The Business Plan or Business Plan is a reflection and / or a document in which the most important aspects are determined to achieve the viability of the business . It is not an act of “goodness” in which we express our wishes about our business, but rather the Business Plan is a working document to assess whether it is feasible to carry out this project, what are the resources and things that we must take into account for it to be successful and in what time frame we are going to achieve the balance between investments and income.
Therefore, the Business Plan is a document that can help us convince others that our project is viable, but fundamentally it has to serve ourselves to understand the most important aspects of our own project .
Before starting the business plan
Before starting to develop the Business Plan, we must look for all the information that we will need to document our project. This in itself is already a very positive step for our project, since it will force us to reflect on those aspects that are most important and on the strengths and weaknesses of our business . So, even if you never get to formally complete a document, considering making a Business Plan is good because it will allow you to get to know yourself better, resolve some doubts or mistakes that you could make due to lack of foresight before starting, and better prepare any type of meeting with potential clients. partners, investors, partners or potential customers.
From my experience, I have been involved in project management and advising entrepreneurs for more than 20 years, those projects that have a Business Plan are much more solid, reliable and predictable than those that do not.
My first advice is :
take it seriously and do it for yourself, without fooling yourself and being a bit pessimistic in your evaluations.
The executive summary of your Business Plan is the first thing anyone outside the project will see. It is a brief description of your business that will serve as a presentation and that, whether we like it or not, will be the first filter to decide whether to continue reading the document is discarded due to lack of solvency.
Therefore, we must prepare the executive summary of the Business Plan at the end of it, even if it is formally at the beginning . And this is something that is rarely done. We as entrepreneurs have in our heads a very clear idea of what our project is (usually an idealized vision and far from reality) and if we write the executive summary at the beginning we are going to transfer that biased vision to our investor or partner.
When writing this executive summary, you must answer 5 questions that the person who reads it will have:
- What is the business opportunity? We all think that our project is unique and that we come into the world to discover the philosopher’s stone, but the reality is that in most cases the project is quite common. However, even if we are going to set up a bar like there are many others in the world, there is something that we have considered that makes our bar interesting. That is the business opportunity. Our Business Plan must convince an investor or a possible partner that there is an opportunity to solve something in the market and that we have the key to it at this moment .
- What is the value proposition? As I have already mentioned before, we can set up a bar, but how are we going to differentiate ourselves from the rest? What are we going to contribute to the world of bars that is not resolved in that place where you want to set up the bar? That is the value proposition. And it is important because if we convince ourselves that there is a need and a solution now , we are likely to be more convincing.
- Who is your ideal client?I always ask my clients this question. You must distinguish between an ideal customer, someone who buys your product or your service because they are very convinced that you are the best option on the market, and your potential customer, someone who can buy your product or service because they consume similar products or services, is in the same geographical or temporal environment as you and therefore could enter your bar, your online store or your consultancy. If you are going to set up an online store, your potential client is anyone who has access to the Internet and a means of payment. You can reduce it depending on the product or your logistics capacity, but that is not very decisive. Your ideal customer, however, has an emotional motivation to buy your product. Share with you a way of seeing life, of consuming and of solving their needs. He will be your most loyal customer and the best prescribed in your business. It is the one that will attract other customers and the one that will make your business profitable. If you want to learn how to focus your business and your brand on your ideal customer, I recommend that you read these two articles ” Creation of customer profiles: buyer persona ” and ” Branding strategy: how to build a solid brand “.
- Who is the promoting team? Another of the most important aspects of the Business Plan and the executive summary is who the promoter team is, what strengths it has, and why this personnel and management structure will make our project a successful business . There are times when the promoter team is so relevant because of its leadership, its capacity for relationships or prescription or its talent that it does not matter if the project has nothing relevant because the differential value is precisely the promoter team. Imagine starting a business with a sports or movie star. Your ability to attract the attention of the media, fans and other celebrities would make the business a success as soon as the product or service is attractive.
