If you want to convince banks and investors of your business idea, you need a business plan. Your business plan is like your company’s business card.
It will also be a key planning and control tool for you to progress the set-up and subsequent development of your business. The plan should clearly highlight opportunities as well as risks.
Business plan components
Your business plan should be a maximum of 20 to 30 pages and should present the business concept as clearly and articulately as possible. There are various requirements depending on the enterprise. If you are setting up a technology-orientated business, as the founder of a small service business, you will undoubtedly need to address certain topics in detail. However, in all cases: the business plan needs to convince others that your business will succeed.
Essentially, a business plan consists of a text section that provides a detailed description of your business idea and a figures section that includes budget calculations for capital requirements, financial and liquidity planning. It consists of the following components:
1. Short description
A summary of the key content of the plan will speed up the assessment of your proposition. A third party should be able to read it and understand it in five minutes. It is important to include details of your idea, type of business, market, product, competition, your strengths in competition, the amount of investment and your budget.
2. The founder(s)
Details about you and your potential partner(s) and your respective business skills. Provide details of the personal history and professional careers of all founders, your knowledge of the industry, your technical qualifications and key skills for managing a business, the application of advice, qualification and support from your own private sphere.
3. Type of business
Are you setting up business alone or in partnership? What roles will you and your partner(s) take? Give details of the business or legal form and the organisational framework of your business. If you are taking over a business, state your specific qualifications and the financial position of the existing business - a well as the contractual obligations to be taken on. If franchising, justify your decision.
4. Product and service offer
Present the benefits of your offer for non-specialists. Outline the key aspects of your products and services and highlight what is new or special about them compared with others offering the same products or services. Also assess the prospects for your offer.
5. Market, location and competition
Your business’s prospects of success will be made apparent by analysing industry and market conditions. Describe and assess your target groups, the market and industry situation, current trends, your choice of location and your sales expectations. Compile competition profiles for your competitors and predict their reaction to your entry into the market. How do you want to ensure the advantages of your location and your competitive edge for the future?
Quote Carsten Grünewälder, Weighing Machine Engineer
- Carsten Grünewälder, Weighing Machine Engineer
I can only recommend people wanting to start up a business to begin by drafting a sound business plan, and to do it themselves. It goes down well with banks when you have thought about things yourself and given careful consideration to issues: What does the idea look like? Which are my target groups and how will I reach them? Where are my income opportunities?
6. Sales and marketing
Explain the marketing strategy that you will become acquainted with and your products and services that you want to sell, including your business image and what your marketing strategy will look like. Which sales concept will you be using and what prices will you apply? Include details about your sales promotions, advertising budget and PR.
7. Business organisation and personnel
If you are setting up as a team, you need to explain the future management and organisational structure of your business. Give details of your personnel requirement and recruitment planning. Show what you will be regulating contractually, the requirements for your company to be noted and whether you are seeking a quality assurance system, such as a certification.
8. Tax and insurance
Your business plan should take account of tax expenses, insurance and other fees and premiums. What risks could arise for your business and staff and what provisions will you make? Consider the costs to cover your personal and family risks. What additional mandatory fees might you also incur?
9. Investment planning and capital requirement
Present your long-term and short-term capital requirement. What should your financing look like? How high is your equity share?
10. Sales and results planning
The projected figures in your calculation for sales and results planning serve to estimate your subsequent performance. Be realistic about the values. Neither you nor your bank will be interested in sugar-coated figures. Include best and worst-case plans for the next three years.
11. Liquidity planning
The spreadsheet for planning your ongoing ability to pay in the first year of business provides evidence that your plans are serious and that you are maintaining sufficient reserves. What effect will your worst-case plan have on your costs and liquidity?
12. Risk analysis
Show that you are aware of the risks of your business start-up and that you are prepared for the reality of the worst-case scenario. What tools will you use to keep a close eye on your business development? And how will you respond to critical developments?
A good schedule will help you to get your start up off the ground and demonstrates that you have a focused and systematic approach. Milestones help you to control the set-up process and create motivational incentives.