Entrepreneur's Handbook
CONTENT OF BUSINESS PLANS
Although different structures are used, there are generally six main sections in the content of business plans:
(1) Executive Summary, (2) Business Idea Elements and Opportunities, (3) Implementation Process and Elements, (4) Venture Team and Partners, (5) Financial Plan, (6) Appendices. In the following sections, while creating a business plan, the information that should be included in each of these six sections and critical questions to be answered will be presented and a resource will be developed that entrepreneurs who want to prepare their own business plans can follow. Especially for potential investors and lenders, each section in the business plan is critically important, and each section contains indispensable information for assessing the potential success of the venture proposal.
2.1. Executive Summary
The executive summary should essentially be a short one or two page summary of the business plan. The aim is to explain the business idea in a few sentences, to explain what to do and how to do it, to reveal the opportunities and success projection, and to reveal clearly and understandably what is expected from the institutions and people targeted by the business plan. Although it is the first part of the business plan, it is recommended to write the executive summary last. It is important to remember that most business people will first read the executive summary and if they are not sufficiently affected by what they see here, they will prefer not to read the rest of the business plan. For this reason, it is important that the executive summary is carefully prepared after the last part and the remaining parts of the business plan are mastered. A good executive summary should cover important elements of the business idea and the venture process, but should not overwhelm the reader with details.
At the beginning of the basic information that should be in a good executive summary is a brief summary of the business idea in a few sentences. A one-sentence statement that answers the question of what will be produced when this venture takes place and why it matters, in other words, sets out the core value proposition of the venture would be particularly effective. Reducing the business idea to a short, one-sentence description is also important for entrepreneurs to be able to communicate their business ideas to others effectively and clearly within seconds.
Other basic information that should be included in the executive summary can be listed as;
- Defining the customers to be targeted,
- Explaining in detail what kind of value proposition will be produced for which problems of these customers and / or what kind of expectations will be met,
- How to differentiate from current and potential competition and to reveal the basic strategies to be used in the competition process,
- Introducing the venture team and its capabilities, explaining why this team is suitable for the business idea,
- Summarizing the financial expectations from the venture and
- Determining the critical stages to be achieved in the venture process and their timing. As mentioned earlier, executive summaries are essentially summary texts containing the main elements of the business plan.
2.2. İş Fikrinin Unsurları ve Fırsatlar
This part of the business plan should begin by stating the general characteristics of the planned venture. What kind of company will be established (natural person business venture, ordinary partnership, joint stock company, limited company, unlimited company, limited liability company, etc.)? How will the company be set up (starting from scratch, taking over another company, expanding the existing company, etc.)? If there are partners, who will they be and how will the partnership structure be formed? Where will the company be established and where will it operate?
What will be the mission and vision of the venture? It is important to answer these questions and similar questions at this stage in terms of understanding the general characteristics of the venture by investors and lenders.
After explaining the legal nature and structural features of the venture company to be established, one of the most crucial parts of the business plan, the markets to be targeted (customers) and the value proposition to be put forward by the venture should be explained. As explained in detail in the section titled Marketing Management and Strategies, the customers targeted by the venture may be individual consumers or corporate customers such as other companies and public institutions. Which customers are targeted? What will be the number of potential customers and their expected total purchases? What is the growth rate of the market? On what basis will customers be segmented (segmented) and which customer segments will be selected as target markets on what basis? What will be the number and rate of customers that the venture plans to reach and sell within a certain period of time in these target markets? Which customers, if any, can be defined as critical or key and must be reached?
The value proposition of the venture should be presented immediately after the target market definition. What kind of benefits will the product or service to be put forward by the venture to which customer groups, or which problems will it produce solutions to customer groups? It is of great importance that this question is investigated thoroughly and answered carefully and individually for each target customer group. It should not be forgotten that customers do not expect only functional benefits (nutrition, heating, housing, speed, comfort, cost reduction, efficiency in production, etc.) from products and services, symbolic benefits (appreciation, being loved, status, prestige, reputation, etc.) and experiential benefits (pleasure, taste, good time, relaxation, well-being, etc.) are also very important. In this sense, the correct definition of the benefit component of the value proposition of the venture will be a critical factor determining the success of the venture. Similarly, the other component of the value proposition, the cost element, should be explained in detail to the customer. When customers evaluate products and services, they consider a wide variety of cost items such as paying a price, undertaking transportation and installation costs, bearing after-sales costs such as maintenance and repair, and sometimes spending time and effort to learn how to use the product. In order for the venture to have a high value proposition and have an advantage over competitors, the benefit component must be high in the eyes of the customers and the cost component must be low. While preparing the business plan, it is very important to make researches especially on these issues, to discuss with potential customers and reflect their perspective on the plan.
