Hello, dear readers of the online magazine about money “RichPro.ru”! This article will talk about how to write a business plan. This publication is a direct instruction to action, which will allow you to turn a crude business idea into a confident one. step by step plan to implement a clear task.
We'll consider:
- What is a business plan and why is it needed?
- How to write a business plan correctly;
- How to structure it and write it yourself;
- Ready-made business plans for small businesses - examples and samples with calculations.
To conclude the topic, we will show the main mistakes of novice entrepreneurs. There will be a lot of arguments in favor of creating quality And thoughtful business plan that will bring your idea to fruition and success things in the future.
Also, this article will provide examples finished works, which you can simply use or take as a basis for developing your project. Ready-made examples of submitted business plans can be found download for free.
In addition, we will answer the most frequently asked questions and clarify why not everyone writes a business plan, if it is so necessary.
So, let's start in order!
The structure of a business plan and the content of its main sections - a step-by-step guide to its preparation
7. Conclusion + video on the topic 🎥
For every entrepreneur who wants to develop himself and develop his business, a business plan is very important. He performs many important functions that no other person can do differently.
With its help, you can secure financial support and open and develop your business much earlier than you can raise a significant amount for the business.
Investors react mostly positively to a good, thoughtful, error-free business plan, because they see it as a way to make easy money with all the troubles invented and described.
In addition, even before the establishment opens, you see what awaits you. What risks are possible, what solution algorithms will be relevant in a given situation. This is not only favorable information for the investor, but also a necessary plan if you get into trouble yourself. In the end, if the risk calculation turns out to be too daunting, you can slightly redo, transform general idea to shorten them.
Creating a Good Business Plan is an excellent solution for searching for investment and developing your own action algorithms even in the most difficult situations, of which there are more than enough in business.
That is why, in addition to our own efforts It’s worth using “other people’s brains”. A business plan involves many sections and calculations, research and knowledge, only with successful operation, which can achieve success.
The ideal option would be to study all aspects yourself. To do this, it is not enough to sit and read the relevant literature. It is worth changing your social circle, turning to courses and trainings, finding specialists for consultation on certain issues. This is the only way really figure it out in the situation and dispel all your doubts and misconceptions.
A business plan is worth writing for many reasons, but home- this is a clear algorithm of actions by which you can quickly get from point A(your current situation, full of hopes and fears) to point B(in which you will already be the owner of your own successful business stably and regularly generating income). This is the first step towards achieving your dreams and secure middle class status.
If you have any questions, you may find answers to them in the video: “How to draw up a business plan (for yourself and investors).”
That's all for us. We wish everyone good luck in their business! We will also be grateful for your comments on this article, share your opinions, ask questions on the topic of publication.
An investment plan is a business project that is very important for an enterprise to obtain the desired financing. Only a well-drafted plan can confirm the viability of an investment project.The presence of such a document does not guarantee one hundred percent receipt of financing, because investors are primarily interested in the existing risks and level of profitability. That is why it is necessary to understand what it is investment plan, and what it should be.
Now it is unlikely that you will be able to find an investor who will consider proposals when it lacks a clear business plan prepared in accordance with all accepted standards.
The business plan should maximally reflect the investment initiative of the enterprise that needs financing, and clearly set out all the main goals. Such documents describe the process of functioning and the direction of activity. The objects of investment and the required volumes are clearly indicated.
Investments can be provided in various forms: financial, tangible, intangible, etc.
The investment entity needs to create an investment plan that concentrates policies, objectives and strategies aimed at achieving certain goals.
It is also necessary that the document contain clear indicators characterizing the expected results from the implementation of the business plan. The time period during which it is planned to implement the project and make a profit must be indicated.
Such a document must fully disclose all weak and strengths, and contain complete information on the volume of required investment.
In relation to a particular organization, a specific strategy for implementing a business idea is indicated, taking into account all indicators of marketing research.
The project documentation must display an investment schedule showing the demand for the amount of financing that investors are willing to provide depending on the interest rate.
As a rule, the higher the interest rate, the lower the desired amount of financing will be.
When constructing investment schedules, the following are taken into account:
Expected demand for products;
Level of wages of employees;
Other expenses (rent, repairs, etc.);
Production technology.
First of all, the investment plan must contain information about the work done on this moment work to implement a business idea. This part also identifies all the persons who prepared the project and describes step by step all the actions aimed at achieving the goals.
Preliminary calculations on the return of invested capital, payback periods, the level of expected income and certain guarantees must be provided.
The second part should contain information about the competitiveness, marketing strategy and reputation of the organization. The process of forming the cost of products is also described and methods for its implementation are indicated.
The third part indicates the financial condition. That is, the available fixed assets are listed and reports for previous months are attached.
The fourth part contains a technological overview. It indicates what the organization needs to achieve its goals. This may include additional production facilities, availability of raw materials, search for suppliers or contractors, production technology, etc.
Next, the process of efficient expenditure of capital investments is described in detail, and an analysis of the profitability of the investment project is carried out. When conducting the analysis, the lowest indicators are taken into account at which the project will remain profitable.
Investment business plan
A business plan is an integral part of business planning as a continuous process of organizational development. An investment business plan or project is a documented manifestation of the investment initiative of an economic entity, providing for the investment of capital in a specific object of real investment, aimed at realizing certain investment goals determined in time and obtaining planned specific results.The main source of capital in this case is an external investor who is unfamiliar with the enterprise or the proposed investment idea and requires high detail on the issues that interest him.
The investment business plan is used for lending needs and is submitted to the bank for consideration by the credit committee as confirmation economic feasibility project issued by professional consultants.
An investment (or credit) business plan in itself is not a guarantee of obtaining borrowed funds, since the bank still lends to a project, and not a document describing it. Such a business plan reveals in detail the issues of interest to the bank: financial plan, qualitative analysis risks, calculation of project profitability, its integral indicators. Currently, not a single bank will accept a project for consideration if the borrower’s package of documents does not include a business plan that meets the standards accepted in Russian credit institutions.
The need for Russian enterprises to develop an investment business plan was caused by a number of reasons:
Adaptation of foreign experience in developing investment projects to domestic conditions. This determined the mandatory typification of the methodology and documentation used in the business field;
using personal computers, which determined the need and possibility of creating software development and analysis of investment projects. Commercial and standard functional programs, as well as programs prepared by the project developers themselves, are used in many calculations;
evaluation of the business plan by the owners financial resources or their borrowers and lenders from the standpoint of returning invested funds and making a profit or other positive effect.
A business plan evaluates a promising situation both internally and externally. It is the most compact document that allows an entrepreneur not only to make an informed decision, but also to indicate what and when should be done in order to meet expectations regarding the effectiveness of the project. The approval and viability of the project depends on the correctness of the document. A business plan answers the questions: is the idea good? who the new product (service) is intended for; will this product (service) find a buyer; Who will you have to compete with?
For medium- and long-term projects, the development of business plans is a central stage in investment planning. Its main content is the formation of the main components of the project and its preparation for implementation.
The main content of this stage includes the following types of work:
Development of the concept and further development of the main content of the project (resources - limitations - result);
establishing business contacts and in-depth study of the participants’ goals;
structural planning;
organizing and conducting tenders, concluding contracts with the main contractors;
obtaining approval to continue work.
For short-term, small-scale or local projects that do not require significant costs and have a very short implementation period, the business plan combines all the stages and work performed in the pre-investment phase.
To develop a development strategy for a large enterprise, a corporate (global) business plan is drawn up.
When developing a business plan, you must first decide: what is the purpose of developing a business plan. These goals could be:
Understand for yourself the degree to which it is realistic to achieve the indicated results in a completed project or technical condition;
convince colleagues of the reality of achieving certain qualitative or quantitative indicators of the proposed project;
prepare public opinion for the corporatization of the enterprise according to the proposed scheme, which the authors consider optimal;
prove to a certain circle of people the feasibility of restructuring work and reorganizing an existing or creating a new enterprise;
attract the attention and increase the interest of a potential investor.
Enterprises operating in a stable situation and producing a product for a fairly stable market develop a business plan aimed at improving production and finding ways to reduce costs. These enterprises constantly provide for measures to modernize the products they produce and formalize them in the form of local business plans.
Venture enterprises that produce products at increased risk systematically work on business plans for the development of new types of products, transition to technologies, etc.
If an enterprise, having outlined a significant increase in the production of traditional products or development new technology, does not have sufficient capacity for their production, then it can go by attracting capital investments or searching for new partners.
