Why draw up a business plan?
If your business exists only in your head, you'll have a hard time convincing investors, lenders and shareholders that it's credible and that you'll put the financing they provide to good use.
That's why it's important to draw up a business plan.
This widely recognized management tool is a written document that essentially describes who you are, the project you want to carry out, and how you will manage the risks involved and deliver the expected returns.
There's a common misconception that only start-ups or companies seeking financing need to draw up business plans.
In fact, this tool is essential to the successful management of any business, not just start-ups.
Write a complete but concise business plan
Many entrepreneurs may think that writing a business plan is a tedious task, and that it must contain hundreds of pages.
On the contrary, it should be concise but provide all the information relevant to the valuation of the company.
While there are no hard and fast rules for writing an effective business plan, it should demonstrate that you have the motivation, know-how, skills and self-confidence to bring your project to fruition.
Here are the main elements you need to include in your business plan:
- Description of your project
Specify who your customers are, your company's sector of activity, what it sells, and your growth plans.
- Your unique selling point
Explain why customers should buy your product or service. What else can your company, product or service offer customers?
- Analysis of your target market
Show the lender that you're well prepared. Market research will help you understand your customers' needs and offer them a product or service that really meets them.
Provide information on your target market, customer demographics and competitive intelligence.
- Key competitive information
Describe your competitors' strengths and weaknesses, and how your product or service will be better than theirs.
- Organizational structure
Use organizational charts that clearly indicate the roles of key managers and the expected size of your company.
- Human resources requirements
Indicate how you intend to recruit and retain your employees or use subcontractors.
A business plan needs to be dynamic first and foremost, so if you're forecasting growth of 30% per year, make sure there's support in the number of employees, who will help you absorb this increase in sales and growth.
By demonstrating that you've thought about human development alongside your economic development, you're proving that you've analyzed your product at length, and that your estimates are based on reliable data.
- Premises and capital goods
Assess the company's needs in terms of premises and capital goods (equipment, technological tools).
Here too, be dynamic, for example if you sell products in-store, bear in mind that your growth will generally mean renting a larger space, which will incur additional rental costs.
- Financial data
Be sure to modify the information according to the recipient.
For example, your bank will want to know how you will repay the loan or overdraft, how you will use the loan and how it will help your business grow.
Potential investors will also want to know the expected return and your sources of financing, and shareholders will want to know the share price, and the dividend they can expect to receive.
A banker will also examine your credit history and personal guarantees to find out how reliable you are.
Bankers will require an investment on your part as proof of your commitment.
Money attracts money. The more sources of financing you have, the easier it will be to find new ones.
- Cash flow and growth forecasts
Include a cash flow forecast, i.e. the amount of money you'll need to run your business: technology, inventory, materials, human resources, etc.
Provide financial forecasts for at least three years, and indicate the size and potential of the market.
Provide details of how you will carry out your project. You'll need to establish clear responsibilities, indicate real deadlines and set realistic budgets.
The financial part is the part that will attract the most attention from potential investors or lenders. You need support and guidance in drawing up this part, which is so critical to the success of your project.
We offer tailor-made solutions to help you create a successful business plan.
Consider issues such as taxes, liability and legal form.
Read also: How do you choose your status in Israel?
If you are buying an existing business, clarify the issue of buy-sell agreements. Ask a lawyer to review the contracts and other legal aspects.
Finally, here are a few pitfalls to avoid in your business plan:
- Being over-ambitious: you need to be able to justify your assumptions and forecasts.
- Conceal your financial difficulties: let your lender know if, for example, your sales are fluctuating. A flexible repayment schedule may suit you better.
- Providing incorrect information about the management team, a hastily drafted marketing plan, unrealistic forecasts or incomplete figures.