TIPS FOR YOUR BUSINESS PLAN

Everyone needs it: the business plan. Whether you are a freelancer designing
someone’s logo on the side or going into business with a few co-workers to start a software
development company: you should definitely have a plan.
But not every business plan needs to be extensive. The important thing is that the reader
understands what the venture is about. A business plan has fixed components. The 12 main
components shall be introduced in the following passages.

1. Executive Summary
The executive summary is the summary of the entire business plan. It can only be
compiled when the business plan is finished. It provides a short overview over the basic contents
of the plan. The most important details should be easily comprehendible.

2. Founder (team) and business leadership

An important component of the business plan is the introduction of the founder(s). It is
important to point out why this person should lead the business to success. You should make a
distinction between professional qualifications and entrepreneurial ones, meaning between
education and job experience, and leadership experience and the ability to work as part of a team.

3. Product or Service
The product (or the service) is the heart of any company. Characteristics and stages of
development should be listed in the business plan. What makes the product one-of-a-kind, what
is its so-called unique selling proposition? The product description should be easily
understandable, even for laypersons. The question of what you want to accomplish should be
answered. This includes short-term and long-term goals and how you want the product to
develop. Should you be producing complex products, the individual stages of production need to
be listed. Is the product new or unusual, the functionality should be described in detail.

4. Market and sector

 A competent business founder should have a keen sense of the market and the
competition. If you only see as far as your own nose, you will not get far. A market analysis is
indispensable. Not only should you be aware of your competitors, you should also know your
customers well. The easiest method of getting to know your potential customers is a survey or
the questioning of other businesses of the sector. For almost every sector, there are current
analyses. In most cases, you can attain the results from banks or view the corresponding theses at
universities. The business plan should show how you expect your business to develop in
comparison to other businesses in the sector. It is usually easy to find out, who your competition
is: Google search, Yellow Pages, in forums, from experts of the corresponding chambers. The
situation on the market also determines the site selection. Internet-based companies or
freelancers, who work from home, clearly have the advantage here. They can work anywhere, or
where salary and rental costs are lowest. Otherwise, the choice of location depends on the
proximity to distributors and customers. There could also be regulatory requirements. It is
important for the business plan that the choice of location justifies the costs.

5. Distribution and marketing

This is one of the most important points of the business plan. You can therefore divide
distribution and marketing into offer strategy, price strategy, distribution strategy, and marketing
strategy.
The product offer is critical and presents an opportunity to set yourself apart from your
competitors. The business plan should stress the difference between you and your competition
and what makes your product special. Your strategy for further development should not be
missing here.
The chosen price strategy is also of importance. Did you opt for high or low prices, or
even a threshold price strategy? Your business plan should demonstrate how your price strategy
secures cost recovery and at the same time sets you apart from your competitors. You should
therefore list the prices of your competitors for comparison. The price needs to be competitive,
which should be visible in the business plan. You should also elaborate on the composition of
your price, how high your profit margin is, and the minimum price of the product.
The distribution concept should be visible as an entity. Naturally, it has to match the
product, which should be demonstrated in the business plan. Every chosen channel of
distribution should be explained. Those that were not selected should also be listed, explaining
why they were not chosen. This shows that you have considered all options and weighed the
advantages and disadvantages of each choice.
Publicity is needed for making your product known. Which strategy is to be pursued and
why, is also part of the business plan
Some products and services can gain a high profile with the help of clever PR-strategies.
This should not be underestimated.

6. Co-workers and business coordination

Your business plan should outline your overall orientation regarding organization: is
there a strict hierarchy or do you prefer project teams? Where lie the responsibilities? The choice
of co-workers and the suitable job description needs to follow accordingly. It may be better to
employ part-time workers or consult external experts for individual projects. The business plan
should also show the planned development of the employee situation. With the growth of the
company, the number of employees may also need to be increased. You may, however, plan not
to hire employees and rather commission external service providers for individual projects. This
is useful in the area of bookkeeping

7. Legal form
A good business plan should also contain explanations about the chosen legal form of the
company. Which person or other corporation holds a part of the company? Why is the current
legal form the suiting the best? Are there any changes planned when growth is coming? This is
part of the business plan.

8. Chances and risks

The risks, but also the chances are the most interesting parts of the business plan for
investors, loan creditors, and bankers. Risks are naturally a delicate topic. However, if you are
honest and mature about them (and they are listed in your business plan), they should not present
a problem. Worst-case scenarios and best-case scenarios can be helpful to make your point. The
appropriate numbers should be listed as well.
9. Capital requirement
The seed capital has to come from somewhere. No one founds a business without any
resources. In most cases, the equity capital is not enough. The business plan should therefore
show, which capital goes where and for what it is used. The reserve capital is also of importance.
Self-employed people or freelancers have to budget for their personal needs. Current as well as
prospective loans should not be forgotten.

10. Finance plan

The finance plan is likely the most complex component of the business plan, because it is
not easy to show where the money comes from, where it goes, and for what it is used.
The equity capital is one component of the finance plan. The amount you contribute
should be noted in the business plan, as banks appreciate it when personal resources support
new-business loans.
External funds and their amount and distribution are an important part of the finance
plan. Often the funding occurs through capital providers, such as investors or banks as loan
providers. (Public) subsidies are also external funds. Should you plan to claim such funds you
should include it in your business plan.
The so-called liquidity projection demonstrates financial solvency over a planned period.
There are benchmarks for every sector, which can help you orientate yourself. Here, you should
also mention the break-even point, meaning the point in time when you move from the red into
the black. Your business plan should also point out how you intend to get by until then.
The profitability statement or earnings forecast demonstrates, which proceeds a customer
generates with which product (should there be more than one). Of course, these are only
estimations but they can be well founded. The profit and loss statement shows how the capital
and value is expected to increase. The turnovers are contrasted with the expenses.

11. Further documents

You should complete your business plan with other relevant documents, such as a CV,
surveys, or drawings.

12. The right measure

 Many business plans are too extensive, as the authors (the business founders) believe they
need to describe every small detail extensively. You should not lose yourself in flowery phrases,
but make precise statements. It is helpful to let friends, who are strangers to your line of
business, read your business plan. If they can understand everything, the plan is comprehensible.
You should be able to recount your business plan by heart and know the numbers in your sleep.
This ensures that a presentation, or a visit with the bank or other investors will go smoothly.
based on structure and goals.