These are important questions that should be answered before starting a new company. The business plan is simply a document that gives an overview of your business idea and how you intend to make money out of it.
Our business plan consists of 6 main areas:
The external analysis is an overview of the environment where the company will operate. Here we use the PESTEL framework (Political, Economic, Social, Technological, Environmental and Legal), which gives an overview of the business climate in relation to the business idea. Startups and SMEs must know the average salary in the region, what is the domestic working culture, which technologies are available in the region as well as intellectual property and laws that need to comply.
In addition to PESTEL, we do an industry and market analysis to see main players in the industry and the potential of the market.
The outcome of this section is a clear understanding of the external environment, the industry, and market where the company will operate. As this are external factors, the company cannot change them, therefore it must be aware of them while making their business strategies.
Once the external analysis is done, we have good business insight that needs to be utilized. This section puts focus on the company itself – how many people will be employed, what expertise they need to have, organizational structure and information about the product/service the company will offer. The outcome of this section is to identify the internal strategic strengths, weaknesses, problems, constraints and uncertainties that the company has.
SWOT represents a summary of the previous 2 chapters. The SW (Strengths and Weaknesses) are taken from the internal analysis, while the OT (Opportunities and Threads) are taken from the external analysis. Having the SWOT, enables companies to see all the risks that might arise and prepare a Risk Management analysis, measuring the impact and probability of each risk and ensuring preventive actions.
Having all the research done in the previous sections, in this section the company will need to define its purpose and basic guiding principles. The Vision, Mission, Long-term objectives as well as short-term objectives are explained here.
Once the strategic direction and objectives are set up, this sections is focused more on the operational level and how to achieve the objectives.
This final section is review of the previous 5 sections expressed in numbers. Based on the previous info, a financial model is created in Excel (fully automated), that shows the financial aspects of the company. The model helps the owners to do several “what-if” scenarios and immediately see the results (ex. What if we increase the price for 10%, or the costs rise for 5%, or we employee 2 extra workers).
Once the numbers are satisfactory, first the basic financial aspects are inserted into the business plan – revenues, the cost of production, break-even point, contribution margin, etc. In addition, the standard financial reports are generated – Balance sheet, Income Statement, Cash Flow Statement.
As an additional financial review, there are financial ratios which can include (not limited to):