Business plan for the investment project improvement. And now everything is in order

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Typical mistakes when drawing up an investment business plan

Considering that many organizations often make the same mistakes when developing an investment business plan, it is worth paying attention to the most common ones. We will not touch upon any complex cases, but will list a number of the most typical mistakes that can be made by beginners who are starting to draw up an investment business plan for the first time. We hope that you will take this information into account and avoid making similar mistakes in your investment business plans.

1. Carefully ensure that the initial data you used in the calculations corresponds to the data indicated in the text part of the investment business plan and tables. Unfortunately, in practice such situations in investment business plans are not uncommon. Some of the employees have not yet prepared the necessary information and provided outdated information, or some of the indicators were obtained from different sources. Even if it is subsequently possible to establish which information is correct, the investor is unlikely to trust the corrected investment business plan, since he will expect other errors.

2. Be careful when choosing parameters such as the duration of the horizon and the planning interval. A very common situation is when an organization indicates too large intervals in its investment business plan. It's easy to see why this happens. The fact is that having an interval of not a quarter, but six months, makes it easier to achieve the results predicted in the investment business plan. This is a reliable way to avoid missing deadlines, not to irritate investors, and to always comply with the set pace in everything. And it seems that such agreement with the investment business plan is a guarantee of the investors’ disposition, but in practice everything turns out differently.

A competent investor understands perfectly why such long intervals arise: the organization is simply not sure that it will be able to achieve its goal within a quarterly period, and therefore stretches it out to six months and beyond. This means that in certain months business will decline. For example, hoping to compensate for everything with May revenue, the organization may be idle during the winter months. But lack of finance will lead to adverse consequences. It is possible that the company will simply go bankrupt during the quiet months, since it will not have the funds to support its activities.

In addition, by setting long deadlines in the investment business plan, companies often try to take time with a reserve, but for the investor this only means that the organization will not work at full capacity. Financing such a project, of course, is undesirable - the risks are too great.

3. It is necessary to be able to explain to the investor why a particular calculation method was chosen in the investment business plan, especially when it comes to the discount rate, sales volumes and production parameters. It is important to understand that an investor will give preference to a business plan in which all elements are not chosen randomly, but according to some principle. Projects where everything is entered offhand do not particularly inspire confidence.

Surely, you have already noticed that the need to create a business plan or investment project is a very difficult task. There are many nuances, features of calculations, methods and approaches, which not every manager is able to take into account and consider. However, there is always a way out. If you cannot draw up an investment business plan yourself, then you should entrust this task to professionals - the information and analytical company “VVS”. Experienced specialists will easily develop an investment business plan of the highest complexity for organizations of any type. The company has 19 years of experience in providing product market statistics as information for strategic decisions, identifying market demand. Main client categories: exporters, importers, manufacturers, participants in commodity markets and B2B services business.

Commercial vehicles and special equipment;

Glass industry;

Chemical and petrochemical industry;

Construction Materials;

Medical equipment;

Food industry;

Production of animal feed;

Electrical engineering and others.

Quality in our business is, first of all, the accuracy and completeness of information. When you make a decision based on data that is, to put it mildly, incorrect, how much will your loss be worth? When making important strategic decisions, it is necessary to rely only on reliable statistical information. But how can you be sure that this information is reliable? You can check this! And we will provide you with this opportunity.

The main competitive advantages of our company are:

Data accuracy. The preliminary selection of foreign trade supplies, the analysis of which is carried out in the report, clearly coincides with the topic of the customer’s request. Nothing superfluous and nothing missing. As a result, we receive accurate calculations of market indicators and market shares of participants;

A well-drafted business plan for an investment project can easily be transformed into a financial application that can satisfy most investors. But not only lenders, professional depositors and investors need this systemic document. Any entrepreneur or designer who thinks through the details of reconstruction, production, or promotion of services studies the consequences of innovations and the necessary financial, material and human resources first “on paper” in the form of a plan in order to avoid costly trial and error in practice.

