Businessplan for Startup Business

8/12/2019 Businessplan for Startup Business

1/31

Page1of31

Business Plan for a Startup Business

Thebusinessplanconsistsofanarrativeandseveralfinancialworksheets.Thenarrativetemplateisthebodyofthebusinessplan.Itcontainsmorethan150questionsdivided

intoseveralsections.Workthroughthesectionsinanyorderthatyoulike,exceptfor

theExecutiveSummary,whichshouldbedonelast.Skipanyquestionsthatdonotapplytoyourtypeofbusiness.Whenyouarefinishedwritingyourfirstdraft,youllhavea

collectionofsmallessaysonthevarioustopicsofthebusinessplan.Thenyoullwantto

editthemintoasmoothflowingnarrative.

Therealvalueofcreatingabusinessplanisnotinhavingthefinishedproductinhand;

rather,thevalueliesintheprocessofresearchingandthinkingaboutyourbusinessina

systematicway.Theactofplanninghelpsyoutothinkthingsthroughthoroughly,

studyandresearchifyouarenotsureofthefacts,andlookatyourideascritically.It

takestimenow,butavoidscostly,perhapsdisastrous,mistakeslater.

Thisbusinessplanisagenericmodelsuitableforalltypesofbusinesses.However,you

shouldmodifyittosuityourparticularcircumstances.Beforeyoubegin,reviewthe

sectiontitledRefiningthePlan,foundattheend.Itsuggestsemphasizingcertainareasdependinguponyourtypeofbusiness(manufacturing,retail,service,etc.).Italsohas

tipsforfinetuningyourplantomakeaneffectivepresentationtoinvestorsorbankers.

Ifthis

is

why

youre

creating

your

plan,

pay

particular

attention

to

your

writing

style.

Youwillbejudgedbythequalityandappearanceofyourworkaswellasbyyour

ideas.

Ittypicallytakesseveralweekstocompleteagoodplan.Mostofthattimeisspentin

researchandrethinkingyourideasandassumptions.Butthen,thatsthevalueofthe

process.Somaketimetodothejobproperly.Thosewhodoneverregrettheeffort.And

finally,besuretokeepdetailednotesonyoursourcesofinformationandonthe

assumptionsunderlyingyourfinancialdata.

Ifyou

need

assistance

with

your

business

plan,

contact

the

SCORE

office

in

your

area

to

setupabusinesscounselingappointmentwithaSCOREvolunteerorsendyourplan

forreviewtoaSCOREcounseloratwww.score.org.Call18006340245togetthe

contactinformationfortheSCOREofficeclosesttoyou.


2/31

Page2of31

Business Plan

OWNERS

YourBusinessName

AddressLine1

AddressLine2

City,ST ZIPCode

Telephone

Fax

EMail


3/31

Page3of31

I. TableofContentsI. TableofContents ................................................................................................... 3II. ExecutiveSummary............................................................................................... 4III. GeneralCompanyDescription ............................................................................ 5IV. ProductsandServices............................................................................................ 6V. MarketingPlan ....................................................................................................... 7VI.

Operational

Plan .................................................................................................. 16

VII. ManagementandOrganization......................................................................... 21VIII. PersonalFinancialStatement ............................................................................. 22IX. StartupExpensesandCapitalization ................................................................ 23X. FinancialPlan ....................................................................................................... 24XI. Appendices ........................................................................................................... 27XII. RefiningthePlan.................................................................................................. 28


4/31

Page4of31

II. ExecutiveSummaryWrite

this

section

last.

Wesuggestthatyoumakeittwopagesorfewer.

Includeeverythingthatyouwouldcoverinafiveminuteinterview.

Explainthefundamentalsoftheproposedbusiness: Whatwillyourproductbe?Who

willyourcustomersbe?Whoaretheowners?Whatdoyouthinkthefutureholdsfor

yourbusinessandyourindustry?

Makeitenthusiastic,professional,complete,andconcise.

