Too often, entrepreneurs (especially for small projects) find out what a business plan is when it comes to applying for a loan to a bank or a grant to a public body. This formal document is nonetheless a very valuable tool before undertaking.
What is a business plan?
A business plan is a document that explains the essential aspects of a business project, from idea to expected profitability, through relevant aspects of strategy, marketing, human resources or technique.
The business plan is usually divided into two parts. On the one hand, a commercial and market study, which explains what is going to be sold (the business idea), who is going to be sold (customer segmentation), against whom will be fought (competition study), with what prices, What commercial policy, etc.
On the other hand, an economic and financial study details from sales to profit after taxes, reviewing fundamental aspects such as investment and its financing, sales and margins, expenses, treasury, internal rate of return, a point of balance, etc.
Other very important elements that are usually included in the business plan are the description of the promoter team (explaining why they are the best ones to lead the project), the production plan, and fundamental aspects such as personnel, legal issues or technology.
What is it for?
The business plan has, in my opinion, two major objectives. In the first place, it is a forecasting tool for the entrepreneur. It allows you to do a very thorough job on your project, and ask you many questions. If done seriously, this is a formidable method to anticipate problems and correct the strategy on time. It is clear that everything cannot be foreseen, but good preparation is very valuable.
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Second is a sales tool to convince prospective investors and funding sources. A complete and serious business plan based on testable hypotheses allows the partners to demonstrate the possibilities of the project and its estimated profitability. It has to be attractive, easy to read and adapt to each audience (so they usually do different versions).
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