The Main Body of the Business Plan

Business Plan Main Body

The Business Plan articulates your project and is the fundamental tool for communicating with investors. A well produced business plan will give you an edge.

Business Plan Guidance : Main Body

Following the Executive Summary, the main body of the Business Plan should cover the following.

Introduction to the Business

Generally introduce the business and what it does / will do.

Outline concisely how the project came about, and progressed to the present situation.

Describe what the company’s legal structure is, who are its shareholders, and how activities have been funded so far.

Explain where you are now and where you want to go from here – what you want to achieve.

The Management

Of the entire project, probably the most important factor is its management. In some cases, such as when dealing with Venture Capital companies (VCs), they will only look at the rest of your proposition if they see a strong management team. This is particularly important when dealing with large investments.

Explain who is involved, including a paragraph on each individual on the management team listing their background and relevant experience / qualifications, as well as on any other mentors or non-executives. Include also any advisors or partnership organisations – from accountants to lawyers.

For all projects you need to put forward a management team that has the ability to realise the plan. If you have gaps in the team highlight them and Investors may be able to help fill them – better that you highlight weaknesses than investors point them out.

The Products

Provide a simple and clear description of your products – a description that a ley person can easily understand. Do not assume technical knowledge by the reader. Then Explain:

What consumer need is being satisfied by these products that is not being satisfied at present.

Performance advantages / value advantages over existing competition. Does it do things better, faster, cheaper, more conveniently, is it easier to operate, smaller in size, longer lasting, lower maintenance, and is this advantage really important to consumers – important enough to pay for.

Other Unique features.

Intellectual property – any patents or trademarks involved or required.

What is the selling price and the pricing strategy behind this. You must re-affirm that your potential customers can afford your products, and are willing to pay for them.

Production and distribution costs and resulting Margins on sale.

What are the retailer margins (if retail channels are being used).

The Market

Market size – describe the size of the market and be specific about the size of the actual market sector that you are targeting.

Market growth.

Other market characteristics.

Market segmentation – how can the market be segmented and which segments are you targeting.

Main players (Rivals) in the market – identify who your main competitors are.

How companies (Rivals) compete in terms of Competitive Strategy.

Analysis of Industry Structure (Porter’s Five Forces).

• Threat of New Entrants into the market: what do we believe is the threat of new players entering the market, are there any barriers to entry or exit such as large investment etc.

• Threat of Substitute Products: the threat of different products filling the same need

• Power of Buyers – are the buyers of products very powerful and able to depress prices

• Power of suppliers – what is the bargaining power of the suppliers to the business

• Rivalry Amongst Existing Players – how intense is this and how strong are they – for example in some markets rivals are willing to sacrifice profitability to gain market share

• How profitable are the companies in the market – do they make good margins, good turnover, etc.

Competitive Market Strategy / Competitive Advantages

How is the company going to compete in the market. Will it compete on price, service, quality, convenience, new features and benefits, by targeting a very specific area of the market (niche), etc. Is this difference really important to the target customer / buyer.

Operations and Production

How is the company organized, or how will it be, to operate on a day to day basis – what office space will it use, what support staff will be employed, who will answer the telephone or will a virtual office be used, who will it do its book keeping in house or initially use a firm of accountants to assist with this, who will take orders and raise invoices, etc.

How are the products to be produced, the process needs to be described. Will any investment in premises and equipment be required, if so detail this. Will the production be contracted out, perhaps to an outside supplier who already has the production assets in place, or will a joint venture be established to do this. How will this production process be managed to ensure efficiency and effectiveness.

What are the production lead times (time taken from decision to make more product to final packaged product ready to ship), costs, bottlenecks/ production limiting factors, the fixed and variable cost break down, etc.

Is the company able to respond quickly to changes in demand – can it raise production quickly or does an increase in capacity require long term investment and planning – if so how long.

Sales and Distribution

How is the company going to reach the customer to provide them with an opportunity to buy. (for more detailed information visit the Sales & Distribution page).

Will the company adopt a retail strategy, sell through other intermediaries or or sell direct. What margin structures will operate for each intermediary in this “sales channel”. How do these margins compare to those offered by competitors. In light of the pricing strategy, what will the consumer have to pay. How much prospect is there within these price and margin arrangements to discount for promotions, etc (see the Pricing Strategy page for detail and tools).

Who will take the orders and process them and how will they link into the company’s financial, production, and physical distribution systems.

How is the company going to physically transport its products to its customers – be these intermediaries such as retailers or end consumers. Will it acquire its own warehouses and fleet of vehicles or will it contract a distribution solutions company and what will that company provide and at what price. Will the company provide the adequate level of service delivery required by the buyers in terms of delivery frequency and any other specific requirements. Will this distribution strategy require very large quantities of spare stock or not (this will be affected in large part by your Production Strategy and Structures).

What are the physical distribution lead times. First from order received to delivery from stock, and secondly if the product is not in stock.

How will the company sell its products to the buyers. Will it use its own sales force or will it contract a sales force, or perhaps rely on wholesalers?

Illustrative Financial Projections

Provide a set of financial projections that show the financial implications of your plan. Make sure that you clearly state the assumptions behind these projections, both in terms of costs and revenues, and ensure that they are realistic. By explaining the assumptions clearly potential investors will be able to see that the figures have been thought through – whether or not they agree with them.

The projections should include:

Cash flow statement – the cash balance and movement by month for the first year to 18 months.

Profit & loss statement – this is a statement of the trading position of the business.

Balance Sheet – this is a statement of the company’s assets and liabilities.

Within this it is also useful to highlight the “cash-burn” rate of the business. How much cash it consumes each month.

The full statements should usually cover three years ahead, with an indication of how headline figures up to five years out. (underlying detail after three years in high potential companies is often a complete stab in the dark). The reason why it is important to give headline figures over a longer period, is to provide an indication to investors of the potential upside of the business.

Finance Requirements and Investment Structure

You need to make clear to investors how much finance you need, how it will be used, and what they are going to get in return, and when they can expect it:

How much money you need to execute the plan?

What do you expect the sources of this money to be, e.g. Business Angels, Venture Capitalists, Bank Finance, or a mixture?

Specifically how will that money be used?

What is on offer, in terms of ownership (shares) in the company, for the money? Is 20% or 40% of the company’s equity available for this investment?

Details behind any banking facility or other forms of finance you expect (if any).

What do you expect investors to receive in return for them risking their money?

How do you expect investors to get their investment and return and when. Will this be through a trade sale, a flotation, or a management buy-out?