Ifapplyingforaloan,stateclearlyhowmuchyouwant,preciselyhowyouaregoingto

useit,andhowthemoneywillmakeyourbusinessmoreprofitable,therebyensuring

repayment.


5/31

Page5of31

III. GeneralCompanyDescriptionWhat

business

will

you

be

in?

What

will

you

do?

MissionStatement:Manycompanieshaveabriefmissionstatement,usuallyin30

wordsorfewer,explainingtheirreasonforbeingandtheirguidingprinciples.Ifyou

wanttodraftamissionstatement,thisisagoodplacetoputitintheplan,followedby:

CompanyGoalsandObjectives:Goalsaredestinationswhereyouwantyourbusiness

tobe.Objectivesareprogressmarkersalongthewaytogoalachievement.Forexample,

agoalmightbetohaveahealthy,successfulcompanythatisaleaderincustomer

serviceandthathasaloyalcustomerfollowing.Objectivesmightbeannualsalestargets

andsome

specific

measures

of

customer

satisfaction.

BusinessPhilosophy:Whatisimportanttoyouinbusiness?

Towhomwillyoumarketyourproducts?(Stateitbrieflyhereyouwilldoamore

thoroughexplanationintheMarketingPlansection).Describeyourindustry. Isitagrowthindustry?Whatchangesdoyouforeseeinthe

industry,shorttermandlongterm?Howwillyourcompanybepoisedtotake

advantageofthem?

Describeyourmostimportantcompanystrengthsandcorecompetencies.Whatfactors

willmakethecompanysucceed?Whatdoyouthinkyourmajorcompetitivestrengths

willbe?Whatbackgroundexperience,skills,andstrengthsdoyoupersonallybringto

thisnewventure?

Legalformofownership:Soleproprietor,Partnership,Corporation,Limitedliability

corporation(LLC)? Whyhaveyouselectedthisform?


6/31

Page6of31

IV. ProductsandServicesDescribe

in

depth

your

products

or

services

(technical

specifications,

drawings,

photos,

salesbrochures,andotherbulkyitemsbelonginAppendices).

Whatfactorswillgiveyoucompetitiveadvantagesordisadvantages?Examplesinclude

levelofqualityoruniqueorproprietaryfeatures.

Whatarethepricing,fee,orleasingstructuresofyourproductsorservices?


7/31

Page7of31

V. MarketingPlanMarket research - Why?Nomatterhowgoodyourproductandyourservice,theventurecannotsucceed

withouteffectivemarketing.Andthisbeginswithcareful,systematicresearch.Itisvery

dangeroustoassumethatyoualreadyknowaboutyourintendedmarket.Youneedto

domarketresearchtomakesureyoureontrack.Usethebusinessplanningprocessas

youropportunitytouncoverdataandtoquestionyourmarketingefforts.Yourtime

willbewellspent.

Market research - How?

There

are

two

kinds

of

market

research:

primary

and

secondary.

Secondaryresearchmeansusingpublishedinformationsuchasindustryprofiles,trade

journals,newspapers,magazines,censusdata,anddemographicprofiles.Thistypeof

informationisavailableinpubliclibraries,industryassociations,chambersof

commerce,fromvendorswhoselltoyourindustry,andfromgovernmentagencies.

Startwithyourlocallibrary.Mostlibrariansarepleasedtoguideyouthroughtheir

businessdatacollection.Youwillbeamazedatwhatisthere.Therearemoreonline

sourcesthanyoucouldpossiblyuse.Yourchamberofcommercehasgoodinformation

on

the

local

area.

Trade

associations

and

trade

publications

often

have

excellent

industryspecificdata.

Primaryresearchmeansgatheringyourowndata.Forexample,youcoulddoyourown

trafficcountataproposedlocation,usetheyellowpagestoidentifycompetitors,and

dosurveysorfocusgroupinterviewstolearnaboutconsumerpreferences.

Professionalmarketresearchcanbeverycostly,buttherearemanybooksthatshow

smallbusinessownershowtodoeffectiveresearchthemselves.

Inyourmarketingplan,beasspecificaspossible;givestatistics,numbers,andsources.

