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5 reasons why you need a business plan

A business plan is one of the most important documents that you will need for setting up a company in Switzerland. Here is how to properly prepare a business plan for presenting your project on an international level. Check if there is a Swiss Business Hub in your country and contact them for any support you may need in this process.

5 reasons why you need a business plan
A good business plan has been carefully prepared, is clearly structured, and is written in a simple and competent language.

1. Why a business plan?

This document contains detailed information about your business project; it is a kind of action plan that contains details of your company, products and services, sales markets, marketing, etc. Nevertheless, in Russia, not many owners of small and even medium-sized businesses engage in detailed business planning. Many rely on intuition, they prepare the document on demand and do it in a perfunctory manner: for instance, when opening a line of credit in a bank.

However, when a business goes international, everything changes. A business plan becomes the show window of your project. Based on this document foreign government agencies and potential investors will evaluate the prospects of your business and your potential as a founder. It may become key to global success. By the same token, a "weak" and poorly prepared business plan shows that the startup owner is not serious about the project and does not understand how the market operates.

2. How will a business plan help start a company in Switzerland?

To establish a company in Switzerland or become an individual entrepreneur in this country, any person who is not an EU citizen must have a valid residence permit. This is required under the Swiss law. However, if you do not meet these criteria, all is not lost. You still have the right to start a business in Switzerland. To make it possible, you have to show local authorities that your business will have a long-term positive impact on the Swiss economy (both regional and national). If you are successful, you will be issued with a short-term work permit (L permit) for up to 12 months that will have to be renewed a year later.

Legally, the above positive impact is achieved when an entrepreneur contributes to a particular industry in which a certain region specializes. For instance, it is machine-building and the chemical industry in Aargau, life sciences and precision instruments industry in Vaud, the power industry and nanotechnology in Neuchatel, the financial sector in Zug, etc. For more details about the region, you can visit official municipal websites of the cantons and also take a look at our Handbook for Investors. In addition, the new business must by all means envisage job creation, and it is often required that the staff be recruited from the local labor market. The sources of initial capital must be transparent, and the amount of money - sufficient for starting a business. The company must also be prepared to place new orders with Swiss contractors and potential partners, i.e. it must contribute to increasing the country's GDP. Importantly, cantons will not consider projects at their initial stage when there is only an idea of a project. A foreign investor must have an already operating business aiming at entering the global market: such an investor considers Switzerland as a kind of outpost. A clear and specific business plan is the only thing that allows local officials to find out whether your project meets all these requirements.

3. At what stages of establishing a company will a business plan be required?

So you have firmly decided to start a business in Switzerland. Now is exactly the right time to get down to planning, as it will help you already at this initial stage. You need a business plan for the following:

—When elaborating the idea and for internal use. First of all, a business plan is useful for the entrepreneur himself so that he can realistically assess the market share and potential of the project, analyze the competition and develop a pricing methodology. One should start by designing a go-to-market strategy and a strategy for further development on the market.  And determine tactical moves only after that. Obviously, the market data should not be a shot in the dark: a good business plan should be preceded by detailed market research. Planning will help you understand whether your company has what it takes to go global and to make sure whether it is worth the effort anyway. When preparing a financial plan, you will have to estimate and compare the potential gains and possible expenses to be incurred in connection with the project. This will spare you some unpleasant surprises in the future.

— When applying for a work permit. There is a quota on such permits in Switzerland. First, the cantonal authorities and then the federal authorities will have to approve your application. Even if your permit is approved by the canton, the State Secretariat for Migration may veto it.

— When starting a company. Based on your business plan, the canton authorities will estimate the added value that your company will create in Switzerland and will “weigh up” its value for the region's economy. In one of our previous publications, Head of Braingines Alexander Talashov gave advice on how to obtain tax preferences from the Swiss canton authorities. "Companies operating in so-called “foresights” - priority economic sectors of a canton (usually comprising IT, the pharmaceutical industry and biotechnology) enjoy the best conditions," he says. — Your business should have an innovative component, i.e. there should be an innovative solution that has a direct impact on your business model and will ensure success in the future. It works best when the impact of this innovation can be measured: for instance, assessing a reduction in the customers' costs that it generates."

— When opening a business bank account. Standard forms for presenting your business in a credit institution are often available onthe websites of Swiss banks. For instance, here you can download an instruction and a template prepared by Credit Suisse, one of the largest financial holding companies in Switzerland.

4. What information should a business plan contain?

A typical business plan includes the following sections:

  • brief overview (summary);
  • description of the existing business and the management team;
  • information about goods and services:
  • assessment of the market and information about the target audience;
  • description of domestic and foreign competition;
  • marketing plan;
  • infrastructure and technological conditions required for business development;
  • financial and operating plan with a three-year planning horizon (the authorities focus mostly on turnover and profit dynamics as well as the number of new jobs);
  • risk analysis for the project;
  • appendices (if any) — presentations, a product portfolio, etc.

5. What is the difference between a good business plan and a bad one?

"A good business plan has been carefully prepared, is clearly structured, and is written in a simple and competent language," says Patrik Wermelinger, Head of Investment Promotion at Switzerland Global Enterprise. — Most importantly, it has to reflect realistic planning. This is crucial, as canton authorities will be able to renew your L permit only if you manage to achieve the targets stated in the business plan in terms of turnover and the number of new jobs."

Here are some tips that will help you put together a business plan that has a high chance of being successful. You should remember that the more detailed the information you provide on your current business, the better, but it should be stated clearly and succinctly. Keep it short. Try to be as objective as possible in providing general market information and in estimating your market share. The experts working for municipal authorities are highly competent and have examined thousands of similar documents. They are likely to have an idea of your industry already, and will notice if you choose to embroider on any details. Pay attention to what your document looks like: do not play around with fonts, format the fields and keep your headings uniform. In most cantons officials accept business plans written in English. Nevertheless, you should enquire in advance whether the document needs to be translated into one of the national languages of Switzerland.

For additional information about various aspects of doing business in Switzerland, please refer to our Handbook for Investors or contact representatives of Swiss Business Hubs.

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