Business plan: startup guideline

You have found your business idea and would like to implement it? Now it’s time to actually prepare your plunge into Self-employment. For that purpose, there is a tried and tested tool: the business plan. Find out here about aspects you will need to bear in mind and why the business plan is so important for banks and investors. 

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Initial thoughts

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Even if you can’t wait to start your business activities, it is important to take the time for adequate preparation. That’s why you shouldn’t rush into things. Instead, focus on drawing up a schedule. Setting up a business plan can help you develop a step by step plan for your enterprise. Your business plan is also crucial for convincing someone of your business idea or your plans. Banks, for example, will use the business plan to assess whether you are a suitable candidate for a loan.  In addition, you will need a business plan if you require a visa before setting up a business in Germany.

Make sure to obtain the information you need. A consultant can give you useful tips for improving your business plan.

As you set up your business plan, make sure you use plain language and a clear structure. A checklist on the usual content as well as computer programmes and an app to guide you through the business plan step by step are available for download on the Startup Portal.

Information for women: The E-training offered by the Startup Portal contains six lessons for aspiring female entrepreneurs on the most important steps in setting up a business. In addition, the E-training contains information on balancing work and family life, part-time business startups or team startups and on personal insurances for female entrepreneurs (E-training is available in German only).

Personal suitability

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The development of your business very much depends on the skills of its founder. That’s why in your business plan you should elaborate your personal suitability. The top priority here are your professional qualifications. You should also mention any specific knowledge of the industry your business will be involved in, as well as your commercial know-how.

Please note: The business plan should mention both your strengths and your weaknesses, so that the bank can get an idea of how you will perform as an entrepreneur. So, don’t be shy – explain what your skills and qualifications are.  Maybe even your origin is an asset for setting up your business, because you have certain language skills or knowledge of a certain country, or because your intercultural skills are excellent? Be realistic when you talk about your weaknesses, and demonstrate how you can work on them.

Idea and product

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Now to the core of your enterprise: the business idea. Try and engage your reader using simple language. Point out what is new and special about your product or service. Illustrate the benefit your customers can derive from it. Explain the current development stage of your product, and when you intend to enter the market. Describe your short and long-term business objectives.

For complex technological products or products requiring a lot of scientific research, you should outline the individual development stages. Which testing methods have you considered? Will you need to meet any technical specifications?

Use the Startup Portal’s checklist to verify that your business idea is well thought-out. The Portal also outlines a number of additional tips and tricks for developing a business idea.

Target group and competition

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The customer is king: the success of your business idea will depend on whether your product or service fulfils your customers’ requirements. That is why before embarking on your business, you should carefully consider who your target group is. You need to be familiar with the needs and desires of your customers in Germany – bear in mind that these may be different from those in your country of origin. Make sure that your business idea is suitable for Germany. 

In your business plan, you should also describe the market situation. Find out who your competitors are and what the prices of similar products or services are. As you do that, you should always ask yourself a core question: what makes you different from the competition? Develop a unique selling point (USP) for the product or service you are offering, make sure you sell superior quality, or gain a competitive edge by offering extraordinary services. On the Startup Portal, you’ll find a concise overview of the most important aspects of the target group and competition analysis.

Choosing a location

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Where is your business going to be situated? In your business plan, you should explain as precisely as possible why you have decided in favour of a particular location.

Decisive factors very much depend on the type of industry you’re dealing with. If you are planning to set up a retail store, for example, you should make sure that your target customers will actually be close to your shop on a regular basis. For business concerned with producing something, other questions are more important: Is there enough space? Is there a good logistic connection to other places? Will your suppliers be near you?

If you are as yet unsure where you would like to set up your business, the service-bw website will provide additional useful information for choosing a location. Regional information is available at the Chambers of Industry and Commerce. Trade associations will be able to provide you with industry-specific information.

Marketing

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The best product is useless if nobody buys it. That’s why a sound marketing concept should have a place in every business plan. You may decide to structure your concept using four factors which are useful for marketing purposes: “proposal”, “price”, “sales” and “communication”.

  • Proposal: First, indicate in what way your particular product is useful for your clients. Point out what the USP of your product or service is. Outline why there is a demand for it.
  • Price: Then, explain how much your product or service is going to cost. Make sure to cover your expenses, but also focus on being competitive. The Startup Portal contains useful tips for determining the right price .
  • Sales: In your sales strategy, you determine how you are going to reach out to your customers. Will your customers order directly from you? Or will you be getting in touch with retailers? Think about which sales channels best fit your offer, and explain your decision in the business plan.
  • Communication: Explain how you are going to draw attention to your new product or service. You may choose traditional advertising methods, trade fairs, advertisements or sales talks, for example.  In this context, you might also want to explain what your Internet presence will look like. Do you need some ideas? Then, have a look at the Startup Portal. It contains an overview of various methods for attracting customers (pdf, 137 KB).