Themarketing

plan

will

be

the

basis,

later

on,

of

the

all

important

sales

projection.

Economics

Factsaboutyourindustry:

Whatisthetotalsizeofyourmarket?


8/31

Page8of31

Whatpercentshareofthemarketwillyouhave?(Thisisimportantonlyifyouthinkyouwillbeamajorfactorinthemarket.)

Currentdemandintargetmarket. Trendsintargetmarketgrowthtrends,trendsinconsumerpreferences,and

trendsinproductdevelopment.

Growthpotentialandopportunityforabusinessofyoursize. Whatbarrierstoentrydoyoufaceinenteringthismarketwithyournew

company?Sometypicalbarriersare:

o Highcapitalcostso Highproductioncostso Highmarketingcostso Consumeracceptanceandbrandrecognitiono Trainingandskillso Uniquetechnologyandpatentso Unionso Shippingcostso Tariffbarriersandquotas

Andofcourse,howwillyouovercomethebarriers? Howcouldthefollowingaffectyourcompany?

o Changeintechnologyo Changeingovernmentregulationso Changeintheeconomyo Changeinyourindustry


9/31

Page9of31

Product

IntheProductsandServicessection,youdescribedyourproductsandservicesasyouseethem.Nowdescribethemfromyourcustomerspointofview.

FeaturesandBenefitsListallofyourmajorproductsorservices.

Foreachproductorservice:

Describethemostimportantfeatures.Whatisspecialaboutit? Describethebenefits.Thatis,whatwilltheproductdoforthecustomer?

Notethedifferencebetweenfeaturesandbenefits,andthinkaboutthem.Forexample,

ahousethatgivesshelterandlastsalongtimeismadewithcertainmaterialsandtoa

certaindesign;thoseareitsfeatures.Itsbenefitsincludeprideofownership,financial

security,providingforthefamily,andinclusioninaneighborhood.Youbuildfeatures

intoyourproductsothatyoucansellthebenefits.

Whataftersaleserviceswillyougive?Someexamplesaredelivery,warranty,service

contracts,support,followup,andrefundpolicy.

CustomersIdentifyyourtargetedcustomers,theircharacteristics,andtheirgeographiclocations,

otherwiseknownastheirdemographics.

Thedescriptionwillbecompletelydifferentdependingonwhetheryouplantosellto

otherbusinessesordirectlytoconsumers.Ifyousellaconsumerproduct,butsellit

throughachannelofdistributors,wholesalers,andretailers,youmustcarefullyanalyze

boththeendconsumerandthemiddlemanbusinessestowhichyousell.

Youmayhavemorethanonecustomergroup.Identifythemostimportantgroups.

Then,foreachcustomergroup,constructwhatiscalledademographicprofile:

Age Gender Location


10/31

Page10of31

Incomelevel Socialclassandoccupation Education Other(specifictoyourindustry) Other(specifictoyourindustry)

Forbusinesscustomers,thedemographicfactorsmightbe:

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

CompetitionWhatproductsandcompanieswillcompetewithyou?

Listyourmajorcompetitors:

(Namesandaddresses)

Willtheycompetewithyouacrosstheboard,orjustforcertainproducts,certain

customers,orincertainlocations?

Will

you

have

important

indirect

competitors?

(For

example,

video

rental

stores

competewiththeaters,althoughtheyaredifferenttypesofbusinesses.)

Howwillyourproductsorservicescomparewiththecompetition?

UsetheCompetitiveAnalysistablebelowtocompareyourcompanywithyourtwo

mostimportantcompetitors.Inthefirstcolumnarekeycompetitivefactors.Sincethese

varyfromoneindustrytoanother,youmaywanttocustomizethelistoffactors.


11/31

Page11of31

InthecolumnlabeledMe,statehowyouhonestlythinkyouwillstackupincustomers

minds.Thencheckwhetheryouthinkthisfactorwillbeastrengthoraweaknessfor

you.Sometimes

it

is

hard

to

analyze

our

own

weaknesses.

