What does a Business Plan contain?

Prestige and value of a Business Plan

At some point we have written in this blog that the reasons for creating a company or setting up a business are as many as the number of companies that are created. On many occasions it is self-employment after a failed employment contract; on other occasions the closure of the company we are in makes us consider acquiring it and taking control of it; other times we see a business opportunity in the same sector or in another one we know or we are interested in entering.

Whatever the reason, there are few things in working life that motivate us to start our own business, start it, develop it, see it grow and, in the most sentimental aspect, that our children continue with it.

How many employees do we know who have not reproached themselves for having created their own company, how many ideas have not occurred to us that could have been a good business...? Again the casuistry is infinite.

The truth is that in Spain, if there are no entrepreneurial roots in the family, potential entrepreneurs see the start of a project as a difficult summit to reach. In fact, 38% of young high school students aspire to work in an outside company, and 27% plan to prepare for competitive examinations to become civil servants. Only 25% dream of being their own boss; and the rest answer 'don't know/no answer' in the surveys elaborated by the University Orientation Hall.

In other similar surveys, the percentage of those who aspire to work in the civil service is higher after the start of the pandemic in 2020.

Being an entrepreneur is no easier or more difficult than passing a competitive examination. It is simply a matter of setting your mind to it and devoting as much time to it as we could devote to studying.

Of course, the first thing is the idea (the what), and the second is knowing how (putting it into practice). In business life we could find hundreds (thousands) of examples of self-made entrepreneurs who never picked up a pen and paper and wrote down how to start their business. But these are the fewest, because even if they had written it down, in their mind they had all the steps they had to take.

Many will know what it is, but even so, let's define it: A business plan is

a document describing the documents, the fundamental pillars of business and the steps for the creation of a project, its objectives and its financial and human resources.

Let's not panic, because following step by step and with some knowledge and time we will be able to do it, yes or yes. Let's think that if we look for external financing they are going to ask us for a written document. And it will also help us if we can provide our own financing to put our own idea in black and white.

Elaboration step by step

Preparing a business plan will never be a waste of time. In fact, there is an infinite amount of training to learn how to prepare them. Let's think that this plan will be a manual to start the company; and although there is no guide to fill out a form, certain guidelines are common. Let's see them:

1. What is your product or service?

You have come up with the idea (or you have copied it, there are some) but there is no one better than you to explain it. You must do it clearly, concisely, in a suggestive way. Think about if you were the one receiving the plan, what you would like to know, how you could fall in love with it and even invest in the idea.

Don't be smug or overly pretentious. Most businesses are already created, so provide what innovative idea you are going to bring to the table. When we say 'be suggestive', we mean make the best presentation and present an idea that can't be rejected.

What does it mean to be innovative? Don't describe what the competition is doing, because your competition is already doing it. What do you bring new? Keep in mind that this will be your first letter of introduction.

2. Sales

You are not a marketing expert, but you must evaluate how you are going to sell your product or service that, according to your idea, is the best.

We must define our target customer and the size of our market. We will have to make a previous research about the penetration capacity of our product in the market. If there is demand, if there is not. What were the sales of this product in the last years and how far it can grow, etc. etc. etc.

Business plan manuals talk about detailing our target audience. However, marketing goes further and we bow to the 'avatar' or 'buyer personal', which are a step further and tells us about the ideal customer, the prototype of our buyer. But we will talk about this in another post.

3. Do we know what type of company we want?

Incorporating a company in Spain means deciding what legal formula we want to adapt to. Attention, there is a real alphabet soup in this question: Self-employed (Individual Entrepreneur), Limited Liability Entrepreneur, Community of Goods, Civil Society or Collective Society, Limited Liability Company, Limited Society of New Company, Limited Company... 

In other words, a real alphabet soup that we can answer in two ways: either we search for the help of a professional advisor or we study the formula for each one of them. 

4. What is your competition?

Let's go for a fourth point but you have already wondered about it in previous points. Keep in mind that you are going to compete with other products in the market. You must evaluate how you improve on them or how they are ahead of you. The ideal is to present what is the added value of your product compared to those who are already making it.

5. Your SWOT

You have heard of these acronyms: SWOT. They stand for W, Weaknesses; T, Threats; S, Strengths; O, Opportunities.

Surely you have it in mind, but in a business plan it is convenient that you have it developed, because possibly the investor or the bank that is going to lend you the money will be the first thing they look at.

Make it very clear in a table and then you can expand on the following pages.

Admit that your plan may have Weaknesses, so that a second look can help you overcome them. Ask yourself what your weaknesses are and don't refuse to write them down, for only then will you be able to control and overcome them. Or they can do it for you. Knowing where your plan may fail means, on the one hand that you are not perfect (you show humility), and on the other hand that you are willing to learn.

Threats are not easy to control, but they are easy to deal with. The T of SWOT are those forces in the environment or competition that make it difficult to implement your strategy. Be realistic when you write them down.

It is not the same to start a business when there is a tailwind as when you are facing an economic crisis. Assume it and explain it.

Strengths: What are they? In many occasions something as intangible as your work when it comes to elaborate this SWOT. Has your competition done it, does your competition have investors, prescribers or commercials as strong as you? Define it. Maybe you are the best at something but few know your talent.

Opportunities are another of your strengths. Surely you have a competitive advantage over your competitors. Highlight it, either because of the quality of your product or because you have found the formula to produce it at a lower cost. If that is your difference, don't let it go too far or be copied.

To summarize, I would say that the Weakness is what can be damaged or what should be avoided. Threats are the risks your company faces, especially in the current economic climate and what your competitors are doing. Opportunities are what changes the market is facing and what you are able to respond to.

6. Your needs

Keep in mind that you may be making this plan in your home office or bedroom, but what does your company really need? It could be an office in your own place or in a coworking space. Maybe an industrial building. Include it in the document and also quantify what the necessary investment and its monthly cost may be.

7. Human resources

The product or service can be assumed by yourself, but when it is not? Have you assumed the salaries of the personnel and the social costs?

8. Go ahead with the finances

Once you have made the initial numbers, you have to simplify them: start-up needs, social cost per month (number of workers), production, maintenance, cost of sales, sales... minus sales forecast and a certain profit margin. This will finally be your business plan.

Maybe the numbers scare you, but keep in mind that they can always be overturned if you are trained for it and seek professional help.

Creating a business is one of the greatest motivations there is. Cheer up!