A Guide to Writing a Business Plan

A business plan is a document used for planning a business or business activity. A business plan includes the methodology of research and planning processes for the establishment of a new business or for the development or rehabilitation of an existing business. When setting up a new business project, it is necessary to examine and assess in advance a wide range of topics and issues. The different sections of the business plan are in fact an effective platform for performing the necessary tests and evaluations when planning the business and its goals. Here, we follow the well-known adage – think first, act later.

A business plan will normally have the following main objectives:

  1. Business feasibility analysis and evaluating the economic feasibility of establishing a business or a new venture – In order to try and reduce the risks involved in setting up a new business, you must conduct preliminary compatibility testing that could shed more light on the chances and risks for success.
  2. Raising funds from investors and credit providers – To establish a new business, or to continue the activities of an existing businesses, sometimes requires sums of money that the entrepreneurs do no have at their disposal. In such cases, the entrepreneurs must consider raising the missing funds from investors and credit providers (such as banks). The business plan is the document used for presenting the business idea to investors and credit providers.
  3. Development, rehabilitation, planning, and more efficient management of an existing business – a business plan is often used for evaluating, reexamining and planning existing business activities. The processes involved in preparing a business plan apply not only for establishing new businesses, but also for making changes to the business activities of existing ones. The business plan may be used as a basis for the recovery program, for business development, and for making strategic changes to the business.


Preparing a business plan

It is a common misconception that a business plan is a document that just has to be written and done with in order to have “something” to show investors. This is a fatal flaw that overlooks the main concept and goals of the business plan. Preparing a business plan is a structured and thorough process of data collection, research, analysis, thought, learning, and most of all, planning. Trying to cut this process short is ill-advised and may bring entrepreneurs considerable financial losses and waste precious time. If there is a dysfunction or significant risk that threatens the success of the project, it should be brought to light during the stage of preparing the business plan rather than after the business had already been established.
Everyone wishes for success and prefers to focus mostly on potential revenues and profitability and in the strengths and advantages of the business. However, it is also important not to ignore the problems, shortcomings, weaknesses and risks that establishing the business is expected to involve. Through the process of preparing the business plan, we know how to ask the right questions on all matters relating to the establishment of the business, and to identify risks and opportunities.
The process of preparing the business plan helps us thoroughly formulate the concept and business model, based on critical information that we must acknowledge and analyze. Critical information on which we can base a business plan pertains, among other things, to the industry and the market, your product or service, potential customers in the market, competition, and existing regulation. The following paragraphs detaile all the issues and various aspects to be covered by the business plan.

Sample business plan – importing children’s clothing (HE)

Sources of information for the business plan

As we’ve clarified in the first part of this Guide, preparing a business plan involves a process of data collection, research and analysis. Analyzing those sources of information will help us better understand industry trends, the characteristics of the target market and its scope, the properties of the main competitors, existing strategies and business models, the common marketing tactics, and more. The sources of information used in preparing the business plan can be found in various places.
A lot of information can be found by searching on the internet. Our information sources include news sites, leading financial websites, business information websites (such as Dun & Bradstreet and BDI), State and municipal websites )such as the Central Bureau of Statistics, Bank of Israel, and Maya – the online company announcement system), websites of competitors and leading players in the industry, professional websites of the same field, international websites where we can learn more about the industry, as well as  paid market research and market surveys. Rules and regulations, financial statements of public companies, press releases, surveys, studies, articles, competitor campaigns – all these are used in the preparation of the business plan.
We might have to gather ourselves some of the information needed for preparing the business plan from different sources. There are many things we can do ourselves, such as observe the competitors, find out information about existing products or services, and interview experts and hold discussions with potential customers in our target audience to better understand their existing needs. The more creative we are, the high the quality of the information we discover.
Analyzing the information will help us better understand the business environment in which we intend to operate, the strengths and weaknesses of our prospective business, and the threats and opportunities that may come in our way. After we get to know and understand the business environment, we can formulate a better strategy, objective and business model. The sources of information are a good basis for business-related and financial predictions, which are included in the business plan.
The data collection and analysis phase is an important step in preparing the business plan and may help us uncover any risks we’ve overlooked, pinpoint important topics and aspects that require special handling and, under certain circumstances, even dissuade us from establishing the business altogether.
Whether the information bears positive or negatives implications for us, it is important that we collect it objectively and analyze it in an impartial manner. Beware the natural inclination to try and seek out only information that supports what we already believe to be true. The trick is to try and be objective and also find those pieces of data that contradict and challenge our beliefs. This way, we ensure that our business plan is more solid and reliable.

Sample business plan – social media management (HE)

What are the chapters included in the business plans?