Try

to

be

very

honest

here.

Betteryet,getsomedisinterestedstrangerstoassessyou.Thiscanbearealeyeopener.

Andrememberthatyoucannotbeallthingstoallpeople.Infact,tryingtobecauses

manybusinessfailuresbecauseeffortsbecomescatteredanddiluted.Youwantan

honestassessmentofyourfirmsstrongandweakpoints.

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


12/31

Page12of31

Factor Me Strength Weakness CompetitorA CompetitorB ImportancetoCustomer

SalesMethod

CreditPolicies

Advertising

Image

Now,writeashortparagraphstatingyourcompetitiveadvantagesanddisadvantages.

Niche

Nowthatyouhavesystematicallyanalyzedyourindustry,yourproduct,your

customers,andthecompetition,youshouldhaveaclearpictureofwhereyour

companyfitsintotheworld.

Inoneshortparagraph,defineyourniche,youruniquecornerofthemarket.

Strategy

Nowoutlineamarketingstrategythatisconsistentwithyourniche.

PromotionHowwillyougetthewordouttocustomers?

Advertising:Whatmedia,why,andhowoften?Whythismixandnotsomeother?

Haveyouidentifiedlowcostmethodstogetthemostoutofyourpromotionalbudget?

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

professionals?

Whatimagedoyouwanttoproject?Howdoyouwantcustomerstoseeyou?


13/31

Page13of31

Inadditiontoadvertising,whatplansdoyouhaveforgraphicimagesupport?This

includesthingslikelogodesign,cardsandletterhead,brochures,signage,andinterior

design(if

customers

come

to

your

place

of

business).

Shouldyouhaveasystemtoidentifyrepeatcustomersandthensystematicallycontact

them?

PromotionalBudgetHowmuchwillyouspendontheitemslistedabove?

Beforestartup?(Thesenumberswillgointoyourstartupbudget.)

Ongoing?(Thesenumberswillgointoyouroperatingplanbudget.)

PricingExplainyourmethodormethodsofsettingprices.Formostsmallbusinesses,having

thelowestpriceisnotagoodpolicy.Itrobsyouofneededprofitmargin;customers

maynotcareasmuchaboutpriceasyouthink;andlargecompetitorscanunderprice

youanyway.Usuallyyouwilldobettertohaveaveragepricesandcompeteonquality

andservice.

Doesyour

pricing

strategy

fit

with

what

was

revealed

in

your

competitive

analysis?

Compareyourpriceswiththoseofthecompetition.Aretheyhigher,lower,thesame?

Why?

Howimportantispriceasacompetitivefactor?Doyourintendedcustomersreally

maketheirpurchasedecisionsmostlyonprice?

Whatwillbeyourcustomerserviceandcreditpolicies?

ProposedLocationProbablyyoudonothaveapreciselocationpickedoutyet.Thisisthetimetothink

aboutwhatyouwantandneedinalocation.Manystartupsrunsuccessfullyfromhome

forawhile.

Youwilldescribeyourphysicalneedslater,intheOperationalPlansection.Here,analyzeyourlocationcriteriaastheywillaffectyourcustomers.


14/31

Page14of31

Isyourlocationimportanttoyourcustomers?Ifyes,how?

Ifcustomerscometoyourplaceofbusiness:

Isitconvenient?Parking?Interiorspaces?Notoutoftheway?

Isitconsistentwithyourimage?

Isitwhatcustomerswantandexpect?

Whereisthecompetitionlocated?Isitbetterforyoutobenearthem(likecardealersor

fastfoodrestaurants)ordistant(likeconveniencefoodstores)?

DistributionChannelsHowdoyousellyourproductsorservices?

Retail

Direct(mailorder,Web,catalog)

Wholesale

Yourownsalesforce

Agents

Independentrepresentatives

Bidoncontracts

Sales Forecast

Nowthatyouhavedescribedyourproducts,services,customers,markets,and

marketingplansindetail,itstimetoattachsomenumberstoyourplan.Useasales

forecastspreadsheet

to

prepare

amonth

by

month

projection.

