The Business Plan Part. II

Starting a business is of three main stages, each having a dimension iterative

• The first step is, according to the objectives and motivations that have led to a project to refine its knowledge of the environment in which the company operates, with an approach also known as SWOT EMOFF (Environment / Strengths / Weaknesses / Threats / Opportunities) and requires gathering information about clients, competitors, suppliers, regulators, and the key skills and resources available to the company or must have.

• The second step is to refine the project in terms of Key Success Factors (CSF) and variables or fields of Strategic Actions (VAS).

• The third focuses on the means (technical, human and financial) necessary and action plans from which the Business Plan is the subject of a valuation, and financial economic quantification.

The document that materializes this research, this reflection, the choices that result, the main actions and associated resources is called Business Plan. It has 2 parts:

• The first part, called pitch, is devoted to the arguments needed to validate and sell his project. This part of nature "literary", must be rigorously prepared to highlight the economic consistency of the project.

• The second part corresponds to a financial overview of the measures and Covering the project's economic viability.

The business plan

Starting a business is not only starting a business alone,  it involves raising  funds, developing  an business activity, diversifying it, transmitting , merging, adjusting, developing, negotiating and  communicating your dream business. There are many reasons for embarking on the adventure of developing a business plan.

Creating a project is not only the record of business plan alone but it also includes a financial component and a pitch.

As for investment, in financial terms, it can be defined as "sacrifice resources in hopes to draw more in the future," which indicates three key concepts: duration, cost and risk. Aspects profitability and financial flexibility are at the heart of the case. They underlie substantive issues such as: How to appreciate and take into account the reversibility of a project? Is there a business model in the business plan?

The financial calculations do not remain a simple decision support, and that beyond the virtues and pitfalls, advice and methodology presented in the Business Plan has many facets. And above all the business is a script of a wonderful story and which should be directed by the creator himself. It is the expression of a chosen strategy to be shared more or less detail, among its shareholders, bankers, employees and other stakeholders of the company if necessary.

The medium-term loans

The duration of the medium-term loans is of 2 to 7 years for the financial investments, and they are granted either by a single bank or a bank in competition with a specialized. There must be an association between the period of funding and the life of the asset financed.  The financial borrowing duration should not be longer than the duration of its use as medium-term financing. If it is so it should be avoided in all cases. Hence it is applicable to investments such as average length of vehicles and technology, and more generally, to most goods and means of production of the business. The loan period must be taken into account to the financial possibilities of the business. That is, during this period, company must not only ensure the repayment of the loan, but also interest payments.

In all cases, financial backing by a medium-term loan does not cover the entire investment, it is logical that the business wants to equip them to make an effort for the flow of money. The percentage of the investment program financed by a medium-term credit is generally between 50% and 75% of total investment.

The granting of loan for a medium term from the merchant banker is subject to a broad study because the risk comes from the period and volume of the loan. The merchant banker must study the market impact of the introduction of this equipment and provide the financial situation of the business, given its new production and also because of its new charges. This require  to develop a further plan for the funding that will parallel the total expenses and resources of the borrower, and more over in order to identify future opportunities for the company to meet its debts and thereby ensure a good outcome of operation of credit

Financial planning

Any company needs to invest for its creation of its new development activity. That is to say, new development activity means of production. Besides the flow of funds of its own source, the use of bank loans is the most commonly used practice.

To production every firm need raw materials, labor, and  also a variety of equipment like Land, buildings, manufacturing equipment, etc.. ; All these devices are called the production tool.

Whether for the creation or for development needs every company needs to invest. Once established, they will allow the company to produce more or better conditions, which will enable it to generate additional profits.

A company can finance its investments from internal funds, without recourse to external capital. This solution has the advantage for the company to play independent, but it has the disadvantage of limiting the company in its investment opportunities and the expansion of the company.

Therefore, the use of bank loans is the most commonly used practice because it is  easy and possible way  for almost all small and medium enterprises. However, we must recognize that this funding has disadvantages for the business. It makes the company dependent on the varieties of the distribution of credit (i.e. amount, cost, time, etc.) And the policy adopted by its banker that is choice of risk guarantees, etc.  Among the solutions offered by banks, there is the classic credit medium or long term.

Constraints of financial investments

A company has a priority, to invest its own resources. If its own sources are insufficient, the company must raise its fund as equity. The conditions of funding of productive investment depend on specific characteristics to the financial situation of the company.


 Analysis on the financial investment has long been conducted in a theoretical framework defined by the Modigliani-Miller theorem (1958). According to this theorem, it is immaterial for a company to finance its investments through debt, issuance of shares, or retention of profits. This theorem is only valid under very restrictive conditions, which in practice are not checked: the hypothesis of perfect capital markets, lack of conflict between managers and shareholders, and the absence of distortions and taxation. The strict application conditions of this theorem led to his questioning, and guided the researchers to the idea of ​​an optimal capital structure of companies. Companies are advised to go into debt to take advantage of the leverage and the tax benefit associated with debt. But the growth of debt poses a risk of failure increased. The company must decide between the benefits of debt and the cost of default risk.


The borrowing capacity of a company depends much on its capacity that it can offer, and market conditions (level of interest rates). The level of profits and the level of indebtedness of the company are the two key indicators to assess the repayment capacity of the borrower. In this way, investment is determined by the level of profits and debt.


Economic research highlights the wide diversity of investment behavior of firms. This heterogeneity is largely explained by the different financing terms offered to them. The variable profit rate and debt ratio have explanatory power and real investment by small businesses, but not for the investment of large groups. Small firms have less collateral to offer banks, and therefore more difficult to finance their investments. The constraints are more strengthened in times of slower growth or recession.