Sample Business Plan

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Business Plan for a Startup Business Thebusinessplanconsistsofanarrativeandseveralfinancialworksheets.Thenarrativetemplateisthebodyofthebusinessplan.Itcontainsmorethan150questionsdividedintoseveralsections.Workthroughthesectionsinanyorderthatyoulike,exceptfortheExecutiveSummary,whichshouldbedonelast.Skipanyquestionsthatdonotapplytoyourtypeofbusiness.Whenyouarefinishedwritingyourfirstdraft,youllhaveacollectionofsmallessaysonthevarioustopicsofthebusinessplan.Thenyoullwanttoeditthemintoasmoothflowingnarrative.

Therealvalueofcreatingabusinessplanisnotinhavingthefinishedproductinhand;rather,thevalueliesintheprocessofresearchingandthinkingaboutyourbusinessinasystematicway.Theactofplanninghelpsyoutothinkthingsthroughthoroughly,studyandresearchifyouarenotsureofthefacts,andlookatyourideascritically.Ittakestimenow,butavoidscostly,perhapsdisastrous,mistakeslater.

Thisbusinessplanisagenericmodelsuitableforalltypesofbusinesses.However,youshouldmodifyittosuityourparticularcircumstances.Beforeyoubegin,reviewthesectiontitledRefiningthePlan,foundattheend.Itsuggestsemphasizingcertainareasdependinguponyourtypeofbusiness(manufacturing,retail,service,etc.).Italsohastipsforfinetuningyourplantomakeaneffectivepresentationtoinvestorsorbankers.Ifthisiswhyyourecreatingyourplan,payparticularattentiontoyourwritingstyle.Youwillbejudgedbythequalityandappearanceofyourworkaswellasbyyourideas.

Ittypicallytakesseveralweekstocompleteagoodplan.Mostofthattimeisspentinresearchandrethinkingyourideasandassumptions.Butthen,thatsthevalueoftheprocess.Somaketimetodothejobproperly.Thosewhodoneverregrettheeffort.Andfinally,besuretokeepdetailednotesonyoursourcesofinformationandontheassumptionsunderlyingyourfinancialdata.

Ifyouneedassistancewithyourbusinessplan,contacttheSCOREofficeinyourareatosetupabusinesscounselingappointmentwithaSCOREvolunteerorsendyourplanforreviewtoaSCOREcounseloratwww.score.org.Call18006340245togetthecontactinformationfortheSCOREofficeclosesttoyou.

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Business Plan

OWNERS

YourBusinessNameAddressLine1AddressLine2City,STZIPCodeTelephone Fax EMail

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I. TableofContents

I. TableofContents ................................................................................................... 3

II. ExecutiveSummary............................................................................................... 4

III. GeneralCompanyDescription ............................................................................ 5

IV. ProductsandServices............................................................................................ 6

V. MarketingPlan ....................................................................................................... 7

VI. OperationalPlan .................................................................................................. 16

VII. ManagementandOrganization ......................................................................... 21

VIII. PersonalFinancialStatement ............................................................................. 22

IX. StartupExpensesandCapitalization ................................................................ 23

X. FinancialPlan ....................................................................................................... 24

XI. Appendices ........................................................................................................... 27

XII. RefiningthePlan.................................................................................................. 28

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II. ExecutiveSummary

Writethissectionlast.

Wesuggestthatyoumakeittwopagesorfewer.

Includeeverythingthatyouwouldcoverinafiveminuteinterview.

Explainthefundamentalsoftheproposedbusiness:Whatwillyourproductbe?Whowillyourcustomersbe?Whoaretheowners?Whatdoyouthinkthefutureholdsforyourbusinessandyourindustry?

Makeitenthusiastic,professional,complete,andconcise.

Ifapplyingforaloan,stateclearlyhowmuchyouwant,preciselyhowyouaregoingtouseit,andhowthemoneywillmakeyourbusinessmoreprofitable,therebyensuringrepayment.

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III. GeneralCompanyDescription

Whatbusinesswillyoubein?Whatwillyoudo?