The

forecast

should

be

basedonyourhistoricalsales,themarketingstrategiesthatyouhavejustdescribed,

yourmarketresearch,andindustrydata,ifavailable.

Youmaywanttodotwoforecasts:1)a bestguess ,whichiswhatyoureallyexpect,

and2)a worstcase lowestimatethatyouareconfidentyoucanreachnomatterwhat

happens.


15/31

Page15of31

Remembertokeepnotesonyourresearchandyourassumptionsasyoubuildthissales

forecastandallsubsequentspreadsheetsintheplan.Thisiscriticalifyouaregoingto

presentit

to

funding

sources.


16/31

Page16of31

VI. OperationalPlanExplain

the

daily

operation

of

the

business,

its

location,

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?


17/31

Page17of31

Includeadrawingorlayoutofyourproposedfacilityifitisimportant,asitmightbefor

amanufacturer.

Construction?Mostnewcompaniesshouldnotsinkcapitalintoconstruction,butifyou

areplanningtobuild,costsandspecificationswillbeabigpartofyourplan.

Cost:Estimateyouroccupationexpenses,includingrent,butalsoincluding

maintenance,utilities,insurance,andinitialremodelingcoststomakethespacesuit

yourneeds.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


18/31

Page18of31

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,howwouldyoudealwith

changingcosts?

Credit Policies

Doyouplantoselloncredit?


19/31

Page19of31

Doyoureallyneedtoselloncredit?Isitcustomaryinyourindustryandexpectedbyyourclientele?

Ifyes,whatpolicieswillyouhaveaboutwhogetscreditandhowmuch? Howwillyoucheckthecreditworthinessofnewapplicants? Whattermswillyouofferyourcustomers;thatis,howmuchcreditandwhenis

paymentdue?

Willyouofferpromptpaymentdiscounts?(Hint:Dothisonlyifitisusualandcustomaryinyourindustry.)

Doyouknowwhatitwillcostyoutoextendcredit?Haveyoubuiltthecostsintoyourprices?

ManagingYourAccountsReceivableIfyoudoextendcredit,youshoulddoanagingatleastmonthlytotrackhowmuchof

yourmoneyistiedupincreditgiventocustomersandtoalertyoutoslowpayment

problems.Areceivablesaginglookslikethefollowingtable:

Total Current 30Days 60Days 90Days Over90DaysAccountsReceivableAging

Youwillneedapolicyfordealingwithslowpayingcustomers:

Whendoyoumakeaphonecall? Whendoyousendaletter? Whendoyougetyourattorneytothreaten?


20/31

Page20of31

ManagingYourAccountsPayableYoushouldalsoageyouraccountspayable,whatyouowetoyoursuppliers.Thishelps

youplanwhomtopayandwhen.Payingtooearlydepletesyourcash,butpayinglate

cancostyouvaluablediscountsandcandamageyourcredit.(Hint:Ifyouknowyou

willbelatemakingapayment,callthecreditorbeforetheduedate.)

Doyourproposedvendorsofferpromptpaymentdiscounts?

Apayablesaginglookslikethefollowingtable.

Total Current 30Days 60Days 90Days Over90DaysAccountsPayableAging


21/31

Page21of31

VII. ManagementandOrganizationWhowillmanagethebusinessonadaytodaybasis?Whatexperiencedoesthatperson

bringtothebusiness?Whatspecialordistinctivecompetencies?Isthereaplanfor

continuationofthebusinessifthispersonislostorincapacitated?

Ifyoullhavemorethan10employees,createanorganizationalchartshowingthe

managementhierarchyandwhoisresponsibleforkeyfunctions.

Includepositiondescriptionsforkeyemployees.Ifyouareseekingloansorinvestors,

includeresumesofownersandkeyemployees.

