The business plan is a written document of about 30 pages that basically includes the objectives of your company, the strategies to achieve them, the organizational structure, the amount of investment you require to finance your project and solutions to solve future problems (both internal and of the environment).
Alvaro Reyes vía Unsplash
Also in this guide are reflected several key aspects such as: definition of the concept, what products or services are offered, to which audience the offer is directed and who are the competitors in the market, among others. This is not to mention the precise calculation of how many resources are needed to start operations, how they will be invested and what is the profit margin that is sought to be obtained.
There are special studies or focused careers such as business management engineering , which have training focused on the planning of a business model and can help improve your sales strategy, financial projection and development of soft skills such as leadership.
Contrary to what some entrepreneurs imagine, developing a business plan is less complicated than it seems. Although each project is different, everything starts from having an idea and putting it into writing based on five basic points:
-Ideological structure. It includes the name of the company, as well as the mission, vision, values and a description of the competitive advantages of the business.
-Structure of the environment. It is based on an analysis of the strengths and weaknesses of the company, as well as the behavior of the sector in which it operates, market trends, competition and potential customers.
-Mechanical structure. Here the distribution, sales, marketing and advertising strategies are listed, that is, what actions must be taken to achieve the success of the business idea.
-Financial structure. This point is essential because it tests –based on calculations and scenario projections– the viability of the idea, in economic terms, and whether it will generate an attractive profit margin.
-Human Resources. It helps to define each of the jobs that must be filled and determines the rights and obligations of each of the members that make up the organization. It does not matter if you are starting alone, this will be your base to ensure the growth of your company .
Below, learn in detail each of the five basic structures that make up a business plan, as well as practical advice to write it and get the most out of it. And don’t forget to run and improve it every day!
1. Ideological structure
This first structure is equivalent to the soul of a company. Here the business idea is presented and described, as well as the objectives to be achieved. The valuable thing about this section is that it is about the business card in front of your collaborators and potential investors.
The ideological structure is made up of the following points:
– Company name. This should reflect in a simple way what the business is dedicated to and the line in which it operates. It is best to keep it short, easy to pronounce and remember. Do an internet search to find out the names used by your competition and to get an idea of which one to choose. Once defined, register it with the Mexican Institute of Industrial Property (IMPI).
– Mission. It is the purpose for which a company arises and it is what gives it its identity. It is made up of three elements:
- Description of what the business does.
- Who is the product and / or service offered for?
- What makes it different from its competitors.
– Vision. It is an image of the company in the future and its function is to inspire employees, investors and target audience to get where it is proposed. This is characterized by being:
- Realistic, with achievable and achievable goals.
- Clear, simple and easy to communicate.
– Values. They are the rules under which the organization will conduct itself when closing a deal with clients, suppliers, investors and collaborators. The important thing about this section is that values will always guide your business practices inside and outside of it.
– Competitive advantages. It reflects the reasons why your product and / or service will be successful in the market. This will depend both on its added value and on your skills and expertise.
– Commitment. Answer why you want to undertake, determine how persistent you are, recognize your skills and calculate how much of your time you will spend on the business.
– Competences. Take into account your experience in the market you want to enter, achievements and failures, and how much you know about the industry to which your product and / or service belongs.
– Character. Are you prepared for risk? Are you honest enough to deal fairly with clients, suppliers, investors and collaborators
Regarding your offer, answer:
- What needs does my product and / or service cover?
- Who will buy it?
- Why will you buy it?
- Where can it be accessed?
- Why is my offer better than that of my direct competitors?
2. Structure of the environment
This section of the business plan is an x-ray of the industry and the market in which your company will develop. Knowing the behavior of the sector to which your offer belongs, how the sales of products and / or services similar to yours have behaved in the last 12 months and what your target audience demands, will help you reaffirm whether your idea is viable or you have to reformulate it.
To start generating this information, do a SWOT analysis . This methodology allows you to know, on the one hand, the strengths and weaknesses of the business, that is, internal variables that you can control. And although both the opportunities and the threats are external and more unpredictable, if you have a proactive plan you can take advantage of and avoid them, respectively.
The variables included are:
– Strengths. It refers to those characteristics that make the company unique and different from its competitors
– Opportunities. Here the entrepreneur must list what the market demands and how his business will be able to satisfy those needs to be solved
– Weaknesses. Honesty is very important in this variable, since it is necessary to recognize which are the defects of the product and / or service
– Threats. The entrepreneur must know very well the industry in which he participates, because only in this way will he detect where a blow from the competition may come from or what his consumer will demand of him in the short, medium and long term.
Then focus on recognizing and documenting your industry and market. Start by completing these points:
-Describe your target audience . Who will buy you? Are they male or female? Define ages, average income, habits and customs, professions, etc. Remember that all data provides information that will be of great use to you
-Investigate market demographics. It includes growth of the sector in the last three years, leading companies in the sector, consumption trends and growth prospects in the short, medium and long term, etc.
-Know how often your product and / or service is purchased. This data is vital to calculate the time to complete your sales cycle and thus determine, for example, your storage and distribution costs.
-Study your competitors. Research the added value of your competition’s offer, the prices they offer and the distribution channels they use. Also pay attention to their sales and marketing strategies. Tip: do not imitate them and better use that information to refine your ideas.
