How to build a (good) business plan?

Update from an article published on August 30, 2021

TL; DR:

• A quality business plan is exhaustive and fluid, it reflects the vision and the reliability of the entrepreneur.
• The form must be as neat as the content: concise and clear.
• It is divided into three parts: descriptive, financial and operational summary.
• Clearly articulate your funding needs.

The business plan (BP) is one of the reference documents for any business creator or buyer. It allows the entrepreneur, as well as future investors and partners, to have a clear and fair idea of ​​the project and its ambitions. A key document for any request for financing, which also allows the project leader to ask and check the clarity of the vision he has of his company.

There is no universal business plan model since it must correspond to a project, but there are nevertheless common and essential steps to follow when writing it. The business plan is obviously not done “by feeling”, it follows a logical reasoning, which unfolds and demonstrates the potential of the project.

The descriptive part is the first step of your BP. It includes, according to Romain Dehaussy, partner at Cambon Partners:

• Contextual elements in relation to your market: how is it a big problem that is getting worse, and how is there a lot of money to be made?
• A presentation of your solution: how does she solve the problem? What angle was taken (high level view) and how does it help customers (low-level vision)?
• The size of your marketwhich must be substantial.
• Details about your competitionwhile indicating that the competition does not scare you.
• Your short-medium term strategy: “We are going to increase our sales and marketing forces, especially abroad, and bring out crazy complementary products. »
• Your previous achievements: “We manage to sign clients easily. They are addicted to the solution. They go upmarket thanks to her. »
• Some ingredients of your recipe: what are you doing differently? It can be marketing, sales, product, tech, etc.
• Your personalized conclusion: “We are looking for X million euros. »

Of course, nothing prevents you from briefly recalling general information present in other documents – such as your pitch deck: a presentation of your team, your products or services, an analysis of your market and the competition or even a detailed explanation of your business model.

This is the part in which tables of all kinds rub shoulders with your textual analyses. This part demonstrates the financial profitability of the company and gives a five-year view of your business. Think of monthly your forecasts for the first two years. This makes it possible to better clarify its strategy, by better framing the arrivals of new employees, the ramp up sales or internationalization. Another interest: the need for cash will be better defined.

You must forecast with the greatest possible precision a good number of forecast data such as turnover, your gross margins, investments and depreciation, overheads and personnel costs. Vigilance is required when estimating your financial indicators and your need for financing. Be careful not to underestimate or, worse, overestimate them.

What does this part include?

• An estimate of incomebased on consistent and justified assumptions;
• An estimate of the charges ;
• The Anglo-Saxon income statement ;
• Cash low point: when will it be achieved and under what conditions;
• The financing plan: what are the financial needs and planned sources of funding, equity, aid, etc.? ;
• The financing plan: for the first year, detail monthly;
• Synthesis ;
• Most often is “possibly, the provisional balance sheet and financial KPIs when relevant.

The operational summary or executive summary summarizes your entire business plan. However, it does not arrive at the end of the BP, but from the first pages in the form of a note highlighting the main points of the following document. It should be written last, once the BP is clear.

It is a synthesis intended to convince and to sharpen the interest of the person who will have your BP between the hands. It is therefore necessary to present the fundamentals of the project and to answer these questions as briefly and concisely as possible (do not exceed two pages):

• What is the market? In what state is it and what are the prospects?
• What do customers expect from this market and what is the strategy to meet their needs?
• How does my product/service respond to it, with what features or innovative character?
• What are my goals and what is my competitive advantage?
• Who is my team, what are their key skills?
• What will my distribution channel be?
• What are the overall financing needs of the project?
• What turnover, operating income, expected profits?

Most business plans are austere and do not invite in-depth study. Take care of the form with understandable tab titles, a summary, a wording clear, a relevant color code… Two objectives: to show that you have clear ideas and to guide the reading. A clear BP is a clear project in the mind of the entrepreneur, it is the expression of his reliability.

Prioritize ease of use, because no one will read a business plan with macros, a weight of 50 megabytes and 50 tabs. Some BPs require computer skills just to open them! Only your board will take the time (and more!).

Ban any “hard” files – and, “as much as possible, the assumptions in the hard, not linked” , notes Romain Dehaussy. Investors need to play with the assumptions to own the plan and do crash tests to back up their investment thesis. It is crucial that the assumptions are easily modifiable and that the aggregates which depend on them are clearly identifiable. It is less the result that interests investors than the way to achieve it.

Structure the document to provide multilevel reading. Within a fund, the audiences differ. Establish an appropriate reading level for each of them. For example, consider a summary tab with charts for committee partners who won’t delve into the details of expenses and payroll.

For each of the main assumptions on which your strategy is based, ask yourself the question of its justification. Two possibilities: (I) your historical performance – number of customers signed after sales in year N-1, for example -, (II) comparisons with other players in the sector. Add these elements to the business plan, alongside the assumptions.

Remember that too many assumptions kill assumptions. Some BPs include several dozen tabs of hypotheses, simulations in all directions and an equation of all the micro-aspects of your business. We will forgive you the shortcuts on the modeling of your rent from the moment when the actions on the turnover and the margin are well documented and credible.

Your BP is the costed version of the slide deck, a document in which you set out your vision, your fundraising objectives and your action plans to achieve these objectives. The BP must take up these actions by detailing them and positioning them over time in order to show the deployment of the amounts to be raised.

You are launching your business and even if the creation of the business plan is an essential step in the structuring of your project, certain tasks can prove to be particularly time-consuming. If Romain Dehaussy indicates “never to have seen an entrepreneur use it” many sites and software allow you to relieve yourself of elements such as the financial forecast, the formatting of the business plan, etc.

How to choose a good tool? Check that the software allows you to make a five-year forecast – with a monthly payment for the first year – and to edit everything. The rendering must be clear and professional, but also secure so as not to risk having your data siphoned off.

What tools are available? Take a look around The Business Plan Shop, Enloop, Izypitch, CreateMyBusinessPlan.fr, My Business Plan, StartMyStory, Forekasts (formerly Evaltonbiz), etc.

Do you want to start your business? Find the latest resources and tools to help you on your journey as an entrepreneur in the sixth edition of Backpack by Maddyness. This is the book that will guide you every step of the way.