How to Create a Do-it-yourself Business Plan?admin
This article will help you find the answer to an important question for an entrepreneur: “How to create a business plan?” Our step-by-step guide will simplify this process and help you model financial results.
If you are faced with the problem of how effective a startup will be or how to develop an existing business, then this article is for you. It’s time to put everything on the shelves and write your business plan.
Why do I need a business plan
Each company must have a financial model for generating profit . A business plan is vital to business success. It allows you to understand the direction of the company, ways to save and the feasibility of investment.
Three rules for creating a business plan
1. Business plans should be short and concise.
No one will read the next volume of War and Peace. Everyone is interested in the end result and due to what it can be achieved. In addition, a business plan is not a formal reply, it is a tool for launching and growing a business.
The final document can not gather dust on the shelf, you need to work with it. After the start of the project, it is necessary to verify and control the actual results in order to optimize costs and increase total profit .
2. Business plans are not written for subordinates
If you plan to create a team of like-minded people, relying on the profits of the company, you will encounter a big problem. Costs will increase, while revenues will decline.
Business plans are written for investors, and it does not matter whether it is their own or borrowed money. Starting a business, any entrepreneur becomes an investor of his future. The success depends on how responsibly you approach the planning of sources of income and expense items.
Subordinates should receive production tasks that the entrepreneur will be able to control and compare the results with his financial model.
3. No need to be afraid of business plans
Most entrepreneurs do not have any degree of financial experts or masters of business.
Writing a business plan for beginners seems like a big problem, but it is not. It is important to understand your own business, in this case, the entrepreneur must be an expert. And to write a business plan, you need a proven template .
What information should be included in the business plan
Remember, creating a business plan is not a homework for a teacher, it is a management tool to make your business more effective.
There will be no business without income. Therefore, they always start with a forecast of future sales and direct costs, without which it is impossible to create added value.
Direct and indirect costs
The costs of the enterprise are divided into direct and indirect. This is necessary for the correct formation of the cost of the product and for determining the tax base.
Direct costs form the cost of only one product and are directly related to its production and sale.
Indirect costs or overheads are involved in the cost of the business. These costs ensure the production process and the operation of the enterprise as a whole.
The classification of direct and indirect costs of the company is as follows (enlarged):
Raw materials, supplies and components
Depreciation of production equipment
Salary of the main production personnel
Energy for production equipment
Commission of sales agents
Product-specific advertising costs
Product specific shipping costs
Energy for accessories
Depreciation of auxiliary production equipment
Advertising costs for the company as a whole
General shipping costs
Administrative staff costs
Costs of external professional services
The basis for forecasting demand is a deep understanding of your market and the level of expected revenue. An entrepreneur, as an expert in his field, must determine the level of expected revenue and evaluate direct costs. This will answer the main question: “Is the game worth the candle?”
If knowledge is not enough, it makes sense to conduct a situational analysis of the market and postpone your venture with profit planning. The risk of losing an investment without assessing competition in the market can be very high.
To determine the expected sales, we will use the worksheet of the business plan template in Excel.
The “Sales Budget Forecast” sheet consists of six parts: the first five allow you to estimate the volume of sales by segment (services, customers or other acceptable revenue grouping system) and take into account the associated direct costs.
How to create a business plan – income structure
The sixth block sums the revenue for the indicated segment and calculates the projected total gross income of the company, as well as the percentage of business margin. The higher this key indicator of project performance , the higher the likelihood of success.
It is believed that for the service sector the optimal ratio of direct costs to gross income should be 1 to 3. That is, the margin percentage should be higher than 67%.
When filling out the cells of each worksheet of the template, remember that the cells containing formulas are highlighted in yellow, and the white cells, underlined with a red dotted line, are used to enter your own numbers and texts that explain the indicated values.
As a rule, to assess the level of direct costs, it is easier to use percentages of sales. Therefore, the template provides the ability to estimate direct costs as a percentage of revenue, and the direct costs for each segment will be calculated automatically with rounding to the nearest whole value.
When you are planning a full-fledged business, you create the conditions for the future development of the company. Therefore, it is important to forecast income for a couple of years. This shows the seriousness of one’s own intentions. The template provides such an opportunity. To do this, enter your values in the appropriate cells of the next period, as shown below.