- What investment is necessary and how will it be recovered? And finally, the money, the vile metal. Do not forget that a business is a way of earning a living, therefore, it will be important to know if it takes a lot, a little and how long it will be possible to recover that money . In the executive summary of your Business Plan, do not forget to make a brief summary of the necessary financial or material resources and what is the return period, as well as the profitability that will be obtained by lending those resources.
With these five points well explained, briefly but decisively, you will have an executive summary in your Business Plan that will help you open doors and get financing or partnership opportunities. The rest of the document is an extension of the previous points for those who want to deepen.
My second advice is :
turn these pages into something that no one can reject, because they will be the first step to the success of your business.
It is necessary that in the Business Plan you explain the structure of your team, the resources you have and that make you have a competitive difference. You should also fully explain what the business opportunity and your value proposition are. This is the most important part because if someone is interested in investing or becoming a partner in your project, it will be because you convince them that you have the key to an opportunity.
In this part of the Business Plan you should also explain more philosophical but equally important questions. Almost all the decisions we make are emotional, so the why , how and what of your business will be decisive to achieve an emotional connection with your ideal client. That is why you must explain your mission, your vision and your corporate values.
- The mission: in a business, the mission is basically the what and how of what we are going to do. It is about explaining what the purpose of the business is. In this sense, you have to be very prosaic and not overdress this concept. If you have a neighborhood store, explain that it is a food store , specialized in fresh, seasonal products, which takes care of customer service and product quality .
- The vision: this concept is much more emotional. From a strategic point of view, the mission would be the starting point of your business and the vision would be the arrival point, in a few years. Therefore, when you talk about your vision, talk about who you want to be in a few years (a few years) and set it as an ambitious goal. Usually things are said like we want to be a point of reference in quality food for our neighborhood; we want our clients to be part of us, our friends .
- Corporate values: at this point you must explain how you are going to get from the point of departure to the point of destination. It is the way to travel that path and it is explained through a series of adjectives, verbs or nouns that explain the things that concern you. Corporate values are usually words such as being aware of sustainability , involved in the development of innovative products or concerned about social growth.
In this part of the Business Plan, the concepts you explain should have a strategic focus , since later you will talk about those same concepts but from a more specific and tactical point of view.
My third tip is :
be inspiring, but don’t freak out about this part. Most of us who see business plans already know that the one who writes it is highly motivated and that for him this is something unique, but it almost never is.
The SWOT is an analysis of Weaknesses, Threats, Strengths and Opportunities . It is very simple to do and very convenient because it will allow you to know your project much more thoroughly and know the market much better. I recommend that you do it in two phases:
- The first is the Weaknesses and Strengths of your business. It is the internal part and therefore it will be easier for you to solve it after the analysis that you have done in the Presentation of the project. To know if something is a Weakness or a Strength (and not a Threat or an Opportunity) you just have to ask yourself if you could change that point by working on it. If you can make it less weak or stronger it means that it really belongs to the inner part and you can consider it a Weakness or a Strength. If not, if it is something that you can hardly influence, it is that it belongs to the external part and it is a Threat or an Opportunity.
- The second is the Threats and Opportunities of the sector. It is the external part and therefore it will be easier for you to determine them when you do the market study of the next point. Wait to do this analysis to get to know the sector and your competitors well. At that time it will be easier for you to determine what is a Threat and what is an Opportunity.
From a practical point of view, make four lists (in the form of a grid as in the attached image or in separate lists) and complete each of the points. From my experience, I recommend that you have a special concern to discover your Weaknesses and the Threats that can make your business.
The good parts of the SWOT are less relevant. At the end of the day, if there is an Opportunity and you have a Strength to take advantage of it, it does not matter if you have put it on paper or not, in the end you will discover it and you will benefit from it. With the bad parts the same thing will happen to you, in the end you will find out, but at that moment you will not be prepared to make defensive decisions and that can end your business. For the Business Plan everything is just as important because if you are going to present it to an investor he will like to know that there are strong and weak points and that you have detected them.
And with this you already have the SWOT Analysis. In the Marketing Strategies point, you can take advantage of this analysis to make decisions after matching Weaknesses with Threats and Strengths with Opportunities.