While explaining the elements of the business idea and opportunities in the business plan, another issue that should definitely be included is the analysis of competition and competitors. The details of the subject will not be entered here as it has been thoroughly examined in the section titled Economy, Industry, Competition and Customer Analysis. However, in a business plan, there should be information about the structure and severity of competition, current competitors, future competitors, strengths and weaknesses of the idea of venture against competitors, basic elements of the competitive strategy and the sustainability of competitive advantages. After all, if you can offer a value proposition that is perceived as better than your competitors in the eyes of your customers, you will have an advantage in the competitive process. Especially if you can offer the same value proposition (product or service) with a higher operational efficiency (low production costs, fast production, etc.) compared to your competitors, you can be in a much more advantageous position. Investors and lenders who evaluate your business plan will definitely want to see similar competitive advantages. Business plans that effectively demonstrate these advantages have a much higher potential for entrepreneurs to achieve their goals.
Finally, although business plans need to focus on the characteristics of the current venture, it may be helpful to briefly mention in this part of the business plan how the current venture can evolve if it is successful, and related investment areas that can be considered in the future. As an entrepreneur, the nature and depth of your vision of the relevant business field can help to impress investors and lenders. Entrepreneurs who understand well the sector in which the venture will take place and who can analyze the aspects in which the sector is evolving and the shape it will take in the future will have a higher chance of success.
2.3. Implementation Process and Elements
In this part of the business plan, detailed information about the features of the products and services that will be put on the market should be given in the first place. Then, it should be explained in detail how the basic business processes such as procurement, marketing, production, distribution will be carried out. In the following paragraphs, critical questions to be answered for the basic elements of the implementation process are listed. Depending on the nature and qualities of the venture, which questions can be emphasized varies, but each of the listed questions will be important for a better understanding and evaluation of the venture. Entrepreneurs should take care to answer the following questions regarding the implementation process while preparing their business plans.
2.3.1. Products and Services
- What are the products and / or services to be put on the market?
- Is the product range planned to be expanded over time?
- What are the technical / performance characteristics of products and services and the benefits they can provide to target customers?
- Which customer needs are met with what features of products and services?
- How do products and services differ from the products and services of competitors?
- Do competitor products have advantages in different areas? If so, what are these?
- What are the new products planned in the later stages of the venture and their timing?
- If the product development processes are continuing, what are the main stages of the product development process specific to the venture idea and at what point is the venture in this process?
2.3.2. Marketing and Sales
- What will be the approach to position the venture's products / services and brand for each targeted market segment?
- Which advantages will not be highlighted in competitors and which will be explained to customers?
- Considering the positioning strategies of competitors, why is it expected that the approach of the venture will be evaluated more positively by customers?
- What will be the approximate unit cost of the products and services to the company?
- What kind of pricing approach will be used (with cost recovery management, based on target profit rates, customer perception of value, taking into account the price of competing products, etc.)?
- What will be the pricing of the venture's products and services compared to competitors?
- How and when will customers pay?
- How much will the forward sales be?
- Will price be used as an important competitive factor?
- How (by what methods) will the products and services be promoted to customers (advertising, public relations, sales force messages, website, promotional products, etc.)?
- If advertising, which channels will be focused on?
- What will be the brands to be used for products and services?
- How will the awareness and recognition of brands be increased?
- What kind of connotations will be focused while creating the brand image?
- What will be the ratio of the budget to be used for promotion and promotion to turnover?
- Will the sales force be used?
- How many salespeople will be used and what will be their characteristics?
- On what principles will salespeople be assigned to customers?
- At what rate will the salesperson's income depend on commission?
- What will be the total costs of the sales force?
- How will the products be delivered to customers (through what kind of distribution channels)?
- Will alternative (more than one) distribution channels be used?
- How much will the distribution costs be?
- Are difficulties expected in finding a place in distribution channels?
- What are the geographic areas primarily targeted and what proportion of the planned distribution densities will be?
- How will the products be delivered to the distribution points?
- Are distribution and transportation factors that play an important role in competitive processes?
2.3.3. Supply and Production
- What are the critical procurement requirements (product, semi-finished product, raw material, energy, labor, etc.) required to produce products and services?
- Among the supply items, which are the ones that are scarce or which may be difficult to supply?
- From where will the necessary components be procured?
- What are the costs of procurement items?
