The business plan is the point of departure for any funding application. It is very important that the business plan should cover all the issues that a funder considers to be important. This means that you need to know what funders are looking for, and why they want that information.
It is also important to realise that you are not writing the business plan just to satisfy the funder. When you address all the key issues, it will also give you a better understanding of your business. It will help you to be in control of all operational aspects the business. And it will show you where your business is weak so you can take action to improve.
The main elements of a successful business plan
A good business plan contains the following elements:
This is the short overview of your business and what you are looking for. Write this after you have finished writing your business plan so that you know which key points to summarise.
In this chapter, you introduce your business idea, the ownership structure, your product or service and how it is different from what is already on the market. You should also provide some information about the industry or sector that your business is active in.
Markets & competitors
In this chapter, you explain who you will be selling to. Who is your target customer or, what is your targeted market segment? In addition, you should explain the main trends in the market, whether you are already selling or whether you have signed sales contracts . You should also provide information about your competition, their strengths and weaknesses, and what your strategy is to get customers to come to you instead of going to them. When an investor or bank is reading this part, they will be looking for proof that you have done the market research to justify what you are saying.
Sales & marketing
This is a very important chapter because it gives investors an idea of whether the business will be successful. It should therefore also include information about your business growth strategy. One main reason why business plans are rejected, is because entrepreneurs give too high – meaning unrealistic – sales forecasts. So there are some important points to look at there:
Entrepreneur and team
This is another important chapter. It will tell the bank or investor why they should have confidence in you and the other people running the business. So, you need to explain the skills of all the people in the business. You should also clarify who will be doing what. Another thing that investors are looking for here is how you will manage the business, for example your administrative procedures or quality control. The final important issue here is your own investment in the business. If you are not willing to put time and money into your own business, or if you are paying yourself a high salary, why would any investor put their money into the business?
Here, you should explain what facilities the business will have and how you will deliver your product or service to the customer. You should also provide a list of employees positions, how you will find them, and also how you selected your suppliers.
In developing countries, investors are often looking for the business to have a positive impact on the community or the sector. Examples: how many jobs will be created, how will women and youth benefit from the project, what benefit will there be for the environment, or how will the business increase the knowledge of certain groups so that they can better compete on the local or international market?
First things first. If your sales forecasts is not realistic, your financial forecast cannot be realistic. So please put in the time and effort needed to get a good sales forecast. In addition to your sales forecast, this chapter should show the expected cash flow, your annual profit and loss (P&L), your breakeven turnover, and your balance sheet. Note that for the P&L, investors want to see the forecasts for 2-3 years. For your balance sheet, they will be interested in the financial state of your business on day 1 + the end of the year, also for 2-3 years.
The money you need & how you will repay it
The investor or bank will want to hear from you how much money you want, when you will need it, and what type of funding you are looking for. They will also want to know what you are going to be using the money for. Example: to buy materials or for working capital. Once you have your cashflow forecast, you will know how much money you need to operate the business. You will also be able to use the forecast to show that the business will be able to repay the money or generate income for the investor.
Risks depend on the type of business that you have. Examples of risks: the market demand drops severely, it is not possible to purchase the materials you need, or the exchange rate drops or increases. If you are able to show the risks that your business will face, you are showing the investor or bank that you have thought well about your business. You should also explain how you will manage the risks because this will improve your credibility with the bank or investor.
The appendices are where you put detailed information to back up what has been written in the business plan. Examples: detailed financial forecasts, CVs of staff, results from market research, business SWOT analysis.