The content of a business plan

Having a business plan is a MUST. It is not just a piece of paper nor is it merely a necessary evil. It forces you to consider the many different aspects of your start-up. Only when all of the elements are positive will your project be viable. The main reason a company succeeds is adequate preparation.

A business plan should be clear, concise, and compelling. From a strong executive summary to a well-defined business concept and cost structure, every section needs to convince investors of your vision. But what if things don’t go as planned? A smart entrepreneur also prepares a fall-back scenario.

A disclaimer

Strange but true! Your business plan starts with the statement that you cannot be held responsible for its contents... Something along the lines of: "Nor the extent to which the proposed scenarios, risks and forecasts reflect the expectations of implementation of the business plan, nor the extent to which they will be reflected in reality can be ensured. The prognoses are indicative. The data in this business plan are general and purely instructive... "

This does not mean that you did not compile this plan in good faith. It just means that nobody has a crystal ball to predict the future.

Executive summary

The importance of the introduction cannot be stressed enough. The investor has little time and will start by reading the introduction. This introduction is a "teaser". If it is appreciated, the investor will continue to read your business plan. It is the first impression you make on the investor. So you should seize this opportunity with both hands. The executive summary is up to two pages long and looks like an "elevator pitch", a flashy presentation ... not an easy assignment, but it is crucial. In a flash you will tell the investor everything he wants to know.

Tell him who you are, what will you do (product or service), which market will you approach, what the key advantages your solution offers are, what makes you unique and interesting (customer, experience, patents... ), how are you going to achieve your objectives (people, resources, cash,... ), how and where you will make profit, what budgets are required...

The business concept

Explain your company idea loud and clear. Remember that an investor will not provide capital if he or she does not understand how the money will be made. Do not get bogged down in complex theories. Define the technology in a distinct and obvious way.

There is an unwritten rule that says that if you need a lot of time to explain your idea to others, your idea is too complicated. The best ideas are the simple ones. It is not always easy, but strive for a simple, transparent and intelligible concept. This is especially true for technological companies! Although the know-how and technology are complicated, the business concept must be simple.

“One common challenge I see with founders in Belgium is their limited approach to fundraising - they talk to a handful of VCs and angels. When I’m fundraising, I reach out to 150 investors. The first hundred conversations are about learning: refining your pitch, understanding what’s important, and adapting based on reactions. Each conversation makes your pitch sharper. It’s all about practice.” Emiel Cockx — co-founder and CEO of Genvision

Cost structure

The investor wants to know how and where you will make money, and how much. He wants an estimate of the investment and the possible return.

• Service model: is the income tied to the number of people you employ? Will the income grow linearly with the number of people you will employ?

• Product: what is the scalability? Is there a leverage effect? Can your income grow any faster with the same effort in product development (for example selling CDs with software)?

• Does the company's growth also require a growth of its capital?

• Will all of the products be the same, or will they be different every time?

• Do you have a detailed picture of the costs of the different elements?

• Will there be pressure on the selling price in the short or long term?

• Are you basing your assumptions on a margin on the production price (100 euro + 100 % margin = 200 euro), or do you assume whatever the customer is prepared to pay (for example 750 euro) because of the many advantages?

Fall-back scenario

This may sound a bit strange, but it does not hurt to think about a fall-back scenario. It is good to have a plan B should the anticipated business concept fail.

Plan B could proceed from a product model to a service model, based on your core competence. You could apply your technology in other, more accessible markets ... You could switch from the intended product (which does not achieve the expected success) to a specific niche market with higher added value...

Be prepared that a candidate-investor will ask for your plan B.

“You need to stay open-minded and ready to pivot quickly. The business model can change unexpectedly, so being adaptable is crucial. Failing fast is valuable—as long as you learn from it—but perseverance is equally important. Constant change can be exhausting, and you have to guard against change fatigue. Building a business is truly a process of trial and error.” Patricia Ceysens — founder and CEO of WeWatt

The market

You have a brilliant idea and you think there is a market for it… but is that true? Do you have a good idea of the consumer market and of your potential customers? This obviously is a question you want to answer in the affirmative.

Our experience teaches us that some starters have a very good view on the market, while others do not.

How to launch market research for your business plan? The aim is to have the right products in the right place at the right price, recommended through the right channels to the right people.

Ask yourself:

• Who needs the products?

• What are its strengths?

• What does the customer need? What is his problem?

