Creating a business plan is a crucial step for any entrepreneur. It provides a detailed roadmap for your company, showcasing its mission, products, market, and financial projections. This plan not only helps you stay on track but also convinces potential investors of your business’s viability. From understanding your target market to calculating startup costs, each section of the business plan serves a purpose. Whether you choose to create it yourself or seek professional guidance, a well-structured business plan can be the key to securing funding and ensuring long-term success. Ready to take the leap? Here's how to get started.
Business Plan Basics
How and why do I create a business plan?
Sooner or later, anyone thinking about setting up a business will come across the term business planning. But what is it actually all about? Put simply, creating one helps you, as well as future employees, investors and other interested parties, to better understand your young company.
Although the German term "Geschäftsplan" does exist, the name "Businessplan" has now become established in German-speaking countries. Below, we take a look at some of the aspects that should be included in your business plan. It can also make sense to have it drawn up externally. If you prefer to create it yourself, you can also find templates on the internet.
What should a business plan cover?
A business plan consists of several parts that should credibly present different aspects of a company. This includes short-term planning as well as the long-term planning process. Some key elements need to be implemented relatively quickly, others have or need more time. It is therefore important for (prospective) entrepreneurs to keep an eye on both the present and the future.
The founders of the new company should also be introduced, as well as the business goals and objectives, including a clear mission statement. This is not just about their names and academic experience, but also about their practical experience and talents. Of course, it is also possible to become self-employed directly after graduating or instead of graduating.
However, it is generally a good idea to gain some work experience as an employee first and not make all the mistakes in your own company (and on your own dime). An executive summary should be included in a traditional business plan, covering all of these aspects in a concise and comprehensive manner. Of course, this type of business plan should also present the products and/or services that a company has in its portfolio, as well as its value proposition and competitive advantage. Some offer only a product, others only services, and some companies offer a combination of both. It is a good idea to offer not only one or more product lines, but also services centered around your own products. This could be coaching or the maintenance of a product. In the case of digital products, for example, you can offer optimization as a service.
The products and services offered by a start-up should be analyzed from several angles. What are the strengths of your offering, especially in comparison with other product lines already available on the market? Here it makes sense to check to what extent these are perhaps superior to your own product line. There is certainly a tendency to present your own product/service in a rather flowery way. However, potential investors will carry out due diligence to check to what extent the statements in your business plan reflect reality. It is therefore advisable to make factual arguments when drawing up your business plan, rather than ignoring your own weaknesses. The financial plan should form a large and important part of your business plan. It deals with various important financial goals and aspects, which we will discuss in the lower part of the article.
Who can create a business plan for me?
As a business plan is a written document with a huge impact, it makes perfect sense to seek support for its creation. On the one hand, this is often available from the local Chamber of Industry and Commerce (IHK) and start-up consultancies. In addition, it is a good idea to seek external support from a company or freelancer who has already created several business plans and may have already founded a company themselves.
They will bring practical experience to the table, which will help to scrutinize the realism of some of the assumptions in the business plan. In this case, it is particularly helpful if the consultant also has experience in your industry and therefore knows what realistic key figures look like. It can also make sense to have your business plan drawn up professionally, especially if you are a small business starting a new business and need to convince investors to provide funding.
Who is on your team?
Of course, it is very important to know who is part of your startup. There are people behind every company. Assessing their professional and personal skills is extremely important for investors and lenders. University degrees certainly play a role here, and a degree from a well-known university is a slight advantage. However, professional experience and life experience are at least as important. There are certainly founders who set up a company in an industry in which they have not previously worked. That is not a problem per se. However, they should have perseverance and a strong thirst for knowledge, as they will have to acquire more information and will probably make more mistakes, especially at the beginning.
Product and Market Situation
What is the market situation?
In addition to the product, the market situation should also be addressed. This concerns both the general market situation and the specific market in which your product or service(s) is located, which can be determined through market analysis. A country's economy goes through different cycles; some products sell better during a boom, others during a recession, and some products always sell, regardless of the state of the economy. It is also extremely important to analyze the market situation in the industry in which you are active, which can be done through performing market research.
The target group, also known as the ideal customer, is a crucial point here. What is their gender, what is their average income, and what hobbies do they pursue? The better you know your target group, the more efficiently you can address them and convince them of your product. Location can also make a difference here, but it doesn't have to.
When looking for suitable employees, it is often important to be in an attractive location. These can be large cities, but also more rural areas that are still reasonably close to large cities. The latter makes sense, as property rents and purchase prices are somewhat lower here and the environment is not quite as stressful.
There are now also quite a few companies that operate completely remotely and consist of colleagues who work all over the world. If you work in several cities and countries, it is often more important that the supply chains work than where the office/production sites are located.
