Before launching a new company to the streets, thorough planning is essential. One of the pillars of this process is the business plan, a document that describes in detail how the new service or product will work. This is a fundamental tool for the activity to get up and running without negative surprises. Randall Castillo Ortega is an expert in business operations and financing and is the founder of RACO Investment, a company dedicated to providing loans to small- and medium-sized businesses in Costa Rica and Panama. Castillo knows what it takes to launch a successful business and he shares tips for entrepreneurs looking to develop a solid business plan.
It is not convenient to ever be negligent in the development of the business plan. Invest the necessary time and efforts, and do not neglect any items. Otherwise, it will suffer consequences later, with unforeseen events when implementing the project. The final document usually reaches 30 to 40 pages, on average. It is also important to keep an open mind to changes and revisions. “During the development of the business plan, the entrepreneur may feel the need to see the concept, the idea or the opportunity,” explains Castillo. “When the final document is ready, it needs to flow singularly from start to finish.”
The business plan is not a whim and often goes beyond convenience. When the entrepreneur intends to join an incubator or get help from investors or financing institutions, the document is a necessity. The reason is obvious. No one will invest or give opportunities to a project that is not viable. As, in these cases, the importance of the plan is even greater, one option is to hire a junior consultant from a university.
The first thing that needs to be done in the business plan is to settle the activity of your company. Detail the branch of activity, establish the mission, and summarize the main points of the plan as an introduction. The tax regime, legal form and share capital of the new company must also be established here.
Market analysis is the first study that will serve to analyze the viability of the business. Asserts Castillo, “Conduct rigorous research on the market segment you are about to enter. Learn who your competitors (their strengths and weaknesses) will be and customer profile in quantitative and qualitative analysis. The following question should be asked in this item, ‘Why will customers choose my product and not another?’ Start thinking about your competitive differences.”
Once the product being offered and the customer profile have already been defined, the next step is to define how the service will be marketed. Set the prices, product presentation, distribution form, promotion strategies and also brand communication along with the target in this stage.
After that, it’s time to think about what you’ll need to get the business up and running. Start with the organizational structure, designing the necessary human resources and their hierarchical distribution (the organization chart of the company). Think about the qualification required for each professional, the remuneration, and the infrastructure and location of the work environment.
The financial plan is the most important thing of the business plan, as it will estimate, provided you take into account the requirements detailed in the previous items, the total investment for the implementation of the company. Adds Castillo, “You should also place fixed cost estimates, working capital requirements, and billing forecast at this point. However, make a mental note: making mistakes in these accounts can cause serious harm.”
The last step is to simulate various situations: realistic, pessimistic and optimistic. Imagine potential difficulties and anticipate solutions to hypothetical seizures.
Once all of this is ready, study the plan from beginning to end. Have someone else review it, as well. Then, discuss it and make any changes that need to be addressed.