Development of business plans for investment projects
The business plan solves many internal and external tasks of the company, the main of which is to obtain financing. There are a number of techniques for effectively compiling such documents. In the example of one of them, we analyzed the structure and content of the plan.
The Importance of a Business Plan
A business plan (BP) is a visiting card for an investment project. The investor will pay attention not only to the amount of profit that his participation in the enterprise promises him but also to a lot of other data. It is important to choose the right indicators, as well as to structure them as logically as possible. The more carefully the information is processed, the more serious the author of the project will look.
The current market participant in communicating with investors is helped by reputation and achieved results. But without a detailed project, it is difficult to get financing even for such enterprises. For young companies or startups, a compelling BP is the only reliable tool to attract investment.
Features of the investment plan
An investment BP is made up when a company needs funding. This may be due to the opening of an enterprise or branch, preparation for the production of a new product, entry into an atypical market.
The document has two tasks: to determine the required amount of investments and to convince the investor of their reliability. It should be clear from it how long the investment will pay off. If financing is planned to be obtained on credit, the bank will require a business plan among other mandatory documents.
The BP solves a number of internal tasks of the company: it helps to assess the financial position of the enterprise and the qualifications of the personnel, analyze the prospects of projects, and draw up prospectuses for additional issuance of securities.
The content of the plan depends on the method of its preparation, the industry of business and the scale of the project. Any document structure needs to reveal the essence of the business idea, the necessary costs, payback forecasts, and possible risks. The information reflected in it must be reliable, timely, sufficient and understandable.
Business Plan Methods
There is no universal or mandatory structure of the BP, but in practice,the document is usually drawn up using one of the following methods.
- UNIDO. The template of the industrial development organization at the United Nations is considered a generally accepted global standard. It involves the execution of an investment project in three stages: pre-investment, investment, operational. Focuses on the industry, as well as feasibility studies in this area.
- EBRD. Methodology of the European Bank for Reconstruction and Development, one of the largest investors in the European and Central Asian regions. The form covers financial issues in most detail: risks, accounting for credit funds, SWOT analysis. Otherwise, this is the most concise template. Suitable for attracting investment bank loans.
- BFM Group. The method of the Ukrainian company Bureau of Financial Modeling is aimed at revealing the investment attractiveness of the project. The most detailed and versatile template.
- KPMG. A technique developed by a Big Four company in the audit market. Allows you to draw up a plan for solving internal business problems. The template is aimed more at the managers of the organization than at potential investors.
An enterprise can choose any methodology or create its own: none of the generally accepted forms is mandatory. True, some investors may require a business plan drawn up according to a certain model. Abroad, this is a long-accepted practice: in order to interact with investors or officials, it is necessary to submit documentation in a strictly defined format.
In the Indian market, the general methodological recommendations of the Ministry of Economic Development of India are applied. But this document is not mandatory: whether to apply it depends on the requirements of the investor, as well as on the preferences of the enterprise.
The structure of the investment business plan
The exact structure depends on the chosen methodology and project features: some lines are not required if there is no relevant information on them. You can also always add your own fields to sections, even if they are not provided by the template.
Let's analyze the structure of the BP using the Unido form as an example. This template consists of the following sections:
1. Summary: general characteristics of the project. This section includes:
- a brief description of the business;
- features of the product, service, technology or market that the company plans to enter;
- general financial presentation: the required amount of investment, terms of financing and payback;
- information about the project team.
According to this block, the investor decides whether the direction of investment is suitable for him, whether he has enough resources, whether the project as a whole is attractive.
2. The idea of the project. This block specifies:
- project parameters;
- description of the product or service;
- sales market;
- project implementation schedule;
- competitive analysis data;
- consumer characteristics;
- assessment of the strengths and weaknesses of the idea.
3. Market analysis, marketing plan. The section contains:
- marketing research results;
- description of the goals and marketing strategy;
- draft budget.
4. Production plan. This block includes information about raw materials, supplies, and features of the creation of goods:
- manufacturer's data;
- description of the technology, the cost of its acquisition;
- the necessary production capacities, whether the enterprise possesses them;
- classification of required materials or raw materials required volume;
- availability of basic raw materials, supply costs;
- a detailed layout of the enterprise, the necessary design work;
- list of required equipment, and cost of its maintenance;
- description of the production process.
5. Location: this section describes the planned location for the enterprise. If it has not yet been chosen, they set out the basic requirements for the region, site, and environmental conditions. This block usually contains the following information:
- the nature of the natural environment, and how it affects the implementation of the project;
- socio-economic features of the region;
- investment climate;
- availability of industrial and commercial infrastructure, its condition;
- possible alternatives when choosing a site for construction;
- cost estimate.
6. Organizational plan - a section on how the management of the enterprise will be arranged. Here you need to reflect:
- The organizational and legal form of the company;
- information about partners and how responsibilities and powers are distributed among them;
- the structure of the enterprise: departments, hierarchy, management;
- personnel policy, forecasts for labor resources and expenses for employee benefits.
If the company needs a lot of employees, information about the personnel can be placed in a separate section. It can describe in more detail the requirements for employees, personnel prospects in the desired region, plans for training and recruiting.
7. Financial plan. This block collects data on possible profits and costs:
- describe the stages of the project;
- predict the cost of each stage;
- draw up an implementation schedule;
- bring the consolidated balance sheet of assets and liabilities;
- explain the funding strategy;
- assess the risks, as well as the cost of insurance;
- develop the overall budget for the project.
In this section or a separate block, you can add an assessment of the effectiveness of investments. It is important for an investor to understand the total amount of financing, what methods were used to evaluate the effectiveness and how big the risks are.
At the end of the BP, if necessary, appendices are added that reveal or illustrate sections of the document. Here you can place graphs, drawings, and results of examinations.
A business plan can be drawn up using computer programs: for example, COMFAR or Project Expert. But for the first project or a complex investment complex, it is better to hire a professional. An incorrectly compiled BP can cost the company the investments it needs.