How to create a business plan – planned income
The final result of the forecast sales budget will be the assessment of the business in terms of ability to generate revenue.
Any business needs capital. Without investing in finance, it is difficult to achieve sustainable development. Any company needs working capital, fixed assets, advertising and promoting its services on the market.
The task when planning a business comes down to generating income with minimal risk for investment. The higher the marginal profit, the more interesting the project. But can an entrepreneur rely on a gold mine without attracting borrowed funds?
The worksheet “Need for capital and loans” of the free business plan template allows you to identify sources of financing for the development of the project.
How to create a business plan – assets and liabilities
The worksheet template of the business plan template is divided into two parts:
An asset is what makes money
Liability is what takes money.
Assets include financial injections into a business that generate a steady income or increase the value of the business. This is the capital available to the company, it consists of fixed and working capital.
Fixed assets are needed by the company, as they are used to support core business: production of goods, rendering of services, performance of work, leasing, etc.
The template offers a list of fixed assets that you can add or change as you wish:
Patents and Values
Machines, equipment and installations
Trademarks and Advertising
In addition to fixed assets, the enterprise needs working capital, which is used for the purchase of raw materials, remuneration of employees, provision of inventories, etc., involved in the formation of value added to the final product.
The sum of fixed and working capital is the capital of the company. After you calculate the size of the company’s assets, you need to determine the sources of project financing. And to understand how much money will eventually be required for the business.
Liabilities include financial liabilities associated with the sustainable functioning of a business. These are short-term and long-term loans, retained earnings and the authorized capital of the company.
Assets and liabilities are usually presented in the form of a balance in which the total amounts on the left and right sides are equal. Any deviation towards an increase in assets or liabilities indicates an imbalance in the project.
Financial business model
After you have decided on the sales forecast and sources of project financing, it is time to calculate the financial results
The worksheet “Financial Business Model” automatically pulls up revenue and direct costs from the “Sales Budget Forecast” worksheet. Therefore, it remains for you to distribute the overhead costs of the company so that the business remains profitable.
The temptation is great to allow maximum comfort, but the possibilities are limited by the marginality of the project. Therefore, it makes sense to be conservative when planning overhead costs.
How to create a business plan – financial results
Indirect costs in the table for calculating business profits are divided into 5 components:
Fixed costs for staff
Production and administrative costs
Costs of servicing loans and credits
You can independently adjust the list of indirect costs that will match your business. It is important to adhere to the proposed structure. The correctness of calculations in the template depends on this.
After the overheads are calculated, you will see your profit figures taking into account the selected tax rate under the Simplified Taxation System (6% or 15%). The USN rate must be indicated at the top of the worksheet.
How to create a business plan – expected profit
Every entrepreneur is an investor
It is important to choose the right investment tool. Therefore, to assess the profitability of the project, an indicator such as interest on a bank deposit is used, which reduces the profitability of the estimated indicator.
There is always an alternative for investment. An entrepreneur can put his money in a deposit and receive a stable rent. If the profit of the project is lower than the interest on the deposit, then why risk investment?
It is important to understand how your efforts and entrepreneurial savvy will provide a profit above passive income. Enter the actual interest values that a reliable bank offers and look at the final result.
Why does the template include a depreciation section?
Depreciation of fixed assets is the transfer of the value of fixed assets to the cost of production.
During production, fixed assets wear out and lose value. If depreciation is not taken into account, then hour X is suitable, when the wear of the equipment does not allow the provision of services of adequate quality. Therefore, it is important to take into account monthly depreciation in monetary terms in the cost of production.
Equipment, tools and inventory used in the implementation of services should be considered at the stage of calculating direct costs. Any other property is included in the overhead structure. This applies primarily to fixed assets, for example, computer equipment, without which it is difficult to conduct business, furniture, cars and other means that will be involved in the company.
Otherwise, you run the risk of coming to the point where extra expenses are required that are not covered by the business plan. After the end of their useful life, depreciation is not charged.
The business plan template minimizes risks; it makes the entrepreneur take a meaningful approach to business. The higher the knowledge of the market, the more pragmatic pessimism will be in the final document. The higher your quotes will be as a businessman.