MissionStatement:Manycompanieshaveabriefmissionstatement,usuallyin30wordsorfewer,explainingtheirreasonforbeingandtheirguidingprinciples.Ifyouwanttodraftamissionstatement,thisisagoodplacetoputitintheplan,followedby:

CompanyGoalsandObjectives:Goalsaredestinationswhereyouwantyourbusinesstobe.Objectivesareprogressmarkersalongthewaytogoalachievement.Forexample,agoalmightbetohaveahealthy,successfulcompanythatisaleaderincustomerserviceandthathasaloyalcustomerfollowing.Objectivesmightbeannualsalestargetsandsomespecificmeasuresofcustomersatisfaction.

BusinessPhilosophy:Whatisimportanttoyouinbusiness?

Towhomwillyoumarketyourproducts?(StateitbrieflyhereyouwilldoamorethoroughexplanationintheMarketingPlansection).

Describeyourindustry.Isitagrowthindustry?Whatchangesdoyouforeseeintheindustry,shorttermandlongterm?Howwillyourcompanybepoisedtotakeadvantageofthem?

Describeyourmostimportantcompanystrengthsandcorecompetencies.Whatfactorswillmakethecompanysucceed?Whatdoyouthinkyourmajorcompetitivestrengthswillbe?Whatbackgroundexperience,skills,andstrengthsdoyoupersonallybringtothisnewventure?

Legalformofownership:Soleproprietor,Partnership,Corporation,Limitedliabilitycorporation(LLC)?Whyhaveyouselectedthisform?

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IV. ProductsandServices

Describeindepthyourproductsorservices(technicalspecifications,drawings,photos,salesbrochures,andotherbulkyitemsbelonginAppendices).

Whatfactorswillgiveyoucompetitiveadvantagesordisadvantages?Examplesincludelevelofqualityoruniqueorproprietaryfeatures.

Whatarethepricing,fee,orleasingstructuresofyourproductsorservices?

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V. MarketingPlan

Market research - Why? Nomatterhowgoodyourproductandyourservice,theventurecannotsucceedwithouteffectivemarketing.Andthisbeginswithcareful,systematicresearch.Itisverydangeroustoassumethatyoualreadyknowaboutyourintendedmarket.Youneedtodomarketresearchtomakesureyoureontrack.Usethebusinessplanningprocessasyouropportunitytouncoverdataandtoquestionyourmarketingefforts.Yourtimewillbewellspent.

Market research - How? Therearetwokindsofmarketresearch:primaryandsecondary.

Secondaryresearchmeansusingpublishedinformationsuchasindustryprofiles,tradejournals,newspapers,magazines,censusdata,anddemographicprofiles.Thistypeofinformationisavailableinpubliclibraries,industryassociations,chambersofcommerce,fromvendorswhoselltoyourindustry,andfromgovernmentagencies.

Startwithyourlocallibrary.Mostlibrariansarepleasedtoguideyouthroughtheirbusinessdatacollection.Youwillbeamazedatwhatisthere.Therearemoreonlinesourcesthanyoucouldpossiblyuse.Yourchamberofcommercehasgoodinformationonthelocalarea.Tradeassociationsandtradepublicationsoftenhaveexcellentindustryspecificdata.

Primaryresearchmeansgatheringyourowndata.Forexample,youcoulddoyourowntrafficcountataproposedlocation,usetheyellowpagestoidentifycompetitors,anddosurveysorfocusgroupinterviewstolearnaboutconsumerpreferences.Professionalmarketresearchcanbeverycostly,buttherearemanybooksthatshowsmallbusinessownershowtodoeffectiveresearchthemselves.

Inyourmarketingplan,beasspecificaspossible;givestatistics,numbers,andsources.Themarketingplanwillbethebasis,lateron,oftheallimportantsalesprojection.

Economics Factsaboutyourindustry:

Whatisthetotalsizeofyourmarket?

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Whatpercentshareofthemarketwillyouhave?(Thisisimportantonlyifyouthinkyouwillbeamajorfactorinthemarket.)

Currentdemandintargetmarket. Trendsintargetmarketgrowthtrends,trendsinconsumerpreferences,and

trendsinproductdevelopment.

Growthpotentialandopportunityforabusinessofyoursize. Whatbarrierstoentrydoyoufaceinenteringthismarketwithyournew

company?Sometypicalbarriersare:

o Highcapitalcosts

o Highproductioncosts

o Highmarketingcosts

o Consumeracceptanceandbrandrecognition

o Trainingandskills

o Uniquetechnologyandpatents

o Unions

o Shippingcosts

o Tariffbarriersandquotas

Andofcourse,howwillyouovercomethebarriers? Howcouldthefollowingaffectyourcompany?

o Changeintechnology

o Changeingovernmentregulations

o Changeintheeconomy

o Changeinyourindustry

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Product IntheProductsandServicessection,youdescribedyourproductsandservicesasyouseethem.Nowdescribethemfromyourcustomerspointofview.