Professional and Advisory SupportListthefollowing:

Boardofdirectors Managementadvisoryboard Attorney Accountant Insuranceagent Banker Consultantorconsultants Mentorsandkeyadvisors


22/31

Page22of31

VIII.PersonalFinancialStatementInclude

personal

financial

statements

for

each

owner

and

major

stockholder,

showing

assetsandliabilitiesheldoutsidethebusinessandpersonalnetworth.Ownerswill

oftenhavetodrawonpersonalassetstofinancethebusiness,andthesestatementswill

showwhatisavailable.Bankersandinvestorsusuallywantthisinformationaswell.


23/31

Page23of31

IX. StartupExpensesandCapitalizationYou

will

have

many

startup

expenses

before

you

even

begin

operating

your

business.

Itsimportanttoestimatetheseexpensesaccuratelyandthentoplanwhereyouwillget

sufficientcapital.Thisisaresearchproject,andthemorethoroughyourresearch

efforts,thelesschancethatyouwillleaveoutimportantexpensesorunderestimate

them.

Evenwiththebestofresearch,however,openinganewbusinesshasawayofcosting

morethanyouanticipate.Therearetwowaystomakeallowancesforsurprise

expenses.Thefirstistoaddalittlepaddingtoeachiteminthebudget.Theproblem

withthatapproach,however,isthatitdestroystheaccuracyofyourcarefullywrought

plan.Thesecondapproachistoaddaseparatelineitem,calledcontingencies,toaccountfortheunforeseeable.Thisistheapproachwerecommend.

Talktootherswhohavestartedsimilarbusinessestogetagoodideaofhowmuchto

allowforcontingencies.Ifyoucannotgetgoodinformation,werecommendaruleof

thumbthatcontingenciesshouldequalatleast20percentofthetotalofallotherstart

upexpenses.

Explainyourresearchandhowyouarrivedatyourforecastsofexpenses.Givesources,

amounts,andtermsofproposedloans.Alsoexplainindetailhowmuchwillbe

contributedbyeachinvestorandwhatpercentownershipeachwillhave.


24/31

Page24of31

X. FinancialPlanThe

financial

plan

consists

of

a12

month

profit

and

loss

projection,

afour

year

profit

andlossprojection(optional),acashflowprojection,aprojectedbalancesheet,anda

breakevencalculation.Togethertheyconstituteareasonableestimateofyour

companysfinancialfuture.Moreimportant,theprocessofthinkingthroughthefinancialplanwillimproveyourinsightintotheinnerfinancialworkingsofyour

company.

12-Month Profit and Loss Projection

Manybusinessownersthinkofthe12monthprofitandlossprojectionasthe

centerpieceoftheirplan.Thisiswhereyouputitalltogetherinnumbersandgetan

ideaofwhatitwilltaketomakeaprofitandbesuccessful.

Yoursalesprojectionswillcomefromasalesforecastinwhichyouforecastsales,costof

goodssold,expenses,andprofitmonthbymonthforoneyear.

Profitprojectionsshouldbeaccompaniedbyanarrativeexplainingthemajor

assumptionsusedtoestimatecompanyincomeandexpenses.

ResearchNotes:Keepcarefulnotesonyourresearchandassumptions,sothatyoucan

explainthemlaterifnecessary,andalsosothatyoucangobacktoyoursourceswhen

itstimetoreviseyourplan.

Four-Year Profit Projection (Optional)

The12monthprojectionistheheartofyourfinancialplan.TheFourYearProfit

projectionisforthosewhowanttocarrytheirforecastsbeyondthefirstyear.

Ofcourse,keepnotesofyourkeyassumptions,especiallyaboutthingsthatyouexpect

willchangedramaticallyafterthefirstyear.

Projected Cash Flow

Iftheprofitprojectionistheheartofyourbusinessplan,cashflowistheblood.

Businessesfailbecausetheycannotpaytheirbills.Everypartofyourbusinessplanis

important,butnoneofitmeansathingifyourunoutofcash.

Thepointofthisworksheetistoplanhowmuchyouneedbeforestartup,for

preliminaryexpenses,operatingexpenses,andreserves.Youshouldkeepupdatingit

andusingitafterward.Itwillenableyoutoforeseeshortagesintimetodosomething


25/31

Page25of31

aboutthemperhapscutexpenses,orperhapsnegotiatealoan.Butforemost,you

shouldntbetakenbysurprise.

