Business plan, its essence and significance for the...

6.2. Business plan, its essence and significance for the economic justification of the investment project

The implementation of any investment project should be preceded by its economic justification, i.e. development of a business plan.

Business plan is a document that accurately and clearly describes the main objectives of the business, the conditions for achieving them; he must prove the effectiveness of making an investment decision for his potential participants.

Developing a business plan allows you to solve the following tasks:

1) answer the question, is it economically feasible to implement an investment project (idea)

2) identify the positive and negative sides in the market associated with the implementation of the investment project;

3) analyze how the implementation of the investment project will affect the financial condition of the enterprise, its image and business value;

4) find sources of financing for the investment project, including the possibility of obtaining a bank loan;

5) Reduce investment risk, as the business plan provides an opportunity to predict the situation in the future, including negative, and take precautions in advance to reduce the degree of investment risk.

In addition, the business plan helps the entrepreneur to solve the following main tasks:

o Identify specific areas of the enterprise;

o establish target markets and the place of the enterprise in these markets;

o formulate the long-term and short-term objectives of the enterprise, as well as the strategy and tactics for achieving them;

o choose the composition and nomenclature of goods and services that will be offered by the enterprise, as well as assess the production and trade costs for their creation and implementation; and others

The composition of the business plan and the degree of its detail depend on a number of factors, which include: the scale of the project, the purpose of the project, the degree of risk, etc.

The business plan structure includes the following sections:

1. Summary. This section contains brief results of the business plan. Its main task is to present in a simple and accessible form the essence of the investment project, its main advantages and summarizing all calculations. This section reflects data that allows a potential investor to understand the essence of the project, its cost and the end results.

It should be noted that the summary of the business plan is a kind of his business card, because investors, for lack of time, study the resume first and only after that if they are interested in the investor they read the business plan in full. Therefore, the summary should contain the main characteristics and indicators of the investment project, which make it possible to judge its attractiveness.

This section is prepared after the work on the business plan is completed, i.e. all analysis is performed and all necessary calculations are made, which can be summarized.

2. Characteristics of business. In this section it is necessary not only to characterize the enterprise (history of origin, position in business cooperation, analysis of property and financial situation), but also its role in a particular industry and the economy as a whole. Here it is necessary to analyze the state of the industry and its development, as well as the needs of the population in the products (works, services) produced.

In this section, you need to reflect information about your main competitors, as well as their strengths and weaknesses.

Information about the enterprise should be more accurate, as a potential user of the business plan must make sure of its reliability.

3. Description of products (works, services). Any investment project begins with its origin with any idea about the production of products (works, services). In this case, it is necessary to reflect their advantages in comparison with analogues, competitiveness in the market, unique properties and useful effect for the sake of which potential buyers will purchase this product (work, services).

In this section, it is appropriate to reflect the life cycle of products (works, services), which will allow the entrepreneur to take timely measures at each stage of the life cycle.

In concluding this section, it is necessary to draw a conclusion about the advisability of developing new products (works, services), as well as financing the project.

4. Market analysis. In this section, the analysis can be carried out in the following sequence:

1) general characteristics of the market of products (works, services);

2) market segmentation by various criteria (by region, buyer group, etc.);

3) identifying potential buyers;

4) sales analysis;

5) determination of the main directions of promotion of products (works, services) to the market;

6) the definition of intermediaries in the sale of products (provision of services, performance of work).

According to the planned production (works, services), it is necessary to reflect the following data:

o product quality;

o sales price;

o output volumes;

o sales form;

o delivery system;

o the storage system; and others

5. Marketing plan. This section of the business plan is based on its previous sections and reflects the results of the market analysis, both for the new product and for the business as a whole, and also assesses the opportunities of competitors and other market factors.

The main purpose of this section is to prove to the user of the business plan that there are a sufficient number of buyers in the market and they will prefer this particular product (works, services). It is also necessary to reflect sales volumes, which has a significant impact on the production plan and investment size.

In general, this section contains:

o measures for maximum satisfaction of consumers of products (works, services) in the process of implementing an investment project;

o possible errors and miscalculations, as well as their cost in various options for the implementation of the investment project;

o activities related to advertising of products (works, services) and costs for it;

o methods to stimulate sales, etc.

Marketing analysis should be based on real and interrelated information.

6. Production plan. This section will only take place when an investment project provides for the production of any products. The main objective of this section is to show potential investors the reality of producing products in the right amount and of the appropriate quality.

In this section it is necessary to reflect the following information: the applied technique and technology; production volumes and production base; raw materials and materials; constant and variable costs; labor resources, etc.

The production plan can be divided into the following subsections:

1) program of production and sales of products;

2) production capacity;

3) Material and technical support;

4) the cost of production and sales of products.

This section is necessary not only for the manufacturer

products, but also to other interested persons (investors, banks, etc.), since its data are an important component of the reliability and efficiency of the project.

7. Financial plan. This section is necessary, first of all, to control the financial security of the investment project and reflects all forthcoming costs, sources of financing, financial results, as well as the results of all calculations.

Financial analysis should accompany the development of an investment project from the very beginning, and each section of the business plan should be linked to the financial plan.

The economic justification of the project is the main criterion in making an investment decision, so the development of a financial plan must be carried out especially carefully.

The financial plan consists of the following sections:

1) a retrospective analysis of the financial condition of the enterprise (over the past 3-5 years);

2) analysis of the financial condition of the enterprise during the preparation of the investment project;

3) the forecast of profits and cash flows;

4) an estimation of financial efficiency of the investment project.

Based on the evaluation of the effectiveness of the investment project, investors make a decision about investing capital.

8. Applications. This section contains all the necessary documents and data that were used to develop the business plan, but were not included in its main text.

The most important section of the business plan is the financial plan, as it is here that the economic justification of the investment project is carried out, which is the main criterion for the investor's decision.

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