FeaturesandBenefits

Listallofyourmajorproductsorservices.

Foreachproductorservice:

Describethemostimportantfeatures.Whatisspecialaboutit? Describethebenefits.Thatis,whatwilltheproductdoforthecustomer?

Notethedifferencebetweenfeaturesandbenefits,andthinkaboutthem.Forexample,ahousethatgivesshelterandlastsalongtimeismadewithcertainmaterialsandtoacertaindesign;thoseareitsfeatures.Itsbenefitsincludeprideofownership,financialsecurity,providingforthefamily,andinclusioninaneighborhood.Youbuildfeaturesintoyourproductsothatyoucansellthebenefits.

Whataftersaleserviceswillyougive?Someexamplesaredelivery,warranty,servicecontracts,support,followup,andrefundpolicy.

Customers Identifyyourtargetedcustomers,theircharacteristics,andtheirgeographiclocations,otherwiseknownastheirdemographics.

Thedescriptionwillbecompletelydifferentdependingonwhetheryouplantoselltootherbusinessesordirectlytoconsumers.Ifyousellaconsumerproduct,butsellitthroughachannelofdistributors,wholesalers,andretailers,youmustcarefullyanalyzeboththeendconsumerandthemiddlemanbusinessestowhichyousell.

Youmayhavemorethanonecustomergroup.Identifythemostimportantgroups.Then,foreachcustomergroup,constructwhatiscalledademographicprofile:

Age Gender Location

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Incomelevel Socialclassandoccupation Education Other(specifictoyourindustry) Other(specifictoyourindustry)

Forbusinesscustomers,thedemographicfactorsmightbe:

Industry(orportionofanindustry) Location Sizeoffirm Quality,technology,andpricepreferences Other(specifictoyourindustry) Other(specifictoyourindustry)

Competition Whatproductsandcompanieswillcompetewithyou?

Listyourmajorcompetitors:

(Namesandaddresses)

Willtheycompetewithyouacrosstheboard,orjustforcertainproducts,certaincustomers,orincertainlocations?

Willyouhaveimportantindirectcompetitors?(Forexample,videorentalstorescompetewiththeaters,althoughtheyaredifferenttypesofbusinesses.)

Howwillyourproductsorservicescomparewiththecompetition?

UsetheCompetitiveAnalysistablebelowtocompareyourcompanywithyourtwomostimportantcompetitors.Inthefirstcolumnarekeycompetitivefactors.Sincethesevaryfromoneindustrytoanother,youmaywanttocustomizethelistoffactors.

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InthecolumnlabeledMe,statehowyouhonestlythinkyouwillstackupincustomersminds.Thencheckwhetheryouthinkthisfactorwillbeastrengthoraweaknessforyou.Sometimesitishardtoanalyzeourownweaknesses.Trytobeveryhonesthere.Betteryet,getsomedisinterestedstrangerstoassessyou.Thiscanbearealeyeopener.Andrememberthatyoucannotbeallthingstoallpeople.Infact,tryingtobecausesmanybusinessfailuresbecauseeffortsbecomescatteredanddiluted.Youwantanhonestassessmentofyourfirmsstrongandweakpoints.

Nowanalyzeeachmajorcompetitor.Inafewwords,statehowyouthinktheycompare.

Inthefinalcolumn,estimatetheimportanceofeachcompetitivefactortothecustomer.1=critical;5=notveryimportant.

Table1:CompetitiveAnalysis

Factor Me Strength Weakness CompetitorA CompetitorB ImportancetoCustomer

Products

Price

Quality

Selection

Service

Reliability

Stability

Expertise

CompanyReputation

Location

Appearance

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Factor Me Strength Weakness CompetitorA CompetitorB ImportancetoCustomer

SalesMethod

CreditPolicies

Advertising

Image

Now,writeashortparagraphstatingyourcompetitiveadvantagesanddisadvantages.

Niche Nowthatyouhavesystematicallyanalyzedyourindustry,yourproduct,yourcustomers,andthecompetition,youshouldhaveaclearpictureofwhereyourcompanyfitsintotheworld.

