A business plan is not just a formality, but a vital document that defines the development strategy of your business, attracts investors and helps you stay on track. It serves as a roadmap describing your goals, methods for achieving them and potential risks.
Read moreA business plan for the implementation of an investment project is a document that is compiled based on an analysis of the market, financial position and investment policy of the enterprise. It contains information about the investment project, initiators, expenditure and income, potential risks, future products and technologies. The content and number of sections depend on the direction and essence of the project, the amount of funds, and the financing period.
A business plan is a form of presenting an investment project. A business plan for an investment project is developed in order to attract external and internal investors, increase the cost of services, modernize and expand production capacities, and enter new markets. Structurally, it consists of several sections: general characteristics of the project, marketing analysis and plan, organizational plan of the project, technical plan, financial plan and risk analysis. There are five aspects to creating an effective business plan that will be correctly perceived by readers:
1. A compact document. Put all additional information in appendices so that the main text fits on 30-50 pages.
2. Conclusions for each section. The main theses and figures should be summarized in several sentences at the beginning or end of the information block.
3. Clarity. Present data in graphs, diagrams and charts.
4. The same units of measurement in tables and graphs. It is important to use the same terms and concepts, units of measurement, structural data, names and dates in the same form in the text of the document. Otherwise, it will be difficult to evaluate the investment project and the feasibility of investments.
5. Automatic numbering and adequate organization of the document structure.
The principles of forming a business plan for an investment project are based on transparency and accessibility. All figures that form the basis of the forecast must be realistic. It is important to track the correspondence between the current state of the business and what the forecast is based on. Each phrase in it should be simple and understandable, and each figure should be based on other facts and figures. To do this, the authors of the document use reliable sources of information, including statistical ones. Those sections that are based on internal data sources limit them to the specifics of organizing a certain type of activity.
Despite the differences in the methodology for developing a business plan, the approximate structure is the same in all variations of the document. A business plan for the implementation of an investment project is developed in such a way as to provide an accurate description of the process and attract capital investment.
The summary of the business plan is no more than one or two pages long, which can be read quickly. This section provides useful information about the project for investors. It includes brief information about the company that proposes to implement the business plan. It formulates the competitive advantages of the product and the key prerequisites for success. The areas of investment expenditure are briefly indicated without justifying the amount. The amount of available capital and potential sources of financing are indicated. The financial indicators of the project, the amount of profit and revenue for the year are listed. More detailed information is contained in the appendices and other sections.
The section on the project initiator is designed to convince the lender or investor of the reliability of the company, as well as its availability of the necessary competencies and resources to implement the plan. In this block, it is necessary to indicate:
Legal information and financial indicators of the organization. The economic results of the activity are noted: the size of profit, revenue dynamics, the ratio of debt and equity capital. This subsection can be supplemented with a presentation on the state of the company.
Experience in similar work. A brief history, areas of activity and achievements of the current business are reported. Thanks to this, investors will be able to decide whether the project initiator has the necessary knowledge, resources and experience.
Additional information. Potential investors may require other data on the initiator company. In this case, the authors should think through all the additional aspects and cover them.
Data on the initiator of the investment project is supported by appendices, copies of statutory documents, certificates, licenses, appraisers' and auditors' reports.
In the project or product description section, potential investors are introduced to the characteristics of the product they want to create and the general idea of the enterprise. They indicate the consumer properties of the service or product, competitive advantages, and provide a comparison with similar products. If the investment goal is an infrastructure or real estate object, they note the construction characteristics, geographic location, and layout. They explain what has already been done for production, what preliminary work has been carried out, and the description of the product or object is accompanied by photographs and diagrams.
And the marketing department or a separate specialist forms this section in such a way that the potential investor sees the advantage of investing and the sales prospects of the goods or services that will be produced. The section is compiled under the supervision of the financial director. The results of the analysis of consumers, competitors, various market segments, the socio-economic environment, and product distribution channels are presented. At the end, a sales forecast and a plan of marketing activities are given.
