Business plan of the project

A well-written business plan for an investment project is easily processed into a financial application that can satisfy most investors. But it's not just lenders, professional savers and investors who need this systemic document. Any entrepreneur or designer who thinks through the details of reconstruction, production, promotion of services studies the consequences of innovations and the necessary financial, material and human resources first "on paper" in the form of a plan to avoid costly trial and error in practice.

A business plan is a specific action plan aimed at the development of a business idea, implemented by a certain firm or entrepreneur to achieve its goals and make a profit. The business plan contains a development strategy, a brief and understandable guide to the management and control of activities.

The main purpose of developing and creating a business plan is to get an answer to the question: is it worth starting a specific project and attracting third-party investors for its implementation.

The main theoretical provisions of the development of business plans

A document that describes the main aspects of the company's activities within the project, taking into account potential problems and options for their solution, is called a business plan for the project. Planning is carried out both when creating a new enterprise and when the business process moves to a new level. Although the planning process has general principles, the exact characteristics of the document (volume, composition, structure) are determined by the size of the company or enterprise, the specifics of the activity, the purpose of the project, the economic and social resource.

Document structure

In practice, a business plan is the only justification addressed to lenders and future investors, which allows you to attract money. This information allows investors to:

determine the degree of sustainability and viability of the project,
choose the best investment option for maximum profit,
assess the prospects for a certain period, taking into account all technical and economic indicators,
evaluate the actual results of the company's work,
monitor the fulfillment of budget obligations,
calculate the possibilities of obtaining credit resources and attracting state support, etc.
Thus, the general task of business plans is to create a holistic assessment of the potential and prospects of specific investment projects, taking into account their specifics, and to justify the introduction of innovations in the described conditions.

To this end, the following are considered as a source of funding:

own funds,
government funds,
funds of possible investors.
The horizon of calculation in this case, most often, is the period of repayment of borrowed funds and another year after that.

According to the form, there is a division into a complete business plan and a conceptual plan. In the second case, only a basis for negotiations with possible investors is created, which will determine the degree of their interest in the project. The official format for the design of such a design is focused on the needs of investors and / or the requirements of business partners, but the general standard structure of the full business plan of the investment project involves the inclusion of the following sections in the document:

Resume. Contains the initial data of the company (name, legal and actual addresses, names of founders). It also formulates the essence of the project, its cost, contains an indication of the degree of secrecy of information.
Characteristics of the enterprise in the context of industry features with an indication of the goal, mission and development strategy.
Description of the product or service with the allocation of their market uniqueness and the cycles of existence of the product (service) in the market.
Analysis of raw materials and sales markets. Potential consumers and competitors, as well as the current market situation and trends in its development are described.
Production plan of the project. This section includes a description of the features of the production process carried out by the main contractor and subcontractors, a list of requirements for premises, equipment, an overview of suppliers of raw materials.
Organizational plan. It indicates the form of ownership, the composition of partners and key shareholders, as well as the measure of their responsibility, information about the members of the management team. In addition, responsibilities are distributed among all project participants.
Implementation (functional) marketing plan. The section determines the prices for the product (service), distribution channels, the forecast for the sale of new products and the target indicators of investment projects.
Investment plan. A schedule of investments and withdrawal of funds is drawn up, indicating the time, volume and possible amount of profit.
Analysis and forecasting of project activities by financial and economic indicators. Including – risk analysis of the project, which identifies the vulnerable aspects of the project, alternative development strategies, the likelihood of technological innovations.
Financial plan and estimated performance indicators of the project in its implementation. All income and expenses, the balance sheet state in time are taken into account, the self-sufficiency point is calculated.
Legal plan. The section is necessary to confirm legal guarantees in the implementation of the interests of all parties and involved persons. This section in business plans as a permanent fixed relatively recently, but in investment projects where it is not enough only to interest the depositor, but it is also necessary to guarantee the observance of his rights, the section has become almost mandatory.
General information about the developer of the plan. The author can be both the initiators of the project, who for methodological recommendations attract experts - for example, financiers in the credit market or the investors themselves - and hired specialists or consulting companies. According to foreign experience, the development of a business plan for an investment project by the initiator himself is preferable.
If the enterprise that undertook the implementation of investment projects is a multi-point organization (with two or more enterprises), then during planning separate plans are developed for each enterprise, which are then summarized in a single document.

Tasks that the business plan solves:

determination of the direction of activity and its feasibility;
formulation of the company's goals and ways to achieve them;
study of target markets for products;
analysis and forecasting of development, identification of weaknesses of activity;
identification of the necessary personnel necessary for the implementation of the idea;
assessment of financial capabilities, trade and production costs;
marketing research;
attraction of investors;
assessment of possible difficulties and ways to reduce risks.
Evaluation of the business plan by investors

The effectiveness of investment projects is characterized by a system of indicators that demonstrate the ratio of costs and benefits in the context of the interests of the participants. Depending on which category the participants of investment projects belong to, the following indicators are distinguished:

financial (commercial) efficiency,

budget efficiency (reflecting the financial implications for the budget of the level corresponding to the project),
economic efficiency (with the reflection of results outside the direct financial interests of direct participants in investment projects that allow value measurement).
In addition, the social and environmental impacts of the project are assessed.

