‘No plan is a plan to fail’

9 steps to a solid business plan

Philip Lodewyckx, Partner BDO Accountancy

Did you know that companies that make a business plan grow up to 30% faster than companies that do not? That you have twice as much chance of getting the necessary financing with a well-thought-out business plan? 9 steps are enough. The added value follows.

What is a business plan?

A business plan is a comprehensive roadmap for the development and growth of your business, indicating who you are, what you plan to do, how you want to do it, and what the essential elements are for that.

You may have a strong business concept, but that is not yet a business plan.
A plan must make it clear that you have the right (solid) team, your product or concept has a good product-market combination, and, above all, that the concept is scalable.
In other words, your company will be able to realise a higher sales volume without a proportionate growth in staff or fixed costs (unless the latter are adequately covered without putting pressure on margins).

When writing your business plan, try to include the KPIs (key performance indicators) that you feel the reader(s) of the plan consider(s) important. A plan written to serve internally as a guideline for management and your employees will emphasise other matters than a plan addressed to your company’s investors.

Finally, know that, as time passes, it is OK to evaluate your business plan and adjust it where necessary. Elements that are relevant today may no longer be relevant in 6 months’ time. Thus, be sufficiently flexible in the implementation of the plan – but remember: ‘No plan at all is a plan to fail’.

Here are the 9 steps to arrive at a well-thought-out business plan:

Financial data must show that the objectives of your business case are measurable.

1. Index/summary

Investors have little patience, and none for a plan that is poorly put together. The plan should be concise (about 15 pages), covering the essentials. Furthermore, provide a clear overview with different sections so that investors can quickly flip to the parts they are interested in. Start the plan with an abstract in which you summarise the important elements, such as the target group, the product or service description, the solution or need, the competitive position, and the things that differentiate your company. Do not get lost in the details.

2. Business case

Make sure your plan contains a clear business case. Investors want to read clear objectives and a brief account of your history. But above all, they are looking for a mission statement that demonstrates your motivation.

  • Define clear objectives and ensure that they are ‘SMART’: that is, sufficiently specific, easily measurable, achievable, realistic (or relevant), and time-bound or linked to important results. Vague targets will not inspire confidence among investors.

  • Investors do not make a decision based solely on a good concept or plan. They often invest in the people who will deliver the story. Thus, clearly highlight your own experience and that of your team.

  • In a mission statement, you show what motivates you and what experiences have led you to solve these problems or why you consider particular social issues to be so important. A mission statement is about much more than what you do or sell. It emphasises the ‘why’ of what you are undertaking.

3. Market research

Who is the ideal customer and how large is the market potential? Describe as accurately as possible the profile of your customer and the market in which he or she is moving. Too broad a target group can be a red flag for investors.

4. Competitive position

Identify other businesses that are active in the same market and do so in sufficient detail. What is their pricing policy? How good is their customer service? Where and how do they advertise? How do they score in the media or on social networks? Etc. Then, clearly indicate what differentiates you from their business model.

5. Product/service

Indicate what characterises your product or service and how these characteristics translate into benefits for your customers. Identify the essential elements to achieving a fully-fledged product/service. Think about raw materials, production process and assembly time, time between order and delivery, quality control, property rights, PLC (product life cycle), additional sales via ‘up-selling’, ‘down-selling’ and ‘cross-selling’, and R&D.

6. Sales strategy

Summarise the value proposal or proposition for your customer, and clearly identify your plan to attract new customers and via which channels. Show what you have already done for this.

7. Financial data

Above all, the financial data must show that the objectives of your business case can also be measured in terms of financial results. A solid plan provides for projections over at least 3 years and, in addition to the results, gives a clear picture of your company’s cash flow and debt repayment capacity (e.g., net debt/EBITDA).

The financial plan calculates what return investors can expect over what period of time, and how you will keep your company financially healthy. The plan also shows when you will need which resources and how you will manage working capital (e.g., customer credit / supplier credit / stock rotation).

8. Organisation

One of the key elements to your plan’s success might well be the team that manages it.
Provide a good description of the key players and their track records, experience and qualities.

9. Financing requirement

Provide a clear picture of your company’s financing needs and illustrate with different scenarios (best case vs. worst case). What are the expectations? Is there a dividend policy? How much needs to be borrowed, when and in what form? When and how will the principal be repaid?