A block for describing the procedure for building the production of a new product or service. They note the advantages of the selected technology over others, and describe the organizational chart of the business. Here, data on the location of the production technology, suppliers of equipment, raw materials, logistics, human resources, and the overall need for personnel are included. A functional diagram is developed for a new production facility. If construction work is required, it is imperative to note the approvals and permits (construction patents, certificates, licenses, and other documents) that must be obtained. The construction plan is supplemented with an estimate of expenditure. The impact of the project on the environment is indicated, since this may affect the location of production.
Since the rationale for organizing business planning for an investment project is to improve the efficiency of the enterprise, increase profitability, manufacture new products, and enter new markets. The leading role in the plan is played by the calculation of the indicators of return on investment, profitability, and break-even point of production. Based on the content of the technical, organizational, and marketing plans, the investment needs of the project are compiled. The section notes the sources of financing, the schedule for attracting and mastering investments. They rely on the sales volume from the marketing plan and the price forecast, production costs, and profit forecasts.
It is used to demonstrate investments, and therefore contains such indicators of the effectiveness of investment projects as the internal rate of return, net present value and discounted payback period. The section is supplemented with coefficients that allow determining the degree of financial stability of the project. The design of this section takes into account the specifics of the project, the requirements of investors or the bank.
The authors of the document should outline possible scenarios for the implementation of the project with a detailed risk assessment for each of them. The scenarios are based on the cost of equipment, sales forecasts and the volume of current costs. To analyze the risks, they build cash flow scenarios, income and expense budgets, calculate the discounted payback period, net present value and internal rate of return. Estimates are made based on the movement of sensitivity graphs.
They provide an analysis of the probability of possible losses and the occurrence of adverse consequences. They must list measures to minimize risks, provide a list of measures that can protect the interests of individual investors.
The financial plan combines sources of financing, expense and income items, projected balance sheet and cash flows. Such financial justification explains the economic necessity of developing a business plan for an investment project and contains the main forecasts of income and expenses, necessary resources. To develop this block, it is necessary to use data on:
the volume of the company's own funds that can be used for financing;
optimal lending terms (interest rate, term and loan amount);
the required volume of investments in working capital before the start of production;
terms of interaction with suppliers of equipment and raw materials.
It is important to make a forecast of current and investment costs before the project is launched and reaches self-sufficiency. Current costs are associated with the characteristics of the technology, marketing activities, and the implementation of the work plan with personnel. They are divided into fixed and variable.
Investment costs are detailed as much as possible so that investors understand how the costs will be interconnected and distributed over time. Investment costs include the purchase and preparation of a land plot, costs for purchasing transport, equipment and other assets, and the entire package of prepaid expenses.
A company can finance an investment project using borrowed or own funds. The first group includes bank loans, credits, subsidies, leasing, private investors' money and grants. The second group includes reserve funds, depreciation and retained earnings. The financial plan details the planned structure of sources of income and describes the overall need for financing. It is imperative to note what amount the investor company will contribute, and what amount of funds are needed from investors and the expected bank loan. Attention is paid to leasing financing. Mechanisms for monitoring the targeted use of funds are noted.
The financial plan for an investment project includes a forecast balance sheet, cash flows, income and expenses. The level of inflation is justified, tax rates are indicated, and macroeconomic indicators are taken into account.
Business planning begins with substantiating the business idea, conducting marketing research, and drawing up a financial plan. Developing a business plan for an enterprise investment project requires the participation of a working group and leading specialists to prepare an audit, necessary paperwork, make calculations, and evaluate the strategy. The work takes at least a month, but often lasts longer.
Developing a business plan takes place in several steps:
Experts form a package of project documentation, constituent documents, and financial statements. They evaluate the business idea, conduct marketing research, technological and economic justification. They draw up a draft business plan using a specific methodology or other generally accepted concept. It finally summarizes the main indicators of the project's profitability, payback periods, and performs a quantitative and qualitative risk analysis.
The draft document is submitted to management for approval and coordination. Since it serves as a basis for attracting various sources of financing and using government support measures, changes can be made to the business plan for each of the tasks.
The document is approved by a separate stamp or order of the manager, after which it is published, used for making management decisions or transferred to partners, government agencies, financial and credit institutions.
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