How to Prepare a Business Plan?
A business plan is nothing but a written description
of your business's prospects. It is a document that tells what you plan to do
and how you plan to do it. Business plans are normally strategic. You start
here, today, with certain resources and abilities. You want to get there, a
point in the future (usually three to five years out) at which time your
business will have a different set of resources and abilities as well as
greater profitability and increased assets. Your plan shows how you will get
from here to there.
You need a business plan if you’re
applying for a business loan:
Most banks
require it, and even those that don’t strictly require it expect it. They
expect it to be a summary of the business, with some predictable key points.
You need a business plan if you’re
looking for business investment:
The plan won’t
get you the investment, but not having a plan will mean you won’t get
investment. Investors require a business plan. They invest in the people, the
idea, the track records, the market, the technology, and other factors; but
they look to the business plan to define and explain the business.
You need a business plan if you’re
working with partners:
The business plan
defines agreements between partners about what’s going to happen.
You need a business plan to communicate
with a management team:
The day-to-day
business routine is distracting, problems come up, opportunities appear, and
commitments should be followed and tracked. How do you know where you are in
business without establishing where you started and where you intended to go?
Simple Tips for Getting
Started and Writing the Business Plan:
Read Sample Business Plans.
Schedule Business Planning time on
the calendar.
Gather Key Financial Statements,
like income statement, balance sheet and breakeven analysis. (Get some
financial statement templates for start-ups)
List a goal for start date of
business and also 3 years and 5 years business goals.
Identify the key strength and
experience of the management team.
Create a personnel or key partners
plan.
Create a marketing budget &
plan and calendar of weekly, monthly and quarterly marketing activities.
Determine funding needs and
possible sources.
KISS (Keep it simple and short):
Highlight the key opportunities for growth and competitive advantage for
company.
What is normally scene with most of the entrepreneurs,
they waste too much time on numbers and devote very less time on the
information that really matters to the investors. Every investor knows that
financial projections for any new venture are nothing but act of imagination.
Any entrepreneurial venture faces far too many variables to predict revenues
and profits. Investors normally discount the figures in a business plan. So it
is always advisable to incorporate most realistic projections in a business
plan. Business plans have to have numbers, it’s not like you ignore them
completely but it should be aligned with your business model showing that you
have looked at all possible options for your venture’s success or failure. It
should also look at the breakeven issue: At what stage of sales your business
will start making profits? And also when does cash flow turn positive?
So on what factors you need to focus on while writing
a Business Plan?
The Team
The Opportunity
The Context
Risks & Mitigation
The Team:
The most important part of any business plan is the
team because without right team nothing matters to the investor. No matter how
good your plan is, without right team the plan will not attract the investors.
So the right questions to be answered would be: What do the team members know?
Whom do they know? How well are they known?
What and whom are related to insights and experiences.
A business plan should clearly explain each member’s knowledge about the new
venture. One should talk about their experience and ability in great detail. So
basically it’s about the people starting out the new venture as well as the
partners involved in providing the key services or as an important resource.
The Opportunity:
Here the questions to be answered are: Is the market
for the venture big enough? Is the industry currently attractive or in future
can become attractive? Investors are normally interested in rapidly growing
market, as it is easy to gain market share as compared to the market densely
populated with competitors (mature market). Investors won’t invest in a company
that could not achieve a significant scale in coming 5 years. You need to
calculate how much money competitors are making and how much money your venture
will make. You need to calculate the profit unit wise and then extrapolate that
figure.
Now for example, suppose you plan to start a chain of
coffee shops in India. Now how will you estimate the market size and seize the
opportunity? Learning through example will help in understanding more about
estimating the market size/opportunity.
This is one way of looking at the available data and it will give the
macro view of the opportunity available in the market. Now if want you to start
a chain of coffee outlets in any city of India then
how can you dig more deep
to look out for market size and opportunity?
Of the whooping 1.2 billion
Indians, roughly 302 million reside in the urban areas and based on market
research ~10% of this population (i.e.31 million & growing) patronize
eating out options. An average Indian person spends a between $1 (Rs.50) to $3
(Rs.150) daily eating out, which translates into a massive $20 billion (Rs.1.1 trillion)
market for restaurant’s and eat-out’s in Urban India. With rapid urban
migration and change in lifestyles, there is no doubt this segment would grow
at a significant pace in the future. Now look at the first city where you want to start your operations. Once you select a city, look for the overall population of the city and then eventually look at the urban population of that city considering you are targeting urban population.
These data you will find in census report. Now do a bit of market research (survey) like how often people (of desired age group, if you intend to target any particular age group) eat/drink outside?