In this case, the business plan is used when searching for investors, creditors, and sponsorship investments. For this purpose, a one- or two-page document can be prepared. short description business plan, which allows investors, lenders and other partners to see the important features and advantages of the project. This document is called a business proposal. It is used in negotiations with possible investors and future partners.
The business plan must be presented in a form that allows the interested party to get a clear understanding of the essence of the business and the degree of interest in their participation in it. The volume and degree of specification of the sections of the plan are determined by the specifics and area of activity of the enterprise.
It should be written simply and clearly and have a clear structure, for example, the one recommended by the Russian Ministry of Economic Development:
1. Introductory part.
2. Review of the state of the industry (production) to which the enterprise belongs.
3. Description of the project.
4. Production plan for the project.
5. Marketing and sales plan.
6. Organizational plan for project implementation.
7. Financial plan for the project.
8. Assessment of the economic efficiency of costs incurred during the implementation of the project.
Let's take a closer look at the contents of each section. The introductory part of the business plan includes:
Title page;
summary;
confidentiality memorandum.
On title page The name of the enterprise - the initiator of the project, the name of the project, the place and time of its development are placed.
The summary is a brief summary of the essence of the investment project. This is a document that reveals all the attractiveness and necessity of achieving a particular goal. It should be short and arouse the interest of the reader. The summary is written last, as it summarizes all the information contained in the project. The summary provides data that should allow a potential investor to understand what the we're talking about, what is the expected cost and profitability of the project.
A confidentiality memorandum is drawn up to warn persons reviewing the business plan about the confidentiality of the information contained in it. The memorandum may contain a reminder that the reader assumes responsibility and guarantees that the information contained in the plan will not be disclosed without the prior consent of the author. The memorandum may contain demands for the return of the business plan and a ban on copying the material.
Now let's move directly to developing an investment business plan; it should begin with a review of the state of the industry (production) to which the enterprise belongs, designed to solve two main problems:
1) study the state and development trends of the industry as an investment object;
2) make a forecast of the volume of production of products and services that an enterprise can produce in a competitive environment.
To solve the first task in the business plan, it is advisable to provide a retrospective analysis of the current state of affairs in the industry, the development of the industry over the previous 5-10 years, and describe possible trends in the development of the industry as a whole, the corresponding industries in the regions where products are planned to be sold abroad.
To solve the second problem, it is necessary to describe the main competitors in the regional, domestic and foreign markets in the following positions:
Nomenclature and sales of products;
the markets in which they operate and shares in those markets;
the competitiveness of their products;
pricing and sales policies;
state of the production base.
Analysis of this data will allow you to determine the competitive advantages of your enterprise or identify its shortcomings, determine methods competition with competing enterprises. The results of the analysis will be one of the criteria on the basis of which a potential investor will be able to judge the company’s capabilities to successfully compete with similar enterprises.
The project description is to briefly and clearly state the essence and main provisions of the project. This section covers the following issues:
What the enterprise does or will do (data is provided on the size and prospects of the enterprise, the profile of its activities, the characteristics of the goods and services produced and other information that provides the competitive advantages of this enterprise);
what is the expected demand for the proposed goods and services, the forecast for their implementation for several years (the main trends in market development, the weaknesses of competing enterprises, plans for growth and expansion of activities are presented here);
the amount of income from the sale of products or the provision of services, the amount of costs and gross profit, the level of profitability, the payback period of investments (in this part of the business plan you should present the economics of the enterprise: profit data, expected profitability, return on invested capital, time frame for reaching the break-even point and the excess of cash receipts over payments);
how much money needs to be invested in the project for its implementation (briefly indicate the amount of necessary financing and the direction of use of capital);
why the enterprise will succeed in quickly penetrating new markets for goods and services (this section indicates the competitive advantages of the enterprise in a given period and possible advantages after the implementation of the proposed project, weaknesses of competitors and other conditions).
The production plan provides information on the security of the investment project from the production and technological side.
In the production plan, you need to do the following:
State the goals of the enterprise's long-term strategy;
describe the structure of the planned production, its raw material base and technological scheme production process, sources of energy, heat, water supply;
provide data on the staffing of production, the training and retraining program;
describe the plan for bringing the enterprise to full design capacity;
provide information on the status of work on the project and production capabilities.
To characterize the status of work on the project, the following data is required:
The degree of development of the products proposed for production;
legal support of the project;
completed work on the project;
availability of production space;
the need to purchase equipment;
names of suppliers, delivery times and cost of equipment;
types of energy sources;
characteristics of the raw material base;
characteristics of production infrastructure (including internal and external transport);
environmental situation regarding discharges into the water basin and emissions into air environment.
The marketing and sales plan is one of the most significant and complex in a business plan. The results of market research are the basis for developing a long-term marketing and pricing strategy for an enterprise and its current policy. They determine the needs for human and material resources.
Due to the importance and complexity of this section, it is advisable to prepare it first and, if possible, check data on the market, its volumes and growth rates from additional, alternative sources.
Market research in a business plan includes three blocks:
1. Analysis of demand for goods and services in the selected market and its development trends.
2. Description of the market structure, its main segments, analysis of forms and methods of sales.
3. Study of competitive conditions in the market segments selected for work.
All subsequent sections of the plan depend on the sales estimates made in this section. The volume of sales of goods and services predicted as a result of market research has a direct impact on the production plan, marketing plan and the amount of invested capital that the enterprise will require. The data obtained during the analysis of the competitive situation largely determines the sales strategy and pricing strategy of the enterprise in selected market segments.
The organizational plan for project implementation sets out the management structure and policy, and provides a brief description of the composition of the management team.
When describing organizational structure businesses should consider:
Main divisions of the enterprise and its functions:
distribution of responsibilities of management personnel;
methods of interaction between departments;
the enterprise's interest in the final results;
new types of work arising from the goals of the enterprise;
necessary personnel qualifications.
The business plan provides detailed information for each head of the enterprise, the largest shareholders, members of the project development team, and the area of work being managed.
The financial plan for the project is prepared after the marketing plan and production plan are prepared. When developing it, one should take into account the diversity of interests of the participants in the investment project. The financial plan must include short review conditions in which the enterprise will operate. It should contain data such as sales volume, gross profit, equipment costs, labor and other costs, as well as a detailed operational analysis of income and expenses, the formation of the enterprise’s net profit. This will provide a complete picture of the profitability of the enterprise. This section of the business plan can only be drawn up after the scope (boundaries) of the project have been determined, as well as unforeseen costs and inflation.
The scope (boundaries) of the project involves defining:
All activities that must be performed on the factory site;
additional operations related to production, extraction natural resources, cleaning Wastewater and emissions;
external transport and warehouses for raw materials and finished products;
external complementary activities (housing, vocational training, general education programs, construction of recreational facilities).
Unforeseen expenses are divided into material and financial. Material contingencies are related to the accuracy of sales forecasting, design requirements, materials and services. In order to avoid losses, a reserve of unforeseen costs is included in the project cost of the object in the amount of 5 to 10% of the estimated cost of the object.
Financial contingencies are associated with inflation, changes in the base interest rate and other factors.
Inflation is accounted for using the following data:
The general index of internal ruble inflation, determined taking into account a systematically adjusted working forecast of the course of inflation;
ruble exchange rate forecasts;
external inflation forecasts;
forecasts of changes over time in prices for products and resources (including gas, oil, energy resources, equipment, construction and installation works, raw materials, individual species material resources), as well as forecasts for changes in the level of average wages and other indicators for the future;
forecast of tax rates, duties, refinancing rates of the Central Bank of the Russian Federation and other financial standards government regulation.
Using the above data, it is necessary to study the impact of inflation on price indicators, on the need for financing, and on the need for working capital.
Drawing up a financial plan takes place in several stages:
Stage 1 - forecast of sales volumes. The volumes and value of sales in the relevant markets for each year are calculated.
Stage 2 - calculation of costs for products and services sold. Calculations are carried out based on the forecast of sales volumes, current standards, pricing policy and conditions of implementation.
Stage 3 - description of counterparties, their reliability, distribution of contracts over time, costs by counterparties.
Stage 4 - calculation of the supply of raw materials, energy, water (technical and drinking), spare parts and operating materials for the first five years, as well as the supply of labor resources.
Stage 5 - forecast of costs (conditionally fixed, conditionally variable and total) over the years.
Stage 6 - calculation of planned profit. A plan of expected profit is drawn up, and net profit or loss is calculated for each year.
Stage 7 - analysis of the point of critical sales volume. Critical volume represents revenue that exactly covers the operating costs of producing products and services. This revenue amount is called the break-even point. It is necessary to analyze the critical volume of production.
Stage 8 - description of funding sources.
