Business plan and calculations
Business plan is a written document about your business idea. It describes how the business idea will be implemented in practice, the operating environment of your company and its working practices and objectives. Business plan includes information and calculations about budgets and cash-flow statements and it describes the product / service, the customer groups, the competitive environment in the marketplace, and training and expertise of the entrepreneur(s) as well as how the enterprise intends to market its products. Business plan also estimates profitability and the amount of financing needed for starting up the business's operations.
You can find a business plan template here.
Instruction videos on how to fill in the plan you can find below - every point explained separately:
When writing a business plan, be realistic - also about the challenges of starting a business (arranging funding, possible lack in knowledge and/or competence, lack of information about legislation, taxation, contracts etc.) Although it is a plan, it is also a testing of Your business idea - a way to estimate and calculate if Your idea is profitable.
Here are few questions to help You estimate Your product / idea:
1. Why should Your customer choose Your product and not Your competitors?
2. How do Your customers find / get information about Your products / services?
3. Are Your customers willing to pay high enough a price of Your product?
4. Can You sell Your products and / or services to Your customer in advance? This way You can conduct Your own market research.
5. How much do You need to sell to make Your business profitable?
A business plan does not need to be a long document. The entrepreneur must plan its extent and focus areas to suit his or her needs. Business plan includes for example following points:
Mission and business idea: What is the company established for? What do You sell? Who do You sell to? How do You sell? In order to think Your idea thoroughly, it is wise to for example make a SWOT -analysis to Your idea, in which You think about the strengthts, weaknesses, opportunities and threats of Your idea.
Visions and goals: Long term planning for the business and entrepreneur. Goal definitions according to customers, products and/or services. What do You want Your company to be in five years?
Entrepreneurs strengths and expertise: What in Your history and character support the plan of becoming an entrepreneur? What line of work You have done, where and what have you studied, what are your personal qualities… This is all about expertise, experience, strengths, knowledge of the line of business and networks.
Business environment: What is the operating environment like in general? How about in Your chosen field of business? How much competition is there on the market? Are there aspects in Your business idea that help You stand out in a positive way?
Marketing and sales: How do Your customers find You? How do You convince Your customers that Your product is better than Your competitors? How do You handle media relationships? What are your interest groups? Describe marketing materials, sales organizing, customer recognizing etc.
Production & product development: Production arrangements, equipment, logistics (delivery), office work and administrative tasks etc.
Personnel: What kind of personnel is needed? Recruiting, motivating, wages etc.
Economical calculations: Where do You need money and how much? What are the costs of entrepreneurship? How will sales be formed? How will the money cover annual costs? How much will the entrepreneur earn per year?
Risk evaluation: Property risks, personal risks, responsible risk of the product, other risks. There is always a possibililty that something does not go quite as planned. That is why it is important to make an evaluation of possible risk - business risks, property risks, personal risks, responsible risk of the product, other
IPR: Business plan can be used in negotiations with for example investors, business partners or suppliers. Business plan document is needed when start-up funds are applied for from the Employment and Economic Development Offices ("TE-toimisto") or when business subisidies are applied for from the Centres for Economic Development, Transport and the Environment ("ELY-keskus").
The company business plan must include a calculations of the investment and other costs associated with starting business operations. The entrepreneur must also make calculations for the company’s regular expenses: payroll, rent, marketing costs, telephone bills, office supplies, insurance, production costs and other significant cost items that should be covered by regular income.The business plan must also consider profitability calculations for what kind of pricing model should be used for products or services in order to cover expenses.
To get started, You need to calculate the money needed and plan Your funding. Economical planning starts with the evaluation of financial needs. To evaluate your financial needs you need to evaluate how much you need to have premises, needed equipments and how much to make marketing investments (logo, website etc.), developing investments and other possible investments.
After defining Your financial needs, the funding will be planned. To plan Your funding (read more about funding from here), you need to list long-term loans, business allowances, VAT return and own Funding. A new company can improve its liquidity by taking a free year from the installments of a loan. Also Finnvera offers funding to new companies. Returns of VAT are regained quite quickly. Payments from ELY-centre can take a long time. It is also wise to estimate if You need temporary funding.
What You need to calculate next, is to estimate your turnover. You need to estimate your sales, purchase costs and gross margin. From these estimations you can produce your turnover forecast.
Business costs. In order to find out how much running Your business costs, You need to estimate for example the following costs: instalment of loans, wages and social costs, insurance costs, costs of premises, machines and equipment, travelling expenses, marketing costs, administrative services etc.
Finally, you need to do a profit review in order to determinate whether your gross margin covers the costs.
Financial calculations template will help and guide You through these calculations.