In the conditions of the market environment and the attraction of investment funds through this line, the main importance is financial efficiency.

The peculiarity of the business plan of the investment project is that the evaluation of investments is based on a comparison of the expected profit from the implementation of the project with the invested invested capital. To do this, net financial flow is calculated as the difference between the receipt of cash as a result of investment and production activities and their outflow, with an additional deduction of costs (for example, interest payments on long-term loans). According to the indicators of net cash flow and the discount ratio, such indicators of investment valuation are calculated as:

net discounted income,
internal rate of return,
profitability index,
payback period and speed.
The discount ratio then brings the potential financial inflow and expense at step t to the initial time period.

Individual elements of the structure of the investment plan

The more detailed the sections of the business plan of the investment project, the greater the chances to win the trust of investors and money for the implementation of the plan. Especially important are the first sections that form the investor's impression of the prospects of investments.

Resume

An introduction where the goals of the project fit in.
The main content with a concise description of all the key sections of the business plan and an emphasis on the factors attractive to the investor.
A conclusion that adds up the factors of potential success, including the most important procedural decisions.
In the resume, it is important to clearly indicate the competitive advantages of the product or service of the future project - something that will allow it to stand out in the market and ensure the effective operation of investments. These advantages can be a different level of technology, geographical location, proximity to a transport interchange, etc.

Description of the company and industry

In addition to the goals and objectives of the enterprise and in addition to the events that influenced the development, current opportunities and trends, special attention should be paid to:

a detailed description of the organizational structure (principles of work, organizational scheme, structure of personnel and legal support, etc.), which, as practice shows, is not done in many, especially newly created, enterprises,
consumer audience, its purchasing opportunities, tastes,
evidence that economic trends are favorable in this industry and in this regional market (which is possible when using mathematical calculations, marketing research, statistics).
This section covers all the factors affecting the project, from local laws to the seasonality of the product. In this case, it is not necessary to refer to the general impression, but to authoritative sources of information indicating specific numerical parameters. Example: "According to Rosstat, in 2016, the volume of product sales in the region amounted to 112 million tons in the first quarter, 118 million tons in the second, 124 million tons in the third. In the fourth quarter, taking into account the trend and the independence of the indicator from seasonal fluctuations, it is expected to reach a volume of 130 million tons. "

Description of the product (service)

The section, characteristics, parameters and purpose of the product describes the entire life cycle of the product or service, indicating the time factors affecting profits and the factors of economic cycles:

The preparatory cycle is associated with an intensive marketing campaign and the presentation of a unique product or its commercial innovation component. Moreover, investors are now interested in the format of presentation of goods (packaging, design, means of protection) no less than quality and usefulness. This cycle is defined as the beginning of sales and a period of growth.
The cycle of high rates of development is the period in which the market begins to saturate itself with a unique product (service). As fame gains, so does the competition.
The alignment cycle – the time of arrival of new unique competitive products on the market – is a period when loyal consumers still remain loyal to the product, but many of them are already beginning to look at alternatives.
Here it is important to clearly understand why the consumer chooses (can choose) this particular product, comparing it with the nearest competitors.

Market analysis

Stage 1. Here there is an assessment of the capacity of the market - the total cost of products that buyers in the region of estimated sales can buy in a month (year). Marketing research concerns socio-economic, political, demographic, national and other factors.

Stage 2. Here, the potential amount of product sales is estimated - the market share that the company expects to win back. This amount coincides with the maximum amount of possible sales.

Often at this stage there is a forced segmentation of the market and reorientation to a narrower segment without abandoning the project as a whole. An example of the choice of narrow specifics is the orientation to low-income consumers (segmentation by income level criterion). More often, however, the project immediately focuses on a particular consumer segment, dividing buyers by gender, age, education, hobbies, professions, etc. For enterprises, such segmentation factors are location, distribution channels, quality, etc.

Production plan

composition, quantity, technical condition of equipment, parameters of production areas,
technical standards of equipment productivity and labor intensity,
the operating time of the equipment, as well as the mode of operation of the enterprise,
nomenclature of products and its quantitative ratio.
Usually, this section creates a subsection indicating external factors that affect production activities (access to resources, change of suppliers, changes in legislation, etc.).

Marketing plan

Increase brand awareness.

Creating a sense of confidence in the highest quality of the goods among sales employees.
Improving the morale of the staff of this department.
Increase in sales by a certain percentage for the specified time.
An example of achieving the first goal is to provide investors with a whole advertising campaign. In addition, the economic effect of advertising distribution options is calculated.