Inoneshortparagraph,defineyourniche,youruniquecornerofthemarket.

Strategy Nowoutlineamarketingstrategythatisconsistentwithyourniche.

Promotion

Howwillyougetthewordouttocustomers?

Advertising:Whatmedia,why,andhowoften?Whythismixandnotsomeother?

Haveyouidentifiedlowcostmethodstogetthemostoutofyourpromotionalbudget?

Willyouusemethodsotherthanpaidadvertising,suchastradeshows,catalogs,dealerincentives,wordofmouth(howwillyoustimulateit?),andnetworkoffriendsorprofessionals?

Whatimagedoyouwanttoproject?Howdoyouwantcustomerstoseeyou?

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Inadditiontoadvertising,whatplansdoyouhaveforgraphicimagesupport?Thisincludesthingslikelogodesign,cardsandletterhead,brochures,signage,andinteriordesign(ifcustomerscometoyourplaceofbusiness).

Shouldyouhaveasystemtoidentifyrepeatcustomersandthensystematicallycontactthem?

PromotionalBudget

Howmuchwillyouspendontheitemslistedabove?

Beforestartup?(Thesenumberswillgointoyourstartupbudget.)

Ongoing?(Thesenumberswillgointoyouroperatingplanbudget.)

Pricing

Explainyourmethodormethodsofsettingprices.Formostsmallbusinesses,havingthelowestpriceisnotagoodpolicy.Itrobsyouofneededprofitmargin;customersmaynotcareasmuchaboutpriceasyouthink;andlargecompetitorscanunderpriceyouanyway.Usuallyyouwilldobettertohaveaveragepricesandcompeteonqualityandservice.

Doesyourpricingstrategyfitwithwhatwasrevealedinyourcompetitiveanalysis?

Compareyourpriceswiththoseofthecompetition.Aretheyhigher,lower,thesame?Why?

Howimportantispriceasacompetitivefactor?Doyourintendedcustomersreallymaketheirpurchasedecisionsmostlyonprice?

Whatwillbeyourcustomerserviceandcreditpolicies?

ProposedLocation

Probablyyoudonothaveapreciselocationpickedoutyet.Thisisthetimetothinkaboutwhatyouwantandneedinalocation.Manystartupsrunsuccessfullyfromhomeforawhile.

Youwilldescribeyourphysicalneedslater,intheOperationalPlansection.Here,analyzeyourlocationcriteriaastheywillaffectyourcustomers.

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Isyourlocationimportanttoyourcustomers?Ifyes,how?

Ifcustomerscometoyourplaceofbusiness:

Isitconvenient?Parking?Interiorspaces?Notoutoftheway?

Isitconsistentwithyourimage?

Isitwhatcustomerswantandexpect?

Whereisthecompetitionlocated?Isitbetterforyoutobenearthem(likecardealersorfastfoodrestaurants)ordistant(likeconveniencefoodstores)?

DistributionChannels

Howdoyousellyourproductsorservices?

Retail

Direct(mailorder,Web,catalog)

Wholesale

Yourownsalesforce

Agents

Independentrepresentatives

Bidoncontracts

Sales Forecast Nowthatyouhavedescribedyourproducts,services,customers,markets,andmarketingplansindetail,itstimetoattachsomenumberstoyourplan.Useasalesforecastspreadsheettoprepareamonthbymonthprojection.Theforecastshouldbebasedonyourhistoricalsales,themarketingstrategiesthatyouhavejustdescribed,yourmarketresearch,andindustrydata,ifavailable.

Youmaywanttodotwoforecasts:1)abestguess,whichiswhatyoureallyexpect,and2)aworstcaselowestimatethatyouareconfidentyoucanreachnomatterwhathappens.

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Remembertokeepnotesonyourresearchandyourassumptionsasyoubuildthissalesforecastandallsubsequentspreadsheetsintheplan.Thisiscriticalifyouaregoingtopresentittofundingsources.

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VI. OperationalPlan

Explainthedailyoperationofthebusiness,itslocation,equipment,people,processes,andsurroundingenvironment.

Production Howandwhereareyourproductsorservicesproduced?