  
  

Market research presumes "getting to know the customer". It often is not advisable to contact a research firm for your market research. They usually are not able to tell you anything new. It is more beneficial and profitable to conduct your own market research.

“In the beginning, you try everything, shooting in all directions. Over time, you learn to focus: choosing your targets carefully. We quickly narrowed our scope, picking niches where our expertise was strongest and the competition weakest. That focus allowed us to stand out, unlike competitors who tried to do everything but lacked credibility. It was a smart move that shaped our success.” Wim Claes, co-founder and Chief Business Development Officer of ICsence

For some industries, there are specialised studies with projections and market prognoses in certain domains, but they usually are not specific enough for starters targeting a given niche. Nevertheless these studies are very expensive.

You need information, which answers questions such as:

• Who are your competitors?

• Who are your potential customers and their suppliers?

• What is the size of the market?

• Is this market growing, stagnating or shrinking?

• Does the market exist or is the product totally new?

• Is this market cyclical?

• What is the value of the market?

• Is the market divisible into segments or types of customer?

• What about your competitors? Are they growing? Are they profitable or not? Did their number increase or decrease? Are there any mergers or acquisitions? Are your competitors well-known companies?

• Can you identify and important trends?

• Are your competitors announcing new products?

• What is their technological situation?

  
  

Besides paid market research and specialised market studies, you can collect data through:

• Specialised technical journals, the press.

• Internet, websites.

• Specialised trade fairs.

• Conferences.

• Theses, projects, white papers.

• Fortune 500 or equivalent literature.

  
  

Market research never is complete. You must have a good feeling about the information you have collected. Do you know enough about the market? Are you able to answer most questions satisfactorily? You will then probably have gained enough information to formulate a first definition of your product or service. In any case your investors will verify your market knowledge. Prepare yourself thoroughly for this. Do not remain moot about competitors or similar products. Talk about them but clearly demonstrate the difference.

The customer

The most important part of your market research is visiting your potential customers. Who is your potential customer? Why is he potentially interested in spending money on your product or service? Can you solve his problem?

There is only one way to find out: by talking to your potential customers. It is quite a normal reflex for a starter to hesitate in taking this next step. Most likely the reason is that they are not yet established and therefore not ready to visit customers. This may very well be the case, but it should not be an excuse to postpone this important step forward.

“A common mistake is waiting until everything is perfect before reaching out to customers. I used to think we couldn’t approach clients without a finished product: what if they wanted to buy it? But that’s a good problem to have. Engage with customers early, even if it’s just a concept. Their feedback is invaluable and helps you build what they actually need.” Gerben Peeters, co-founder and CEO of Mappalink

You can easily explain to your potential customer that you are planning to found a company. Experience teaches us that potential customers are very helpful and prepared to give feedback. Such free feedback and hints will help you to adjust your plans if necessary.

Contact with your potential customers is therefore a first and real test and there is no reason to avoid it. It will soon become clear to you whether or not your potential customer is interested in your offer and prepared, under certain circumstances, to abandon his current solutions and choose yours.

It should be possible by now to refine your profiles of potential customers. It is not exceptional, and in fact it is strongly advisable, to have a customer or two already by the time you are starting up your company. This promotes your start-up and is very much a positive when approaching investors.

"As a starter, you dream of resources coming your way so you can invest in perfecting your product. But ‘the proof of the pudding is in the eating’—a paying customer, even with just an MVP, is what truly matters. It’s the paying customers that make the difference." Patricia Ceysens, founder and CEO of WeWatt

Sales and marketing plan

Make sure to mention how your business plan will progress.

• Customers: for whom is the product intended? Which customers will be approached initially and why?

• Explain clearly how you came to a certain price. Does the price change as a function of the volume of sales?

• How will you sell it? Are you prospecting yourself? Are you using the inter­ net, distributors, ...

• Demonstrate that you know how long it takes for a sales process to be completed. Will it take weeks or months or even a lot longer?

• What does the sales funnel look like? How many prospects do you have to contact to take one order?

• How will you establish international sales? Will you employ someone or will you outsource it?

The team

We already spoke about the importance of the team's responsibilities and tasks. Solo starters have a hard time compared to start-ups with a team of two, three or more. Together teams know more. Team members are each other's sounding board.

An investor will examine the team's competences. In the first place he will invest in the people who execute the business plan. The human factor is often decisive. Therefore it is very important that every member of the team knows how to use his or her competences. The keyword here is complementarity! Combine your knowledge with ability.

