Business plan as the backbone of the company

Author: Raili Ilves

“A bank is place that will lend you money if you can prove that you don’t need it.” (Bob Hope)

A business plan should be like that – so extensive, thorough, reliable and equally realistic that the lender, investor, cooperation partner or grantor of support measures has a spontaneous desire to be a participant in it.

There are different reasons for drawing up a business plan and the target groups can vary as well. Detailed business plans are compiled when starting a business or expanding it, entering the market with new services or products and raising capital from investors or lenders to execute your strategies. There are also situations where cooperation partners need an overview of your business activities and finances (including forecasts) in order to fulfil their business objectives in the best possible way. The current crisis has shown that a comprehensive business plan is also necessary for companies when applying for various state support measures or negotiating the terms of existing financing agreements with banks.

Prepare your business plan bearing in mind the audience

The emphasis and content of the business plan depends on the readers and the response you are looking to get, but the expectations of the structure are similar for all parties. Always keep the reader and response in mind, as it influences the content and style.

• The business plan should include a detailed description of the product or service, an objective overview of the market and environment, overview of the capabilities (strengths and weaknesses) of the company and insight to the strategy with an action plan for executing it. If you are looking for an investor or lender, an explanation of the competence and reputation of key management team is essential and could have a positive response to their decisions.
  
  
• It is reasonable to highlight factors of the economic environment that have the most influence on your business activities and focus less on a general description of the economic situation. The readers of the business plan want to get a sense that the entrepreneur has considered and carefully weighed the risks and opportunities, and there is a feasible action plan in place.
  
  
• Financial forecasts (cash flow, income statement and balance sheet) play a crucial role in business plans. The readers expect forecasts for the next three years in some cases, but usually for the next five years. Financial forecasts should be realistic rather than overly optimistic (for example, not based on historical trading results and the general economic outlook). The level of detail of financial forecasts is also important, as it will help all parties in monitoring the fulfillment of the goals and assess the reasons behind exceeding or not achieving the targets.

Business plan as a guide in achieving your goals

Business plans are not only prepared to raise money or financing but are also used as a management tool. It is a guide to evaluate the achievement of the company’s’ goals. A well-prepared business plan should be the backbone of every company – starting a business should begin with preparing a business plan, where various opportunities and scenarios have been thought of without emotions. An idea that initially seems like the best possible plan may prove to be inefficient or even unprofitable after thorough analysis.

Entrepreneurs can prepare business plans themselves as you can find instructions and prepared forms on the web and other sources. It is beneficial to involve business and financial advisors in preparing a business plan that creates extra value for your business, is reliable and meets international standards. Advisors have experience working with different industries, have sector-specific market overviews and bring in specialists from other fields (e.g. tax and legal advisers), making them valuable partners for entrepreneurs.

A business plan will be compiled in cooperation with advisors and entrepreneurs, that meets the expectations of even the most demanding readers. Experienced financial consultants also advise and coordinate communication with the lenders, cooperation partners or potential investors, if necessary.

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