3. Mechanical structure
Here are included the company’s objectives and the strategies to achieve them, as well as the deadlines in which the first results must be reported. The mechanical structure will act as a blog and will be the one that will help you detect errors and change tactics immediately if necessary.
Based on the “Structure of the environment”, determine what strategies you will implement to create a sales and marketing plan that guarantees a constant flow of income in the company. Therefore, you will have to define these points:
– Price of your product and / or service . A good way to price your offer is to investigate the range in which the products and / or services of your competitors oscillate. Of course, do not punish your sale price in order to lower the sale price to the public, better bet for having more efficient internal processes that reduce your operating costs.
– Payment plans. If your product and / or service is more expensive than your competition, you can design credit or deferred payment schemes. The goal is for your clients to put price aside and take advantage of the financing benefits you offer.
-Sales force. Here you determine the number of sellers you need to start, as well as their profile and the skills required to place your offer on the market successfully. It is worth including compensation and payment schemes.
-Distribution channels. Depending on the nature of what you market, you will have to choose the means through which your potential customers will have access to your offer. To do this, answer questions such as:
- Do you need to take inventory?
- Do you need a place to store your merchandise?
- Are your sales made to order?
- Is it better for you to have a store or to manage a catalog on the Internet?
-Communication channels. Currently, companies rely on other media in addition to the traditional ones (such as radio and television) to reach their target audience. Therefore, it is no longer necessary to invest large amounts of money to have a massive communication channel. It is enough to have defined the profile of your consumer to choose which of the following options is best for you to explore:
+ Radio and television spots. It is recommended for businesses that are already operating and that have products and / or services already positioned in the public mind.
+ Social networks. The advantage is that they are powerful and even some of their applications are free. They are ideal to reach a young audience, between 14 and 35 years old. Among the most popular are Facebook and Twitter.
+ Web 2.0 campaigns. Includes direct emails, newsletters, blogs, Web pages and Web banners on sites with high netizen traffic. These strategies require a moderate investment of time and money.
4. Financial structure
The experience of some entrepreneurs shows that the most complicated part when developing a business plan is the one that has to do with finances. However, this is the one that provides more information about the viability of an idea to become a successful company.
The basic financial structure of a business plan is made up of six reports:
– Pro-forma income statement projected for three years. Its objective is to present a vision for the future of the behavior of the business. “It is calculated considering the following variables: how many units you will sell and at what price, cost of sales per unit, fixed costs, variable costs, interest (if you have a credit) and taxes. The result will be the net profit ”, affirms the expert.
– Pro-forma balance sheet projected for three years. This report is divided into two variables: what the company has and how it was financed. It contemplates from furniture and equipment (company assets), as well as where the resources to acquire them came from.
– Pro-forma cash flow projected for three years. Here you define your accounts receivable policies, how long your suppliers will give you to fulfill your obligations to them and what your sales cycle will be. This report should answer these two questions: when am I going to require capital? And where will these resources be obtained from?
– Breakeven analysis. It is a measure that indicates the units that a company must sell to cover the fixed costs derived from its own operation. This data is relevant to determine the moment in which sales will begin to generate profits for the company. Make sure that the balance point is something real and achievable according to your possibilities. How to calculate your breakeven point.
– Scenario analysis. Take the income statement and project (with the help of a spreadsheet software) two possible scenarios: one optimistic, with an annual growth of 20%, and the other pessimistic, with 3%. In this way, you will know what your utility would be in each of the two cases, as well as the behavior of the rest of the variables, such as costs, expenses, investments, etc.
– Conclusions. This section is the one that future investors will give the most importance to if you use your business plan as a tool to get financing. Therefore, it must include the Internal Rate of Return and the break-even analysis, among other key indicators.
5. Human resources
A trend among entrepreneurs is to become “all-doologists” since it is they who, at the beginning, are responsible for both the administration and the operation of the business.
However, if the company has founding partners and a work team, it is important that functions, responsibilities, salaries and benefits are defined according to the role that one has. Here are some practical tips for building an HR strategy:
– It begins by developing an organization chart in which the functions, obligations and responsibilities of the team are delimited based on their positions.
Determine the salaries, benefits and incentives of each position
– While it is true that it will be difficult to match the salaries offered by companies that have been operating for years, it is also true that you can “reward” the efforts of your team with bonuses or recognition for their outstanding achievements.
– Prepare a table in which the leader of each strategy implemented within the organization is identified and includes their functions, people in charge, goals to be achieved and in which period they must report their results.
Once your company is consolidated, the ideal is to create a Human Resources department that is responsible for both the hiring and development of each worker.
On the other hand, if your business plan is directed at potential investors, Ruiz Massieu recommends including the contracts that you have signed with collaborators, clients and suppliers. It also includes the documents that accredit you as a company formally incorporated before the Ministry of Finance and Public Credit (SHCP).
This document has the function of synthesizing all the activity of your company and is generated based on your business plan once it is ready.
Generally, the summary is one or two pages long and should include the following points
-Business concept. It describes the company, the product or service it offers, its competitive advantage, the characteristics of potential customers and the context in which the business operates
-Financial factors. In this line, items such as sales, earnings, cash flow and return on investment stand out.
-Financial needs. Includes the capital required to start or strengthen the business, as well as the destination of each peso invested
-Current position of the business. Provides relevant information such as the number of years of operation of the company, the name of the owner and partners, as well as key personnel.
-The best results achieved. This is a report on the main achievements, for example, patent registration, prototype or technology development, etc.