Explainyourmethodsof:

Productiontechniquesandcosts Qualitycontrol Customerservice Inventorycontrol Productdevelopment

Location Whatqualitiesdoyouneedinalocation?Describethetypeoflocationyoullhave.

Physicalrequirements:

Amountofspace Typeofbuilding Zoning Powerandotherutilities

Access:

Isitimportantthatyourlocationbeconvenienttotransportationortosuppliers?

Doyouneedeasywalkinaccess?

Whatareyourrequirementsforparkingandproximitytofreeway,airports,railroads,andshippingcenters?

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Includeadrawingorlayoutofyourproposedfacilityifitisimportant,asitmightbeforamanufacturer.

Construction?Mostnewcompaniesshouldnotsinkcapitalintoconstruction,butifyouareplanningtobuild,costsandspecificationswillbeabigpartofyourplan.

Cost:Estimateyouroccupationexpenses,includingrent,butalsoincludingmaintenance,utilities,insurance,andinitialremodelingcoststomakethespacesuityourneeds.Thesenumberswillbecomepartofyourfinancialplan.

Whatwillbeyourbusinesshours?

Legal Environment Describethefollowing:

Licensingandbondingrequirements Permits Health,workplace,orenvironmentalregulations Specialregulationscoveringyourindustryorprofession Zoningorbuildingcoderequirements Insurancecoverage Trademarks,copyrights,orpatents(pending,existing,orpurchased)

Personnel Numberofemployees Typeoflabor(skilled,unskilled,andprofessional) Whereandhowwillyoufindtherightemployees? Qualityofexistingstaff Paystructure Trainingmethodsandrequirements

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Whodoeswhichtasks? Doyouhaveschedulesandwrittenproceduresprepared? Haveyoudraftedjobdescriptionsforemployees?Ifnot,taketimetowritesome.

Theyreallyhelpinternalcommunicationswithemployees.

Forcertainfunctions,willyouusecontractworkersinadditiontoemployees?Inventory

Whatkindofinventorywillyoukeep:rawmaterials,supplies,finishedgoods? Averagevalueinstock(i.e.,whatisyourinventoryinvestment)? Rateofturnoverandhowthiscomparestotheindustryaverages? Seasonalbuildups? Leadtimeforordering?

Suppliers Identifykeysuppliers:

Namesandaddresses Typeandamountofinventoryfurnished Creditanddeliverypolicies Historyandreliability

Shouldyouhavemorethanonesupplierforcriticalitems(asabackup)?

Doyouexpectshortagesorshorttermdeliveryproblems?

Aresupplycostssteadyorfluctuating?Iffluctuating,howwouldyoudealwithchangingcosts?

Credit Policies Doyouplantoselloncredit?

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Doyoureallyneedtoselloncredit?Isitcustomaryinyourindustryandexpectedbyyourclientele?

Ifyes,whatpolicieswillyouhaveaboutwhogetscreditandhowmuch? Howwillyoucheckthecreditworthinessofnewapplicants? Whattermswillyouofferyourcustomers;thatis,howmuchcreditandwhenis

paymentdue?

Willyouofferpromptpaymentdiscounts?(Hint:Dothisonlyifitisusualandcustomaryinyourindustry.)

Doyouknowwhatitwillcostyoutoextendcredit?Haveyoubuiltthecostsintoyourprices?

ManagingYourAccountsReceivable

Ifyoudoextendcredit,youshoulddoanagingatleastmonthlytotrackhowmuchofyourmoneyistiedupincreditgiventocustomersandtoalertyoutoslowpaymentproblems.Areceivablesaginglookslikethefollowingtable:

Total Current 30Days 60Days 90Days Over90Days

AccountsReceivableAging

Youwillneedapolicyfordealingwithslowpayingcustomers:

Whendoyoumakeaphonecall? Whendoyousendaletter? Whendoyougetyourattorneytothreaten?

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ManagingYourAccountsPayable

Youshouldalsoageyouraccountspayable,whatyouowetoyoursuppliers.Thishelpsyouplanwhomtopayandwhen.Payingtooearlydepletesyourcash,butpayinglatecancostyouvaluablediscountsandcandamageyourcredit.(Hint:Ifyouknowyouwillbelatemakingapayment,callthecreditorbeforetheduedate.)

Doyourproposedvendorsofferpromptpaymentdiscounts?

Apayablesaginglookslikethefollowingtable.

