No Success Without A Plan: The Business Plan
25 January 2022
Contribution by Volker Doberanzke, PhD, Numarics Chairman of the Board of Directors and Professor of Finance and International Management
Are you looking to start a new business? Or do you want to expand your existing business? Or do you simply want to think about how you will be profitable in 3 or 5 years? Then you need a plan: Without a plan there is no success. We show you the most important components for a powerful business plan. Numarics gives answers.
The Basis For Profitable Action
Economic activity requires structure and system. Since economic life is always about making the best possible use of scarce resources, the most important issues concerning the use of resources (your workforce, available money, available time, etc.) should be carefully planned. Three different starting points can be identified:
1. You have set yourself a goal and want to achieve it with the least possible use of resources (minimum principle). For example, building a house follows the minimal principle when the design and shape of the house are agreed and the builder is looking for the best price to implement the plans. You have a new business idea and ask yourself how you can implement this idea as quickly and cost-effectively as possible.
2. However, you could also proceed the other way around and first clarify how many resources you have available in order to then achieve the greatest possible success. In the example of building a house, the building materials and their quantity are fixed. The builder tries to build as big a house as possible with the available resources (maximum principle).
3. In entrepreneurial (start-up) practice, a combination of both principles is often applied (optimum principle). In this case, the best combination of means employed and yield is sought - in other words, the use of means must be optimized. In the case of house construction, for example, the question then arises as to how a pleasant house can be built at a reasonable cost. It is therefore crucial, especially when founding a company but also when optimizing existing business activities, to carefully answer the question of how the best possible economic success can be achieved with the limited resources available.
The business plan primarily serves you to become clear about what is to be achieved, when and with which resources. In addition, the business plan also has an important external function: It is the basis of information for business partners, banks and investors.
The Vision - Your Personal “USP”
A good starting point for creating a business plan is to answer the question of your company's value proposition. What exactly is your "USP" (unique selling proposition), i.e. the central argument why other economic actors should buy your product or service from you? Successful companies make sure that the "USP" is also recognized on the market. It is therefore worthwhile to develop your own vision for your company and to put it down on paper. Based on this vision, your short-term and longer-term company goals can then be derived. True to the motto: success can be planned.
The Market Environment And Your Product
A determining building block in your business plan is the analysis of the market environment. Here you need to answer a number of fundamental questions. How big is the relevant market? Is the market growing and what are the future prospects? The basis for such analyses can be publications by business or trade associations or your own research. And something else is important: Who are the competitors and how are they positioned? In order to be successful, it is important to know who I am competing with and what my individual positioning on the market looks like. And finally, the question must be answered as to how you want to present your product in the market in concrete terms. Here, for example, the question of the advantageousness of your product or service must be answered. This advantage can be for example a price and/or a quality benefit. Furthermore, it is worth answering the question of how easily your product can be copied by competitors.
Your Leadership Team
Business is made by people. Introduce yourself as the company founder and your management team! In doing so, also express your personal and professional strengths. Convince other business players of your professionalism and expertise. Facts and figures are one thing - but ultimately people are convinced by people. This also includes the description of your business idea and how it came about. Nothing is more exciting than the stories of startups that were founded in the garage and then became successful companies.
Financial Planning - The Heart Of The Matter
At the heart of any business plan are finances - and there are a few things to keep in mind. If you have started a new business or want to implement a new business idea, the first step is to answer the question: what resources are available in the short, medium and long term? And: how much capital do I need to implement my vision. This can initially be done in the context of a rough plan, which is then permanently refined over time. The more concrete the plans for implementing a business idea, the more detailed the planning process should be. Among the figures that should be planned are, on the one hand, the expenses; here it can be useful to plan the expenses for personnel and other material expenses in as much detail as possible right at the beginning. On the other hand, it is important that you think about how high the possible earnings can be. If, for example, you have largely implemented your business idea and are about to launch it on the market, you should develop an idea of possible sales, number of customers, development of customer numbers, etc. You should then plan the costs for personnel and other operating expenses in as much detail as possible. Against this background, you could calculate the costs for the next three months, twelve months or even two years.
Provided that all revenues and costs have been estimated as realistically as possible, the need for funding can be derived from this: how much money do I need at what point in time. And: Who are the potential funders (see more on the article "How do I finance a startup").
Financial planning should be as realistic as possible in order to avoid unpleasant surprises. In any case, the finances are the heart of every business plan.
Putting Your Business Plan To The Test
No plan, no success. Have you thought of everything? Have you put all the important points on paper? Is anything still missing? Especially with innovative business ideas and start-ups, it is often important to obtain neutral opinions from experts. These can be potential financial backers, other entrepreneurs, experts from the respective industry, but also close people such as the so-called "friends and family". The aim of such a review should be to identify possible weaknesses in the business plan or to look for starting points for improvement. In this sense, the business plan is not a static paper that is created once. Rather, the business plan is a "living" document that must be regularly reviewed and adjusted. And when the first business results are in place, it is also worth looking back and asking: What have I achieved and what could have been done better?
Numarics offers a unique business operation environment to plan and monitor your finances with pinpoint accuracy. Use a comprehensive dashboard to keep a constant eye on and control key figures of your company (more on this topic under “Controlling With Key Figures”).
Numarics Chairman of the Board of Directors and Professor of Finance and International Management
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