• Home
• About
• Services
• Business Plan
• Collateral Free Loan
• Contact

How To Write A business plan / Financial Projection

Many people assume business plan is prepared to be presented to VCs/PEs / Banks. However business plan is prepared by the entrepreneur as a guiding book for future. Find below the format of an effective business plan.

1. Business Plan Should be neatly structured / organized: Business plan should be neatly structured in a manner which lists the assumptions in chronological order of
   
   • Revenue – No of products / services, No of potential customers, conversion ratio, rate per product or service. Clearly spell out to whom you are charging and when revenue occurs to you
   
   • Ancillary income to primary income – Percentage of primary customers to use ancillary product, rate per product. Clarity on when people will buy ancillary products / service(eg: Cartridges would be sold along with printer, Annual maintenance of printer would start after a year or so), duration of the product (which will determine the repeat sales)
   
   • Direct expenses – Expenses spent to generate above income. Eg: Raw materials, workers’ wages / salary to execute an order.
   
   • Indirect expenses – Common expenses which cannot be identified with a specific product or service. Eg: Management/ marketing/ administrative salary
   
   • Capitalize expenses which gives benefit over a period of time: Eg Fixed assets (machinery, tools, computers, servers etc), product development expenses, one time marketing expenses. Either depreciate or amortize the expenses over the effective utilization period of the asset appropriately.
   
   • Plan for proper working capital: based on past experience plan the working capital cycle. In how many days debtors (customers) will pay, how many days of average raw material is required for production, how many days it will take to sell goods after manufacturing, within how many days you will pay suppliers for the goods purchased.
   
   • Sources of money: finally it drills down to how much money you need to expand the business (invest in fixed assets, product development) or for day to day operations (working capital). Project how much can be internally funded and how much of external assistance is needed.

2. Assumptions should be simple so that even a layman can understand the nuances of business (growth, organization structure etc) with ease. It should also have rationale behind the above assumptions.
   
   Eg: Instead of directly giving no of products to be sold, give no of potential customers along with sources of customers then apply conversion ratio to arrive at no of products to be sold.

3. Project numbers which are achievable: Instead of projecting too high numbers which are not achievable, make a conservative business plan.
4. Business plan should show seasonality, risk mitigation aspects of your business
5. Strengths of business should become obvious: Business plan to be prepared to project the strengths of business mentioned in the presentation. Eg: Non-linear growth, low breakeven point, low leverage, asset light business model etc.

6. Correlation with past: Project a business plan which correlates with past. If future significantly differs from past, categorically validate why it is different.
   
   Eg: Direct Cost of product A in the past is Rs 100. However it will be produced at Rs 50 in the future. This is because of investment in new technology /machines which reduces cost.
   
   Correlation should be there for each and every line item of business plan and should be commonly applied for the whole projection period.

Please contact us to create a business plan for you.