- What is the level of uncertainties / fluctuations in the prices of supply items?
- Where will the production activity take place (address and square meter information of indoor / outdoor area)?
- Will the production sites belong to the venture or will they be rented?
- What are the technologies to be used? What critical devices and machines are needed?
- Are the technologies to be used new?
- Are important innovations expected in production technologies?
- How many people will work in production. What is the planned production capacity?
- How much will production costs take up in the total unit cost of products?
- What are the critical stages in the production processes?
- What are the strengths and weaknesses of the venture compared to its competitors in procurement and production processes?
2.3.4. Past Achievements, Critical Stages, Performance Indicators and Risk Areas
- What are the key achievements of the venture in the past?
- What progress has the venture process made so far?
- What will be the most critical stages of the venture process in the future?
- How and why is the venture expected to be successful at these critical stages?
- What are the performance indicators to be used in the main elements of the venture and implementation process (product development, procurement, production, product quality, sales, positioning, brand development, distribution, etc.)?
- What are the targeted performance levels in the main elements of the venture and implementation process (product development, procurement, production, product quality, sales, positioning, brand development, distribution, etc.)?
- What are the most prominent risk factors in the main elements of the venture and implementation process (product development, procurement, production, product quality, sales, positioning, brand development, distribution, etc.) and what measures have been taken or planned to be taken?
2.4. Venture Team and Partners
From the perspective of investors and lenders, one of the more important issues of an venture idea than itself should be who will undertake the venture. Most investors actually invest in people and their reputation, not in a business idea. The number of members of the core team that will make the venture, their knowledge and skills, past success, training, reliability and motivation for the venture are among the most important indicators that many investors and creditors will use when evaluating that venture idea. It is therefore very important to include such information in business plans.
In addition to the core team, it will be necessary to provide information on the qualifications of the workforce to be used in the venture process, the planned number of employees, the expected growth rate in the number of employees, the financial and additional opportunities to be provided to the employees, the planned organizational structure, the different functions and units considered in the venture organization and their distribution of duties / responsibilities. It would be useful to add an organizational plan to the business plan, if any.
Finally, it is necessary to provide information about the partners of the venture. Who are the current partners? At what stages of the venture process are long-term partnerships planned with whom? What / will be the most important contribution of these partners in the venture process? What level will the partners have to decide about the future of the venture?
2.5. Financial Plan
This part of the business plan should include estimates and calculations of how the venture will be financially. Among the main purposes of financial projections are (1) to reveal the profitability potential of the venture, (2) to determine the amount of capital needed for the venture and how it will be used, (3) to determine by calculations that the venture will grow and grow with the sales and turnover it will generate, and (4) to determine by data and calculations that the venture can pay its debts with its revenues. Financial projections are summary tables that present the financial results of the plans and strategies described in the previous sections of the business plan. The leading estimated financial statements that must be included in the business plan are;
(1) Income Statement, (2) Balance Sheet and (3) Cash Flow Statement
Since the financial statements and related analyzes are explained in the section titled Determination and Management of the Financial Strength of the venture, the details of the subject will not be included here. However, the following information must be included in the business plans that will be presented especially to investors and creditors; the total investment required for the venture, how much of it will be covered by credit or foreign investment, where and for what purposes the external capital will be used, the contribution of this capital to the profitability and growth of the venture, what percentage of the company will be transferred if the share is transferred, rate of return, details of repayment schedule for creditors.
For most ventures, predictions for the future are made for a period of two to four years, but in very dynamic and rapidly changing economic environments such as Turkey, shorter estimates may also be required. Moreover, it is especially recommended by many experts to prepare the said financial statements for each month in the first twelve months of the venture and to follow the process closely.
The critical information required to produce projections of financial statements such as Income Statement, Balance Sheet and Cash Flow Statement are listed below. The most valuable information for already existing ventures in terms of predicting the future is naturally the past data of the venture and the financial statements formed in the past. For new ventures, it will be difficult to calculate the critical information listed below accurately and reliably. For new entrepreneurs, such estimates require calculations within the framework of very sharp assumptions. Investors and creditors are often aware of these challenges and tend to evaluate the financial statement projections of new ventures with a certain degree of doubt. Nevertheless, these financial projections are expected to be included in the business plan and provide clues about the venture's future stance.
Finally, in this part of the business plans, it is beneficial to explain the "exit plan" of the entrepreneur, if any. Sometimes, entrepreneurs plan to exit by selling their shares after reaching a certain size and profitability. It may be important to share these and similar exit plans with investors and creditors at the early stage of the venture.