When describing sources of financing, the following scheme is used:
Sources of resource generation:
- own funds;
- borrowed funds;
after-tax profit distribution policy:
- share of profit allocated to the accumulation fund;
- payment of dividends (terms and interest);
measures to control consumer payments, financial policy regarding credit insurance;
criteria for evaluating effectiveness;
insurance methods.
If it is planned to use a loan to finance the project, then the business plan provides a calculation of the procedure and timing for obtaining and repaying the loan, as well as paying interest payments.
As a result of the calculations carried out, three basic forms are drawn up in the business plan financial statements: profit report, movement report Money and balance sheet.
The profit statement illustrates the relationship between the income received in the process of production activities of the enterprise (project) during the period of the project, with the expenses incurred during the same period and associated with the receipt of income. The profit report is necessary to assess the effectiveness of current (economic) activities. Analysis of the ratio of income and expenses allows you to evaluate the reserves for increasing the equity capital of the project, as well as calculate the amounts of various tax payments and dividends.
The cash flow statement provides information on the formation of sources of financial resources and the use of these financial resources. The sources of funds in the project may include: an increase in equity capital through the issue of new shares, an increase in debt through loans and the issue of bonds, revenue from sales of products and other expenses. In case of repurchase of shares or losses from other sales and non-operating activities, negative values may appear in the corresponding positions.
The main areas of use of funds are associated, firstly, with investments in permanent assets and replenishment of working capital; secondly, with the implementation of current production (operational) activities; thirdly, with servicing external debt (payment of interest and debt repayment); fourthly, with settlements with the budget (tax payments) and, finally, with the payment of dividends.
An important point is that not all current project costs act as an outflow of funds, but only operating expenses and current interest payments. Depreciation charges, being one of the cost items, are a source of financing fixed assets. Consequently, the volume of free cash for the project is equal to the sum of net profit and depreciation charges for a specified period of time. Repayment of external debt is carried out using free cash flows, and not from profits.
In the balance sheet, for the sake of convenience of analysis in project practice, an aggregated balance sheet is used, i.e. in an enlarged form. The purpose of the balance sheet of an investment project is to illustrate the dynamics of changes in the structure of the project’s property (assets) and sources of its financing (liabilities). The balance provides the ability to calculate generally accepted indicators financial condition project, assessment of liquidity, turnover ratios, maneuverability, overall solvency, etc.
Investment project plan
A business plan for an investment project is a document that describes all the most significant aspects of the future project, taking into account the tasks assigned to this document.The object of such a business plan is an investment project. The subject may be: evaluation of the idea, profitability analysis, justification for the possibility of obtaining external financing, search for partners, etc.
In accordance with the statement of objectives, the business plan may have very different requirements for structure, content and even speech.
So, in one of the business plans (it was known that a fairly well-known businessman would read it), ABS Group specialists used words, images and speech patterns used by this person. For this purpose they were collected public performance, recurring ideas and stable speech preferences are highlighted, and a psychological portrait is drawn up. The text of the document was constructed taking into account this information and was written “in his language.”
The business planning process may or may not include various stages of project analysis: market research, development of basic and functional strategies, cost estimation, etc.
The structure of a business plan for an investment project may look like this:
1. Project summary (0.75 pages).
Components:
1. Project goal.
2. Products (services) of the project.
3. Project time frame.
4. Brief financial characteristics of the project.
2. Project products (Substance of the project, Description of the project).
General meaning: description of the idea and subject area of the project.
1. The general goal and essence of the project.
2. System of goals and planned composition of results.
3. Description of project products.
4. Availability (need to obtain) permits and licenses.
5. Social effect of the project (new jobs, improved living conditions, etc.).
6. Environmental effect of the project (if any).
3. Industry analysis (Analysis of business practices).
General meaning: description of practice and experience (if possible, also foreign) in performing similar cases. (How can this even be done, and how does the approach chosen in the project relate to all this?) Allows you to identify possible alternatives (technological, technical, organizational, etc.), analyze them, and assess the feasibility of subsequent calculations.
1. Definition of the industry.
2. State and stage of the industry life cycle. Business activity in the industry.
3. Innovations, changes and trends in the industry.
4. Traditional and new types of organization (formats) of business in the industry, their advantages and disadvantages. Factors influencing the choice of business format.
5. Key issues that need to be addressed when creating a business.
6. Industry technical and economic proportions and indicators.
7. The idea of the project in the context of industry development.
8. Analysis of alternatives for implementing the plan and choosing one of them.
4. Market analysis.
General meaning: research of the environment from which money will come in exchange for the project's products.
1. Description of target consumers.
2. Analysis of the target segment.
3. Information about competitors (products, pricing, promotion, distribution). Their strengths and weaknesses, the most successful marketing solutions.
4. Forecast of sales volume in physical terms and its justification.
5. Marketing plan.
General meaning: developing ways to obtain funds from the external environment.
1. SWOT analysis and project strategy.
2. Pricing (for each project product).
3. Product promotion.
4. Distribution of products.
6. Production plan.
General meaning: to determine and evaluate in kind and monetary terms the actions to create a business and the processes of its functioning.
1. Justification of the location.
2. Technical and construction solutions.
3. The need for production space, the possibility of renting premises, purchasing them, etc.
4. Production process. List of all main operations for production, warehousing (storage) and delivery.
5. Composition and specification of the necessary equipment. Possibility of leasing.
6. Industrial cooperation and work with contractors.
7. List of all types of raw materials and supplies, names of supplier companies, their addresses and estimated prices.
8. Supply plan (description of the subject of supply, delivery schedule, estimate of supply costs).
9. Production plan in physical terms. Possibility of increasing (reducing) production volumes.
10. Quality control methods.
11. List of specialties indicating the number of workers in each specialty and their wages.
12. Overhead costs.
13. Estimation of production costs.
14. Environmental and industrial safety.
7. Organizational plan.
General meaning: to determine organizational and legal approaches to the creation and operation of a business and the interaction of participants.
1. Project participants (sometimes this item is drawn up as a separate section of the business plan).
2. System of motivation of participants (balance of interests).
3. The expected scheme of interaction between participants. Information about key management figures in the project.
4. Organizational structure and project management system.
5. Structure of work and calendar schedule for project implementation.
6. Personnel plan.
8. Financial plan.
General meaning: building the cash flows of the project, assessing its effectiveness, calculating financing schemes.
1. Description of assumptions and assumptions (taxes, duties, benefits, inflation rate, amount of working capital, financing, payment regime for raw materials and products, depreciation method, etc.).
2. Forecast cash flow statement.
3. Forecast income statement.
4. Forecast balance.
5. Assessment of the financial condition of the project organization enterprise.
6. Justification for the choice (calculation) of the discount rate.
7. Calculation of project performance indicators.
8. Development of financing schemes (types, volumes, sources and conditions of receipt) and servicing of project obligations (payment of interest, dividends, leasing payments, etc.).
9. Project risk analysis.
The general idea is to explore what could go against plans, what damage it could cause, and what needs to be done to prevent and minimize risks.
1. Cause-and-effect risk analysis (possible adverse events, sources and influencing factors, possible anti-risk measures).
2. Project sensitivity analysis (graphs, conclusions and recommendations).
3. Scenario analysis of the project.
4. Security and guarantees for creditors and investors.
10. Applications.
Registration, technical and other documents, reports, certificates, patents, calculation tables, calculations, diagrams, drawings, others graphic materials etc.
Development of an investment plan
An investment project is a plan or program of activities related to the implementation of capital investments and their subsequent reimbursement and profit.The task of developing an investment project is to prepare the information necessary for making an informed decision regarding the investment.
For modeling purposes, the investment project is considered in a time scale, and the analyzed period (research horizon) is divided into several equal intervals - planning intervals.
Administration of investment activities includes four stages: research, planning and project development; project implementation; ongoing control and regulation during project implementation; assessment and analysis results achieved upon completion of the project.
The main procedures at the planning stage are: formation of goals and subgoals of investment activities, market research and identification of possible projects, economic assessment, selection of options under various restrictions (temporary, resource, economic and social in nature), formation of an investment portfolio.
The project implementation stage is usually divided into three phases: investment, project execution (production, sales, costs, ongoing financing), and liquidation of its consequences. At each of these phases, control and regulation procedures are carried out.
In international practice, it is customary to distinguish three main stages in the development of an investment project:
Pre-investment stage;
investment stage;
stage of operation of newly created facilities.
At each stage, its own problems are solved. As we move through the stages, the idea of the project is refined and enriched with new information. Thus, each stage represents a kind of intermediate finish: the results obtained at it should serve as confirmation of the feasibility of the project and, thus, are a “pass” to the next stage of development.