Principles of drawing up a business plan "for yourself" and for investors

The principles of drawing up a business plan are reduced to the reliability, logic and clarity of the idea, which, after presenting it, should look attractive to the investor. Therefore, it is more expedient not only to write a document, but also to make a presentation with graphs, diagrams, tables, info graphics from slides. At the same time, it is necessary to take into account the difference between a business plan "for yourself" and an "official-ceremonial" document. In the first case, the real state of affairs is reflected. The second is a detailed and consistent statement of preferences, as when creating a project "from scratch".

"For myself", the business plan always includes more real values and is considered as a working option. An example of the difference between the "internal" version and the "official" one can be seen on the description of the estimate in terms of the purchase of office equipment. If the project really needs 10 laptops for a total of 500 thousand dollars, then they are all rightly included in the official estimate. However, in practice, out of 10 computers in the hands of direct participants, there are already 3 personal laptops, another 2 - business partners have and 3 quite powerful computers - relatives. Thus, the real needs involve the purchase of only two laptops, instead of the ten planned in the investment document. However, if the investor allocates the entire amount for these needs, it will be necessary, at a minimum, to provide documentary evidence of the purchase of the entire volume of equipment.

To draw up the most informational business plan, SWOT analysis is often used, which is popular due to the ability to clearly structure data.

S – Strengths – strengths: medium and low cost of the product, the use of innovations, the presence of experts and professionals in the project team.
W – Weakness – weaknesses: lack of knowledge about the brand among the target audience, the need to rent premises, etc.
O – Opportunities – opportunities involving the introduction of new technologies, the opening of unplanned sources of financing, access to modern materials, etc.
T – Threats – threats that in this type of analysis are considered as sources of risks from outside, which cannot be influenced.

In any case, before drawing up a particular version of the business plan, a maximum of useful information is collected, often with the involvement of experts. This information is necessary to understand the real objective situation. And their own subjective ideas about the environment of the project development rarely give such an exhaustive understanding.

What business models can be laid down

Even before creating a plan, the entrepreneur needs to answer the question of how exactly the activity will be profitable, to develop a business concept - to determine the business model. The business model is a description of the company's strategy in the market, it is the basis of the business plan. Creating a quality product does not always play a major role in the company's success. The main share of success falls on the ability to apply the necessary business model for the activity in order to stand out among competing companies.

In order to create an effectively working business model, it is not necessary to make a new one, it is enough to look at which ones are already on the market. There are more than 50 basic template models, each of which can be used independently or undergo creative changes. Let's look at some examples of effective business models.

Customization. Use of known existing goods or services supplemented with unique elements. It is these additions that distinguish the product from the rest, making it specific to the purchase of a certain group of buyers.

Franchise. Development and sale of strategies for a successful business. This is not only the sale of a business plan, but also the support of the new owner in various areas of work.

Premium. Free provision of a part of the product or service, which allows unlimited use of a set of basic functions, to obtain additional features, the client will have to pay.

Low-touch. The essence of this model is to obtain a low final price of goods, by providing a non-full or even budget package of services.

"Razor and Blade". The model got its name from the product to which it was first used. The essence lies in the sale of a durable product of low cost and increase profits due to the large volume of sales of disposable components for this product.

This is only a small fraction of examples of successful business models. Before developing an innovative model, it is necessary to study what is successfully used by the market, make your own adjustments and get something new and interesting.

Annexes to the plan

In the section of the annex it is necessary to include documents containing a detailed explanation or confirmation of the previously presented materials. Mandatory documents include:

Official registration documents (certificates, certificate of registration of individual entrepreneurs, licenses, charters);
the results of marketing research;
technical characteristics of goods and equipment necessary for their manufacture;
Contracts or agreements with suppliers;
documents reflecting the financial section of the business plan (sales forecast, financing plan, profit analysis);
opinions of state services on environmental issues;
lease and lease agreements.

This list is not exhaustive, it may contain other documents related to the developed business plan. Each document should be on a separate page and numbered, and a link to the relevant document should be used in the main text.

Errors that occur during compilation

Insufficient or poor market analysis. To ensure good sales volumes, it is necessary to carefully study the needs of consumers and obtain objective data for further use.

Ambiguity of goals. To attract investors, a business plan should have a clear and understandable goal.

Undeveloped issues with suppliers and attracting investors.

Underestimation of project implementation costs. When drawing up a business plan, it is important to consider all the costs that will be incurred, including the delivery and configuration of the equipment. Otherwise, it can negatively affect the implementation of the idea.
Understatement of the cost of manufactured goods. It is necessary to pay special attention to the issue of purchasing raw materials and use only specific verified information about its value.

Poor elaboration of the issue of sale of goods or services. The entrepreneur should pay enough attention to the process of marketing products and reflect this in detail in the plan in order to avoid burying the goods in the warehouse.

Lack of credit repayment scheme. This question is relevant and necessary not only for the investor, but also for the entrepreneur himself.

Examples of ready-made business plans

Developing and creating a business plan helps an entrepreneur understand whether it is worth developing a specific business idea. In order to make a project correctly, you should use third-party resources and study ready-made examples of work.

Wednesday, 2 February 2022