Total Current 30Days 60Days 90Days Over90Days

AccountsPayableAging

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VII. ManagementandOrganization

Whowillmanagethebusinessonadaytodaybasis?Whatexperiencedoesthatpersonbringtothebusiness?Whatspecialordistinctivecompetencies?Isthereaplanforcontinuationofthebusinessifthispersonislostorincapacitated?

Ifyoullhavemorethan10employees,createanorganizationalchartshowingthemanagementhierarchyandwhoisresponsibleforkeyfunctions.

Includepositiondescriptionsforkeyemployees.Ifyouareseekingloansorinvestors,includeresumesofownersandkeyemployees.

Professional and Advisory Support Listthefollowing:

Boardofdirectors Managementadvisoryboard Attorney Accountant Insuranceagent Banker Consultantorconsultants Mentorsandkeyadvisors

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VIII. PersonalFinancialStatement

Includepersonalfinancialstatementsforeachownerandmajorstockholder,showingassetsandliabilitiesheldoutsidethebusinessandpersonalnetworth.Ownerswilloftenhavetodrawonpersonalassetstofinancethebusiness,andthesestatementswillshowwhatisavailable.Bankersandinvestorsusuallywantthisinformationaswell.

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IX. StartupExpensesandCapitalization

Youwillhavemanystartupexpensesbeforeyouevenbeginoperatingyourbusiness.Itsimportanttoestimatetheseexpensesaccuratelyandthentoplanwhereyouwillgetsufficientcapital.Thisisaresearchproject,andthemorethoroughyourresearchefforts,thelesschancethatyouwillleaveoutimportantexpensesorunderestimatethem.

Evenwiththebestofresearch,however,openinganewbusinesshasawayofcostingmorethanyouanticipate.Therearetwowaystomakeallowancesforsurpriseexpenses.Thefirstistoaddalittlepaddingtoeachiteminthebudget.Theproblemwiththatapproach,however,isthatitdestroystheaccuracyofyourcarefullywroughtplan.Thesecondapproachistoaddaseparatelineitem,calledcontingencies,toaccountfortheunforeseeable.Thisistheapproachwerecommend.

Talktootherswhohavestartedsimilarbusinessestogetagoodideaofhowmuchtoallowforcontingencies.Ifyoucannotgetgoodinformation,werecommendaruleofthumbthatcontingenciesshouldequalatleast20percentofthetotalofallotherstartupexpenses.

Explainyourresearchandhowyouarrivedatyourforecastsofexpenses.Givesources,amounts,andtermsofproposedloans.Alsoexplainindetailhowmuchwillbecontributedbyeachinvestorandwhatpercentownershipeachwillhave.

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X. FinancialPlan

Thefinancialplanconsistsofa12monthprofitandlossprojection,afouryearprofitandlossprojection(optional),acashflowprojection,aprojectedbalancesheet,andabreakevencalculation.Togethertheyconstituteareasonableestimateofyourcompanysfinancialfuture.Moreimportant,theprocessofthinkingthroughthefinancialplanwillimproveyourinsightintotheinnerfinancialworkingsofyourcompany.

12-Month Profit and Loss Projection Manybusinessownersthinkofthe12monthprofitandlossprojectionasthecenterpieceoftheirplan.Thisiswhereyouputitalltogetherinnumbersandgetanideaofwhatitwilltaketomakeaprofitandbesuccessful.

Yoursalesprojectionswillcomefromasalesforecastinwhichyouforecastsales,costofgoodssold,expenses,andprofitmonthbymonthforoneyear.

Profitprojectionsshouldbeaccompaniedbyanarrativeexplainingthemajorassumptionsusedtoestimatecompanyincomeandexpenses.

ResearchNotes:Keepcarefulnotesonyourresearchandassumptions,sothatyoucanexplainthemlaterifnecessary,andalsosothatyoucangobacktoyoursourceswhenitstimetoreviseyourplan.

Four-Year Profit Projection (Optional) The12monthprojectionistheheartofyourfinancialplan.TheFourYearProfitprojectionisforthosewhowanttocarrytheirforecastsbeyondthefirstyear.

Ofcourse,keepnotesofyourkeyassumptions,especiallyaboutthingsthatyouexpectwillchangedramaticallyafterthefirstyear.

