Business Plan what is it for and how to do it

The Business Plan is a tool that allows the entrepreneur to plan the future of his company. The definition of some goals and objectives not only allows you to clarify the situation in which your entrepreneurial project is positioned in the competitive market, but also to prepare alternatives that fit better and face the difficulties that may arise. The Business Plan project is a reference that, during the exploration of the company, will also make it possible to verify how the objectives and targets set are being met and how the strategy can be adapted to improve performance. Let's see what it's for and how to make a Business Plan.

Estimated reading time: 13 minutes

What is a Business Plan

The business plan is a document that describes the business and allows the entrepreneur and his team to be guided over time.

It describes the objectives of the enterprise, anticipates situations and creates the strategy and the paths to achieve them.

To achieve this, you must include an analysis of the market, competitors, target audience as well as the strategy for the operation.

It is with this analysis that it will be possible to have a more complete view and understanding of reality, allowing for better solutions to be found for the challenges that may arise.

Another aspect that a business plan serves is from the perspective of investors, partners and other “stackeholders” as it allows a clear view of the company's viability.

What is a Business Plan for?

When the enterprise is in the start-up phase, it serves to show the challenges that arise, helping to find adequate strategies to overcome them and showing the feasibility of each alternative that is foreseen.

It shows the positioning of the company within the market, what distinguishes it from the competition, what are the characteristics of the target audience and how the company can be balanced to overcome the challenges of starting up.

If the company is in operation, the Business Plan project allows you to find strategies for the expansion of the company, for the launch of new products and, above all, it is a guide that allows you to know at any time how the objectives are being fulfilled.

Planning activities is an important step towards success.

The Business Plan is an important tool because it allows you to avoid making some less accurate decisions.

First, it is necessary to verify the impact of these decisions on the various plans of the company and, finally, the economic and financial impact, allowing the decision to be adjusted in order to maximize the positive impact and minimize or eliminate the negative impact.

With this plan it is possible to demonstrate the feasibility of the enterprise, from the various points of view, whether strategic, operational, technical, market or economic and financial.

Advantages of the Business Plan

In addition to planning the company's activities, this document provides an overview of how the company will operate, how its products and services are suited to the needs of future customers, how the competition will react and how we propose to overcome difficulties. .

Entrepreneurs' overconfidence often leads them not to make the business plan. This is the main cause of business failure.

Another reason why a business plan is useful is that the process of its elaboration helps to study the market, customers, suppliers and competitors in greater depth, and to translate the idea into values ​​that will, finally, be a preview of the results of the company.

It allows you to visualize the economic and financial results that are foreseen, facilitating communication with partners, financiers or possible loans.

Another great advantage of the Business Plan project is that its elaboration allows:

• Better organize ideas;
• Provide management with the economic and financial results of each planned action;
• Improve communication between the team and reinforce their confidence and commitment;
• Help with any request for credit or in obtaining a difficult resource;
• Help with management transparency;
• Align the expectations of all stakeholders, partners and investors.

How to Make a Business Plan

Although with some variations, most publications and existing literature point out that a company's Business Plan has the following chapters:

• Executive summary
• Market Analysis and Strategic Analysis
• Marketing plan
• Operations Plan
• Financial plan
• Strategic Analysis

Executive summary

This is the most important chapter of the business plan, as it summarizes the main goals and strategies for achieving them, detailed in the following chapters.

Being the first to be read is what will make a good first impression, whether on future partners or on potential investors or business partners.

The executive summary should detail the following aspects:

• description of the enterprise;
• what is the company's mission;
• impact it may have on the market;
• description of the entrepreneurial team profile;
• description of the employees' profile and what specific training will be required for employees;
• products and services offered and differentiation from the competition, with the main benefits they bring;
• profile of potential customers;
• location, in the case of a physical company;
• investment to be made;
• legal nature.

