16 April 2019

Business Plan Introduction

Author/Compiled by
Leonellha Barreto-Dillon (seecon gmbh)
Johannes Schmiester (seecon gmbh)

Executive Summary

A business plan is an essential roadmap for business success. It describes the direction the company is taking, what its goals are, where it wants to be, and how it is going to get there. Thereby it holds great value as an internal tool for the company but moreover as a communication tool to potential investors and partners. A business plan has to be edited under consideration of its target audience, with clarity and conciseness, in an understandable and consistent way and should be revised by externals. Content-wise it should cover details on the company and its products, its market environment, its marketing strategy, organisational setup, financial and capital planning.

Introduction

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A business plan is an essential roadmap for business success. It describes the direction, the company is taking, what its goals are, where it wants to be, and how it is going to get there. A business plan is also a written summary of an entrepreneur’s proposed business venture, its operational and financial details, its marketing opportunity and strategies, and its managers’ skills and abilities.

The business plan holds great value for the entrepreneur and the company as an internal tool for structuring and streamlining the venture’s activities. Furthermore, it is the most important tool to communicate to externals what the company is all about. It is a mandatory document that needs to be in shape when communicating to potential investors and partners. They are the most commonly the target audience of a venture’s business plan.

A business plan has to convince its recipients. Source: HOWLETT'S CHARTERED ACCOUNTANTS NO YEAR

A business plan has to convince its recipients. Source: HOWLETT'S CHARTERED ACCOUNTANTS (NO YEAR)

Rules

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Before structuring and editing a business plan, a number of rules should be kept in mind. As a starting point, it should always be considered who the audience for the business plan is. A potential investor might be addressed differently than a potential joint-venture partner. The target audience should influence the level of detail, disclosure and technical sophistication.

A business plan should stand out with clarity and conciseness. This means that the business plan’s contents should be cut right to the chase. An entrepreneur usually possesses wide knowledge about the business, its environment and its products and might have difficulties to bring the essential messages to the point. It is essential to master the art of editing a concise business plan without losing essential information.

Moreover, a business plan must be understandable for everyone inside and outside the respective industry. In addition to the width of knowledge an entrepreneur has on the business, he or she commonly possesses great in-depth knowledge on products and processes. Very technical, complex, scientific or industry-specific terminology and explanations are hard to understand for “ordinary people”.

As a business plan includes a variety of topics and might be edited by several people of an organisation, it should be made sure that it is a consistent document. This refers to the layout as well as contents and writing style. Figures have to match throughout the document and the level of detail should be streamlined. For example, if in the marketing section a series of customer events is planned for, this has to be reflected as costs in the financial management section. In addition, a business plan evolves when editing the different sections and therefore needs to be kept dynamic. Consistency checks with the former sections should be made whenever a new section is added.

Besides internal checks of the business plan, external reviewers should be engaged in the process as well. These can be experts in the specific industry but also non-experts that review the draft business plan on for example the issues mentioned above. In any case, these should be trusted people since the business plan might include sensitive data on the venture.

Components

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A business plan always comprises a variety of components and might be structured in a variety of ways. However, certain elements should always be part of a business plan:

  • Executive summary: A brief summary of the complete business plan to provide readers with a quick overview of what the venture is all about.
  • Company and product/service description: A description of what the company does, for this refer to Company Description
  • Market and competitor analysis: An analysis of the market environment including trends, customer segments and competitors. For this refer to Market Analysis and Competitors Analysis
  • Marketing plan: A description on how the company is planning to tackle its target market. For this refer to Marketing
  • Enterprise management: A description of what qualifications and experiences the entrepreneurs bring into the company, what additional staff profiles are planned to be hired, how the company will be organised and which legal form it will adopt. For this refer to invalid link.
  • Risk assessment: A description and evaluation of risks, their probability of occurrence and possible impact. For this refer to Risk Management.
  • Implementation or action plan: A time schedule for the company’s activities outlined in the business plan. For this refer to Action Plan.
  • Financial management: An outline of the company’s planned profit & loss, balance sheet and liquidity planning. For this refer to Financial Management
  • Financing and capital planning: A plan for the required capital and how the company intends to raise it. For this refer to invalid link.
Further Readings

Example Sandwich Co

An example business plan for the fictitious Example Sandwich Co.

LLOYDS TSB (2009): Example Sandwich Co. Business Plan. SAGE in Association with LLOYD TSB COMMERCIAL URL [Accessed: 16.12.2015]

How to Prepare Your Business Plan

An extensive guideline on how to write a business plan. It includes general information on business plans and detailed chapters on the components of business plans.

UNCTAD (2002): How to Prepare Your Business Plan. Geneva: United Nations Conference on Trade and Development (UNCTAD) URL [Accessed: 16.12.2015]

Alternative Versions to