Clear guide explains the business plan definition, parts of a business plan and how to use it internally and externally. Understanding a business plan definition is the key starting point to developing the parts of a business plan detailed below.
CONTENTS
Business plan definition
Requirements of a business plan
Business plan definition: Parts of a business plan
1. Cover page business plan approaches
2. Business plan executive summary
– Business plan example executive summary
3. Business / product idea
4. Company
5. Market and competition
6. Marketing analysis
7. Sales, production and purchasing plan
8. Risks and opportunities
9. Financial plan
10. Documents
How to use a business plan
Jargon definition and common examples
Business plan definition
A business plan is the written summary of a future business idea. This business idea, when you define the business plan, shows all goals, strategies and activities associated with the company, management, development and manufacture, marketing and sales as well as financing. Keep this business plan definition strongly in mind while developing your business plan, and follow the sections below for each part of the business plan.
A realistic picture of the company and the market is shown in a strong business plan. Thus, in addition to the strengths and the uniqueness of the business idea, possible risks and obstacles, including suggested solutions, should be presented.
A business plan has both an internal and an external purpose. In the case of internal use, the company is addressed and in the case of external potential investors or other stakeholders, such as suppliers or shareholders. The business plan can be aimed at the following interested parties:
- Internal Use
- Management reporting tool
- Business development planning
- Structuring of change measures
- Help with day-to-day decision-making
- Control over the management and control of everyday business
- External use
- Venture Capitalists / Private Equity
- Financing through bank loans
- Strategic alliances
- Mergers and acquisitions
- Securing business relationships
Business plan definition: Requirements of a business plan
With a business plan there are some requirements that have to be considered regardless of the business idea. A good business plan must be clearly structured and easy to understand so that, for example, an investor can immediately understand and sort the content. Another characteristic of a good business plan is that it is short and concise and the content is meaningful and easy to read in a visually appealing layout.
Evaluation criteria of the bank
First and foremost, a business plan is drawn up in order to generate funding from an investor. In doing so, the bank attaches importance to the general requirements for a business plan, but also to the business idea itself. The bank therefore considers the prospects of success, feasibility and uniqueness of a product or idea. But the entrepreneur must also meet various criteria at the bank. So the bank looks at what collateral the borrower or the company has and in what period of time repayment can be guaranteed. The personality and demeanor of the borrower are also considered, e.g. how does the borrower sell, what qualifications does he have, and the borrower already has experience in this segment.
Parts of a business plan
1. Cover page business plan approaches
- A good business plan cover page increases the chances that your copy will be read. Conversely, if your business plan looks unprofessional, there is a risk that the addressee will not even deal with it.
- Resist the attempt to decorate your cover sheet. Cliparts, bright colors and / or ornaments may look pretty in your eyes, but they can have a negative effect on the professional impression of your business plan – and this is central to your concern. Instead, try to be serious. The best way to achieve this is through a more minimalist, sober design. It is important that all key information is visible.
- Your company logo is an exception. If you have one, it should definitely be clearly visible on your cover sheet. By the way, it pays to hire a good designer here. Because a logo also makes a decisive contribution to the first impression of your company.
The key to a good business plan cover sheet is that all important information is visible at a glance . This includes:
- Company name (if one already exists)
- Type of planned project / company and industry
- Addressee of the business plan
- The purpose of the business plan (what do you hope the reader will do?)
- Your full contact details
- Date of the creation of the business plan and the planned company formation
- It is also worth writing on the cover sheet whether someone helped you with the creation of the business plan or checked it (for example, a tax advisor or start-up coach). This often reinforces the professional impression.
In the majority of cases, founders send their business plan by email today. However, it still happens that investors prefer the paper form. Often it even makes a particularly good impression if you personally hand over a sample copy during an appointment . Then, for many, the first question that arises is which binding is best to choose.
Our recommendation is: Choose a normal binding that is not too conspicuous. When creating the text, make sure that there is a margin for binding and punching.
2. Business plan executive summary
The executive summary is the summary of the business plan. The business idea, the organization of the planned company, the current market situation and the planned financing are briefly presented. The executive summary of the business plan represents the introduction to the business plan and should therefore be designed in such a way that the reader’s interest is aroused. In just a few words, it gives the reader an overview of the project and its economic feasibility.
- 1. You never get a second chance to make a first impression.
- 2. Keep the summary short and simple.
- 3. Be crystal clear.
- 4. Don’t believe your product is selling itself.
- 5. Always prove your assumptions with independent sources.
- 6. Be positive.
The summary should be written last and be a maximum of one and a half pages long. It is ideal if it ends with a clear statement of what the founder expects from the addressee, for example like this: ” A bank loan of xy euros is necessary to secure liquidity until breakeven in the 19th month .”
The information contained in the summary must of course also be found in the corresponding chapters of the business plan. It must not simply consist of text passages taken from there, but it must be a separate document. The above requirement (5) is also often overlooked: Right at the beginning, the reader should be given an indication of how he can independently check the assumptions made for the plan.
Example of a business plan executive summary
Below is an example of a business plan for a well-presented Executive Summary. It comes from the business plan for a research project (‹LITEC›).