After all, the customer is usually not located in the immediate neighborhood either, which requires a certain amount of forwarding work. If you are unsure about some of these points, it may make sense to have your business plan drawn up externally, including a thorough market analysis. This section is where you will showcase all the information about your potential customers.
What can your product do?
Your product is, of course, the centerpiece of your company. It should therefore be described in detail when creating your business plan. You should often go into much detail. How did you come up with the idea for your new product, and how does it work? What problem does it solve, and can it do this better than other products that already exist on the market? Can your product be legally protected by registering it as a utility model or patent, thus securing your intellectual property? Where do you have it produced, how much does your product cost, and what is your margin?
These are just some of the many important product questions to which the section of your business plan should provide good answers and explain how your product is a good place in the current market. Additionally, your company description should explain the competitive advantages that will make your business a success and list out the consumers, organizations, or businesses your company plans to serve.
Do you have a strategy?
Strategies are extremely important. After all, you are usually not the only entrepreneur working in a particular industry. It is therefore all the more important that you know your competitors and what their strengths and weaknesses are. This allows you to base your own business strategy on them and perhaps use one of their weaknesses to your advantage.
A strategy doesn't have to be static; as a dynamic endeavor, it can also evolve and adapt to a changing market situation over time. However, it is important that it works.
What opportunities and risks exist?
Of course, the opportunities and risks must also be analyzed and presented in detail. This makes founders and investors realize what risk they are taking, but also what reward they can potentially expect for their risk.
Risks can take many different forms. A tax back payment or advance payment can represent a financial risk. If someone is injured while handling your product, this can mean a liability risk as well as an image risk. As you can see, there are definitely some risks that need to be thought through.
However, you shouldn't just focus on the negative aspects. Sufficient space should also be given to your company's opportunities. It is important to know the competition very well in order to plausibly explain how your own product or company is superior to the competition.
Marketing & Sales
Don't underestimate the power of marketing!
The marketing of a company is of enormous importance. It can ensure that a product/service is bought an insane amount of times. Good marketing is more difficult than you think. Here, too, it is important to know your own target group well. Then the question arises as to where and how you address them. Where in this context refers to the communication channel.
Although we live in a highly digitalized age, it can sometimes also make sense to address a target group via print, TV or radio; either in addition to the digital channels or instead of them. This depends entirely on where the respective target group is (presumably or demonstrably) located. If you are doing online marketing, the question arises as to what you should focus on. On your newsletter? On SEO and SEA? Or rather, on your social media channels?
Ideally, you should test all channels and see which ones are best received and lead to conversions. The advantage of online marketing is that it can usually be easily understood in terms of figures, for example by means of tracking. This allows you to find out which channel your website visitors came from, how long they stayed on your website, and which channel generated the most sales. You can therefore recognize which channels are suitable for your company marketing. Make sure that you describe these in detail when creating your business plan. A business plan template can also help you here.
Which distribution channel do you choose?
Depending on your product, it may also make sense to sell it offline. For example, in supermarkets or specialist retail outlets. Although this may take away some of your margin, you will be able to sell higher quantities and increase your brand awareness, both of which are important for your company's long-term growth. In addition, it is certainly a good idea if you have a sales department in your company.
Trade fairs are also a valuable point of contact, both in terms of networking with other companies and with the professional audience and the general public. Of course, it can also make a difference whether the trade fair is open to the general public at all. But trade fairs without public visitors can also make sense for the distribution of your product.
Feel free to try out different trade fairs and record some values (how many contacts did you have, did you receive leads at the trade fair) to compare how effective different trade fair visits were.
Company Form
Which type of company should you choose?
Of course, the way in which the company is organized also plays a role. Founders with limited financial resources often start out as an Unternehmergesellschaft (UG) or GBR (Gesellschaft bürgerlichen Rechts). This means you don't have to tie up a lot of capital straight away, which you may not even have. To set up a limited liability company (GmbH), you need share capital of EUR 25,000; half of this must be available in the business account when the company is founded.
If the 25,000 euros have not yet been paid in full, the founders may also be held liable with their personal assets. Founding a GmbH involves a number of bureaucratic tasks. A memorandum and articles of association must be in place, as well as notarization, entry in the commercial register and business registration.
In addition, there is a strict accounting obligation, which is not so easy to understand. It can make sense to seek external help here. Even if a GmbH usually means more work, it can be worthwhile to set up a GmbH for reasons of prestige and liability. When drawing up your business plan, please also make sure that you explain which company form you are choosing and why.
Does a public limited company make sense?