Projected Cash Flow Iftheprofitprojectionistheheartofyourbusinessplan,cashflowistheblood.Businessesfailbecausetheycannotpaytheirbills.Everypartofyourbusinessplanisimportant,butnoneofitmeansathingifyourunoutofcash.

Thepointofthisworksheetistoplanhowmuchyouneedbeforestartup,forpreliminaryexpenses,operatingexpenses,andreserves.Youshouldkeepupdatingitandusingitafterward.Itwillenableyoutoforeseeshortagesintimetodosomething

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aboutthemperhapscutexpenses,orperhapsnegotiatealoan.Butforemost,youshouldntbetakenbysurprise.

Thereisnogreattricktopreparingit:Thecashflowprojectionisjustaforwardlookatyourcheckingaccount.

Foreachitem,determinewhenyouactuallyexpecttoreceivecash(forsales)orwhenyouwillactuallyhavetowriteacheck(forexpenseitems).

Youshouldtrackessentialoperatingdata,whichisnotnecessarilypartofcashflowbutallowsyoutotrackitemsthathaveaheavyimpactoncashflow,suchassalesandinventorypurchases.

Youshouldalsotrackcashoutlayspriortoopeninginaprestartupcolumn.Youshouldhavealreadyresearchedthoseforyourstartupexpensesplan.

Yourcashflowwillshowyouwhetheryourworkingcapitalisadequate.Clearly,ifyourprojectedcashbalanceevergoesnegative,youwillneedmorestartupcapital.Thisplanwillalsopredictjustwhenandhowmuchyouwillneedtoborrow.

Explainyourmajorassumptions,especiallythosethatmakethecashflowdifferfromtheProfitandLossProjection.Forexample,ifyoumakeasaleinmonthone,whendoyouactuallycollectthecash?Whenyoubuyinventoryormaterials,doyoupayinadvance,upondelivery,ormuchlater?Howwillthisaffectcashflow?

Aresomeexpensespayableinadvance?When?

Arethereirregularexpenses,suchasquarterlytaxpayments,maintenanceandrepairs,orseasonalinventorybuildup,thatshouldbebudgeted?

Loanpayments,equipmentpurchases,andownersdrawsusuallydonotshowonprofitandlossstatementsbutdefinitelydotakecashout.Besuretoincludethem.

Andofcourse,depreciationdoesnotappearinthecashflowatallbecauseyouneverwriteacheckforit.

Opening Day Balance Sheet Abalancesheetisoneofthefundamentalfinancialreportsthatanybusinessneedsforreportingandfinancialmanagement.Abalancesheetshowswhatitemsofvalueare

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heldbythecompany(assets),andwhatitsdebtsare(liabilities).Whenliabilitiesaresubtractedfromassets,theremainderisownersequity.

Useastartupexpensesandcapitalizationspreadsheetasaguidetopreparingabalancesheetasofopeningday.Thendetailhowyoucalculatedtheaccountbalancesonyouropeningdaybalancesheet.

Optional:Somepeoplewanttoaddaprojectedbalancesheetshowingtheestimatedfinancialpositionofthecompanyattheendofthefirstyear.Thisisespeciallyusefulwhensellingyourproposaltoinvestors.

Break-Even Analysis Abreakevenanalysispredictsthesalesvolume,atagivenprice,requiredtorecovertotalcosts.Inotherwords,itsthesaleslevelthatisthedividinglinebetweenoperatingatalossandoperatingataprofit.

Expressedasaformula,breakevenis:

FixedCostsBreakEvenSales=

1VariableCosts

(Wherefixedcostsareexpressedindollars,butvariablecostsareexpressedasapercentoftotalsales.)

Includeallassumptionsuponwhichyourbreakevencalculationisbased.

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XI. Appendices

Includedetailsandstudiesusedinyourbusinessplan;forexample:

Brochuresandadvertisingmaterials Industrystudies Blueprintsandplans Mapsandphotosoflocation Magazineorotherarticles Detailedlistsofequipmentownedortobepurchased Copiesofleasesandcontracts Lettersofsupportfromfuturecustomers Anyothermaterialsneededtosupporttheassumptionsinthisplan Marketresearchstudies Listofassetsavailableascollateralforaloan

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XII. RefiningthePlan

Thegenericbusinessplanpresentedaboveshouldbemodifiedtosuityourspecifictypeofbusinessandtheaudienceforwhichtheplaniswritten.