A business plan typically includes the following chapters:

  1. Executive summary – In this chapter we introduce a brief and concise summary of the business plan’s main points. The executive summary chapter is vitally important, as it functions as the business plan’s “display window.” If readers don’t find the executive summary interesting or convincing, they probably won’t go on to read the rest of the business plan. The executive summary chapter must be written only after all other chapters were completed, and the summary must be based on them. This chapter presents the most essential information for the business plan. This information will typically include a brief description of the business idea, the industry, potential customers, your product or service, and the planned strategy. The executive summary will succinctly introduce the entrepreneurs (experience, training) and the main points of the financial plan.
  2. A presentation of the business – This chapter of the business plan describes the business idea and presents the products or services to be provided by the business, listing their properties and benefits to consumers. Here we’ll also see a short description of the industry and the target market, alongside the competitive benefits, goals, and business vision. Also in this chapter are the main strengths and weaknesses and key factors vital to the project’s success. When composing a business plan for an existing business, this chapter will also include a description of the business and its history.
  3. The market and business environment – This chapter will include a description of the industry and the market, including recent trends, forecasts, and estimated potential. Here, the prospective clients and the ways of reaching them will be clearly and accurately defined. In addition, the main competitors are presented, competition levels in the industry are examined, and barriers to entry are evaluated. This chapter is a good place to describe the pros and cons of our business relative to competitors and the threats and opportunities that were identified.
  4. Business strategy and marketing plan – Here we will include a description of the business revenue model and planned strategy. The pricing policy will be reviewed, distribution channels and points of sale will be listed, and the planned marketing plan will be described. In this chapter we may already include the revenue forecast and the working assumptions it relies upon.
  5. Operational program – This chapter contains the issues and aspects involved in running and operating the planned business. The topics covered in this chapter will be determined according to the specific nature of the business and may include, among other things, manufacturing processes, procurement and inventory management, costing system, employment structure and manpower costs, outsourcing, shipping and storage, customer collection processes, working capital, regulatory and standardization requirements, quality control, customer service, computerization and technology, unique insurance requirements, and more.
  6. Introducing the entrepreneurs – A description of their experience and training and, if necessary, the introduction of material experts and consultants which are involved or are planned to be involved in establishing the business.
  7. Financial plan – This chapter will include full forecasts for revenues, profit and loss, and cash flow. Preferably, these are produced on a monthly level for the first 12 months and on an annual level for the three or four years after that. At the same time, the balance of assets and liabilities at the end of the first year will also be indicated. The balance point will be demonstrated, and sensitivity analyses will be conducted, examining the effect of various parameters on the business results and financial condition. This chapter will describe the financing requirements for setting up and running the business in its early days, including construction costs, investments in equipment, working capital requirements, financing initial predicted losses, etc. On the other hand, the planned funding sources will be indicated, such as equity of the entrepreneurs, loans and credit, investors, and so on. The financial plan must be based upon plausible and reasonable working assumptions.
  8. Appendices to the business plan – This chapter includes information related to the business plan, such as reports, charts, surveys, studies, statistics, specifications, etc.

Sample business plan – delicatessen (HE)

Important points in preparing a business plan

In this section, the Guide’s fourth and final, we highlight five main points that must be taken into consideration during the process of preparing and writing any business plan:

  1. You must base your business plan on thorough preparatory work – A professional and serious business plan must be based on a profound understanding of the business environment. It is impossible write a quality business plan without in-depth knowledge of the industry and the market, the competition, alternative products, the strengths and weaknesses of the business, the threats and opportunities, the technological and legal issues, and all other aspects that may affect the planned business. To this end, you must embark on a process of research and investigation before you start writing the business plan.
  2. When writing the business plan, the target market profile should be kept in mind  The objectives detailed in the business plan will usually dictate its target market. A business plan made for internal business purposes will customarily focus on more operational and marketing-related issues that are of interest to business managers, while a plan aimed at investors and credit providers will focus on the financial aspects, including a potential return-on-investment analysis in relation to the inherent risk.
  3. It is important to ensure that all topics relevant to the business receive proper attention– The business plan should touch on all the essential aspects relevant to the planned business. In addition to trivial matters pertaining to the market and the competition, the business plan must cover, among other things, issues such as regulatory requirements, the recruitment of specialists, technology issues, and the protection of patents and copyrights. An essential topic that is disregarded only to pop up at a later time might hurt the success of the business.
  4. You must dedicate special thought and effort to writing the executive summary chapter – The executive summary chapter is the most important section in the business plan, and most readers will base their initial judgment upon it. This chapter should therefore be edited and phrased in a focused, clear and concise way, and only after all other chapters of the business plan are written.
  5. Don’t forget to perform quality control after completing the writing process – level of quality and attention to detail in the business plan helps readers gauge its writers. A sloppy business plan that includes phrasing errors, typos, ianccuracies, contradictions between chapters, and calculations that are not based on reasonable work assumptions, may give the readers a negative impression of the entrepreneurs and even affect the prospects of business investment.

To download a business plan template by BDO Maof, click here.

Information courtesy of Tamir Bibi, CEOI_value_small

Sample business plans courtesy of Mati

 

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