At the first stage, the feasibility of the project is assessed from the point of view of marketing, production, legal and other aspects. The initial information for this is information about the macroeconomic environment of the project, the intended market for products, technologies, tax conditions, etc. The result of the first stage is a structured description of the project idea and a time schedule for its implementation.
The pre-investment stage, in turn, consists of the following stages:
Search for investment concepts.
In international practice, the following classification of initial assumptions has been adopted, on the basis of which enterprises and organizations of various profiles can search for investment concepts:
1. availability of minerals or other natural resources suitable for processing and industrial use. The range of such resources can be very wide: from oil and gas to wood and plants suitable for pharmaceutical purposes;
2. the capabilities and traditions of existing agricultural production, which determine the potential for its development and the range of projects that can be implemented at enterprises of the agro-industrial complex;
3. assessments of possible future shifts in the magnitude and structure of demand under the influence of demographic or socio-economic factors or as a result of the emergence of new types of goods on the market;
4. structure and volumes of imports, which can become an impetus for the development of projects aimed at creating import-substituting industries (especially if this is encouraged by the government as part of foreign trade policy);
5. experience and trends in the development of production structure in other industries, especially with similar levels of social economic development and similar resources;
6. needs that have already arisen or may arise in consumer industries within the domestic or global economy;
7. information about plans to increase production in consumer industries or growing demand in the world market for products already produced;
8. known or newly discovered opportunities for diversification of production on a single raw material base (for example, deepening wood processing by creating finishing materials from production waste and low-quality timber);
9. rationality of increasing the scale of production in order to achieve cost savings in mass production;
10. general economic conditions (for example, the government creating a particularly favorable investment climate, improving export opportunities as a result of changes in national currency exchange rates, etc.).
Preliminary preparation of the project. The task of this stage of work is to develop an investment project (or business plan for the project) - this is a document that describes all the main aspects of the future commercial enterprise, analyzes all the problems that it may encounter, and also determines ways to solve these problems.
The preliminary investment project must have a well-defined structure, similar to that which will be necessary during the detailed development of the project.
The project business plan may contain the following sections devoted to the analysis of possible solutions in terms of:
Volumes and structure of goods production, based on a study of the market potential and production capacities necessary to ensure the projected volumes of goods output;
technical foundations of production organization: characteristics future technology and the fleet of equipment necessary for its implementation;
desirable and possible location of new production facilities;
resources used and their volumes required for production;
organizations labor activity personnel and remuneration;
size and structure of overhead costs;
organizational and legal support for the implementation of the project, including legal forms of functioning of the newly created facility;
financial security project, i.e. assessing the required investment amounts, possible production costs, as well as methods for obtaining investment resources and the achievable profitability of their use.
Final preparation of the project and assessment of its technical, economic and financial acceptability. The preparation of a detailed feasibility and financial study of the project should provide an alternative consideration of problems associated with all aspects of the investment being prepared: technical, financial and commercial.
At this stage of analytical work, it is especially important to determine the scale of the future project as accurately as possible, i.e. the size of the planned output or quantitative parameters of activity in the service sector. An equally important task at this stage of work is the most accurate time planning of all types of work, without which this investment project cannot be implemented. Such planning is especially important for analysis based on comparison of discounted cash inflows and outflows.
The preparation of all types of data for making a final decision constitutes the main content of the stage of final formulation of the investment project and a thorough assessment of its technical, economic and financial acceptability.
Here the effectiveness of investments is assessed and the possible cost of attracted capital is determined. Initial information is a schedule of capital investments, sales volumes, current (production) costs, the need for working capital, and the discount rate. The results are most often presented in the form of tables and investment performance indicators: net modern value(NPV), payback period, internal rate of return (IRR).
The optimal scheme for financing the project is selected and the effectiveness of investments is assessed from the position of the owner (holder) of the project. For this purpose, information about interest rates and loan repayment schedules, as well as the level of dividend payments, etc. Results financial assessment The project must include: a financial plan for the implementation of the project, forecast forms of financial reporting and indicators of financial solvency.
The stage of final consideration and decision-making. At this step, the effect of external environmental factors and the situation within the company are analyzed. If these assessments are negative, then the project is either postponed or abandoned. If the decision is positive, they proceed to the second stage of development of the investment project - the investment stage.
During the investment phase, contracts are concluded with investors and with equipment suppliers and builders. The main task of this phase is to bring the facility “turnkey”.
On final stage the facility must be brought to its designed capacity. The functioning of the created object begins.
Any method of investment analysis involves considering the project as a conditionally independent economic object. Therefore, at the first two stages of development, the investment project should be considered separately from the rest of the activities of the enterprise implementing it.
The isolated nature of the consideration of projects excludes the possibility of correctly selecting their financing schemes. This is due to the fact that the decision to attract one or another source to finance capital investments is made, as a rule, at the level of the enterprise as a whole or its financially independent division. In this case, first of all, the current financial condition of this enterprise is taken into account, which is almost impossible to reflect in a local project.
Thus, in large enterprises, the task of choosing a financing scheme for an investment project (at least for projects classified as “large”) necessarily goes to the highest level of management. At the middle management level, the task remains of selecting the most effective, that is, the most potentially profitable projects from the available list.
Based on the above, the meaning overall assessment investment project consists in presenting all information in a form that allows the decision maker to make a conclusion about the feasibility (or inexpediency) of making investments. And a special role here is played by the commercial (financial and economic) assessment of the investment project.
Thus, the problem of making an investment decision is to evaluate the plan for the expected development of events from the point of view of how well the content of the plan and the likely consequences of its implementation correspond to the expected result.
Investment financial plan
Investing in any activity aimed at generating profit or social effect requires certain organizational, legal, technical and economic documentation. Such documentation is formed, as a rule, according to the idea of the investment object and, depending on the conditions of its implementation, determines the composition of the investment project or investment program, as well as a separate event. In the most general sense, an investment project is defined as a plan for investing capital in order to make a profit.It should be noted that the scientific literature presents many approaches to the classification of investments.
German professor Weinrich classifies investments according to the nature and use of the investment object:
Financial investments, i.e. investments in financial assets, acquisition of rights to participate in the affairs of other companies (purchase of securities, shares);
investments in property or material investments;
investments in intangible assets - training, advertising, research, etc.
In addition, it classifies investments by nature of use:
Investments to change the product release program;
investments in the creation of an enterprise;
investments to replace equipment;
investments to expand production potential (extensive investments).
State - formed from the state budget and state financial sources;
foreign – funds invested by foreign investors, other states, foreign banks and companies, as well as entrepreneurs;
private - are formed from the funds of private, corporate enterprises and organizations of individual citizens.
It should be noted that all investments regarding the application object can be divided into:
Real - investments for the purpose of increasing material and production fixed assets, technical re-equipment, expansion of existing enterprises, new construction, reconstruction of existing enterprises, etc.;
portfolio – investments in securities in order to receive dividends and subsequently play on changes in their rates.
Depending on the stage of investment there are:
Net investment - in the foundation of the project;
reinvestment - the direction of available funds for investment;
gross investment - includes net investment and reinvestment.
Depending on the nature of participation in the investment process:
Direct investments - with the direct participation of the investor in the selection of investment objects;
indirect investments - carried out by investment companies and other financial intermediaries.
From the point of view of economic conditions, two types of investment strategy of an enterprise (company) are possible:
Passive investments that ensure at least maintaining the profitability indicators of a given enterprise at a given level;
active investments that ensure an increase in the competitiveness of the enterprise and the profitability of its operations compared to the level already achieved.
Thus, the multiplicity of approaches to the classification of investments indicates the weakness of theoretical developments on this problem, which complicates the regulation of investment processes, both at the micro and macro levels.
Sources of funds used by an enterprise to finance its investment activities are usually divided into:
Own sources of investment financing: profit, depreciation charges, on-farm reserves, funds paid by insurance authorities in the form of compensation for losses from accidents, natural disasters, etc.;
borrowed sources: loans from banks and credit organizations; issue of bonds; targeted government loan; tax investment credit; investment leasing; investment sales;
raised funds: issue of ordinary shares; issue of investment certificates; investor contributions to authorized capital; funds provided free of charge, etc.
Methodology for managing investment processes in general case includes the following stages: planning; implementation of an investment project; current control and regulation of the investment process at all its stages; assessment and analysis of the quality of project execution and its compliance with the set goals.