EXECUTIVE SUMMARY FOR THE ‘LITEC’ BUSINESS PLAN. The LITEC project aims to build a research and technology center in Virgina. The core of this center is a synchrotron radiation source, which is tailored to the development of technology from the bio and nanosciences. For this purpose, two special laboratories are being set up which guarantee optimal transmission between the technological goals and the potential of synchrotron radiation.
The main goal is to develop light-based technologies for industrial partners. LITEC also serves as a hub in the European research network. This function is reinforced by the construction of a high-performance data network. Finally, LITEC serves as a training center in cooperation with universities and industry.
In the background is the fact that short-wave light, UV and X-rays, are a strategic resource for analysis in bio- and nanotechnology. Demand will increase as the pressure to innovate in key high-tech markets increases. The direct, industrial use of synchrotron radiation is currently still poorly developed. This is the great opportunity for the LITEC project, as a technology and problem-solving company. Through research partnerships and joint research at the site of the synchrotron source, an offer is being built that does not yet exist in this form. A team of scientists and technicians with many years of experience in the international synchrotron business is available to set up LITEC.
LITEC’s business system will develop on two parallel tracks: on the one hand, synchrotron technology, with the operation and further development of the system, and, on the other hand, research and recycling. Their task is the creation and marketing of intellectual property with a strategic reference to synchrotron radiation.
A construction period of five years is planned for the realization of the entire system, with a budget of 70 million euros. Thereafter, the annual operating costs, including staff and renewal, will be around 8 million euros. The project is tailored for a service life of the synchrotron system of 20 years.
A public-private partner model (PPP model) is being developed for financing : the construction of the facility and the laboratories will be partly borne by the public sector (with an EU share of 10%). The income from research contracts should cover 20% of the operating costs in the medium term, and as a result the exploitation of the research results (patent licenses) should generate income at an amount that enables full privatization on the capital market.
3. Business / product idea
Business or product ideas are the essential components of a business plan. The description of the business idea should therefore be understandable for third parties. When describing the business or product idea, the reader should first be given an overview of the current market situation . In this way, third parties can imagine the difficulties entering the market could bring, on the other hand it shows the financier how interested or informed the entrepreneur is. Next, the problem or need that the founder hopes to solve through his idea will be explained at this point. This is followed by a detailed description of the business idea.
4. Company
In the company chapter, the existing team is first introduced and explained who is responsible for which tasks and what experience the team members bring to the project. Company structure and culture are also listed. The legal form and personnel planning also play a role. Finally, the company’s mission and vision are explained. The company section is intended to give the reader an idea of what the entrepreneur has planned for the future and whether these points are feasible.
5. Market and competition
The market and competition analysis in the business plan consists of 3 steps:
- Determination of the market size: Here, the sales or the products sold per year are considered. These insights can then be used to determine market growth. The market size can be determined with the help of two approaches. Either industry and statistical data are used or the market size is estimated.
- Market growth and market dynamics: A complete market analysis not only includes the current status, but also shows the growth rates that the company would like to achieve. A forecast for market development (market dynamics) over the next few years is an important criterion for investors.
- Competition analysis : The competition analysis is an important part of market analysis. The competition analysis looks at the individual factors that are important for a market. The point here is to analyze and describe the most important characteristics of the market.
6. Marketing analysis
In the marketing analysis, the marketing goals, such as market share or sales maximization, are first considered. This is then followed by the STP strategy (S = segmentation, T = targeting, target group selection and P = positioning), in which the exact position in the market is filtered out in which the product or idea is to sell. Finally, the product, contract, communication and distribution policy are discussed through the marketing mix.
7. Sales, production and purchasing plan
A possible future is discussed in this paragraph . For example, it describes how many products a company wants to sell each year and what profits it hopes to generate from them. In addition, calculations are made of how many raw materials, employees or new machines the company needs for this process.
8. Risks and opportunities
The risks and opportunities that exist for the business idea are described here. The situation should be researched and assessed realistically. In this way you can give the reader a good overview of how the situation will develop in the future. But not only that. This section should also explain how to deal with risks and how to use the given opportunities. Some people use the SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) as the basis for this section.
9. Financial plan
The financial plan is an important part of a business plan. In the finance plan, all estimates and plans that have been worked out in the previous chapters are combined. Here various calculations are created:
- Capital requirement plan / investment plan
- Opening balance
- Liquidity planning
- Profit and Loss Account
- Closing balance
The financial plan should reflect the capital requirements that the entrepreneur needs for his start-up or idea.
10. Documents
In order to get an even better overview of the personality of the borrower, the following documents are attached to the appendix:
- Tabular CV
- Partnership agreement
- lease agreement
- Cooperation agreements
- Leasing contract
- if necessary, expert opinion
- if applicable, proof of registered property rights
- Overview of collateral
How to use a business plan
A business plan serves not only the investor, but also the entrepreneur himself. From planning and control to the presentation of business life, the business plan offers an all-round view of the idea. It helps the entrepreneur to take advantage of opportunities and identify risks. In addition, it offers customers and suppliers an overview and, thanks to greater security, enables the chances of successful implementation.
