What is a personal investment plan and how to draw it up correctly? What is a business plan for an investment project
Read also
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 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 no amount of financial calculations will 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 an idea: “We came up with brilliant idea: sell 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 eyesight. 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 are 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.
Good move When drawing up a spending plan, there may 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 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.
Summary and experience of participants.
Attention!
The VVS company provides exclusively analytical services and does not consult By theoretical issues marketing basics(calculation of capacity, pricing methods, etc.)
This article is for informational purposes only!
WITH full list You can familiarize yourself with our services.
In contact with
Classmates
Typical mistakes when drawing up an investment business plan
Considering that many organizations often make the same mistakes when developing an investment business plan, it is worth paying attention to the most common ones. We will not touch upon any complex cases, but let’s list a number of the most typical mistakes that beginners can make when they first start drawing up an investment business plan. We hope that you will take this information into account and avoid making similar mistakes in your investment business plans.
1. Carefully ensure that the initial data you used in the calculations corresponds to the data indicated in the text part of the investment business plan and tables. Unfortunately, in practice such situations in investment business plans are not uncommon. Some of the employees have not yet prepared the necessary information and provided outdated information, or some of the indicators were obtained from different sources. Even if it is subsequently possible to establish which information is correct, the investor is unlikely to trust the corrected investment business plan, since he will expect other errors.
2. Be careful when choosing parameters such as the duration of the horizon and the planning interval. A very common situation is when an organization indicates too large intervals in its investment business plan. It's easy to see why this happens. The fact is that having an interval of not a quarter, but six months, makes it easier to achieve the results predicted in the investment business plan. This reliable way to avoid missing deadlines, not to irritate investors, to always and in everything comply with the set pace. And it seems that such agreement with the investment business plan is a guarantee of the investors’ disposition, but in practice everything turns out differently.
A competent investor understands perfectly why such long intervals arise: the organization is simply not sure that it will be able to achieve its goal within a quarterly period, and therefore stretches it out to six months and beyond. This means that in certain months business will decline. For example, expecting to compensate everything with May revenue, the organization may be idle for winter months. But lack of finance will lead to adverse consequences. It is possible that the company will simply go bankrupt during the quiet months, since it will not have the funds to support its activities.
In addition, by setting long deadlines in the investment business plan, companies often try to take time with a reserve, but for the investor this only means that the organization will not work at full capacity. Financing such a project, of course, is undesirable - the risks are too great.
3. It is necessary to be able to explain to the investor why a particular calculation method was chosen in the investment business plan, especially when it comes to the discount rate, sales volumes and production parameters. It is important to understand that an investor will give preference to a business plan in which all elements are not chosen randomly, but according to some principle. Projects where everything is entered offhand do not particularly inspire confidence.
Surely, you have already noticed that the need to create a business plan or investment project is very difficult task. There are many nuances, features of calculations, methods and approaches, which not every manager is able to take into account and consider. However, there is always a way out. If you cannot draw up an investment business plan yourself, then you should entrust this task to professionals - the information and analytical company “VVS”. Experienced specialists will easily develop an investment business plan of the highest complexity for organizations of any type. The company has 19 years of experience in providing product market statistics as information for strategic decisions, identifying market demand. Main client categories: exporters, importers, manufacturers, participants in commodity markets and B2B services business.
Commercial vehicles and special equipment;
Glass industry;
Chemical and petrochemical industry;
Medical equipment;
Production of animal feed;
Electrical engineering and others.
Quality in our business is, first of all, the accuracy and completeness of information. When you make a decision based on data that is, to put it mildly, incorrect, how much will your losses be worth? Taking important strategic decisions, it is necessary to rely only on reliable statistical information. But how can you be sure that this information is reliable? You can check this! And we will provide you with this opportunity.
The main competitive advantages of our company are:
- determine the degree of sustainability and viability of the project,
- choose the best option investment for maximum profit,
- assess the prospects for a certain period, taking into account all technical and economic indicators,
- evaluate the actual performance of the company,
- monitor the implementation of budget obligations,
- calculate the possibilities of obtaining credit resources and attracting state support and etc.
