The main difference between a business plan and an investment project

Investment planning is the key to success for any investor. At the same time, it is important that planning is comprehensive and covers all aspects of the proposed activity.

The difference between a business plan and an investment project is that the former often acts as one of the documents of the latter, that is, its integral part. Very often, when implementing a small or short-term investment project, only a business plan can be drawn up.

Similarities and Differences

In general, the difference between an investment project and a business plan is that an investment project includes a large-scale substantiation of a wide range of tasks, including:

• commercial ;
• industrial ;
• economic ;
• social, etc.

On the other hand, a business plan can be viewed as a program of activities for a project that is in operation or is just being developed.

The business plan contains:

• the mission of the organization;
• the goals of the organization;
• the objectives of the organization;
• the resources of the organization;
• task executors;
• key areas of work.

The most important task of a business plan is planning and forecasting the further development of the organization in a specific time period. And now let's try to consider both documents in more detail.

Investment project

An investment project is a complex set of measures aimed at creating new products, services, modernizing or reconstructing operating industries in order to obtain economic benefits.

In this article, we begin to consider the issues of direct development of a business plan. There are three known reasons when it is required to prepare a business plan for an investment project: opening a new business, a new direction of an existing company and creating a new market product. Almost every businessman is faced with business planning, and a reasonable question often arises: where to start, how to act competently and accurately from the first steps?

Initial requirements for the business plan

Suppose an entrepreneur or head of a company intends to prepare a business plan on his own, without involving consultants. Even if a company has economists on its staff, it is best to pilot it under the auspices of a decision maker. This significantly improves the overall quality of work and further seriously helps to put business planning (BPL) on stream. In addition, if a business person himself participates in planning, research and analysis, at least in a supervising aspect, the process of negotiations with potential investors is facilitated. The reasoning in the mouth of a competent leader is strengthened and the rationale becomes more powerful.

The aim of the business plan is to convince the main stakeholders of the developer's competence, the reliability of the data included in the business plan, the literacy of calculations and the effectiveness of participation in the project. Therefore, the development of a business plan for an investment project is based on the strength of its idea, the realism of market forecasts, the consistency of financial plans and the accuracy of economic calculations. By business plan, we mean a document that logically consistently presents a comprehensive justification for the success of an investment project.

Composition of requirements for the document of the business plan of the investment project

The plan uses investment marketing, planning, financial performance appraisal, and simulation tools. It works as a detailed providing factor in the process of persuading the investor, lender, decision maker from the customer's side. The basic principles of BPL are set forth in the material on the place of business planning in business activity. When starting to develop a business plan, in addition to the principles, it is also important to take into account the requirements that apply to the business plan as a presentation document (the diagram presented above). Let's consider some of these requirements.

• Structured and compact document. In business, there have been unified requirements for the form, composition and sequence of the main sections of the plan developed for decades. This document should not be excessively large, its maximum length is no more than 50-70 pages.
• Realism and reliability of information. The information that is accepted for calculations must be confirmed by real statistics and data from comparative studies (benchmarking). Information on the external investment environment, sales and internal resource costs must be adequate, reliable and verifiable. Getting some reliable data is very laborious. It is important not to allow adventurous connivance in specifying numbers, which, when checking them, can discredit the entire business plan.
• The relevance of the information used in the calculations. Non-specific, overly generalized conclusions, forecasts for planning actions are unacceptable. Little specific and insignificant facts should also not be accepted for use.

Compliance with the structure of the business plan

The structure of a business plan for an investment project in ordinary activities is not something rigidly formalized. It depends on the field of activity, the size of the project and the type of participants to whom this document is focused. For example, some banks offer borrowers forms for consideration by credit committees. The same practice is used by regional business incubators and republican, regional ministries of economic development for the purpose of making decisions on the allocation of grants.

In the article devoted to the meaning of the structure of a business plan, a comparative analysis of the composition of sections of a business plan is carried out according to the main international methods used in Russia (UNIDO, EBRD, KPMG, BFM Group). The most widespread is the implementation of the UNIDO methodology and the corresponding LTP structure. Below are the typical sections of the document that are included in the most detailed version of the business plan.

• Title page.
• Privacy Memorandum.
• Summary.
• Introduction.
• Description of the industry, company and its current activities.
• Description of the project and its product (sometimes included in the marketing plan).
• Marketing plan.
• Production and sales plan.
• Investment plan.
• Organizational plan.
• Financial plan.
• Organizational and legal aspects.
• Financial and economic analysis and assessment of the project's effectiveness.
• Warranties and risks.
• Applications.

Many people know that starting a business in Russia is like a heroic act. Startups are created, often relying on the Russian maybe and on "somehow then everything will definitely work out." At the same time, the entrepreneur looks at any offered assistance with distrust, treats his business idea like a child and believes that he himself knows best how to raise him. And when it comes to developing a business plan that is binding and reveals the full scope of upcoming concerns, potential businessmen often prefer to hide their heads in the sand and rely on their own competence.