Investment activity plan
Business in the field of investment is one of the most attractive, as it includes a high level of profit generation, continuous market development, interesting projects, the opportunity to profitably use or attract available funds. Successful entry and functioning in the field of investment business requires a correct understanding and necessary knowledge about the basic and most important concepts and principles, which include investments and their types, an investment business plan as the most important part of the project, and much more.The essence of this type of activity comes down to a profitable investment and profit making by one party and attracting and using external funds in the implementation of the project by the other. The benefits of investment for making a profit are obvious; when money does not “work”, not only unrealized benefits are lost, but the damage from inflation increases. Most things immediately after acquisition lose from 30 to 70% of their original value, so spending money on material assets cannot be considered effective capital accumulation.
The concept of “investment” in a broad sense means funds that are allocated to the creation of new, expansion or technical re-equipment of existing enterprises and types of business activities; acquisition of real estate, assets, securities for further profit and/or other positive effect. In the case of investing, capital is invested immediately, and the reward comes later.
Investment activity (investing, investment business) is the process of using funds, financial and other resources in various kinds of projects in order to increase capital and generate income in the future.
The main subjects are investors (invest their own or borrowed funds and ensure their intended use), issuers of securities, users.
Individual investors are considered persons (individuals or legal entities) who participate in transactions with securities. Institutional include investors-depositors and investment intermediaries (banks, funds, companies). Investors include legal entities that invest financial resources in projects, and intermediaries include legal entities that assist in establishing and maintaining business relations issuers and investors.
In Russia, regulatory legal acts regulate the relationship between objects and subjects of investment activity, determine the rights and responsibilities of investors, and the role of the state. These include federal laws: “On investment activities carried out in the form of capital investments” No. 39-FZ, “On the securities market” No. 39-FZ, “On foreign investments in the Russian Federation” No. 160-FZ, “On leasing” No. 164-FZ “On protection of rights and laws on the securities market" No. 46-FZ, "On agreements on production sharing" No. 225-FZ.
It is important for an investor to decide which investment is the most profitable for him in terms of the ratio of material and time costs to the profit received.
Real investment (tangible and intangible) is investment in real economic assets; investments in the form of capital investments are their most important component.
Financial investment is the acquisition of financial assets in the form of securities, shares, etc. Includes investments of a speculative nature, designed to generate profit over a certain period of time, usually short-term, as well as long-term ones, the purpose of which is to participate in the management of the investment object.
Investments in production means are called material investments. Depending on the goal (creation or expansion of production, investment in fixed assets or modernization, technical re-equipment), they can be strategic, basic, current, innovative.
There are such types of investments as capital investments: defensive (risk reduction, regulation of price levels), offensive (search for new technologies and maintaining a high technological level), social (improvement of labor), mandatory (satisfaction state requirements), representative (improving the image of the enterprise).
Depending on the purpose of investing funds, there are direct investments in the authorized capital (their goal is to establish control and management of the enterprise) and indirect or portfolio investments in economic assets (their goal is to generate income).
There are a large number of other classification characteristics of investments, including investment terms (short-, medium-, long-term), relationship to the investment object (external and internal), ownership (private, public, foreign, jointly owned), region (domestic, foreign ) and manufacturing industry.
It is worth paying attention to the types of investments by risk. Characteristic of aggressive high degree risk, high profit level and low liquidity; moderates have an average degree of risk with sufficient levels of profit and liquidity; among conservative low level risk and profitability, high liquidity.
Before choosing any form of investment, it is necessary to thoroughly study all its advantages and disadvantages for each specific situation.
To make decisions, investors and other participants in the investment process must be provided with necessary information, therefore, it is planned to develop and create investment projects.
In the general understanding, an investment project is a set of documents that substantiate the economic benefits, volume and period of investment and include the necessary standardized and executed in accordance with the law design and estimate documentation and a business plan as a description of practical actions to implement investment.
Projects are classified according to several criteria:
1. By relationship: completely independent projects that can be implemented simultaneously; alternative (mutually exclusive), which perform the same functions; mutually complementary, their implementation must occur together.
2. By time for implementation: short-term (up to 3 years), medium-term (from 3 to 5 years), long-term projects (more than 5 years).
3. By scale of investment: small - limited to one enterprise, aimed at expansion or modernization, short-term; medium - projects of technical re-equipment of production, are carried out in stages; large - creation of large enterprises; mega-projects are targeted investment programs that include several small projects.
4. Focus: commercial; social; environmental and others.
5. According to the degree of influence of the results: global; national economic; large scale; local.
6. According to the amount of risk: reliable - high profit; risky - high degree of uncertainty of costs and results.
7. By purpose: maintaining products on the market; new category products; increased production; socio-economic tasks and others.
Regardless of what type of investment project it is, it consists of 4 identical elements: billing period, net investment, cash flow, liquidation cost.
General information about the project includes the direction of future production and the specifics of the products being manufactured, features of the location of production facilities, information about the features of the technology, and the sales system. The project is accompanied by standardized documentation and a description of the actions that will be carried out sequentially according to the timing of the investment.
The life cycle is the period of time between the beginning, appearance of a project and the end of its implementation, completion or the interval between the origin and appearance of the result. The development cycle of any investment project consists of 3 stages: pre-investment, investment, operational (production).
At the first stage, the project is developed, its possibilities are studied, research is carried out, negotiations with investors and participants are carried out, legal registration is carried out and suppliers are selected. Costs at this stage range from 1 to 5% of the total.
At the second stage, actions are carried out that require large expenses; their key feature is irreversibility. Documentation is developed, premises are prepared, equipment is ordered, delivered and installed, personnel are recruited and trained, advertising events are carried out, and permanent production assets are formed. This is the highest cost phase.
The third stage starts with the start of operation of the main equipment or the acquisition of various types of assets (for example, real estate). The production of products or the provision of services begins, and the funds borrowed from the bank are returned. The stage continues until production is completed and is characterized by both cash inflows and costs. At this stage, the investment attractiveness of the project is formed.
The most important steps towards creating a high-quality investment project are pre-investment studies, which include 4 main stages:
1. Formation of the project idea, plan, search for its concept.
2. Preparatory research, the result of which should be the creation of an investment business plan.
3. The stage of creating a feasibility study is necessary in the case of large-scale capital investments; otherwise, a business plan is sufficient.
4. Final assessment, development of a conclusion and formation of a decision on the investment process. The result of pre-investment research is the creation of a project business plan - a document that contains the information necessary for the implementation of the project.
It cannot be said that the main purpose of creating a business plan is to attract investors; this document also needs to be used by the leader, managers and employees for a clear understanding of the goals, objectives and prospects of the enterprise. A business plan is needed when preparing applications for loans, to justify proposals for the privatization of state-owned enterprises, developing projects for the creation of private organizations, developing a project for the production of a new type of product, and the like.
From the point of view of a person planning to invest, an investment business plan can answer the questions: is it worth investing in this project and whether the costs, efforts and resources will pay for themselves.
The main goal of the project and its tasks, legal support, economic environment and orientation.
Marketing information - sales market, competitiveness, indicative sales program, pricing policy and product range.
Material costs - the cost and terms of supply of energy resources, materials, raw materials, the needs of the enterprise.
Proposed location.
Design decisions - choice of production technology, list and quantity of necessary equipment, scale of construction, etc.
Organization and expenses - determination of the legal form, creation of a management system, rental conditions.
Recruitment of personnel - need, distribution of working hours, conditions, size and form of remuneration.
Project implementation period - construction schedule, equipment installation time, operating time.
Analysis and evaluation of investment efficiency.
Ministry of Economic Development and Trade Russian Federation presented guidelines according to the structure of the business plan:
Summary including general information about the project;
Assessment of the state of the industry in which the enterprise will operate;
Description of the project - products (services), characteristics of the novelty of solutions;
Production development plan - description of the enterprise's manufacturability, personnel policy, elements of material and technical support, legal aspects of protecting the operation;
Plan marketing activities and product sales - assessment of the competitive environment, comprehensive analysis of market processes, potential consumers, promotion strategy, etc.;
Implementation of the organizational plan;
Financial implementation planning - planned profit, financial analysis of products, break-even analysis and cash flow;
Economic efficiency and its assessment.
Depending on the level of detail, a small (business prospectus), short or complete business plan for an investment project can be developed.
The main criterion for evaluating an investment project when accepting it for implementation is the part of the business plan relating to financial indicators. This part of the document reflects upcoming costs, sources of investment to cover them and potential financial performance. This section is the most voluminous and labor-intensive.
The financial section of the investment business plan includes:
Assessment of the state of the organization’s finances over the previous 3-5 years of operation;
The same assessment for the period of preparation and development of the investment project;
Projected profits and cash flows;
Assessment of the financial efficiency of the project.