Basic theoretical principles for developing business plans

A document that describes the main aspects of a company’s activities within a project, taking into account potential problems and options for solving them, is called a project business plan. Planning is carried out both when creating a new enterprise and when moving a business process to a new level. Although the planning process has general principles, the exact characteristics of the document (volume, composition, structure) are determined by the size of the company or enterprise, the specifics of the activity, the purpose of the project, economic and social resources.

Document structure

In practice, a business plan is the only justification addressed to lenders and future investors, which allows them to raise funds. The information presented allows investors:

determine the degree of sustainability and viability of the project,
choose the best investment option for maximum profit,
assess the prospects for a certain period, taking into account all technical and economic indicators,
evaluate the actual performance of the company,
monitor the implementation of budget obligations,
calculate the possibilities of obtaining credit resources and attracting government support, etc.

Thus, the general task of business plans is to create a holistic assessment of the potential and prospects of specific investment projects, taking into account their specifics, and to provide justification for the introduction of innovations in the described conditions.

For this purpose, the following are considered as a source of financing:

own funds,
government funds,
funds of possible investors.

In this case, the calculation horizon, most often, becomes the period of repayment of borrowed funds and another year after that.

In form there is a division into a full business plan and a concept plan. In the second case, only the basis for negotiations with possible investors is created, which will determine the degree of their interest in the project. The official format when preparing such a design is oriented towards the requests of investors and/or the requirements of business partners, however, the general standard structure of a complete business plan for an investment project involves the inclusion of the following sections in the document:

If the enterprise that has undertaken the implementation of investment projects is a multi-point organization (with two or more enterprises), then during planning, separate plans are developed for each enterprise, which are then compiled into a single document.

Evaluation of the business plan by investors

The effectiveness of investment projects is characterized by a system of indicators that demonstrate the relationship between costs and results in the context of the interests of the participants. Depending on which category the participants in investment projects belong to, the following indicators are distinguished:

financial (commercial) efficiency,
budgetary efficiency (reflecting the financial implications for the budget corresponding to the project level),
economic efficiency (reflecting results beyond the direct financial interests of direct participants in investment projects that allow for cost measurement).

In addition, the social and environmental impacts of the project are assessed.

In a market environment and attracting investment funds through this line, financial efficiency is of primary importance.

The peculiarity of a business plan for an investment project is that the assessment of investments is based on a comparison of the expected profit from the implementation of the project with the invested capital. To do this, net financial flow is calculated as the difference between the inflow of funds as a result of investment and production activities and their outflow, with additional subtraction of costs (for example, interest payments on long-term loans). Based on the indicators of net cash flow and discount factor, the following investment evaluation indicators are calculated:

net present value,
internal rate of return,
profitability index,
time and speed of payback.

In this case, the discount factor brings the potential financial income and expense at stage t to the initial period of time.

Separate elements of the investment plan structure

The more detailed the sections of the business plan of an investment project are worked out, the greater the chances of winning the trust of investors and money for the implementation of the plan. The first sections are especially important, forming the investor’s impression of the prospects of the investment.

Summary

The introductory part (summary), first of all, is written for the investor, and, although in fact it is compiled after filling out the remaining sections of the business plan, the summary takes first place in the structure of the document. This overview brief (3-4 pages) part is written in such a way as to arouse the interest of investors, as a result of which it is formally divided into three parts:

Introduction where the project goals fit in.
Main content with a concise description of all key sections of the business plan and an emphasis on factors attractive to the investor.
A conclusion that summarizes the factors for potential success, including the most important procedural decisions.

In the resume, it is important to clearly indicate the competitive advantages of the product or service of the future project - something that will allow it to stand out in the market and ensure the effective operation of investments. These advantages may be a different level of technology, geographic location, proximity to transport interchanges, etc.

Description of the company and industry

In addition to the goals and objectives of the enterprise and in addition to the events that influenced the development, current opportunities and trends, special attention should be paid to:

a detailed description of the organizational structure (principles of work, organizational chart, personnel structure and legal support, etc.), which, as practice shows, is not done in many, especially newly created, enterprises,
consumer audience, its purchasing capabilities, tastes,
evidence that economic trends are favorable in a given industry and in a given regional market (which is possible using mathematical calculations, marketing research, statistics).