It is also important that since Soviet times, strategic planning has compromised itself by regular discrepancies between plans "on paper" and reality. The feasibility study of those years also did not inspire confidence, especially since there could be no question of business planning. But the country was changing, and the approaches to building a business also changed. If in the 90s and early 2021s rare business plans were drawn up for Western banks, today they are much more widespread. However, unfortunately, most entrepreneurs perceive business plans as only a laborious formality on the way to obtaining the coveted funding.

In this book, we will show the real benefits of planning for business, simplify the task for those who need to develop a business plan, reveal the secret of how to get financing for a business plan, and finally show how a business plan can bring money and respect. We want to share with potential and current entrepreneurs the experience of developing various business plans, plus show the modern possibilities of business planning in the implementation of investment projects.

In the first part, we present the universal structure of the business plan that we have developed and tell in detail what should be written in each section, where to start and in what order it is better to fill them out; where to look for information for this, what these or those terms mean, what are the schemes for attracting financing and financial guarantees, which sources are more profitable for the entrepreneur, and who should be included in the project team for the business to take place and bring profit for many years.

In the second part, we provide quite detailed instructions for the independent development of a professional business plan using a specific project as an example - with tables, graphs, diagrams, pictures, comments, and an example of design. The given numerical data are slightly changed so as not to reveal trade secrets. To save space, not all tables, graphs, diagrams and pictures that are in a real business plan are given in the book to save space. But they give a completely adequate idea of ​​the main financial and economic indicators of the project.

In addition, in this first edition of the book, to facilitate understanding of its contents, only the basic calculation formulas with the necessary comments are given.

The authors of this book have proven scientific articles on economics, which reveal much deeper, at an understandable level, the secrets of business planning, market research, pricing, credit interest, wages and other problems of the modern economy. These articles will undoubtedly be of interest to those who are friends with mathematics at least at the level of algebra, and also understand what differentiation and integration of functions of one or more arguments are.

Ultimately, we see our mission in increasing the competence of Russian entrepreneurs and our clients by introducing the latest methods of business planning and marketing into their practice, which leads to an increase in the efficiency of the Russian economy.

Chapter Planning is the Key to Success

Scheduled tasks

From the very beginning, we want to give real examples of the challenges that life poses for entrepreneurs. A well-designed business plan allows you to successfully solve these problems.

After studying the business plan prepared by us, the client asked to calculate what would happen if: the cost of production equipment increased 5 times, production capacity - 5 times, production space and personnel - 2 times, the cost of advertising and promotion - 2 times, increase energy costs 3 times, reduce the purchase period for machine tools from 8 to 4 months, reduce the selling prices for the product by 25% and recalculate the sales plan based on the changed parameters.

As a result, the NPV value obviously increased, the net profit stream also increased significantly, but the project's need for initial investments also increased. At the same time, due to the reduction of the investment period, less working capital was required, which somewhat reduces the need for investments, however, the terms of repayment of borrowed funds also increased - from 1.3 years to 1.8 years, which, however, is insignificant. The sales plan has also changed significantly: to sell the increased volume of products, it will be necessary to occupy a much larger market share. For this, in the business plan, on the one hand, the advertising budget has been increased, on the other hand, the responsibility of the project team for this result has increased.

Investment planning is the key to success for any investor. At the same time, it is important that planning is comprehensive and covers all aspects of the proposed activity.

The difference between a business plan and an investment project is that the former often acts as one of the documents of the latter, that is, its integral part. Very often, when implementing a small or short-term investment project, only a business plan can be drawn up.

Similarities and Differences

In general, the difference between an investment project and a business plan is that an investment project includes a large-scale substantiation of a wide range of tasks, including:

• commercial ;
• industrial ;
• economic ;
• social, etc.

On the other hand, a business plan can be viewed as a program of activities for a project that is in operation or is just being developed.

The business plan contains:

• the mission of the organization;
• the goals of the organization;
• the objectives of the organization;
• the resources of the organization;
• task executors;
• key areas of work.

The most important task of a business plan is planning and forecasting the further development of the organization in a specific time period. And now let's try to consider both documents in more detail.

Investment project

An investment project is a complex set of measures aimed at creating new products, services, modernizing or reconstructing operating industries in order to obtain economic benefits.

Investment planning is the key to success for any investor. At the same time, it is important that planning is comprehensive and covers all aspects of the proposed activity.

The difference between a business plan and an investment project is that the former often acts as one of the documents of the latter, that is, its integral part. Very often, when implementing a small or short-term investment project, only a business plan can be drawn up.

Similarities and Differences

In general, the difference between an investment project and a business plan is that an investment project includes a large-scale substantiation of a wide range of tasks, including:

• commercial ;
• industrial ;
• economic ;
• social, etc.

On the other hand, a business plan can be viewed as a program of activities for a project that is in operation or is just being developed.

The business plan contains:

• the mission of the organization;
• the goals of the organization;
• the objectives of the organization;
• the resources of the organization;
• task executors;
• key areas of work.

The most important task of a business plan is planning and forecasting the further development of the organization in a specific time period. Now let's try to consider both documents in more detail.

Investment project