- own funds,
- government funds,
- funds of possible investors.
- financial (commercial) efficiency,
- budgetary efficiency (reflecting the financial implications for the budget corresponding to the project level),
- economic efficiency (reflecting results beyond the direct financial interests of direct participants in investment projects that allow for cost measurement).
- net present value,
- internal rate of return,
- profitability index,
- time and speed of payback.
- Introduction where the project goals fit in.
- Main content with a concise description of all key sections of the business plan and an emphasis on factors attractive to the investor.
- A conclusion that summarizes the factors for potential success, including the most important procedural decisions.
- detailed description organizational structure(principles of work, organizational chart, personnel structure and legal support, etc.), which, as practice shows, is not done in many, especially newly created, enterprises,
- consumer audience, its purchasing capabilities, tastes,
- evidence that economic trends are favorable in a given industry and at a given regional market(which is possible using mathematical calculations, marketing research, statistics).
- The preparatory cycle is associated with an intensive marketing campaign and presentation of a unique product or its commercial innovative component. Moreover, investors are now interested in the format of product presentation (packaging, design, protective equipment) no less than quality and usefulness. This cycle is defined as the beginning of sales and the growth period.
- The cycle of high development rates is a period in which the market begins to become saturated with a unique product (service). As fame increases, competition also increases.
- The leveling cycle is the time when new and unique competitive products come to market - a period when loyal consumers are still loyal to the product, but many of them are already beginning to look at alternatives.
- Stage No. 1. Here the market capacity is assessed - the total cost of products that buyers in the region of expected sales can buy in a month (year). Marketing research concerns socio-economic, political, demographic, national and other factors.
- Stage No. 2. Here the potential sales amount of the product is estimated - the market share that the company expects to win. This amount coincides with the maximum amount of possible sales.
- composition, quantity, technical condition of equipment, parameters of production areas,
- technical standards for equipment productivity and labor intensity,
- equipment operating time fund, as well as the operating mode of the enterprise,
- product range and its quantitative ratio.
- Increasing brand awareness.
- Creating a sense of confidence among sales staff highest quality goods.
- Improving the morale of employees in this department.
- Increasing sales volume by a certain percentage over a specified time.
- S – Strengths – strengths: average and low cost of the product, the use of innovations, the presence of experts and professionals in the project team.
- W – Weakness – weaknesses: lack of knowledge about the brand among the target audience, the need to rent premises, etc.
- O – Opportunities – opportunities that involve the introduction of new technologies, the opening of unplanned sources of financing, access to modern materials, etc.
- T – Threats – threats that in this type of analysis are considered as sources of risks from outside that cannot be influenced.
- author of the idea;
- content author;
- investors;
- the enterprise (group of enterprises) to which the project is directed;
- consumers to whom the project was aimed.
- decision support for design and selection;
- optimal business development plan; creation financial plans and investment projects;
- enterprise activity modeling different forms and structures.
- initial data,
- market assessment,
- financial assets
- production,
- human resources,
- territorial location of investment objects,
- project documentation,
- organization and expenses,
- deadlines for implementation of plans,
- business performance assessment.
- company,
- conceptual essence,
- capital investment plan (technical and permitting documentation, network deployment costs, etc.),
- production dates,
- implementation deadlines,
- sales and distribution routes, materials and components,
- general costs and personnel plan,
- financing.
Data accuracy. The preliminary selection of foreign trade supplies, the analysis of which is carried out in the report, clearly coincides with the topic of the customer’s request. Nothing superfluous and nothing missing. As a result, the output we get is exact calculations market indicators and market shares of participants;
Well-written business plan investment project easily converted into a financial application that can satisfy most investors. But not only lenders, professional depositors and investors need this systemic document. Any entrepreneur or designer who thinks through the details of reconstruction, production, or promotion of services studies the consequences of innovations and the necessary financial, material and human resources first “on paper” in the form of a plan in order to avoid costly trial and error in practice.
