There are many reasons why companies prepare Business Plans. One of the most common reasons is where the promoters of the company are intending to raise finance and a detailed Business Plan is required for presentation to potential investors.
CONTENTS OF BUSINESS PLAN
The Business Plan must be well constructed and provide sufficient detail to enable a potential investor to decide in principle, whether the company is a candidate for investment.
The Business Plan should include the following:
- Executive Summary
Potential investors often make an initial judgement based on the content of the Executive Summary and their decision to read the detailed content of the Business Plan will depend on its content.
While the Executive Summary is shown at the front it should not be completed until the Business Plan has been written. It will highlight all milestones in the company’s development over the next five years. At minimum, it should summarise the following:
- Purpose of the Plan
- Product or Service and its advantages
- Market Opportunity
- Management Team
- Track record, if any
- Financial Projections – sales, net profit before tax, investment etc. Funding Requirements
- Company Description
Promoters and Shareholders Promoters
Management structure and areas of responsibility
Shareholders names, % shareholding, cash invested to date
Financial, legal and other advisors with contact details
Products and Services
Explain the product/service Background to development
Benefits and features
Unique selling point
Advantages to customers
Disadvantages or weak points Future developments
Long Term Aim of Business
Specific objectives to be achieved over next five years (sales, exports, employment, product development etc.)
Analyse the strengths and weaknesses of the business and product/service, the opportunities that exist in the marketplace and the threats to the viability of the project.
- Market Analysis
This covers market research and competitor analysis and demonstrates that the research undertaken justifies the projections made in the plan and indicates a viable market exists for the product/service.
Analyse the market:
Size of each segment
Is the segment growing or declining?
Characteristics of potential customers in each segment
Total Market Valuation
Show the total potential value of the market for the product/service, in all targeted markets (domestic and international).
Target Company Revenue
The basis for the sales figures in the financial projections and must be based on realistic assumptions. Include average deal size, length of sales cycle, recurring revenues.
Market Trends Recent changes
Drivers – demographic changes, economic and legislative factors
Implications for company product/service
Plans to meet future demands and changes in the market
Profile of Competitors
What are the competing products/services
Profile of key players (size, turnover, profitability etc.) and their market share
Advantages and disadvantages of competitors’ offerings
Why potential customers will choose company’s product
New technologies or systems
Better value (efficiency, ROI, cost/benefit)
Greater compatibility with existing systems Include any independent validation Benefits to Clients
What does product/service provide to potential customers?
Save money Save time
Maximise resources Reduce errors
Improve customer service, increase loyalty
- Marketing/Sales Strategy
Strategies for reaching target market, generating interest in the product/service and actually achieving sales.
Which segments of the market will be targeted first and why
How will product/service be differentiated
What potential customers have already been targeted
Is test site in operation and what is feedback
What contacts can be used to generate market awareness and sales
Who will do the marketing – staff, agency, representatives
How will product/service be sold Directly
State the advantages of the methods chosen
How will price charged be set? Consider
Level of competition in market
Perception of quality-price relationship by customers
Production costs and overheads
Marketing and Communications Strategy
How will product/service be promoted in the marketplace?
Advertising – where, when, how and whom
Website and internet marketing Exhibitions and conferences
Word of mouth
- Research and Development
Intended future development of product/service. Detail plans for new products/services. List all technical partners and indicate nature of involvement.
State any protection available for product/service – patented, copyright or trademark registration and brand image to be built up as protection against competition.
- Staffing and Operations
Outline intended structure of the company – management, number of employees and physical operations.
Management (including Board) Organisation Chart
Areas of responsibility of each manager
What employees will be hired over the next three years, skills and in which areas?
Planned employee and management development. Should tie-in with future product/market developments.
Production facilities Infrastructure
- Financial Projections
Number of employees projected for each year and their salaries
Projected investment in equipment and materials
Projected R & D costs Depreciation policy
Expected rent and rates charges
Creditor and Debtor days expected Expense calculations
Profit & Loss Accounts
Projected for first three years of operations
Projected for first three years of operations
Monthly cash flow predicted for the first two years of operations
- Sales Pipeline
Analyse pipeline business – customer, size of deal, date expected, probability of achieving sale etc.
- Funding Requirements
Total funding requirements and how these are to be provided. Also state approximate breakdown of how funds are to be spent.
Grants or loans from agencies
Investment already received
R & D
Provide detailed data on which the main text of the plan is based and extra information of interest to the readers. Details will vary from business to business but may include:
Detailed financial assumptions Most recent company audited accounts
Share capital table and investment history
Term sheet from potential investors
Detailed market research findings
Product or service information
Details of company website
Testimonials or letters of intent from customers