So if x% of the people from specified age group
eat/drink outside at least once, then x% of specific age group of the urban
population of the city are your total customers. Now you need to segment your
market. So again you need to ask your customers (Total customers) what kind of
item they eat/drink outside? And you will find some y% of your total customers
go out to have coffee at coffee shops. The average price of a coffee at coffee
shops can easily be found out. Now you know your target customers i.e. y% of
your total customers (a numerical number) and when you multiply this by average
price of coffee you will get your target segment size.
Once you have got the target segment size (in INR) then you need to decide your price band for your coffee and also how many customers you are expecting to be served at your coffee shop per day
The Context:
Opportunities always exist in context. You need to
look at the macroeconomic view of the business environment, various kinds of
economic activities, inflation, exchange rates as well as interest rates.
Another aspect would be taking a look at the government rules and regulations,
which can affect the opportunity. A change in context can often turn an
attractive opportunity to unattractive one and vice versa. In every business
plan, one needs to show the awareness of the new venture’s context and how can
it help the specified proposal. The business plan should also highlight that
the management team can handle the situation even if the context grows
unfavourable. There has to be a way through which management team can turn the
unfavourable context in positive direction.
Risk & Mitigation:
There could be possibly no business without having
risks. So when you say it’s a risk free business, just hang on; its not the
line investors are interested in. Good business plans talks about the people,
opportunities and the context tandem as a process. With time there could be
changes in these factors as a firm evolves from being a start up to enterprise.
People say entrepreneurs are risk seekers but this is a myth. Entrepreneurs
always try to minimize the risks and the risks they take is the calculated one.
Even if the opportunity is big having a sustainable business model but the
question to be answered is “Is it possible to create competitive edge and
defend it?” Risks should be listed and discussed properly and on the same lines
mitigation strategy should be proposed. This is very important part of the
business plan.
Business
Plan Template
Information of key contact person:
Name:
E-mail:
Website:
City and Country:
Mobile number:
Landline Number:
Overview of the plan
Plan/company
name:
Industry (choose one) from the following:
Customer
Internet and information services
Mobile
applications (products and services)
Software
products, including web applications
Emerging
Market Technology
IT,
ITES, BPO, KPO
Others
Current revenue size:
Amount of funding required: USD/INR
____________
Please provide the following details in no more than (4-5)
pages
Brief
business description (Executive Summary):
No more than one paragraph to describe your business
and the business opportunity. If it takes more than a paragraph to describe
your business, perhaps you need to revisit the drawing board. The simpler the
message, the quicker you will draw investor attention.
Team
This section should answer the question ‘Why is this
team/entrepreneur best suited to implement this business opportunity’. Keep it
simple. Include educational qualifications and work experience.
Who
is your customer? What is the issue/pain point that your product/solution will
address?
This section will reflect the clarity of your thinking
about your business opportunity. Be precise and succinct.
What
is the size of the market opportunity?
Please size the addressable market for your business,
and outline key qualitative trends in the marketplace that either increase or
decrease the relevance of your solution.
(While describing market size please include overall market size as well
as the part of the value chain addressed by you)
Product/Technology
Overview
Highlight the uniqueness of the technology and
application (not technical details of the solution).
What
is the value proposition?
Who is going to buy your product/service and how much
they would pay for it. Why would consumers choose this over others? Remember to
articulate the key differentiators in customer benefits, not an internal
perspective on technology superiority (Attach Customer Value Canvas).
Business
model / financial model
Business Model:
This is about how you will make money from this business opportunity
(example who will pay you, who will charge the customer, how, when etc.)
Financial Projections: Provide next 2-year
quarterly financial projections and provide an estimate of the 5-year financial
projection. Cover revenue, cost, gross margin and net cash flow.
Sales
and Marketing model
How are you going to market and sell your products/services
(Go to Market Model). What capability does the team have and plans to build to
take the offerings to the market. What partnerships are critical to your
business? What is the current status of customer and partner pipeline?
Competitive
landscape
Who are you currently or in future likely to compete
against and what is your plan to win this battle? Remember that competition is
not just those providing a similar solution to yours, but all those addressing
the same customer need through variety of approaches.
Risk
factors to execution
What are the market risks, financial risks, business
model risks, execution risks, etc. that may hamper your plans?
Funding
objective and use of funds
Describe how much money you want to raise and what you
intend doing with these funds.
Fundraising
history and investors
Mention previous investment history including year,
amount and investors.
Attach
the Business Model Canvas Sheet
Writer:
Anis Bari
Co-Founder|Tantra Consultancy Services, Style Shop & Vidya Hub
Author|Dreams of The Mango People, The Sulemani Keeda of Entrepreneurship & Brush Up Ur Quant
