• Business plan = written summary of an entrepreneur’s proposed business venture , its operational and financial details, its marketing opportunities and strategy, and its managers’ skills and abilities. It should act as a roadmap on the journey towards building a successful business.
• Importance of a business plan:
  • The real value lies not so much in the plan itself, but especially in the process that an entrepreneur or founders team go through to create the plan. It allows to replace “I think” with “I know” and make mistakes on paper rather than in reality. Building a business plan reduces risk and uncertainty in launching a venture. It helps documenting a business and making sure every important aspect has been thought through
  • Building a plan forces potential entrepreneur to look at the business idea in the light of reality. It requires objective assessment of venture’s chances of success.
  • Sometimes the greatest service a business plan provides is the realization that the planned venture will just not work. It is important to reveal potential problems before launching a venture and committing significant resource.
  • Business plan gives founders and employees a sense of direction, but only if everyone is involved in creating, updating or altering it. It gives everyone targets to shoot for, and provides yardsticks for measuring actual performance.
  • Business plan is important to attract lenders and investors. It enables to communicate the potential that the business opportunity offers. It is a tool suitable for later phases of mowing towards pitching to investors and other partners (in early phases, value propositions, business models or other modelling tools are more useful)
• Purposes of a business plan:
  • Provide basis for pitching and negotiating with investors and institutional support organizations
  • Helps clarifying goals and analysing the market for the entrepreneurial team
  • Presenting for key partners and convincing them about trustworthiness and potential of the start-up.
• What types of start-ups need business plan and what don’t
  • There is a general consensus on crucial importance of business plan when approaching investors and asking for money.
  • Yet, sceptical voices about business plans express doubts about their value for start-ups themselves. According to them, with rapid development and leaps in practically all areas, many elements of business change very frequently. In this context, business plan is accused of replacing creativity and experimentation with rigidity.
  • The true is probably, as always, somewhere in the middle.
  • Why any business, even a start-up, really needs business planning – without any systematic approach to planning, founders are frequently vague, unfocused and messy about their future business. They don’t have straight product or clear vision, and they lack alignment and a common concept in their heads.
  • Even for a dynamic start-up venture in a dynamic market, a few pages document should express with clear language the following:
    • What your product is, and what it does, and why
    • Your strategy for bringing that product to market
    • Details about your revenue model
    • Goals and milestones
    • The method you’ll use to know if you’ve failed
    • Your customer personas and target market
    • Your financial needs
  • The more predictable the business and market of a start-up is, the closer should be its business planning practice (and business plan as an outcome of that process) to the generally recommended and established structure as presented below.

• What is special for new venture business plan compared to one of an established business:
  • Uncertainty about assumptions
  • Works with milestones and real options
  • Used for raising capital

• Executive summary – emphasizes key issues of the business plan (team, product/service, target market, business model, finance, funding requirement and proposed return) and provides overview of entire business plan. Between 1 and 3 pages, placed at the beginning of the document but written as its very las part.
• Entrepreneur and team – demonstrates talents, skills and experience of founders and/or management team. Describes their contribution to the success of the venture and its product/service.
• Vision, mission value proposition and business model – explains the essence of the business and describes the company and its key elements.
• Product/service – describes the product/service offered by the venture. Should capture rather user’s than technology perspective. Stresses benefits and competitive advantages of the product.
• Opportunity analysis and market validation, Market analysis – presents highlights of market research and reflects your knowledge of the industry. Demonstrates market need for the product.
• Strategy – describes how the business wants to achieve its goals. Describes how it plans to gain a competitive advantage and meet its goals, including specific methods (i.e. tactics). Builds on strategic analysis of external and internal environment.
• Marketing strategy, sales plan – linked to market analysis. Discusses competition and describes intended marketing instruments (communication, channels, sales strategy and plan, market entry strategy).
• People – actual and future requirements for employee (number, required qualification and profile|, description of jobs (responsibilities, competences), financial/non-financial compensation and motivation, employer competitiveness.
• Resources and operations, Operational plan – how products/services are to be produced, by what procedures and via what production or service delivery capacity.
• Financial plan – financial representation of all the information presented in the other sections. May include various prospective scenarios. Includes financial forecasting, pro forma financial statements and financial analysis (e.g. break-even, ratios) – for more detail see “Financial planning” training fiche.
• Risks – summary of critical risks and their prevention and handling if become materialized. Includes main internal, external, institutional and financial risks.
• Start-up schedule – outlines plan of the next steps of the start-up process. Near future can be described in detailed activities, for long-term aspects it is sufficient to stress milestones and connections between interdependent activities.