The financial analysis the work of an enterprise during its existence and its current position usually include the calculation and assessment of key indicators (liquidity, solvency, turnover and profitability), their analysis over time, and identification of changing trends.
Forecasting profits and cash flows at the stage of implementation of an investment project and assessing financial efficiency include: assessing the cost of capital that is attracted to implement the project; development of a general balance sheet of project assets and liabilities; profit forecast, loss and cash flow indicators; assessing the effectiveness of the project in financial terms.
Based on the calculations carried out, a plan of income and expenses, a cash flow plan, and a balance sheet of assets and liabilities are drawn up. Assessing the effectiveness of the project, investors and other participants make decisions about investing, exiting the project, adjusting parameters, and opportunities to improve efficiency.
Comprehensive investment plan
Integrated investing is a state-level issue because it is most often carried out by the state. A complex approach to investment projects implemented by the state is easily explained. The state, investing money in a large investment project, cannot allow the unilateral development of the invested object, but is also interested in the development of interconnected areas of production, social sphere, ecology and security of the country. Investment programs or plans, in this case, are comprehensive. This is where the term integrated investment comes from.Complex investments do not imply a full set of investment instruments, but involve the placement of investments (for example, funds) in various areas of the investment project, which is a comprehensive program for the development of the investment object. Objects can be settlements, cities, regions, sectors of the country's economy or large national economic facilities.
An example of comprehensive investment is the Affordable Housing program. This program involves the development of new settlements in underdeveloped areas. For settlements, the state offers land plots on preferential terms and provides new settlers with funds for the construction of individual houses. At the same time, the state is investing in the creation of the necessary infrastructure: industrial and social. The production structure is necessary for employment of the population in production, and the social structure is necessary to ensure normal conditions in new settlements: construction of schools, preschool institutions, medical centers, shopping centers and cultural and entertainment organizations.
This kind of comprehensive investment is being carried out by the municipalities of many Russian cities; they are aimed specifically at eliminating some of the problems in the integrated development of cities and villages. Investments in real estate in many cities of Russia are burdened for investors with the construction at their expense of infrastructure facilities under programs for the integrated development of these cities. In this way, real estate investment becomes a comprehensive investment.
In Russia, enterprises and organizations making complex investments are stimulated by the state. For enterprises and organizations implementing complex investment projects, the State provides subsidies. Thus, by government decree, within the framework of the program “Development of Industry and Increasing Its Competitiveness,” the list of complex investment objects that are subject to state subsidies for interest on loans is expanded. The list of investment objects includes, in addition to new construction, reconstruction of fixed assets.
To stimulate private capital in complex investments of various kinds, the state widely uses various forms of attracting private capital. These forms of attraction are varied, from competitions for co-executors of complex investment projects to widespread public-private partnerships. Starting this year, investors themselves can take the initiative to form and implement complex investment projects by obtaining concessions from the state for the use of state assets.
A serious obstacle to the development of complex investments in Russia is the lack of methodology for the formation of comprehensive plans for the development of investment objects. If the objects are small towns or single-industry towns, then another problem hindering the implementation of comprehensive investments in their development is the lack of specialists capable of forming and justifying a comprehensive plan for their development. Because of this, many cities refused state support in the form of complex investments.
Production investment plan
An important factor in attracting third-party money to start your own business is drawing up an investment business plan. Let's consider the features of document development and its main components.The main purpose of developing this document is to obtain money for organizing or expanding a business. It is necessary for future investors in order to conclude financing and loan agreements with them. It is compiled for third parties and organizations.
When developing an investment project, you need to adhere to a certain structure:
1. Project summary.
This part of the document provides information about the company and its type of activity. The investor analyzes the information and decides whether the upcoming investment will be successful. The section provides initial data on production and financing. Based on it, conclusions can be drawn about the advantages and disadvantages of the project.
Indicated:
Business goals;
reasons for starting a business;
form of organization;
founders, managers, investors.
2. Characteristics of the industry. Information about goods produced by the company or services ( general information). This may be production, service, retail sales, distribution and other areas. Use of patents, copyright, brands. IN general outline the ability of the product to be sold on the market is assessed. It is necessary to indicate the development trends of the company.
3. Company product or service.
This is one of the main sections of the business plan of an investment project. The section includes Full description service or product, analysis of competitive advantages and disadvantages.
Product Description:
Name of the manufacturer;
range of services and products (full list);
cost of sales, planned profit;
buyers of a service or product;
use of patents or proprietary rights;
strategic capabilities of the company;
product modernization (if necessary), use of new technologies;
planning changes in the assortment of goods, cost of sales and other decisions.
4. Object placement.
Information is necessary to assess the investment attractiveness of a particular region. The advantages (disadvantages) of location are also considered based on factors such as proximity to raw materials, energy resources, human resources, sales markets, etc.
5. Analysis of the company's industry.
A thorough assessment of the industry in which the business operates is carried out. It is necessary to talk about outperforming competitors, a rapidly growing market and other factors. The project must be favorable for investment. Competitors, their strengths and weaknesses are identified. Information about the main suppliers of products is considered.
Basic information in this section:
The size and nature of competition in the industry;
description of the strengths and weaknesses of the main competitors;
financial position of competitors;
difficulties of entering and developing entrepreneurship;
use of innovations;
legislative regulation;
economic trends;
sales volume in this industry for last years;
information on the number of new firms and their decisions;
introduction of new products.
6. Production cycle companies.
This section describes the material and technical means to produce products or provide services. For release new products planning and description of the production process is required.
Key elements of the production section:
Manufacturing process: mechanical processes, costs, etc. (copies of contracts are attached);
methods of quality control of manufactured products;
company purchasing policy;
raw material costs;
material suppliers (names, addresses, conditions);
premises (purchase or rent);
production capacity (cost, location, area);
necessary equipment and costs of purchasing, renting or leasing equipment;
personnel: number, qualification level, skills, wages, organization of personnel training and cost.
7. Ensuring the release of the product (service).
It is necessary to determine whether it is realistic to achieve the planned volume of output and the effectiveness of locating the enterprise in a particular region. The investor evaluates whether the production of the product will be ensured by the types of raw materials, materials and resources used. The vulnerability of the investment project is determined.
8. Marketing campaign.
Main components of the section: marketing strategy:
Market analysis, forecasting its development in the coming years;
the purpose of opening the enterprise;
planned sales volumes;
marketing campaign strategies;
market price of a product or service;
methods of marketing products;
ways to increase sales;
advertising campaign to promote a product;
marketing planning;
methods and timing of the marketing campaign.
Information on methods of registering a business:
The section provides information on how to manage a company:
Current organizational structure;
legal form of registration;
form of ownership (information about partners or main shareholders);
types of shares, their number, voting rights;
owners and their responsibilities;
names and addresses of members of the board of directors;
information about the powers of each manager (voting rights, signing contracts);
managers' salaries.
1. Risk analysis.
This section describes the critical risks associated with the company's development. They are related to:
The reaction of competitors;
weaknesses in production or marketing;
using modern achievements.
If risks are not planned, you need to tell why they will not happen or how to achieve this.
For each risk, ways to minimize losses are described:
1. Financial issues. This is one of the main documents. It is he who influences a person’s decision whether to invest or not. Information is presented in tables. All aspects related to financing, basic and monthly costs, items of expenses and profits are described.
Main components of the section:
Profit and loss planning (forecasting results taking into account taxation);
cash expenses and receipts (assessment of investments by periods, liquidity check);
balance sheet of assets and liabilities for the beginning and end of billing periods;
break-even of the business (break-even point, profitability threshold). A table is compiled based on the production cost estimate.
2. Strategy for financing the investment project.
The sources of capital to be attracted and the possibility of attracting money from foreign investors are being considered. The periods for receiving money, amounts, etc. are indicated.
Based on the data presented, conclusions are drawn about the profitability of your business. Based on the investment business plan, the investor decides on the advisability of investing money.
A business plan is an integral part of business planning as a continuous process of organizational development. An investment business plan or project is a documented manifestation of the investment initiative of an economic entity, providing for the investment of capital in a specific object of real investment, aimed at realizing certain investment goals determined in time and obtaining planned specific results.
The main source of capital in this case is an external investor who is unfamiliar with the enterprise or the proposed investment idea and requires high detail on the issues that interest him.
The investment business plan is used for lending needs and is submitted to the bank for consideration by the credit committee as confirmation of the economic feasibility of the project, issued by professional consultants.
An investment (or credit) business plan in itself is not a guarantee of obtaining borrowed funds, since the bank still lends to a project, and not a document describing it. Such a business plan reveals in detail the issues of interest to the bank: financial plan, qualitative risk analysis, calculation of project profitability, its integral indicators. Currently, not a single bank will accept a project for consideration if the borrower’s package of documents is not accompanied by a business plan that meets the standards accepted by Russian credit institutions.