Your marketing success very much depends on getting the “mix” right – you need to find the right focal points in the right areas. Important guiding questions can be found in this overview (pdf, 28 KB).

Staff

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Are you planning to hire your own staff from the start? Or will you be working on your own at first? No matter what your decision is, HR planning should be discussed in your business plan.  After all, it is an important point for potential investors who are trying to get an idea of both your ambitions and your financial obligations.

Think about how many employees your company will have in the early stages and as it starts to grow, and which kinds of qualifications your staff will need. If you require skilled workers, you should indicate how you are going to find them. You should also think about the salaries you’re going to pay.

The Business Portal contains additional tips for example on how to work out your staff requirements, things to watch out for as you’re hiring somebody, and the kinds of leadership qualities you’ll need. The Centre of Excellence on Securing Qualified Professionals provides plenty of tips on recruiting staff.

Legal structures

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If you want to set up a business in Germany, you will need to choose a legal structure for it. In your business plan, you should give reasons for your choice. Additional information on legal structures is available on this portal under “Startup types: Ways of setting up your business”.

Planning your finances

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Your financial planning is at the heart of each business plan. After all, your business can only be successful if you’re able to make the investments you need and if it’s profitable in the longer term. Your financial plans can be divided up into several sections.

Capital requirements: choosing what to invest

As a first step, you will need to determine your capital requirements. That means that you need to write down how much money you need to set up your company. Your list should include all the expense you’ll incur before your business starts operating, for example for machinery, buildings or other investments. You should also allow for a budget for what is known as the start-up phase, which is usually deemed to be about six months. Remember how much money you need to pay for your cost of living, and don’t underestimate it.

The Startup Portal provides a template for a capital requirements plan and further informations.

Financing plan: where to get the money

Once you have determined how much capital you need, you will need to work out where to get it from. The answer to this question should lie in a financing plan.

Normally, you would finance your enterprise with a mixture of equity (your own wealth) and borrowed capital (e.g. a bank loan). You should be able to say quite accurately how much equity you have. For borrowed capital, the answer is probably not as straightforward. After all, you want to use your business plan to convince creditors to give you a loan! They should be able to tell how much borrowed capital you require. 

A template for the financing plan is available for download on the Startup Portal. Make sure to mention possible risks for your enterprise and develop a worst-case scenario as well as a best-case scenario.

Cash budget: balancing inputs and outputs

You should use a cash budget to determine whether you can cover your running expenses with your earnings. You need to set up this budget for the first six to twelve months after you’ve launched your business. Think about how much you’re spending on fixed costs. How much does the interest for your bank loans cost you, for example? How much do you intend to spend on sales and marketing? In the input column, you indicate your intended revenue and profit. To cover a situation where you’re spending more than you are earning, you should have an adequate cash reserve. To find out what else to bear in mind when preparing your cash budget, please refer to the Startup Portal.

Profitability forecast: what is your expected profit?

In a profitability forecast, you can indicate your intended revenue, expenditure and profit for the first three business years. A template is available on the Startup Portal. Even though you will have to estimate most of the figures, your calculations will give you a feeling for whether the investment in your business is likely to pay off. In addition, the expected profit is important for convincing creditors of your enterprise.

Consultancies, for example, will support you in setting up a profitability forecast. As you estimate your profit, you should make sure to bear in mind overall trends in your industry. Information about industry trends is available at industrial and professional associations and the Chambers of Industry and Commerce. It may also be helpful to take a look at the situation of comparable businesses.

Information on this portal

Assess your opportunities in the German labour market

Money and banks: managing your finances

Find out in which industries Germany is a global leader

Information on the World Wide Web

Startup Portal

Checklist for your business plan (English, German)

 

Startup Portal for Female Entrepreneurs

Here, you will find information about the services available for women entrepreneurs (German, English, Turkish, French, Russian, Italian)

BMWi Overview no. 5. Capital requirements

Financing the start-up and the initial operating phase (German, English)

BMWi Checklist no. 6: Profitability outlook

Create your profitability outlook (German, English)

BMWi GründerZeiten no. 7: Businessplan (business plan)

Useful information and tips for drawing up your business plan (PDF) (German)

BMWi Overview no.1: The most frequent mistakes in negotiations

What you should keep in mind for your business negotiations (English)