A business plan is an essential tool for any entrepreneur – whether to simply bring structure into your business idea or to seek funding for your start-up from a venture capital fund. A business plan is essentially a document that summarises and structures important information about your idea or company. We wrote this little guide to answer some of the most common questions about business plans. You can also contact us in case you would like us to draft a business plan together with you or simply need a ready to pitch business plan.
What topics should be included in a business plan?
This varies depending on your needs of course but the most common topics are the following:
- Executive summary (1 pager summary of your whole business plan)
- What problem or gap exists in the market & what is your solution
- Your business model (how tdo you plan to make money)
- Market and competitor analysis – Analysis of strengths, weaknesses, opportunities & risks (SWOT)
- Your strategy and roadmap
- Financial forecast
- Who are you (team and company)
- What do you need from investors (usually how much funding you seek)?
What format should the business plan be in?
While this depends on what the business plan is used for, we usually recommend two elements: a Word document with some graphs and an Excel document with a few tabs with detailed financials. In some cases, you may also need a pitch deck or a shorter Word document. How big should a business plan be? Again, there is no universal set size of a business plan but we often see business plans ranging from 15 to 25 pages (normal Word document with a few graphs, font size 11).
How can I identify the appropriate market and estimate the market size for my business plan?
The identification and quantification of the market can be a very difficult task once you start digging into this task. In most cases, your business may fit into many different markets or it may be in between somewhere. For example, if your business idea is a vegan restaurant, you may think your target market is the gastronomy market, the market for takeaway food, the market for healthy or sustainable food. Or all of them at the same time. And are you talking about the national market for takeaway food or the global market for healthy food, etc. In fact, all of this may be true but the essential thing is to identify which market is the most appropriate one for your business idea. When identifying a problem or a gap in the market and proposing your solution to this, you are already thinking more precisely about the exact market that you are attempting to target. In your business plan, you can well make the case that your business fits into various markets at the same time. You should just always explain and justify why this is the case. When it comes to estimating the size of your market, in our experience it is rarely the case that you can just google a few words and find the right number. There are two common approaches to quantifying your market size: one is top down and the other one is bottom up. Choosing which method to use often depends on what data you can find, which approach is more appropriate in your case, etc.
Top down approach
In a top down approach you start from a larger or more general figure and you downsize it according to your needs based on a various parameters that you have set. For example, if you have decided that your target market is sustainable food restaurants in Luxembourg, you may not find exact statistics on this. You may, however, have figures on the healthy food industry in Europe. So you could deduct Luxembourg’s share in this market based on population figures. And you could further deduct the restaurant share in this (as opposed to sustainable food sold in supermarkets) based on a general ratio of where food is sold.
Bottom up approach
In a bottom up approach, you start from a small figure based on a single company or a single use case and then upsize it based on selected parameters. Using the same example as before, you could start with figures on the average Luxembourger’s spending on restaurant food, then take a ratio on how much of this is spent on sustainable food and then multiply this by the number of consumers in the country per year, etc.
Of course, these are often just estimations and you can easily criticize these findings in most cases. This is perfectly fine as long as you justify your decision at every step and explain why you have proceeded this way and why this is the best available approach. You should also highlight potential weaknesses in this approach and how to have addressed this weakness.
Who are my competitors and what if there is already competition in the market?
The best approach is if you show that you are well aware of the market conditions around you. In more established markets, it is important that you show who your competitors are and what their position is. If you have a completely new idea, then you may not have direct competitors but you might need to think more broadly about what substitute services or products people are using. If you are in a market with a lot of players, then you might want to emphasise factors that differentiate you from them, be it details about your service or products, or even geographical factors that influence your level of competition. Remember also that competition is not just about existing competition but also about competition you may face from players in adjacent markets.
What funding amount should I aim for when applying for a loan or venture capital with my business plan?
The amount of funding you need should not be arbitrary but it should be derived from your financial forecast and liquidity needs. It is therefore important that your business plan explains how you have reached this estimation and why this number is justified. Also remember that you should definitely allow for a decent margin of error. You can also look up similar companies and see how much funding they have received as a rough benchmark. Anyways, usually your investors or lenders may want to negotiate the exact amount with you or they may simply offer you what they think is appropriate, so do not stress too much over this figure.
Any more questions about your business plan? We can help!
We hope you found this useful! We know that you may have many more questions, so please do not hesitate to get in touch with us and arrange a consultation sessions. We will not charge you for an initial conversation but we will arrange the best way to move forward together with you. Alternatively, another good information source is available from the Luxembourg public sector on Guichet.lu.