For Raising Capital ForBankers

Bankerswantassuranceoforderlyrepayment.Ifyouintendusingthisplantopresenttolenders,include:

o Amountofloan

o Howthefundswillbeused

o Whatthiswillaccomplishhowwillitmakethebusinessstronger?

o Requestedrepaymentterms(numberofyearstorepay).Youwillprobablynothavemuchnegotiatingroomoninterestratebutmaybeabletonegotiatealongerrepaymentterm,whichwillhelpcashflow.

o Collateraloffered,andalistofallexistingliensagainstcollateral

ForInvestors

Investorshaveadifferentperspective.Theyarelookingfordramaticgrowth,andtheyexpecttoshareintherewards:

o Fundsneededshortterm

o Fundsneededintwotofiveyears

o Howthecompanywillusethefunds,andwhatthiswillaccomplishforgrowth.

o Estimatedreturnoninvestment

o Exitstrategyforinvestors(buyback,sale,orIPO)

o Percentofownershipthatyouwillgiveuptoinvestors

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o Milestonesorconditionsthatyouwillaccept

o Financialreportingtobeprovided

o Involvementofinvestorsontheboardorinmanagement

For Type of Business Manufacturing

Plannedproductionlevels Anticipatedlevelsofdirectproductioncostsandindirect(overhead)costshow

dothesecomparetoindustryaverages(ifavailable)?

Pricesperproductline Grossprofitmargin,overallandforeachproductline Production/capacitylimitsofplannedphysicalplant Production/capacitylimitsofequipment Purchasingandinventorymanagementprocedures Newproductsunderdevelopmentoranticipatedtocomeonlineafterstartup

ServiceBusinesses

Servicebusinessessellintangibleproducts.Theyareusuallymoreflexiblethanothertypesofbusinesses,buttheyalsohavehigherlaborcostsandgenerallyverylittleinfixedassets.

Whatarethekeycompetitivefactorsinthisindustry? Yourprices Methodsusedtosetprices Systemofproductionmanagement Qualitycontrolprocedures.Standardoracceptedindustryqualitystandards.

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Howwillyoumeasurelaborproductivity? Percentofworksubcontractedtootherfirms.Willyoumakeaprofiton

subcontracting?

Credit,payment,andcollectionspoliciesandprocedures Strategyforkeepingclientbase

HighTechnologyCompanies

Economicoutlookfortheindustry Willthecompanyhaveinformationsystemsinplacetomanagerapidlychanging

prices,costs,andmarkets?

Willyoubeonthecuttingedgewithyourproductsandservices? Whatisthestatusofresearchanddevelopment?Andwhatisrequiredto:

o Bringproduct/servicetomarket?

o Keepthecompanycompetitive?

Howdoesthecompany:o Protectintellectualproperty?

o Avoidtechnologicalobsolescence?

o Supplynecessarycapital?

o Retainkeypersonnel?

Hightechcompaniessometimeshavetooperateforalongtimewithoutprofitsandsometimesevenwithoutsales.Ifthisfitsyoursituation,abankerprobablywillnotwanttolendtoyou.Venturecapitalistsmayinvest,butyourstorymustbeverygood.Youmustdolongertermfinancialforecaststoshowwhenprofittakeoffisexpectedtooccur.Andyourassumptionsmustbewelldocumentedandwellargued.

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RetailBusiness

Companyimage Pricing:

o Explainmarkuppolicies.

o Pricesshouldbeprofitable,competitive,andinaccordancewithcompanyimage.

Inventory:o Selectionandpriceshouldbeconsistentwithcompanyimage.

o Inventorylevel:Findindustryaveragenumbersforannualinventoryturnoverrate(availableinRMAbook).Multiplyyourinitialinventoryinvestmentbytheaverageturnoverrate.Theresultshouldbeatleastequaltoyourprojectedfirstyearscostofgoodssold.Ifitisnot,youmaynothaveenoughbudgetedforstartupinventory.

Customerservicepolicies:Theseshouldbecompetitiveandinaccordwithcompanyimage.

Location:Doesitgivetheexposurethatyouneed?Isitconvenientforcustomers?Isitconsistentwithcompanyimage?

Promotion:Methodsused,cost.Doesitprojectaconsistentcompanyimage? Credit:Doyouextendcredittocustomers?Ifyes,doyoureallyneedto,anddo

youfactorthecostintoprices?