Thereisnogreattricktopreparingit: Thecashflowprojectionisjustaforwardlookat

yourcheckingaccount.

Foreachitem,determinewhenyouactuallyexpecttoreceivecash(forsales)orwhen

youwillactuallyhavetowriteacheck(forexpenseitems).

Youshouldtrackessentialoperatingdata,whichisnotnecessarilypartofcashflowbut

allowsyoutotrackitemsthathaveaheavyimpactoncashflow,suchassalesand

inventorypurchases.

Youshouldalsotrackcashoutlayspriortoopeninginaprestartupcolumn.You

shouldhavealreadyresearchedthoseforyourstartupexpensesplan.

Yourcashflowwillshowyouwhetheryourworkingcapitalisadequate.Clearly,if

yourprojectedcashbalanceevergoesnegative,youwillneedmorestartupcapital.

Thisplanwillalsopredictjustwhenandhowmuchyouwillneedtoborrow.

Explainyourmajorassumptions,especiallythosethatmakethecashflowdifferfrom

theProfitandLossProjection.Forexample,ifyoumakeasaleinmonthone,whendoyouactuallycollectthecash?Whenyoubuyinventoryormaterials,doyoupayin

advance,upondelivery,ormuchlater?Howwillthisaffectcashflow?

Aresomeexpensespayableinadvance?When?

Arethereirregularexpenses,suchasquarterlytaxpayments,maintenanceandrepairs,

orseasonalinventorybuildup,thatshouldbebudgeted?

Loanpayments,equipmentpurchases,andownersdrawsusuallydonotshowon

profitandlossstatementsbutdefinitelydotakecashout.Besuretoincludethem.

Andof

course,

depreciation

does

not

appear

in

the

cash

flow

at

all

because

you

never

writeacheckforit.

Opening Day Balance Sheet

Abalancesheetisoneofthefundamentalfinancialreportsthatanybusinessneedsfor

reportingandfinancialmanagement. Abalancesheetshowswhatitemsofvalueare


26/31

Page26of31

heldbythecompany(assets),andwhatitsdebtsare(liabilities).Whenliabilitiesare

subtractedfromassets,theremainderisownersequity.

Useastartupexpensesandcapitalizationspreadsheetasaguidetopreparingabalance

sheetasofopeningday.Thendetailhowyoucalculatedtheaccountbalancesonyour

openingdaybalancesheet.

Optional: Somepeoplewanttoaddaprojectedbalancesheetshowingtheestimated

financialpositionofthecompanyattheendofthefirstyear.Thisisespeciallyuseful

whensellingyourproposaltoinvestors.

Break-Even Analysis

Abreak

even

analysis

predicts

the

sales

volume,

at

agiven

price,

required

to

recover

totalcosts.Inotherwords,itsthesaleslevelthatisthedividinglinebetweenoperating

atalossandoperatingataprofit.

Expressedasaformula,breakevenis:

FixedCostsBreakEvenSales =

1 VariableCosts

(Wherefixedcostsareexpressedindollars,butvariablecostsareexpressedasapercent

oftotalsales.)

Includeallassumptionsuponwhichyourbreakevencalculationisbased.


27/31

Page27of31

XI. AppendicesInclude

details

and

studies

used

in

your

business

plan;

for

example:

Brochuresandadvertisingmaterials Industrystudies Blueprintsandplans Mapsandphotosoflocation Magazineorotherarticles Detailedlistsofequipmentownedortobepurchased Copiesofleasesandcontracts Lettersofsupportfromfuturecustomers Anyothermaterialsneededtosupporttheassumptionsinthisplan Marketresearchstudies Listofassetsavailableascollateralforaloan


28/31

Page28of31

XII. RefiningthePlanThe

generic

business

plan

presented

above

should

be

modified

to

suit

your

specific

type

ofbusinessandtheaudienceforwhichtheplaniswritten.

