the rule is: if you make a convincing job of it and are passionate about what you are doing, there is nothing to be said against it.

Using templates

The second method is to use templates. Templates bring structure and confidence to the business plan sample. That is an advantage, because this way you “only” have to fill in a few fields. 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 still to choose the first method.

Dedicated business plan software

Finally, you have the option of using dedicated software for the business plan.

Programs of this kind come with tips and wizards, formatting and structure are already in place, and every tiny detail can be adjusted, even if you are not a software veteran. At the end you can also print out the finished business plan or send it directly by email.

The disadvantage of this method is obvious: it costs money. Software of this kind is not free, so there is no way around an investment. But it is probably also the most effective and most promising way of presenting a business plan to investors.

What belongs in my business plan?

Many individual points ultimately make up a complete business plan. A single A4 page will not do – it is more like a small collection of documents that lands on the investors’ desks:

Basic idea and target group

What is your idea, what is your offering and who are you addressing with it? Be as specific as possible here and explain exactly which kind of sports shoes (for example) you want to sell to which groups of people.

The competition

How large is your market and how will it develop in future? Which competitors exist both regionally and on the internet, and how can you penetrate this (often fiercely contested) market? Anyone who goes into the matter starry-eyed usually ends up with a black eye.

Corporate goals

Listing short- to long-term goals sets the 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

With which strategy will you implement the goals you have just set your sights on? What benefit do you offer customers that was not already available on the market? What is your unique selling point? Be as specific as possible here.

Marketing

(Unfortunately) it does not work without advertising. If the customer does not know you, they will not come to you either. The marketing budget is often very limited, so you have to deploy every euro as efficiently as possible. Set out here on which channels you will address your target group cheaply and effectively.

Legal matters

Legal forms and permits, expected tax burdens, company names and ideas about how the bookkeeping can be handled: these are all very dry subjects that hardly anyone can get excited about – but unfortunately they are necessary.

Organisation of the business

Where do you work, with how many employees, and how are they structured? Why are you well suited to implementing this project? Anyone who cannot answer these questions has little chance – because investors love orderly and therefore easily plannable teams.

Financing

How much capital do you need and how do you plan to raise these funds? Do you have extensive financial resources up your sleeve, or are your calculations practically on a knife edge? Planned investments and liquidity are subjects that investors will examine in any case.

Weighing up risks and opportunities

Where do your strengths and major growth potential lie, and which weaknesses do you have to face? Build a plan here that shows exactly how you will exploit opportunities to the maximum while minimising risks as far as possible.

Executive summary

In the closing summary (the English term executive summary is often used) you once again give a comprehensive overview of all the important statements. Do not underestimate this page: readers often skim the rest and go straight to the summary. That is not right, but it is common practice – so pay particular attention here.

Done: these essential points are present in a good plan and can also be found in any appealing business plan template. Take just as much time over it and put just as much heart into it as you do into your actual planned business.

Should I get help?

Absolutely! Hardly anyone creates a business plan out of nothing, walks into a bank, gets a loan worth millions and strolls back out again. A great deal of hard work goes into this plan – and you will probably not be able to manage it on your own.

The easy option is to ask among friends and acquaintances: you may know a few founders and can pick up some tips. The only hurdle to bear in mind is the other founder themselves – because self-employed people are not usually known for being able to sit down with you for many hours and discuss problems. Time is money!

An alternative is to make use of advisory services and seminars. Some are free, others (most of them) involve financial outlay. Here you will in principle only learn something about the basics, because of course you are sitting in a seminar with several other participants. Your specific project will not be addressed there.

The ultimate would be your own coach: with them you will create a business plan and thus ensure that mistakes hardly occur, if at all. However, this also comes with a considerably higher price than attending a simple seminar. Here the question is not so much whether the coach is worth the money to you – but whether you can afford it.

In the end the rule is: look at a few business plan examples and then work out your own plan calmly – ideally with your team. Which route you take is up to you. The one thing you should definitely not do is rush.

Credits: Photo by Volodymyr Hryshchenko on Unsplash