This section touches on all the factors affecting the project: from local laws to the seasonality of the product. In this case, you should refer not to the general impression, but to authoritative sources of information indicating specific numerical parameters. Example: “According to Rosstat, in 2016, product sales in the region amounted to 112 million tons in the first quarter, 118 million tons in the second, 124 million tons in the third. In the fourth quarter, taking into account the trend and independence of the indicator from seasonal fluctuations, a volume of 130 million tons is expected.”

Product (service) description

The section on characteristics, parameters and purpose of products describes the entire life cycle of a product or service, indicating temporary factors affecting profit and factors of economic cycles:

The preparatory cycle is associated with an intensive marketing campaign and presentation of a unique product or its commercial innovative component. Moreover, investors are now interested in the format of product presentation (packaging, design, protective equipment) no less than quality and usefulness. This cycle is defined as the beginning of sales and the growth period.
The cycle of high development rates is a period in which the market begins to become saturated with a unique product (service). As fame increases, competition also increases.
The leveling cycle is the time when new and unique competitive products come to market - a period when loyal consumers are still loyal to the product, but many of them are already beginning to look at alternatives.

Here it is important to clearly understand why the consumer chooses (can choose) this particular product by comparing it with its closest competitors.

Filling out the section begins with a description of the intended niche in the market and which segment of the target audience will become consumers of the product. Moreover, these values must be predicted for the coming months or years (depending on the specifics of the project). Forecasting is usually carried out in 2 stages:

Stage No. 1. Here the market capacity is assessed - the total cost of products that buyers in the region of expected sales can buy in a month (year). Marketing research concerns socio-economic, political, demographic, national and other factors.
Stage No. 2. Here the potential sales amount of the product is estimated - the market share that the company expects to win. This amount coincides with the maximum amount of possible sales.

Often at this stage there is a forced market segmentation and reorientation to a narrower segment without abandoning the project as a whole. An example of choosing a narrow specificity is targeting low-income consumers (segmentation by income level criterion). More often, however, the project immediately focuses on one or another consumer segment, dividing buyers by gender, age, education, hobbies, professions, etc. For enterprises, location, distribution channels, quality, etc. become such segmenting factors.

Production plan

The main task of this part of the plan is to prove to investors and partners that the company is really able to produce (sell) the intended quantity of goods (services) of the required quality in the required time frame. In this section, it is necessary to demonstrate the production capacity of the enterprise - the ability of the means of labor to produce maximum output over a period (shift, year, day). To calculate power, use data on:

composition, quantity, technical condition of equipment, parameters of production areas,
technical standards for equipment productivity and labor intensity,
equipment operating time fund, as well as the operating mode of the enterprise,
product range and its quantitative ratio.

Typically, a subsection is created in this section indicating external factors that influence production activities (access to resources, change of suppliers, changes in legislation, etc.).

Marketing plan

Factors that contribute to successful market penetration are divided into external and internal. At the same time, as the project develops, the market begins to influence plans for the formation of project strategies and tactics. Such a plan is usually drawn up a year in advance, broken down into stages, and adjustments are made to it, if necessary. In terms of interaction with the sales department, the marketing plan sets 4 main goals:

Increasing brand awareness.
Creating a sense of confidence among sales staff in the highest quality of the product.
Improving the morale of employees in this department.
Increasing sales volume by a certain percentage over a specified time.

An example of achieving the first goal is providing investors with an entire advertising campaign. Additionally, the economic effect of advertising distribution options is calculated.

Principles of drawing up a business plan “for yourself” and for investors

The principles of drawing up a business plan come down to the reliability, logic and clarity of the idea, which, after presentation, should look attractive to the investor. Therefore, it is more advisable not only to write a document, but also to make a presentation with graphs, charts, tables, and infographics from slides. In this case, it is necessary to take into account the difference between a business plan “for yourself” and an “official ceremonial” document. In the first case, the real state of affairs is reflected. The second is a detailed and consistent statement of preferences, as when creating a project from scratch.

