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Essential qualities of a business plan

A business or corporate plan should be a clear and precise document. Written in part to fulfill a need within the business but strongly oriented towards financial institutions, it should reflect the vision of the company leader and should therefore be based, in large part, on his or her way of thinking. As an overview of the business proposal, it presents a realistic assessment of the investment and target market needs.

Like the company itself, the business plan should change and develop over time in accordance with certain basic rules.

A comprehensive overview

By getting the business plan down on paper, the business executive can assemble the basic concepts of his or her corporate project. There will be many complex questions to ponder but the answers must be simple. In order to hold the readerís attention, the focus must either be on a strategic orientation that will distinguish this company from its competitors, or on the new need the company executive intends to fulfill.

With this in mind, a business plan should:

  • Hold the readerís attention by demonstrating a sound approach;
  • Explain how past experience should guarantee the success of the project;
  • Show that the project is a serious one by highlighting the entrepreneurís managerial skills;
  • Describe the marketing strategy chosen to penetrate the target market;
  • Justify the technical, financial, human resources, and if need be, research and development choices that have been made, in order to convince the experts with whom the financial institutions will consult.

Complete information

A business plan should include the following elements:

  • A description of the business proposal and accompanying technical elements (such as the product to be launched) that can be quickly comprehended by a specialist;
  • A depiction of the companyís organizational structure (organization charts and production teams), which indicates essential and secondary functions;
  • An assessment of the companyís human resources requirements;
  • An assessment of the companyís requirements with regard to premises and capital goods (machinery, technological equipment);
  • A statement of projected operating expenses and revenue, cash flow requirements, and investment budgets, with budgeted balance sheets;
  • An assessment of the requirements for capital and its use;
  • The market prospects for the product or service;
  • The expected return;
  • The legal structure;
  • An overview of development projected for the next 3 to 5 years.

Market research

The market survey is an important component of a business plan and uses statistical tools, documentation from companies specialized in market research, and in-house electronic monitoring methods to assess the market prospects for the future product. A market survey describes the companyís competitors, explains how the business will distinguish itself from them, and pinpoints the market segment to be targeted.

The market survey provides detailed information on the marketing methods to be used, depending on the nature of the product (general public, wholesale, professional, institutional, etc.) and on the main method of distribution (in-store, market, trade shows, Internet, locally, nationally, internationally, etc.).

Financial Planning

Lenders need guarantees. You must supply them with facts and figures that enable them to judge the appropriateness of a financial request.

A business plan should indicate how much money is allocated to:

  • Purchase or rental of basic equipment i.e. machines, stock, start-up costs;
  • Payment of fixed costs such as rent, electricity, taxes, and salaries;
  • Payment of related costs such as advertising and transportation;
  • Cash flow required for the first twelve months;
  • Building a contingency fund.

The entrepreneur should estimate as precisely as possible the revenues and losses the business will experience until it becomes profitable, as well as set realistic goals that take into account such aspects as payment periods.

This exercise will help the entrepreneur avoid investment loans, except when absolutely necessary, as well as more precisely assess the returns to investors and the terms of withdrawal.

Investors expect a return that is proportionate to the risk they are taking, and these parameters are specified within the shareholder agreement. Investors generally redeem their shares in one of two ways: through redemption of their equity by the company founder(s), or by way of an initial public offering (issue of shares to the public).

In order to reassure the investors, it is in the business executiveís interest to put up as much security as possible (property or other assets), in case events take a turn for the worse.

Choose a good legal system

It is important to choose the appropriate legal system, keeping the following facts in mind:

  • In a sole proprietorship or general partnership, the owner is liable for all debts and obligations incurred personally and by the business;
  • In a corporation (copartnership of persons), each associate is liable, personally and without limit, for debts and obligations incurred in the name of the corporation;
  • In a limited company, each shareholder is liable for debts pro rata with the capital invested;
  • In a cooperative, all members have equal voting rights; interest on capital stock is limited.

A transparent business plan is one of your best assets in gaining the trust of bankers and investors, whether they are your associates or people outside the company.

To have our business plan professionals write a business plan for you click here

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