For Raising Capital

ForBankers Bankerswantassuranceoforderlyrepayment.Ifyouintendusingthisplanto

presenttolenders,include:

o Amountofloano Howthefundswillbeusedo Whatthiswillaccomplishhowwillitmakethebusinessstronger?o Requestedrepaymentterms(numberofyearstorepay).Youwill

probablynothavemuchnegotiatingroomoninterestratebutmaybeable

tonegotiatealongerrepaymentterm,whichwillhelpcashflow.

o Collateraloffered,andalistofallexistingliensagainstcollateralForInvestors

Investorshaveadifferentperspective.Theyarelookingfordramaticgrowth,andtheyexpecttoshareintherewards:

o Fundsneededshorttermo Fundsneededintwotofiveyearso Howthecompanywillusethefunds,andwhatthiswillaccomplishfor

growth.

o Estimatedreturnoninvestmento Exitstrategyforinvestors(buyback,sale,orIPO)o Percentofownershipthatyouwillgiveuptoinvestors


29/31

Page29of31

o Milestonesorconditionsthatyouwillaccepto Financialreportingtobeprovidedo Involvementofinvestorsontheboardorinmanagement

For Type of Business

Manufacturing Plannedproductionlevels Anticipatedlevelsofdirectproductioncostsandindirect(overhead)costshow

dothesecomparetoindustryaverages(ifavailable)?

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

ServiceBusinesses Servicebusinessessellintangibleproducts.Theyareusuallymoreflexiblethan

othertypesofbusinesses,buttheyalsohavehigherlaborcostsandgenerally

verylittleinfixedassets.

Whatarethekeycompetitivefactorsinthisindustry? Yourprices Methodsusedtosetprices Systemofproductionmanagement Qualitycontrolprocedures.Standardoracceptedindustryqualitystandards.


30/31

Page30of31

Howwillyoumeasurelaborproductivity? Percentofworksubcontractedtootherfirms.Willyoumakeaprofiton

subcontracting?

Credit,payment,andcollectionspoliciesandprocedures Strategyforkeepingclientbase

HighTechnologyCompanies Economicoutlookfortheindustry Willthecompanyhaveinformationsystemsinplacetomanagerapidlychangingprices,costs,andmarkets? Willyoubeonthecuttingedgewithyourproductsandservices? Whatisthestatusofresearchanddevelopment?Andwhatisrequiredto:

o Bringproduct/servicetomarket?o Keepthecompanycompetitive?

Howdoesthecompany:o Protectintellectualproperty?o Avoidtechnologicalobsolescence?o Supplynecessarycapital?o Retainkeypersonnel?

Hightechcompaniessometimeshavetooperateforalongtimewithoutprofitsand

sometimesevenwithoutsales.Ifthisfitsyoursituation,abankerprobablywillnot

wanttolendtoyou.Venturecapitalistsmayinvest,butyourstorymustbeverygood.

Youmustdolongertermfinancialforecaststoshowwhenprofittakeoffisexpectedto

occur.Andyourassumptionsmustbewelldocumentedandwellargued.


31/31

Page31of31

RetailBusiness Companyimage Pricing:

o Explainmarkuppolicies.o Pricesshouldbeprofitable,competitive,andinaccordancewithcompany

image.

Inventory:o Selectionandpriceshouldbeconsistentwithcompanyimage.o Inventorylevel:Findindustryaveragenumbersforannualinventory

turnoverrate(availableinRMAbook).Multiplyyourinitialinventory

investmentbytheaverageturnoverrate.Theresultshouldbeatleast

equaltoyourprojectedfirstyearscostofgoodssold.Ifitisnot,youmay

nothaveenoughbudgetedforstartupinventory.

Customerservicepolicies:Theseshouldbecompetitiveandinaccordwithcompanyimage.

Location:Doesitgivetheexposurethatyouneed?Isitconvenientforcustomers?Isitconsistentwithcompanyimage?

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

youfactorthecostintoprices?

Documents

Businessplan for Startup Business