While this is the first chapter to be presented, as it reflects the rest of the business plan, it also has to be the last to be updated with data and conclusions from the various components of the plan.

Market analysis

This chapter encompasses the most complete possible analyzes or market research on customers, competitors and suppliers.

Customer Study

In this chapter we aim to get to know potential customers well.

What can we do to attract them and then to retain them.

Without forgetting that it is more difficult and more expensive to attract than to retain customers, the strategy to be developed must take this into account.

In order to characterize potential customers, some points that must be considered:

• What kind of customers will you have? People or companies?
• What is the age group, gender, education, among others, that will be predominant in the business?
• How often do they consume the product or service we offer?
• Where do you usually buy?
• Where would you like to buy?
• Which competing companies do potential customers most admire? It's because?
• What do you value most in a company?
• What drives them to look for this product or service?
• How often do they buy these products or services again?
• What media do you normally use to stay informed?
• What criteria do you consider when making the purchase decision?

The collection of this information does not fall from the sky and you cannot assume that you already know everything about this matter.

You should collect information using surveys, interviews, meetings with hypothetical clients or even, if your budget allows, using specialized services.

Competition Analysis

Identify which are the most relevant competitors in the market in which it proposes to participate.

Check the strengths and weaknesses of each of them.

With this knowledge you will be able to find ways to better differentiate and make products or services more competitive.

Knowing good practices that are practiced and that can also serve as guidance and also, on the contrary, behaviors or actions that should be avoided.

Some points to consider when designing a business plan for a complete analysis:

• What is the quality of the product or service offered by the competitor?
• What are the prices charged?
• Are there new sales techniques used by competitors?
• Is the audience the same that we are addressing?
• What drives a customer to choose the company in question?
• What makes a customer give up doing business with this company?
• What publicity and promotion actions does the competitor do?
• What features does customer service have?
• What are the payment terms you offer?
• What time does the physical space open and close?
• What extra services do you offer, for example home delivery?
• What can we offer that competitors don't?
• What are the business process support information systems used by competitors?
• What is the most used distribution logistics in the market?
• What types of promotion are used by the competition?

Another important point to consider is how each competitor can react to the opening of your company!

Supplier Analysis

The suppliers will be the business partners that will provide the raw materials, equipment, systems and other goods and services necessary for the proper functioning of the company.

To better plan the opening of the company, we need to know them and choose the ones that best suit our particular needs.

Here are some points to consider when analyzing suppliers:

• What do I need to buy?
• Which companies supply each necessary item?
• What are the prices charged by each of them?
• What are the payment terms?
• What are the delivery times?
• How is support offered?
• What are the minimum order quantities?
• Where are the suppliers located?

It is good policy to have more than one supplier, particularly for products or services that are most critical to the business.

Thus, it only has a greater negotiating capacity but, above all, it reduces the risk of the business stopping if that single supplier fails to deliver.

Marketing plan

It is in the marketing plan that the characteristics of each product or service that is intended to be offered must be described in detail.

Characteristics such as colors, flavors and aromas, packaging, quality, certifications that may exist, labels, brands, logos, environmental footprint and everything that applies to each product or service produced.

Some issues that must be addressed:

• How can you describe the product or service we offer?
• At what price will it be sold and what is the profit margin?
• Is the price comparable to the market?
• How does the product stand out from the competition?
• What will be the customer's behavior in relation to this product/service?
• Is it a product for a local or comprehensive market? National or international?
• How should the product be advertised?
• Will sales take place in physical stores or online?
• And if they are online, how is the delivery done?
• What is the most used distribution plan?

This is the starting point for the entire team involved in the project to get to know better the unique characteristics of the product or service that is intended to be sold on the market.

Operations Plan

This plan is intended to clarify what the sales value will be in the various months since the company's opening to the public.

With this sales estimate we will have to calculate what the costs will be to produce the products and services, namely the costs of raw materials, labor costs and other costs of operating the business.