• Formal requirements for a business plan:
  • Easy to read – simple (but not oversimplified) text, attractive headlines,
  • Attractive but rather decent visual layout
  • Use figures, charts, pictures, diagrams where relevant
  • Numbered pages and sections
  • Avoiding too small letters (definitely not smaller than 10 pts)
  • Maximum extent of 30-40 pages including appendices, i.e. 15 to 25 pages plus appendices
  • Avoid abbreviations that are not previously explained
  • Terminology, analogies and examples must be understandable for target audience
  • Carefully check for mistakes and errors
  • Always include references and sources of secondary data

Different types of business plan include:

• Types according to extent and detail:
  • One-page business plan = one page summary including only main highlights to provide a quick overview of a business
  • Lean plan (miniplan) = faster, easier, and more efficient than a formal business plan because it doesn’t include summaries, descriptions, and background details.
  • Standard business plan = main type of business plan, that is referred to in this training fiche.
• Types according to the nature of target audience:
  • Working business plan = used by entrepreneur to guide his/her business
  • Presentation business plan = used to attract investors or partners
• Types according to purpose
  • Feasibility study = assesses marketing, technical, management, financial and social feasibility of new business/proruct.
  • Operations plan/annual plan = used to set the way to meet the goals of the business. Includes specific implementation milestones, project deadlines, and responsibilities.
  • Growth / expansion plan = focusing on growth or expansion of a specific subset of the business. Can be internally or externally oriented (depending on need for outside investment).

• Dos
  • Demonstrate understanding of the technology, market, risks, and customer needs
  • Always provide defensible assumptions that yield testable hypotheses.
  • Include a credible evidence of irrevocable commitment of the entrepreneur and founders team.
  • Provide any available relevant evidence of reputation and certification of founders’ team, and any other signals of their quality and capabilities.
  • Follow the common business plan structure, while also adjusting (i.e. reshuffling, adding or leaving out) for unique aspects of your start-up and its business and industry specifics. Elements of a business plan may be standard, but the way you tell your story should be unique.
  • Control the copies of your business plan and keep distribution records. This helps to update your distributed plans as needed.
  • Include an appropriate private placement and ethical disclaimer that your plan should not be copied and distributed without your approval.
  • Be sure to understand every part of the business plan, as you will be presenting it to the target audience. You need to present it convincingly.
  • Do make your plan readable, use charts and graphics where appropriate, and avoid making it too long.
• Don’ts
  • Don’t try to be everything to everybody. Stay focused with your business plan same as you have to stay focused in your business.
  • Don’t fall into “Chinese soda” trap. “If just 1 percent of people in China buy our soda, we will be successful.” Big market numbers are not realistic for small ventures. Always build your forecast on real market data backed by primary and secondary market research.
  • Don’t forget the importance of cash flow. Profits are important, but cash keeps business alive and growing. Include a realistic cash flow forecast.
  • Avoid overly simplistic assumptions.
  • Don’t be dishonest with what you state in the business plan. Absolute honesty is critical, so always tell the truth (e.g. about weaknesses of your product, your competitors, estimated market size, estimated costs and revenues, etc.).
  • Preparing a business plan is not a one-shot exercise. Projections have to be modified in light of actual experience, and to reassess overall strategy.
  • Don’t let others (i.e. outsiders) to completely prepare your business plan. They do not understand the business concept or envision the proposed company as entrepreneur or founders do.
  • If it is your first experience with writing a business plan, don’t write it without seeking the advice of individuals with experience in the process.
  • Avoid errors and mistakes in your business plan, as it is always a reflection of it creator.  
• As a “bonus”, we provide an overview of empty phrases commonly used in business plans and their “translation”. Make sure you avoid such phrases in your business plan:
  • “Our market is huge“ = “We don’t think it’s important to get reliable data about the market potential of the venture”
  • “We conservatively forecast..” = “Rather than trying to get reliable information on critical factors of performance, we have made some guesses that should sound plausible”
  • “Our revolutionary technology..” = “Customers have yet to figure out why they might be interested in what we are doing”
  • “ We believe that..” = “We have been too busy writing the plan to gather any actual evidence”
  • “ We have no competition!” = “We don’t understand our market!”

• Besides using a business plan as a planning and communication instrument in the early phases of venture’s lifecycle, it is also useful and important tool for planning the business scale up.
• Scale up business plan, as it is created in different context, will have some specific features (besides the common attributes) compared to start-up business plan.
• After reviewing the venture’s progress and identifying the key growth areas that you want to target, you will have to revisit your business plan and make it a road map to the next stages for your business.
• What are the main areas your growth business plan definitely needs to cover?
  • Identification and analysis of growth opportunities – focus specifically on growth opportunities (see e.g. growth strategies in the “Managing growth” training fiche).
  • Description of the current business, including analysis of its strengths and weaknesses
  • Outline of the mid-term growth plan, including very specific 1-2 years strategy and detailed 90 days tactical plan.
  • Information on the team + Revision of staffing needs – assessment whether you need additional employees to accomplish the growth plans.
  • Financial plan + Revision financial resources needs – each expansion requires financial resources. Revise your finance to determine the need for external financing.