Private International Commercial & Industrial Financing Consultants

A business plan is a document describing a company’s principal activities, or products, or services, its environment, and the objectives and strategies of management, backed up with suitable financial information.

Purpose and advantages of having a business plan

The plan is a presentation of a company and its opportunities.

It can serve as the basis for strategic planning and as a management and control tool.

It enables an investor or financier to evaluate a company, and assess the risks and prospects for return on investment.

It requires fact-finding, and forces the management to be realistic and to put theories to the test.

It should prove the management team’s planning capabilities and reduce the time required to study and negotiate financing.

Presentation of the business plan

A plan should be prefaced by a summary of the business opportunity and the key aspects of the firm, including information on:

• objectives;
• desirability of products or services; or
• feasibility of the project (such as in the case of real estate development) markets (if applicable);
• management team;
• financial projections;
• amount and nature of funding required and the estimated return this will produce.

The plan must include enough information to enable an investor or financier to make a decision, but it must not be overloaded with superfluous or irrelevant detail.

Precautions in writing a business plan

Ideally, and at least initially, the entrepreneur or the management team should prepare the plan themselves, simply because they, of all people, know their project best. . They should, of course,d seek outside help in areas where they lack expertise.

It is certainly useful to have the plan evaluated by a knowledgeable outsider before presenting it to potential investors or funders.

The plan must demonstrate that the project is able to meet the funder’s criteria, such as:

• the management is qualified;
• the description of the market and marketing methods is well established and realistic (if applicable);
• the property has a sufficient valuation (if real estate) the projected new funding will be adequate;
• the product is competitive; or
• the project is profitable (for example, in the case of real estate development) the production capacity will be adequate (if applicable);
• the probability of an attractive return on investment is high.

The funding applicant should:

• prepare a 3 to 5-year plan;
• undertake and document a specific feasibility, and, if applicable, marketing study;
• be prepared to make a personal financial commitment;
• divide large-scale plan into phases;
• provide a list of users, suppliers, clients, etc. who are ready to act as references;
• include both strengths and weaknesses of the business plan (this adds credibility and underlines the practical knowledge of management);

More Detail for the Business Plan

The plan must be adapted to the situation. Nevertheless, certain basic information is necessary in all cases. This includes the company’s major objectives, opportunities and profit targets, any assumptions made, resulting forecasts, special risks, and resumes of the management team.

Of course, not all the following items will be applicable to every application. For example, often in the case of a real estate development or acquisition, matters relating to production etc. would not be applicable.

Provide a general introduction to the business plan

Describe the development of the company to date, and indicate products and target markets, capital required and profits expected.

Provide an idea of the schedule of the program and elaborate on objectives. Mention the unique qualities of the business, why it would make a good investment, and identify the individuals involved.

Management details for the business plan

You should:

• provide a complete curriculum vitae for each member of management;
• emphasise achievements, duties and references;
• supply current and proposed organisational charts with a description of the duties of management;
• give full details pertaining to remuneration of management;
• give details of shareholders’ participation;
• explain non-monetary contributions;
• give objectives and main motivation of shareholders and how they view their contribution to the organisation’s success

Manpower in the business plan

• indicate skills required and manpower availability;
  • provide statistics
  • turnover, productivity, etc; comment on mechanisation or automation.

Marketing in the business plan

• describe products,indicating characteristics;
• explain product policies;
• provide sales brochures, photos and the results of market analyses;
• explain advantages of company’s products over competitors’ lines;
• indicate profit contribution of each line of products;
• describe the present and projected marketing policy:
  • what are the target segments and customers?
  • What are the most attractive opportunities?
  • provide a breakdown of sales by customer, territory and product group;
• explain supply channels; describe market characteristics and potential for existing and future products;
• what is the expected market share (per product line) what substitute products can/or could be found?

Production as described in the business plan

• explain the production process;
• provide equipment requirements;
• indicate necessary investment
• describe available fixed assets;
• provide actual manufacturing capacity;
• explain possible improvements;
• list the raw materials used and major suppliers;
  • how do the prices of supplies fluctuate?
  • explain quality control methods used

Business plan – Product research and development

The plan must indicate whether or not the business has the technology necessary to create and develop products (if this is part of its strategy).

• indicate the originality of the process or product;
• provide technical reports to support the firm’s case;
• indicate costs related to development and the manufacture of prototypes;
• summarise a schedule for development;
• indicate time and costs necessary for accelerated production;
• indicate patents available and names of patent holders

Financial information for the business plan

This part of the plan should summarise the financial structure of the company. A financial plan generally includes:

• financial statements for most recent three to five years, if available;
• recent monthly financial statements, if available;
• projected income statements and balance sheets for the next three to five years, indicating all assumptions;
• cash flow projections for the first two years, prepared on a monthly basis;
• breakdown of fixed and variable costs; details of costing system;
• break-even point analysis; a list of all loans, financial obligations, and their terms and conditions;
• details of customer backlog; breakdown of inventory into raw materials, work in progress and finished goods

Additional information for the business plan

• description of authorised and issued share capital;
• complete list of shareholders, including number and percentage of shares held;
• incorporating documents;
• existing shareholders’ agreements;
• names of lawyers, accountants and consultants;
• names of bankers and other lenders;
• information on any past or current litigation;
• information on any former and/or affiliated company;
• information on any important rules and regulations concerning the firm’s operations:
  • anti-pollution laws, government standards, etc.;
• information on important contracts:
• franchise agreements, distribution/supply contracts, grants, etc.;
• contracts related to industrial technology (patents, licenses, trademarks, etc.).

And that, in a nutshell, is the makings of a great business plan.