Some points to consider in this phase of construction of the Business Plan project:

• how long it takes for a sale to be made;
• how many collaborators will be needed;
• what qualifications are required for employees;
• what are the equipment and materials needed for sales to be made;
• what are the production, distribution and storage capacities;
• the availability of products or raw materials from suppliers and the delivery time for each of these items.

In case a business plan is for a company that will have a physical space or an industrial area, you have to make a design with the arrangement of the equipment in the available space in order to optimize the routes between equipment.

Financial plan

Make a note of all the monetary amounts that will be needed for the financing and day-to-day management of the company.

Social capital, equipment acquisition, operating costs, whether fixed or variable costs, working capital needs and whatever else is needed for the business plan.

How much are we going to spend on domains, hosting e-commerce sites, salaries, advertising, rents, insurance, among others.

This way, you can find out the total investment that will be needed not only for the start-up, but also to maintain yourself in the first months while the result is still not profitable.

With this scenario, you also know if you can make the investment yourself or if you need to have investors to help you, or if you need to take out a loan.

Include a summary with the Income Statement (DR) where it will be easy to see the income and expenses side by side and you will be able to better understand how much time the business needs for the return on investment to be realized.

Strategic Analysis

To complement how to make a Business Plan, the strategic analysis of the enterprise could not be missing.

We can use a SWOT Analysis, acronym for the English term, Strengths, Weaknesses, Opportunities and Threats or in Portuguese, Weaknesses, Opportunities, Strengths and Threats, SWOT analysis.

With this tool, we assess the external and internal environment of the enterprise, as well as the opportunities and threats that may arise.

In fact, it is the intersection of 4 quadrants that can be seen in this table:

Strong points

• What characteristics are we better at than the competition?
• What are the advantages of the company, products or brand

Weaknesses

• What are the points where the competition outperforms us?
• What are the limitations of the company, products or brand

Opportunities

• What opportunities are still to be explored?
• What trends favor the company, product or brand

Threats

• What factors negatively influence the sales process
• What obstacles exist internally and externally

Scenario Evaluation in the Business Plan Project

Another reason why a Business Plan is important is the evaluation of different scenarios. It is about simulating different alternatives in the various parameters of the business.

We can consider more optimistic, more pessimistic or even more realistic scenarios. The important thing is to simulate alternatives and analyze the impact they have on the results.

This will enable a clearer view not only of the current scenario but also of what may be found in the future and to be able to plan strategies for these impacts.

Each of the main scenarios we can consider:

• optimistic scenario: considers a very favorable environment for the business, with goals that are exceeded, expenses below estimated and with low production costs;
• pessimistic scenario: considers possible adversities, foreseeing the worst possible situations so that the team can know in advance how to deal with these situations, if necessary;
• realistic scenario: it seems to us to be the most adequate to the reality that we found in the analyzes carried out. It is neither optimistic nor pessimistic. It is based on the true information that we access and in a very critical way.

Tools and support to help build the Business Plan

We recommend some tools and support that can help in the best way to make a Business Plan:

• Support from IAPMEI: provides management support tools, evaluator of innovation levels; financial and digital maturity diagnosis, among others;
• Guide for your Business: from the Portuguese Government.
• O Pássaro no Ombro™ There are several articles explaining step by step how to develop a business plan, with examples.

Conclusion

The very process of drawing up the business plan, by forcing people to think, investigate, analyze and document, is the best way to not be surprised by unforeseen events and make the business work and succeed.

Being able to show details of the various plans, marketing, operational and financial makes it very clear, both for you and for partners, partners or potential investors, which are the estimates of the project's profitability and the reliability of the vision that underlies the project.

The SWOT Analysis is also a way of showing the company's strategic vision that will be important for investors, or for the employees themselves to feel involved and motivated for the project.

We hope to have been useful, not only in clarifying what a Business Plan is and what it is for, but also in how to do it.