WellTax Blog

Benefits of writing a business plan

November 15, 2017

When you are running a business, it is crucial to writing a business plan to implement a feasible company strategy.

The business plan is the foundation of the firm and it is a very useful tool to determine the goals that the entrepreneur would like to achieve in the future. It is possible to delineate the performance of a company in a specific time frame (from three to five years) through the analysis of many variables. As a first step, it is fundamental to comprehend the industry challenges that the business has to face. This analysis will lead to contact potential customers, collect information about rivals and evaluate the main investments to be made.

In essence, the goal is to define the business objectives, so that the entrepreneur will be able to improve the vision and have a clear strategy for the company. In addition, the business plan is prepared to be released to financial intermediaries (banks, government bodies, and insurances) to help them evaluate the risks of running the business. The business plan, also, sets the guidelines for the entrepreneur and it has to be constantly updated on the business challenges and opportunities.

Therefore, it is essential to combine this documents with other financial tools (Cash Flow, Budget, etc.) to give a clear understanding of the results achieved by the company and the consequent possible changes in the business strategies.

An effective business plan has to be structured as follows:

  1. The Executive Summary
  2. The Company
  3. Products
  4. Industry Analysis
  5. Market Analysis
  6. Marketing Strategy
  7. Management Structure
  8. Implementation Plan
  9. Funding
  10. Financial Information

To list them is quite simple; however, what it is not easy is to understand which information these points should contain. Let’s have a look at them together.

The Executive Summary is the summary of the future entrepreneurial project, basically the main idea. It is a fundamental section of the Business Plan, which it will be usually read by potential investors to have a snapshot of the whole document.

The Company: in this section, managers need to make a more detailed description of the company including short and long-term goals, strengths, weaknesses and the source of competitive advantage.

The Products/Services: this part is related to the description and the in-depth details of the current products/services and their future upgrades. It is advisable to specify whether the products/services are “trading-ready” or not. If it is not the case, it should be mentioned how long it will take to market them. Furthermore, the main features of the products or other possible sources of competitive advantage must be described in detail.

Industry Analysis: the purpose of this section is to analyse in detail the industry in which the company operates and to explain why the products/services will stand out from the competition.

Market Analysis: this section will deal with the competition in more detail. Hence, brand positioning has to be implemented to target customers and highlight the real opportunities for the company to achieve the designated goals.

Marketing Strategy: once a detailed market description is completed, the product/service delivery methods and the strategies required for this purpose need to be defined.

The Management Structure: the presence of a solid management is absolutely crucial to the potential investor and to the company success. It is advisable to count on experienced managers that can reduce the risk typically associated with the day-to-day business activities, particularly when related to start-ups and fast-growing companies.

The Plan of Implementation: this part will focus on the operational side of the company, in which a list of actions and activities will be described and divided by business function. This classification is essential to achieve the company’s objectives. It is necessary to include the timing of each scheduled activity, by indicating with a chart the starting and finishing time.

Funding: it is the required capital to fund the business. Hence, in this section will be explained and justified the financial outlay required. The following questions will facilitate the preparation of a financial report:

  • What is the total amount of funds required for the business development and what is the amount required by the company to be profitable in the long-term?
  • How many investments are required in the coming years?
  • How many funding and borrowings are required from investors and credit institutions (including the amount, terms and any other agreements)?

Financial Information: as previously mentioned, it is advisable to combine this document with the other financial tools and provide a business plan with five-year cost projections. It is also essential to include historical financial data in the Business Plan (if applicable).

 

 

Please do not hesitate to contact us if you need any support in preparing your business plan.

 

 

Silvano Ghigliani

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