My fourth advice is :
do a good SWOT because it will help you make good strategies.
In this third part of the Business Plan, you must analyze the strategic scenario and your competitors . When facing this analysis you must take into account several things.
The first thing is that your competitors are both in the offline world and in the online world, so you must do an analysis of competitors on and off the Internet . Most of the analyzes focus on searching for similar companies on Google and with that you are done. And that’s a very poor analysis.
To perform the analysis you must detect which companies are:
- Direct competitors: those who do the same as you.
- Indirect competitors: those who do something similar and that the customer does not distinguish when consuming.
- Substitute competitors: those who do something completely different, but it is an option that can solve the need and prevent your potential customer from buying your product.
From there, it analyzes your business in the offline version and in the online version (even if they do not sell over the Internet, the product search process may start in the Google search engine and materialize in a store).
With regard to the strategic scenario, the most important thing is to understand that it is about the way in which companies in the sector interact. There are different types of scenarios:
- There is no leader in the sector: it is a scenario in which the most important thing is to try to become the leader, making our potential client value our product / service as the standard and ask for the rest of our products / services. competitors what you see in ours.
- The leader is a competitor: here we can find different forms of leadership, but to face this scenario it is best to seek differentiation and become strong in a market niche. If we try to compete with the leader directly and with his own weapons, we will be at a disadvantage. That is why we must look for a less direct but more effective option.
- The leader is us: if you are doing the Business Plan it will not be your scenario. The normal thing is that you enter with a new project in the other two, but in case you wonder how to solve this scenario (which is the most beneficial and simplest) the solution is to be very attentive, protect your strengths and when you see that a competitor tries To become strong in a niche, fill it before with the strength of your leadership.
You can see how to do a more complete competition and strategic scenario analysis in the article Complete Competitor and Strategic Scenario Analysis in a Business Plan
My fifth advice is :
if you know your competition better than yourself, it will be difficult for them to surprise you.
Commercial Strategy (Marketing Plan)
The Commercial Strategy or Marketing Plan will help you obtain sales opportunities in your business . For an investor or a partner it is an important part, because it will help them make decisions about your ability to take the business from 0 to 100 in a few months.
This part of the project is not about revealing what your promotional, advertising or marketing actions will be, but the strategies that you are going to follow . You have an article on How to make a Strategic Marketing Plan that you can consult.
You must develop a Marketing Plan that contains a Launch Plan for your business. It has to be as exhaustive as possible, not only containing the general strategies, but also the specific actions that you are going to carry out in the first two years of your business , the human and financial resources you need, and an execution schedule.
This meticulous and rigorous part of the Plan does not need to be included in your Business Plan. In this document you can include the strategies and general lines of action, as well as a summary of the human and financial resources that you will later detail in points 6 and 7 of the Plan.
To develop Marketing strategies you must resort to the SWOT (which you have prepared in point 3 of the Business Plan). As you have already seen, SWOT is an analysis tool, but it is also a tool that will allow you to make strategic decisions. For that you have to follow these rules:
- Strengths vs Opportunities (offensive strategies): you should look in your Strengths for those that allow you to take advantage of the Opportunities that the sector offers you. When you pair a Strength with an Opportunity and make a decision to take advantage of it, that decision is an offensive strategy , which will allow you to be stronger in the market and improve the ability to generate sales in your business. When you have finished matching Strengths and Opportunities you will have the offensive strategies from your Marketing Plan. If you have too many Strengths or you have too many Opportunities that you cannot match, that means that they were neither Strengths nor Opportunities, because they cannot be taken advantage of.
- Weaknesses vsThreats (defensive strategies): you must look in your Weaknesses for those that can be attacked by the Threats on the market. When you pair a Weakness with a Threat and make a decision to minimize the impact of the second on the first, this decision is a defensive strategy , which will allow you to reduce the risk in your business. When you have finished matching Weaknesses with Threats you will have the defensive strategies of your Marketing Plan. If you have excess Weaknesses or Threats that you cannot match, that means that they were neither Weaknesses nor Threats, because they did not generate any risk for your business.