“For yourself,” a business plan always includes more realistic values and is considered as a working option. An example of the difference between the “internal” option and the “official” one can be seen in the description of the estimate for the purchase of office equipment. If a project really needs 10 laptops for a total amount of 500 thousand rubles, then they are all fairly included in the official estimate. However, in practice, out of 10 computers, the direct participants already have 3 personal laptops, another 2 are owned by business partners, and 3 fairly powerful computers are owned by relatives. Thus, real needs involve the purchase of only two laptops, instead of the ten planned in the investment document. However, if the investor allocates the entire amount for these needs, it will be necessary, at a minimum, to provide documentary evidence of the purchase of the entire volume of equipment.

To draw up the most informational business plan, SWOT analysis is often used, which is popular due to its ability to clearly structure data.

S – Strengths – strengths: average and low cost of the product, the use of innovation, the presence of experts and professionals in the project team.
W – Weakness – weaknesses: lack of knowledge about the brand among the target audience, the need to rent premises, etc.
O – Opportunities – opportunities that involve the introduction of new technologies, the opening of unplanned sources of financing, access to modern materials, etc.
T – Threats – threats that in this type of analysis are considered as sources of risks from outside that cannot be influenced.

In any case, before drawing up one or another version of a business plan, maximum useful information is collected, often with the involvement of experts. This information is necessary to understand the real objective situation. And one’s own subjective ideas about the project’s development environment rarely provide such a comprehensive understanding.

Every activity has a planning stage; in the financial sector, special attention is paid to this issue. An investment plan is a project that includes both a description of the stages of work in a business and an analysis of potential risks and a scenario of behavior in a particular case. Developing an investment plan is a mandatory requirement, regardless of the volume of investments, so every investor must have the appropriate skills to draw it up.

What is an investment plan and its differences from a business plan

The essence of this document is that it represents a complete strategy for achieving the goals and objectives, as well as the expected results of the investment. In a broad sense, any person can create an investment plan, not only in relation to the financial side, but also in any other area of life.

In practice, this document is also called an investment (strategic) project, strategic investment plan or business plan. These concepts practically coincide, since in all cases we are talking about planning investments in an enterprise, the expected results of the investment and specific deadlines for achieving them. However, there are some differences between an investment plan and a business plan:

A business plan is a specific study of a newly created or ready-made business, a description of investments, a full estimate of expected expenses, participants in the process and a description of the expected time frame for achieving results.
The investment plan largely coincides with it in structure, however, it represents long-term planning of investments in one or several types of business at once.

Therefore, a plan is a strategic project, and a description of business development is often an integral part of it. Thus, we can say that a business plan is the most important part of a strategic project. And therefore the concepts are often used with the same meaning, which is not a mistake.

Purpose, objectives and functions

Each plan has its own goals and objectives. In a global sense, the goal of a strategic project is to determine the object of investment, the timing of profit and the expected results from investment planning. That is, when setting a goal, the expert must clearly answer the question of whether the investor will be able to achieve his goals within the set time frame by investing a specific amount in the enterprise. Accordingly, the following tasks arise:

attracting investments;
creation of new jobs;
improvement of key economic indicators, business expansion;
correct prioritization, highlighting the main and secondary areas of business development;
analysis of the sales market (for this it is necessary to draw up a separate marketing plan).

Therefore, the development of a strategic project performs several functions at once:

creating a business concept and a model for its development;
practical implementation of this model, analysis of possible risks;
attracting new financial resources, searching for sources;
calculations and evaluation of the effectiveness of previously made investments.

To implement them, it is necessary to take into account several requirements for the preparation of this document. It must contain specific qualitative and quantitative indicators, real goals that are expected to be achieved in a given period. Also, any plan must contain a complete list of its advantages and weaknesses. In fact, it is risk analysis that allows the company to achieve financial stability, since the advantages of the business should not distract the investor from forecasting possible difficulties.

Regardless of the specific type of business, the structure of the plan looks approximately the same for all cases. It includes an introductory part with a description of the project, a main part where the stages, volumes of investments and desired results are described in detail, as well as a conclusion with tracking of all key indicators and an analysis of the actual situation on the market.