Basic theoretical principles for developing business plans
A document that describes the main aspects of a company’s activities within a project, taking into account potential problems and options for solving them, is called a project business plan. Planning is carried out both when creating a new enterprise and when transferring a business process to new level. Although the planning process has general principles, the exact characteristics of the document (volume, composition, structure) are determined by the size of the company or enterprise, the specifics of the activity, the purpose of the project, economic and social resources.
Document structure
In practice, a business plan is the only justification addressed to lenders and future investors, which allows them to raise funds. The information presented allows investors:
Thus, common task business plans - to create a holistic assessment of the potential and prospects of specific investment projects, taking into account their specifics and to provide justification for the introduction of innovations in the described conditions.
For this purpose, the following are considered as a source of financing:
In this case, the calculation horizon most often becomes the return period borrowed money and another year after that.
In form there is a division into a full business plan and a concept plan. In the second case, only the basis for negotiations with possible investors is created, which will determine the degree of their interest in the project. The official format when preparing such a design is oriented towards the requests of investors and/or the requirements of business partners, however, the general standard structure of a complete business plan for an investment project involves the inclusion of the following sections in the document:
If the enterprise that has undertaken the implementation of investment projects is a multi-point organization (with two or more enterprises), then during planning, separate plans are developed for each enterprise, which are then compiled into a single document.
Evaluation of the business plan by investors
The effectiveness of investment projects is characterized by a system of indicators that demonstrate the relationship between costs and results in the context of the interests of the participants. Depending on which category the participants in investment projects belong to, the following indicators are distinguished:
In addition, social and environmental consequences project.
In a market environment and attracting investment funds through this line, financial efficiency is of primary importance.
The peculiarity of a business plan for an investment project is that the assessment of investments is based on a comparison of the expected profit from the implementation of the project with the invested capital. To do this, net financial flow is calculated as the difference between receipts Money as a result of investment and production activities and their outflow, with additional deduction of costs (example - interest payments on long-term loans). Based on the indicators of net cash flow and discount factor, the following investment evaluation indicators are calculated:
In this case, the discount factor brings the potential financial income and expense at stage t to initial period time.
Separate elements of the investment plan structure
The more detailed the sections of the business plan of an investment project are, the greater the chances of winning the trust of investors and money for the implementation of the plan. The first sections are especially important, forming the investor’s impression of the prospects of the investment.
Summary
The introductory part (summary), first of all, is written for the investor, and, although in fact it is compiled after filling out the remaining sections of the business plan, the summary takes first place in the structure of the document. This overview brief (3-4 pages) part is written in such a way as to arouse the interest of investors, as a result of which it is formally divided into three parts:
It is important to clearly indicate in your resume competitive advantages product or service of a future project - something that will allow it to stand out in the market and provide effective work investments. These advantages may be a different level of technology, geographic location, proximity to transport interchanges, etc.
Description of the company and industry
In addition to the goals and objectives of the enterprise and in addition to the events that influenced the development, current opportunities and trends, special attention should be paid to:
This section touches on all the factors affecting the project: from local laws to the seasonality of the product. In this case, you should refer not to the general impression, but to authoritative sources of information indicating specific numerical parameters. Example: “According to Rosstat, in 2016, product sales in the region amounted to 112 million tons in the first quarter, 118 million tons in the second, 124 million tons in the third. In the fourth quarter, taking into account the trend and independence of the indicator from seasonal fluctuations, a volume of 130 million tons is expected.”
Product (service) description
In the section, characteristics, parameters and purpose of the product, the entire life cycle products or services indicating temporary factors affecting profit and factors of economic cycles:
Here it is important to clearly understand why the consumer chooses (can choose) this particular product by comparing it with its closest competitors.
Filling out the section begins with a description of the intended niche in the market and which segment of the target audience will become consumers of the product. Moreover, these values must be predicted for the coming months or years (depending on the specifics of the project). Forecasting is usually carried out in 2 stages:
Often at this stage there is a forced market segmentation and reorientation to a narrower segment without abandoning the project as a whole. An example of choosing a narrow specificity is targeting consumers with low level income (segmentation by income level criterion). More often, however, the project immediately focuses on one or another consumer segment, dividing buyers by gender, age, education, hobbies, professions, etc. For enterprises, location, distribution channels, quality, etc. become such segmenting factors.