With each of the strategic decisions you must make tactical decisions . You must translate these strategies into specific lines of action, depending on your ability to carry them out. For example, one of the typical defensive strategies in a starting business is the need to quickly gain visibility and notoriety (the weakness is that we are not known and the threat is the reluctance of customers to trust new brands).
To be able to solve this strategy, the best thing is to be able to launch a massive Advertising and Communication campaign, right? But of course, not all businesses can invest thousands of euros in ads even if they are online.
Therefore, it will be necessary to look for less expensive actions, also less effective, but that allow in the medium term to achieve the objective of being more visible and more influential in our potential clients. I recommend guerilla Marketing actions, quick, easy to measure, easy to change and that allow you to reach different types of potential customers with much more precise messages.
My sixth advice is :
be creative when marketing and remember that not everything is selling your product. Put your ideal customer at the center of your strategy and the product will be easier to sell.
Production and Human Resources
In your business, everything you are going to do requires work (Human Resources) or raw materials and a production system . This is what you must solve in this section of the Business Plan.
Regarding the Production section, it is necessary to detail very well what is the Production process, what raw materials are needed for each product, machinery or patents that are required to be able to produce … in short, you have to make a precise description of how it goes to be your process of making your products . It is very important that you estimate your production costs at scale. It does not cost the same to produce 1,000 units of something as 100,000 units, since there are fixed costs that will be diluted the greater the number of units to produce.
Investors or partners will want to know the depreciation costs of the machinery, where you plan to get the raw materials, the scalability of the business
If yours is a service without the need to produce anything, this section will be much easier.
Let us now turn to one of the most delicate points, that of Human Resources. Typically, a small project does not require many workers, but you have to bear in mind that this is one of the most expensive and least flexible costs in a business . Employees are people and therefore you cannot hire them and fire them easily or cheaply. It has administration costs, even if they take a short time, you have to pay compensation, and most importantly, they have feelings, dreams and when they commit to something it is a great disappointment to throw them out on the street.
Therefore, you must evaluate your needs in terms of Human Resources very well, grow progressively and measure the costs of this item well. Of course, once you decide that you should hire an employee or several, take care of them, pay their work decently and involve them in the project so that they consider it something more than a job .
My seventh tip is :
surround yourself with people who are better than you, brighter and more creative. If someone must be the mediocre in the room, it must be you. You will go further. Leave out your pride and let the talent work.
Economic financial analysis
And we come to the last part of the Business Plan and the most delicate. We are going to talk about numbers and about costs, returns and benefits. In this part of the document you have to be tremendously sincere and credible. In the executive summary you will have put a summary of this section, but here you should make a development that is easy to read but very clarified , because any investor, a bank or a partner will pay special attention to these pages.
In an economic-financial analysis of a business, three possible scenarios must be taken into account:
- An optimistic scenario: to calculate the optimistic scenario, think about the number of products or services that you can offer in the best of cases. In this scenario, you consider a great ability was to attract customers and to sell products without discounts or promotions.
- A realistic scenario: to calculate this scenario, reduce sales and consider that it will not be so easy to get customers. Reduce the number of products or the success of your campaigns, especially in the first months.
- A pessimistic scenario: to calculate this scenario you must be cautious and think that, perhaps, for two, three or four months you will not sell anything. In the following months you may sell less than you could imagine. Invoices begin to haunt you and some raw materials do not arrive or have risen in price.
I’ll give you the last piece of advice :
When you’ve worked out the three scenarios, take the pessimistic one, consider it the optimistic one, and rework the other two (the realist and the pessimistic one). Believe me, the reality of business is much more demanding than excel.
From here, what you have left is to walk this document through different banks and investors to get the financing, support or resources you need.
My eighth tip is :
you shouldn’t be pessimistic, but you should be cautious. Think that your euphoria is the result of your illusion, but the market will never respond in the same way. It is better to be surprised at your success than to bemoan your excessive optimism.