The management team should have a range of skills. They will have to redefine their role during the first years of growth. After all, while growing their challenges will be subject to constant change. This is a natural process.

In your business plan, pay attention to the qualities of the different team members. No dull curriculum vitae but rather a list of achievements, interests and ambitions.

Investors are looking for certain characteristics:

• Creativity and flexibility

• The capacity to solve problems

• Perseverance

• Optimism

• Eagerness to learn, capacity to learn fast

• Sense of reality, having both feet on the ground

• Immune to stress

• Determined

• Reliable

• Social skills, emotional intelligence, managing capacities

• Commercial capacities: negotiating

• International experiences

• Realisations

• Awards.

These amazing employees are hard to find and it is impossible to have all these capacities if you lack experience, but investors are also looking for potential in team members. Show your potential when presenting your business plan.

If there are gaps in the skills you need to make your company succeed, talk about them and how you plan to solve this problem. For example: you lack knowledge of financial management but you will appeal to an accountant.

Present the organisation of the team. The investor will like to know who will fulfil what function. Who will be CEO, COO, CTO... ? That way the investor will be able to figure out for himself whom he is dealing with. Who will be responsible for sales? How will you deal with it?

Who will you take on board in the future? Explain using an organisational chart what your organisation will look like in the beginning, and how you expect it to grow.

Which tasks should be outsourced and which ones will you execute yourself? Show the investor that you have really thought things through.

When you're starting out without a management structure and zero experience in people management, you’re filled with questions. Early on, I leaned heavily on the SO Kwadraat coaching to navigate these challenges. Now that I have a management structure and a CEO, I don’t need it as much, but in those early days, it was absolutely essential." Leen Peeters, founder and manager of Think-E

Plan of execution

The implementation plan is used to show which steps you will take in the future. This may sound trivial, but the investor wants to know everything about your development. We mention this because start-ups often start with only a demonstrator.

This may seem insignificant but there are vital differences between a successful lab result, a working demonstrator, a prototype and a commercial product. Identify the steps necessary to proceed from one phase to another. This can be tough for some start-ups because they lack experience. Therefore do not be too optimistic in estimating the time you will need to make this evaluation.

It is not unusual for PhD students to have an operating test in a lab environment or a demonstrator, which can give you an idea of the used technology. The next step in order to come to a good operating prototype will take a long time. The developments and the resources (time and money) that are needed to turn it into a commercial product are typically underestimated.

The prototype will have to be operational in circumstances where in the future it will have to function as a product. The shape and materials you want to use in the final product will have to be tested thoroughly. The prototype forces you to think about user friendliness, user interface, weight, size, manoeuvrability, packaging ... Customers and investors will take you a lot more seriously if you have a nice operational prototype to show. After all they are accustomed to dealing more with people presenting an idea alone than with people presenting an operational and aesthetically pleasing prototype.

Some companies can assist you for the manufacturing the packaging of your prototype in plastic or metal. It is important here to think ahead about bringing the device into production. Reflect profoundly about all circumstances in which your product will have to operate and about all the things that can go wrong. Keep an eye on the material cost and the production cost. These factors will determine the margin on your selling price.

The implementation plan contains the different steps you will take in order to realise your business plan:

• What is the focus?

• What are the priorities?

• What happens and when?

• When do we plan to win our first customer?

• When will we win the second, third... ?

• What will the turnover be, and at what moment?

• What are the most important milestones?

• What does the technological roadmap look like?

• What will be the trigger to hire new people?

• When will it be time to adjust?

This implementation plan will link to the financial plan since various steps will connect with certain expenses.

Be conservative in your implementation plan. Developments typically proceed slower than expected. Sales may lag. Payment terms are not respected ... You are much better off with a conservative implementation plan which turns out positively instead of the other way around.

Risk analysis

Include a risk analysis in your business plan. What can go wrong and which solutions did you come up with? In any case this exercise has to be done by every starting team. The investor will certainly come up with different scenarios and he will expect you to be ready with an answer.

Beware not to ruin your own business plan. It is all about your realistic assessments and how you can anticipate them.

It is obvious you have a scenario to address every single risk:

• What if pending patents are not granted?

• What if a patent (licensed or not) is attacked?

• What if competitors drop their prices tremendously?

• What if a productions run fails and there is a one-year delay... ?

• What if a key figure leaves the company?

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