Production plan
The main task of this part of the plan is to prove to investors and partners that the company is really able to produce (sell) the intended quantity of goods (services) of the required quality in the required time frame. In this section, it is necessary to demonstrate the production capacity of the enterprise - the ability of the means of labor to produce maximum output over a period (shift, year, day). To calculate power, use data on:
Usually in this section a subsection is created indicating external factors that have an impact on production activities (access to resources, change of suppliers, changes in legislation, etc.).
Marketing plan
Factors that contribute to successful market penetration are divided into external and internal. At the same time, as the project develops, the market begins to influence plans for the formation of project strategies and tactics. Such a plan is usually drawn up a year in advance, broken down into stages, and adjustments are made to it, if necessary. In terms of interaction with the sales department, the marketing plan sets 4 main goals:
An example of achieving the first goal is providing investors with an entire advertising campaign. Additionally, the economic effect of advertising distribution options is calculated.
Principles of drawing up a business plan “for yourself” and for investors
The principles of drawing up a business plan come down to the reliability, logic and clarity of the idea, which, after presentation, should look attractive to the investor. Therefore, it is more advisable not only to write a document, but also to make a presentation with graphs, charts, tables, and infographics from slides. In this case, it is necessary to take into account the difference between a business plan “for yourself” and an “official ceremonial” document. In the first case, the real state of affairs is reflected. The second is a detailed and consistent statement of preferences, as when creating a project from scratch.
“For yourself” a business plan always includes more real values and is being considered as a working option. An example of the difference between the “internal” option and the “official” one can be seen in the description of the estimate for the purchase of office equipment. If a project really needs 10 laptops for a total amount of 500 thousand rubles, then they are all fairly included in the official estimate. However, in practice, out of 10 computers, the direct participants already have 3 personal laptops, another 2 are owned by business partners, and 3 fairly powerful computers are owned by relatives. Thus, real needs involve the purchase of only two laptops, instead of the ten planned in the investment document. However, if the investor allocates the entire amount for these needs, it will be necessary, at a minimum, to provide documentary evidence of the purchase of the entire volume of equipment.
To draw up the most informational business plan, SWOT analysis is often used, which is popular due to its ability to clearly structure data.
In any case, before drawing up one or another version of a business plan, maximum useful information is collected, often with the involvement of experts. This information is necessary to understand the real objective situation. And one’s own subjective ideas about the project’s development environment rarely provide such a comprehensive understanding.
The concept of “investment project” is a system of measures deployed over time for a significant renewal or creation of fundamentally new individual components of the enterprise’s activities. The components of any investment project are the direct participants (individual/legal entity), organization or group of persons interested in it. The last link of this structure can relate to both the macroeconomic level and the mesolevel, as well as the microeconomic level.
From this link you can download the most complete investment project (example with calculations in Excel). The calculation results are available for testing, the formulas are “visible” (it’s easy to check which formula was used and what data it refers to).
The project needs to create a structure diagram something like this:
We draw up an investment project using an example
| Name: | “Creation of a full production cycle livestock farm.” |
| Documentation: | business plan, marketing research of the agricultural market. |
| Project budget: | 40,000 USD. |
| Field of activity: | Agriculture. |
| Sources of financing: | personal funds, credit funds. |
| Goal Definition: | creation of a full production cycle livestock farm on the basis of an existing agricultural enterprise. |
| Direction: | commercial. |
Registration of the structure of an investment projecta
Another example of a formalized investment project could be the following structure: The structure should depend directly on the specifics of the investment object, the scope of implementation, etc. These examples of investment projects do not take into account the financial side of business projects. It is important that the current financial condition determines the balance of the launch date for the project. This factor directly affects the magnitude and direction cash flows. In this regard, the return on investment is determined. The compiled examples must have descriptions of the volume and form of investment. A brief summary of the essence of the proposal is required. By summary we mean a detailing of the main features of the development pre-determined by the project itself. Many companies and specialists provide services for the development of investment projects or their analysis, and as a result, correction for maximum efficiency.