Introductory part

The introductory part is not just an introduction describing planning, but a project passport, which contains the following data:

The name of the project, which reflects its essence. It often coincides with the name of the company, although it may differ from it - for example, in cases where the same enterprise implements several strategic projects at once.
Detailed description of the enterprise. Its full name, constituent documents, details, main and secondary areas of activity are given. The introduction indicates the positions and names of all managers of the company, its key employees (chief accountant, heads of sales, advertising, security services, etc.).
A detailed description of the products or services that the company provides. This section not only provides a list of products, but also describes their advantages and disadvantages from a sales point of view. Provide a description of competitive advantages (real and potential).
Description of the stages of achieving goals. A schedule of investments is drawn up over different periods of time. When implementing it, they take into account the expected demand for a product or service, the growth rate of wages for various employees, and fixed costs (rent, depreciation, transportation costs, etc.).

Marketing plan

It is an analysis of the features of product sales:

analysis of market conditions;
goals and development strategy of the company in the foreseeable period (next year);
tactics, detailing of each stage (detailed description of the strategy);
budget, analysis of expenses and income (fixed and variable);
system for monitoring the implementation of the plan, the ability to adjust it.

Organization of the project implementation process

This is one of the most important components of an investment plan. The project itself, the stages of its implementation (timing, sales volumes, costs and expected results) are described in detail here. Typically this information is presented in the form of a graph, which is compiled taking into account various factors:

decrease or increase in demand;
dynamics of purchase prices;
current environment;
development forecast.

At each stage of project implementation, responsible persons are appointed, and forms of control over their work and the activities of other subordinate employees are established.

Financial plan

A financial plan is essentially a budget with monthly (quarterly, annual) income and expenses of an enterprise. Income is calculated based on business development indicators (for example, sales volume, trade margin, average bill). Costs - based on fixed and variable costs:

rent;
purchase of goods;
salary fund;
taxation;
transport costs, etc.

Conclusion

The conclusion should contain reasonable conclusions about whether this project is worth pursuing at the moment, how best to enter the market, for example:

minimal investment in the initial period;
location of the company (store);
pricing policy, aggressive market conquest.

Also, the conclusion should contain specific answers to all questions of the investment plan and a description of the stages of its implementation. Therefore, the conclusion is a summary of the project with a brief description of all its points.

Example of an investment plan

It is possible to develop a strategic project for the development of a company only if you have the appropriate skills. However, a business plan for a small company (small business), if desired, can be drawn up by anyone. As an example, we can take the opening of a toy store with the code name “Fairy Tale World”.

In practice, the plan for a specific project may differ slightly from the theoretical scheme, but in essence it will always include a cost estimate, risk analysis, marketing and financial plan.

Introduction

The name of the store is “Fairytale World”. The main products are children's toys, goods for children under 15 years of age. Product advantages:

constant demand;
psychological characteristics of the consumer (it is more difficult to refuse a purchase to children);
the client purchases goods not only in connection with the holiday, but also in everyday life (baby food, clothing, stationery, etc.).

Weak sides:

high competition;
the presence of large companies that can offer a lower price;
high rental costs (usually it is advisable to place such a store in large shopping centers).

Calculation of initial investment

The initial investment estimate is about 4 million rubles based on the following calculations:

rent of premises for 1 month 150 thousand rubles;
renovation of the premises 600 thousand rubles;
purchase of equipment for trade 400 thousand rubles;
purchase of the first goods 2 million rubles;
advertising costs 300 thousand rubles;
organizational expenses for registering a business and processing other documents - 100 thousand rubles;
spare means for actions in unforeseen situations 250 thousand - 400 thousand rubles.

Selecting a room

This is a very important point, since at least 50% of the profit depends on the choice of a specific location. In this case, we focus on the following factors:

location in large shopping centers with a constantly large flow of customers, including families with children.
the location of kindergartens or schools, as well as other educational institutions nearby;
Another factor is the proximity of new buildings (new microdistricts), where young families usually live.

Recruitment

Minimum requirement is to hire 6 people:

manager (manager);
3 sales consultants working in shifts;
accountant;
Warehouse Manager.

Marketing plan

The most frequently chosen format is self-service, i.e. cash and carry. In this case, it is necessary to analyze the store’s assortment especially carefully. It should be quite diverse and designed for any family budget:

cheap plastic toys (consumer goods) and expensive goods (board games, collectible models, gaming mechanisms);
It is mandatory to have branded products that are associated with children’s films, for example, the “Smeshariki” series, “Angry Birds”, etc.;
display of goods in strict accordance with the principles of successful merchandising (prices, color, design, in accordance with zoning, etc.).