If you want a little more prestige, you can also consider setting up a public limited company (AG). Incidentally, this is also an option for companies that are not planning to go public. A public limited company can be founded from scratch or converted from a GmbH, for example. Incidentally, an AG can be founded by one person. The founder does not even have to be a natural person; a legal entity can also found an AG. It is also necessary to appoint 3 members to the supervisory board. These must approve important decisions.
An AG must hold at least one general meeting per year. The share capital of an AG must be 50,000 euros. However, this does not have to be fully available at the time of formation. Depending on the country in which you want to set up, there might be other company forms that are suitable. In England, the limited company (Ltd.) is widespread; in Germany, too, there are some companies that operate as limited companies.
Financial Aspects
The financial plan is an integral part of your business plan
To better understand your risks, it is very important to draw up a solid financial plan. This type of plan is often the most important part of a business plan, as it works with concrete figures. If it is solid and well-thought-out, it can convince banks, investors, and venture capital firms to give you money. A major challenge here is certainly the forecasting of some figures, as you often have to work with assumptions. Nevertheless, it makes sense to provide more conservative estimates, and you should definitely not make any exaggerated or even untrue statements. Banks, investors, and venture capital firms are actually mainly interested in whether you can pay off your loan or provide a return on their investment. It makes perfect sense to get external help with your financial plan, including creating a pitch deck to accompany your business plan. A pitch deck is a short and informative presentation that can help convince potential investors to provide funding for your business. It is crucial to have a well-crafted pitch deck as part of your financial plan when seeking funding for your business. What key points should the financial plan actually cover? It goes without saying that sales planning is extremely important. It is very helpful here if your company can already show sales. This makes it much easier to create a real sales plan. It is quite possible that banks and investors will ask what assumption your sales planning is based on. So if it is based on past sales and is not simply a product of your imagination, you are more likely to receive external funding. In addition to turnover, you should of course also list your costs; otherwise it is difficult to calculate the company's profit. This applies to variable costs as well as running costs such as wages and rent. The start-up costs should also be factored in. Especially if you are founding a GmbH or AG, these can run into four figures. The liquidity of your company and your capital requirements are also important key points. These should be taken into account in your calculations. The so-called profit and loss account is also an important part of your financial plan.
Depending on the industry in which your company operates, it is also a good idea to look around for suitable insurance policies. This could be liability insurance, for example, which will cover you if you or one of your employees makes a mistake that results in financial losses. In addition to the past, it's certainly also a good idea to look to the future. This is important insofar as investments here can add value to your company in the long term. For example, by automating certain tasks or at least making them much easier to perform. If you first need expensive equipment such as industrial machinery or tractors to get your business off the ground, investments are of course relevant much earlier on. However, it's not a bad idea if you still have a few financial reserves to work with in an emergency.
Once your investments have been recorded, you should of course also look at your forecast capital requirements. After all, it is important that you ensure that these are covered in good time and that you can acquire the properties you need. Both the available equity and the required borrowed capital should be listed here, along with your financial statements such as the balance sheet, income statement, cash flow statement, and statement of retained earnings. At the end of your financial plan, it is highly recommended that you include a profitability calculation to determine how much money you need to launch your company and finance the start-up phase. This helps investors to estimate how long they will have to wait until your company makes a profit, making it attractive as a stock market candidate, for example. There are also a number of tools and templates on the internet that can help you create a financial plan, including a cash flow forecast and a list of start-up costs. Please also make sure that it looks attractive and is clearly structured. After all, the eye is also a deciding factor.
Are there any funding opportunities?
In addition to investments and borrowing, your company may also be able to access funding. These are usually awarded by foundations, but also by government agencies. Subsidies are usually also tied to requirements and certain objectives. There are often specific funding priorities. If your company fits in well with these, this increases your chances of actually receiving funding. They are often awarded to achieve and accelerate certain developments in society. Funding comes in different forms. They can be paid out as a subsidized loan, a guarantee or a direct grant. Some have to be repaid, others do not. We recommend that you read the respective conditions/manuals of funding providers carefully. This will tell you what type of funding you can expect and what conditions are attached to it.
How to Write a Business Plan for Early Stage Entrepreneurs?
For early stage entrepreneurs, writing a business plan involves outlining your business idea, target market, competition analysis, marketing strategy, financial projections, and operational plan. It serves as a roadmap for your business's success and helps secure funding from investors or lenders.
Conclusion
As you can see, creating a business plan is a detailed and demanding task. That's why it can be a good idea to seek external help. We wish you every success with your start-up and that you become a successful entrepreneur. If there are any other questions, or you need further help, we are your partner for creating your own professional business plan.
Are you ready?
Do you like what you are reading? Book a free introductory call with us.