The need for Russian enterprises to develop an investment business plan was caused by a number of reasons:
Adaptation of foreign experience in developing investment projects to domestic conditions. This determined the mandatory typification of the methodology and documentation used in the business field;
the use of personal computers, which determined the need and possibility of creating software for the development and analysis of investment projects. Commercial and standard functional programs, as well as programs prepared by the project developers themselves, are used in many calculations;
assessment of the business plan by the owners of financial resources or their borrowers and lenders from the standpoint of returning invested funds and making a profit or other positive effect.
A business plan evaluates a promising situation both internally and externally. It is the most compact document that allows an entrepreneur not only to make an informed decision, but also to indicate what and when should be done in order to meet expectations regarding the effectiveness of the project. The approval and viability of the project depends on the correctness of the document. A business plan answers the questions: is the idea good? who the new product (service) is intended for; will this product (service) find a buyer; Who will you have to compete with?
For medium- and long-term projects, the development of business plans is a central stage in investment planning. Its main content is the formation of the main components of the project and its preparation for implementation.
The main content of this stage includes the following types of work:
Development of the concept and further development of the main content of the project (resources - limitations - result);
establishing business contacts and in-depth study of the participants’ goals;
structural planning;
organizing and conducting tenders, concluding contracts with the main contractors;
obtaining approval to continue work.
For short-term, small-scale or local projects that do not require significant costs and have a very short implementation period, the business plan combines all the stages and work performed in the pre-investment phase.
To develop a development strategy for a large enterprise, a corporate (global) business plan is drawn up.
When developing a business plan, you must first decide: what is the purpose of developing a business plan. These goals could be:
Understand for yourself the degree of reality of achieving the indicated results in a completed project or technical condition;
convince colleagues of the reality of achieving certain qualitative or quantitative indicators of the proposed project;
prepare public opinion for the corporatization of the enterprise according to the proposed scheme, which the authors consider optimal;
prove to a certain circle of people the feasibility of restructuring work and reorganizing an existing or creating a new enterprise;
attract the attention and increase the interest of a potential investor.
Enterprises operating in a stable situation and producing a product for a fairly stable market develop a business plan aimed at improving production and finding ways to reduce costs. These enterprises constantly provide for measures to modernize the products they produce and formalize them in the form of local business plans.
Venture enterprises that produce products at increased risk systematically work on business plans for the development of new types of products, transition to technologies, etc.
If an enterprise, having outlined a significant increase in the production of traditional products or the development of new technology, does not have sufficient capacity for their production, then it can go by attracting capital investments or searching for new partners.
In this case, the business plan is used when searching for investors, creditors, and sponsorship investments. To do this, a one- or two-page summary of the business plan can be prepared, which allows investors, lenders and other partners to see the important features and benefits of the project. This document is called a business proposal. It is used in negotiations with possible investors and future partners.
The business plan must be presented in a form that allows the interested party to get a clear understanding of the essence of the business and the degree of interest in their participation in it. The volume and degree of specification of the sections of the plan are determined by the specifics and area of activity of the enterprise.
It should be written simply and clearly and have a clear structure, for example, the one recommended by the Russian Ministry of Economic Development:
1. Introductory part.
2. Review of the state of the industry (production) to which the enterprise belongs.
3. Description of the project.
4. Production plan for the project.
5. Marketing and sales plan.
6. Organizational plan for project implementation.
7. Financial plan for the project.
8. Assessment of the economic efficiency of costs incurred during the implementation of the project.
Let's take a closer look at the contents of each section. The introductory part of the business plan includes:
Title page;
summary;
confidentiality memorandum.
The title page contains the name of the enterprise initiating the project, the name of the project, the place and time of its development.
The summary is a brief summary of the essence of the investment project. This is a document that reveals all the attractiveness and necessity of achieving a particular goal. It should be short and arouse the interest of the reader. The summary is written last, as it summarizes all the information contained in the project. The summary presents data that should allow a potential investor to understand what is at stake, what the expected cost and profitability of the project are.
A confidentiality memorandum is drawn up to warn persons reviewing the business plan about the confidentiality of the information contained in it. The memorandum may contain a reminder that the reader assumes responsibility and guarantees that the information contained in the plan will not be disclosed without the prior consent of the author. The memorandum may contain demands for the return of the business plan and a ban on copying the material.
Now let's move directly to developing an investment business plan; it should begin with a review of the state of the industry (production) to which the enterprise belongs, designed to solve two main problems:
1) study the state and development trends of the industry as an investment object;
2) make a forecast of the volume of production of products and services that an enterprise can produce in a competitive environment.
To solve the first task in the business plan, it is advisable to provide a retrospective analysis of the current state of affairs in the industry, the development of the industry over the previous 5-10 years, and describe possible trends in the development of the industry as a whole, the corresponding industries in the regions where products are planned to be sold abroad.
To solve the second problem, it is necessary to describe the main competitors in the regional, domestic and foreign markets in the following positions:
Nomenclature and sales of products;
the markets in which they operate and shares in those markets;
the competitiveness of their products;
pricing and sales policies;
state of the production base.
Analysis of this data will allow you to determine the competitive advantages of your enterprise or identify its shortcomings, and determine methods of competition with competing enterprises. The results of the analysis will be one of the criteria on the basis of which a potential investor will be able to judge the company’s capabilities to successfully compete with similar enterprises.
The project description is to briefly and clearly state the essence and main provisions of the project. This section covers the following issues:
What the enterprise does or will do (data is provided on the size and prospects of the enterprise, the profile of its activities, the characteristics of the goods and services produced and other information that provides the competitive advantages of this enterprise);
what is the expected demand for the proposed goods and services, the forecast for their implementation for several years (the main trends in market development, the weaknesses of competing enterprises, plans for growth and expansion of activities are presented here);
the amount of income from the sale of products or the provision of services, the amount of costs and gross profit, the level of profitability, the payback period of investments (in this part of the business plan you should present the economics of the enterprise: profit data, expected profitability, return on invested capital, time frame for reaching the break-even point and the excess of cash receipts over payments);
how much money needs to be invested in the project for its implementation (briefly indicate the amount of necessary financing and the direction of use of capital);
why the enterprise will succeed in quickly penetrating new markets for goods and services (this section indicates the competitive advantages of the enterprise in a given period and possible advantages after the implementation of the proposed project, weaknesses of competitors and other conditions).
The production plan provides information on the security of the investment project from the production and technological side.
In the production plan, you need to do the following:
State the goals of the enterprise's long-term strategy;
describe the structure of the planned production, its raw material base and technological scheme of the production process, sources of energy, heat, and water supply;
provide data on the staffing of production, the training and retraining program;
describe the plan for bringing the enterprise to full design capacity;
provide information on the status of work on the project and production capabilities.
To characterize the status of work on the project, the following data is required:
The degree of development of the products proposed for production;
legal support of the project;
completed work on the project;
availability of production space;
the need to purchase equipment;
names of suppliers, delivery times and cost of equipment;
types of energy sources;
characteristics of the raw material base;
characteristics of production infrastructure (including internal and external transport);
environmental situation regarding discharges into the water basin and emissions into the air.
The marketing and sales plan is one of the most significant and complex in a business plan. The results of market research are the basis for developing a long-term marketing and pricing strategy for an enterprise and its current policy. They determine the needs for human and material resources.
Due to the importance and complexity of this section, it is advisable to prepare it first and, if possible, check data on the market, its volumes and growth rates from additional, alternative sources.
Market research in a business plan includes three blocks:
1. Analysis of demand for goods and services in the selected market and its development trends.
2. Description of the market structure, its main segments, analysis of forms and methods of sales.
3. Study of competitive conditions in the market segments selected for work.
All subsequent sections of the plan depend on the sales estimates made in this section. The volume of sales of goods and services predicted as a result of market research has a direct impact on the production plan, marketing plan and the amount of invested capital that the enterprise will require. The data obtained during the analysis of the competitive situation largely determines the sales strategy and pricing strategy of the enterprise in selected market segments.
The organizational plan for project implementation sets out the management structure and policy, and provides a brief description of the composition of the management team.
When describing the organizational structure of an enterprise, you should consider:
Main divisions of the enterprise and its functions:
distribution of responsibilities of management personnel;
methods of interaction between departments;
the enterprise's interest in the final results;
new types of work arising from the goals of the enterprise;
necessary personnel qualifications.
The business plan provides detailed information for each head of the enterprise, the largest shareholders, members of the project development team, and the area of work being managed.