Financial plan

Here we calculate the fixed costs necessary to maintain the normal state of the business (in monthly terms):

wage fund and insurance contributions from 150 thousand rubles;
monthly rent 150 thousand rubles;
outsourcing (cleaning, accounting is also transferred to it later) 15 thousand rubles;
payment for utility services of the premises is 30 thousand rubles;
taxation costs 10 thousand rubles;
advertising expenses 50 thousand rubles;
other (unforeseen) expenses 30 thousand rubles.

In total it turns out to be about 400 thousand rubles. monthly.

Risk analyzes

Risks include manifestations of business weaknesses that were described above:

high competition among stores in a similar segment (small business);
competition from large players (network companies);
seasonal dependence (the largest sales volume during the New Year holidays, a decline in the summer);
increase in rent payments and other costs (utilities, purchase prices, etc.).

Expected return

Also in the investment plan it is necessary to specify in detail the expected level of income. It should be based on specific indicators:

trade margin minimum 50%, maximum 200%, average 100%;
average bill (excluding markup) is about 800-1000 rubles;
number of checks (sales) per day - on average 50;
daily income about 30 thousand rubles;
monthly income is about 900 thousand rubles.

Thus, in pure terms, the store can bring in about 400-500 thousand rubles. revenue monthly. This is an average value that can vary significantly depending on the season.

In conclusion, you need to make a reasonable conclusion about whether it is worth doing such a business, as well as where exactly to start, where exactly to open a store. That is, the conclusion represents the answers to all the questions identified in the plan and the corresponding conclusions.

1. Spam. All investors are annoyed by messages that invite them to “call to learn about the most disruptive technology since the invention of the wheel.” You can be sure that even if he then receives your business plan, he will put it at the bottom of the pile. Asking an investor to look at and comment on your site is just as bad.
2. Business plan without a resume. Summary– This is a one-page “elevator speech” (and can be presented separately from the business plan) that gives the investor a complete overview of the key parameters of the business. Many business plans do not have a normal summary, or vice versa– a business plan looks like an extended resume. Both options are bad.
3. Lack of plan in the business plan. Many business plans that are sent to investors are actually extended product specifications that give more than enough information about the product and nothing about how and where you plan to sell it and make money.
4. Illiteracy. Blots, typos, grammatical and spelling errors, handwritten documents will only convince the investor that you will also conduct your business unprofessionally. Keep in mind that investors invest in people first and foremost, and then– into ideas.
5. Overfilling the text with abbreviations. Don't forget that the people who will read your business plan, while not stupid, will not be aware of the terms or acronyms used in your industry. They will consider the heavy use of abbreviations to be a result of inattention, laziness, or perhaps deliberate confusion of the reader. Try to stick to commonly used vocabulary.
6. A book instead of a business plan. Don’t be too verbose, don’t fill your business plan with unnecessary information. A business plan for an investor should be no longer than 30 pages. Stick to the facts, state them clearly, and don't repeat yourself unnecessarily. Planning too long-term will create the impression that your business is too complex and risky.
7. Links to applications. Investors do not object to documents supporting the basic business plan. But it must impress and be complete without applications. The thickness of a business plan or the presence of dozens of applications is not impressive in itself.
8. Negative statements. Don't say anything about your competitors or clients that you couldn't prove in front of them. Many business plans contain claims like “poor usability,” “low quality,” “big and cumbersome,” all without any justification. Investors view such statements as signs of unprofessionalism and a lack of ethics unless they are supported by third party data.
9. Prototypes and demo versions. Don't forget that at an early stage, prototypes tend to break, and demo versions hang or don't work in unfamiliar hands. Therefore, they cannot adequately reflect all the work and passion you put into them. Pictures and words will make a much better impression.
10. Letters from your partners. Letters of recommendation from an investor's partners will be helpful, but letters from your partners will not carry the same weight. But the presence of reviews from clients and suppliers and concluded contracts will make the right impression.