The financial plan for the project is prepared after the marketing plan and production plan are prepared. When developing it, one should take into account the diversity of interests of the participants in the investment project. The financial plan should include a brief overview of the environment in which the business will operate. It should contain data such as sales volume, gross profit, equipment costs, labor and other costs, as well as a detailed operational analysis of income and expenses, the formation of the enterprise’s net profit. This will provide a complete picture of the profitability of the enterprise. This section of the business plan can only be drawn up after the scope (boundaries) of the project have been determined, as well as unforeseen costs and inflation.
The scope (boundaries) of the project involves defining:
All activities that must be performed on the factory site;
additional operations related to production, natural resource extraction, wastewater and emissions treatment;
external transport and warehouses for raw materials and finished products;
external complementary activities (housing, vocational training, general education programs, construction of recreational facilities).
Unforeseen expenses are divided into material and financial. Material contingencies relate to the accuracy of forecasting sales, project requirements, materials and services. In order to avoid losses, a reserve of unforeseen costs is included in the project cost of the object in the amount of 5 to 10% of the estimated cost of the object.
Financial contingencies are associated with inflation, changes in the base interest rate and other factors.
Inflation is accounted for using the following data:
The general index of internal ruble inflation, determined taking into account a systematically adjusted working forecast of the course of inflation;
ruble exchange rate forecasts;
external inflation forecasts;
forecasts of changes over time in prices for products and resources (including gas, oil, energy resources, equipment, construction and installation works, raw materials, certain types of material resources), as well as forecasts of changes in the level of average wages and other indicators for the future;
forecast of tax rates, duties, refinancing rates of the Central Bank of the Russian Federation and other financial standards of state regulation.
Using the above data, it is necessary to study the impact of inflation on price indicators, on the need for financing, and on the need for working capital.
Drawing up a financial plan takes place in several stages:
Stage 1 - forecast of sales volumes. The volumes and value of sales in the relevant markets for each year are calculated.
Stage 2 - calculation of costs for products and services sold. Calculations are made based on the forecast of sales volumes, current standards, pricing policy and sales conditions.
Stage 3 - description of counterparties, their reliability, distribution of contracts over time, costs by counterparties.
Stage 4 - calculation of the supply of raw materials, energy, water (technical and drinking), spare parts and operating materials for the first five years, as well as the supply of labor resources.
Stage 5 - forecast of costs (conditionally fixed, conditionally variable and total) over the years.
Stage 6 - calculation of planned profit. A plan of expected profit is drawn up, and net profit or loss is calculated for each year.
Stage 7 - analysis of the point of critical sales volume. Critical volume represents revenue that exactly covers the operating costs of producing products and services. This revenue amount is called the break-even point. It is necessary to analyze the critical volume of production.
Stage 8 - description of funding sources.
When describing sources of financing, the following scheme is used:
Sources of resource generation:
- own funds;
- borrowed funds;
after-tax profit distribution policy:
- share of profit allocated to the accumulation fund;
- payment of dividends (terms and interest);
measures to control consumer payments, financial policy regarding credit insurance;
criteria for evaluating effectiveness;
insurance methods.
If it is planned to use a loan to finance the project, then the business plan provides a calculation of the procedure and timing for obtaining and repaying the loan, as well as paying interest payments.
As a result of the calculations carried out in the business plan, three basic forms of financial statements are drawn up: a profit statement, a cash flow statement and a balance sheet.
The profit statement illustrates the relationship between the income received in the process of production activities of the enterprise (project) during the period of the project, with the expenses incurred during the same period and associated with the receipt of income. The profit report is necessary to assess the effectiveness of current (economic) activities. Analysis of the ratio of income and expenses allows you to evaluate the reserves for increasing the equity capital of the project, as well as calculate the amounts of various tax payments and dividends.
The cash flow statement provides information on the formation of sources of financial resources and the use of these financial resources. The sources of funds in the project may include: an increase in equity capital through the issue of new shares, an increase in debt through loans and the issue of bonds, revenue from sales of products and other expenses. In case of repurchase of shares or losses from other sales and non-operating activities, negative values may appear in the corresponding positions.
The main areas of use of funds are associated, firstly, with investments in permanent assets and replenishment of working capital; secondly, with the implementation of current production (operational) activities; thirdly, with servicing external debt (payment of interest and debt repayment); fourthly, with settlements with the budget (tax payments) and, finally, with the payment of dividends.
An important point is that not all current project costs act as an outflow of funds, but only operating expenses and current interest payments. Depreciation charges, being one of the cost items, are a source of financing fixed assets. Consequently, the volume of free cash for the project is equal to the sum of net profit and depreciation charges for a specified period of time. Repayment of external debt is carried out using free cash flows, and not from profits.
In the balance sheet, for the sake of convenience of analysis in project practice, an aggregated balance sheet is used, i.e. in an enlarged form. The purpose of the balance sheet of an investment project is to illustrate the dynamics of changes in the structure of the project’s property (assets) and sources of its financing (liabilities). The balance sheet provides the ability to calculate generally accepted indicators of the financial condition of the project, assess liquidity, turnover ratios, maneuverability, overall solvency, etc.
Our task in this article is to understand how to prepare a business plan for an investor. We talked about how to prepare a real business plan. Now let’s concentrate on preparing a business plan that can stimulate investors to invest money in your idea.
Main objectives of the business plan:
- 1. Show the investor the prospects of the idea and your understanding of the market.
- 2. Show your down-to-earth understanding of the necessary costs.
- 3. Show that the team that will implement the project has the necessary knowledge and skills.
Everything else is tinsel, needed in a business plan, but does not have much influence when making decisions. To illustrate the above, let’s take the business of one of our clients – selling lenses through vending machines.
The main thing is the idea!
Unprofessional investors often don’t even read the following paragraphs after describing the idea. They either like the idea or solution you propose or they don't. And none financial calculations They won't be able to convince him. Therefore, it is important that a person believes in this idea, which means the first point: “It needs to be sold.” And you need to sell an idea with an understanding of the market. Let's take an example with lenses.
If you simply present the idea: “We came up with a brilliant idea: selling lenses through vending machines,” there is a high probability of skepticism. Therefore, it needs to be presented a little differently.
- 1. The lens market is growing by 20% annually.
- 2. Main points of sale: optical stores and the Internet.
- 3. People are accustomed to using coffee machines, payment terminals, and ATMs.
- 4. Lenses are an essential commodity, so the round-the-clock opportunity to purchase lenses in any residential area will be in demand.
The most important thing is that the idea is supported:
- Real need for a product or service;
- Analyzing the shortcomings of solutions to this need now;
- Examples of successful similar solutions or approaches to solutions;
- An assessment of the prospects for either a growing market or the reasons why the existing shares will be redistributed.
Income plan
The most unpredictable article in a business plan. With its help, a business plan can be turned into a quick payback. To attract an investor, this article must be clearly justified. Let's take our example: The population is 150 million, of which 40% have poor vision. Of these, 30% use lenses. This is the economically active population under 35 years of age.
Considering that there are about 20% of innovators in this category, we can determine the potential consumer niche in the amount of 3,600,000 people. And it will constantly grow due to the inclusion of conservatives and the aging population.
One consumer uses 2 packs of lenses per month. Based on this, we can calculate the number of potential consumers for each city or region.
A very good move would be to reduce the estimated figure by 2 times. Or use an optimistic and pessimistic scenario. In a pessimistic scenario, the numbers should be quite satisfactory.
In fact, any forecast will still be approximate and no one can accurately predict sales. Most investors understand this, the main thing is that there is a clear logic in the forecast of the number of buyers, purchase volumes and pricing.
Spending plan
If the income plan shows the investor your adequacy of market perception, then the expense plan shows your experience, a rational approach to spending the investor’s funds. The costs will be different in each situation. An important point is the justification of expenses. If the business plan includes costs for contractors, then commercial proposals from these contractors should be attached, or you can refer to average market prices or salaries.
An important point is the salaries of management personnel. They should be at the level of your subsistence level. If they are raised to quite acceptable salaries, the investor will decide that you have a desire to find a warm place and receive comfortable money.
A good move when drawing up a spending plan can be financing in several stages, when a solution is created on the knee, testing is carried out, and then the main money is invested. But in general, you don’t need to immediately cut your costs; you need to find solutions that have proven themselves in the market and are justified by quality.
Firstly, the investor wants to invest in a serious business with serious decisions, so that later this business can be sold. Therefore, the initial decision should show the solidity of the entire event. And secondly, if he still decides to cut, then you will have something to reduce the amount of investment.