Rural Entrepreneurs - Writing Your Small Business Plan

STEPSTOSUCCESSFORRURALENTREPRENEURS: WRITINGYOURSMALLBUSINESSPLAN PREPAREDFOR U.S.DEPARTMENTOFCOMMERCEECONOMICDEVELOPMENTADMINISTRATION MARCH2008

UniversityofAlaskaCenterforEconomicDevelopment 3211ProvidenceDrive Anchorage,AK99508 9077865444 http://ced.uaa.alaska.edu/

OthertitlesintheStepsToSuccessForRuralEntrepreneurseries StartingaBedandBreakfast StartinganEcotourismBusinessinAlaska StartingaFishProcessingPlant StartingaRuralAlaskaLodge StartingaSmallEngineRepairShop StartingaSmallRentalBusiness StartingaSmallRestaurant

ACKNOWLEDGEMENTSThishandbookwasdesignedandauthoredbyChristiBell,LindaKetchum,andJohnEric Humphries.WeappreciateandacknowledgegraphicdesignassistancebyClemencia MerrilloftheInstituteofEconomicandSocialResearch.OurgratitudealsotoAndrew Crow,AnnMarbourg,andWillFischer,whohelpededitandpreparethereviewdrafts. Weverymuchappreciatethefinancialsupportofoursponsor,theU.S.Departmentof CommerceEconomicDevelopmentAdministration,whomadethisprojectpossible.The statements,findings,conclusions,andrecommendationsarethoseoftheauthorsand donotnecessarilyreflecttheviewsoftheEconomicDevelopmentAdministration.

TABLEOFCONTENTS INTRODUCTION........................................................................................................................ 1 Welcometothishandbook................................................................................................... 1 Entrepreneurialspirit............................................................................................................ 1 Successfactors...................................................................................................................... 2 StartingabusinessinruralAlaska ........................................................................................ 2 PERSONALGOALSANDSKILLS.............................................................................................. 5 Whydoyouwanttogointobusiness?................................................................................. 5 Isstartingyourownbusinessrightforyou?......................................................................... 5 Whatskillsdoyouhaveandwhatwillyouneedhelpwith?................................................ 6 THEBUSINESSPLAN................................................................................................................ 8 Whyshouldyouwriteabusinessplan?................................................................................ 8 Whydoyouneedthishandbook? ........................................................................................ 9 Isyourideafeasible? ............................................................................................................ 9 Businessplanoutline ............................................................................................................ 12 STEP1EXECUTIVESUMMARY............................................................................................ 14 Preparingtowriteastrongexecutivesummary .................................................................. 14 Writingtheexecutivesummary............................................................................................ 16 STEP2BUSINESSDESCRIPTION......................................................................................... 17 Gatheringinformationforthebusinessdescriptionsection................................................ 17 Writingthebusinessdescription .......................................................................................... 18 STEP3INDUSTRYOVERVIEW ............................................................................................ 21 Gatheringinformationfortheindustryoverviewsection.................................................... 21 Writingtheindustryoverview .............................................................................................. 22 STEP4MARKETANALYSIS.................................................................................................. 24 Gatheringinformationforthemarketanalysissection........................................................ 24 Writingthemarketanalysis .................................................................................................. 26 STEP5COMPETITIVEANALYIS.......................................................................................... 28 Gatheringinformationforthecompetitiveanalysissection................................................ 28 Writingthecompetitiveanalysis .......................................................................................... 30 SWOTanalysis....................................................................................................................... 32 STEP6MARKETINGSTRATEGY ......................................................................................... 34 Gatheringinformationforthemarketingstrategysection .................................................. 34 Writingthemarketingstrategy............................................................................................. 36

WritingYourSmallBusinessPlan

STEP7OWNERSHIP,STAFFING,ANDMANAGEMENTPLAN......................................... 38 Gatheringinformationfortheownership,staffing,andmanagementplansection ........... 38 Writingtheownership,staffing,andmanagementplan...................................................... 40 STEP8FINANCIALPLAN...................................................................................................... 42 Gatheringinformationonyourbusinessstartup ................................................................. 42 Gatheringinformationonyourbusinessoperations............................................................ 43 Writingthefinancialplan...................................................................................................... 48 Financialmanagementofyourbusiness .............................................................................. 49 STEP9IMPLEMENTATIONSUMMARY .............................................................................. 51 STEP10CONCLUDINGCOMMENTS.................................................................................... 53 APPENDICES Estimatedstartupcostsworksheet .................................................................................... 57 Estimatedrevenueworksheet............................................................................................. 58 Estimatedfixedcostsworksheet ......................................................................................... 59 Estimatedvariablecostsworksheet .................................................................................... 60 Profitandlossstatement..................................................................................................... 61 Balancesheet....................................................................................................................... 62 Cashflowstatement ............................................................................................................ 63 GLOSSARY.................................................................................................................................. 64 ADDITIONALSOURCESOFINFORMATION FreepublicationsforAlaskasmallbusinessowners............................................................ 66 Otherpublications ............................................................................................................... 66 AlaskaRegionalDevelopmentOrganizations(ARDORs) ..................................................... 67 Othersmallbusinessresources ........................................................................................... 68


INTRODUCTION WelcometothishandbookEconomicdevelopmentisallaboutpeople.Peoplearethereasonweseekeconomic growth.Peopleintroducetheideasandinnovationsthatdriveoureconomies.Formany years,entrepreneurshiphasbeenthedrivingforcebehindtheU.S.economy.Where entrepreneurshipisstrong,youfindselfsufficientpeoplelivinginhealthycommunities. InAlaska,theruraleconomyhasbeenbasedmostlyonlargescaleresourceproduction andgovernmentspending.Often,abigshareofthismoneyisspentoutsidethe communityandeventhestate.Entrepreneurshiphasanimportantroletoplayinthe futureoftheruralAlaskaeconomy,andyourbusinesscanbeapartofthat. Whetheryourgoalinstartingyourownbusinessistostayandmakealivinginyourown communityorpursueaninnovativeideawiththepotentialforglobalcommercialization, thishandbookwilltakeyouthroughtheprocessofdevelopingyourbusinessideaintoa businessplan.

EntrepreneurialspiritTheindigenousingenuityofthefirstAlaskansenabledthemtosurviveandbuild communitiesinremoteplaceswithaharshclimate.Theydidthisbymasteringavariety ofsciencestocreatepracticalobjectstools,containers,weapons,watercraft,and clothinguniquelysuitedtotheirenvironment. Alaskascommunitiescontinuetofacechallenges,butthechallengespresentedby todayschangingworldalsobringnewopportunities.Technologydevelopmentshave introducedanewsetofpowerfulbusinesstoolsandgreateraccesstoglobalmarkets. Therisingcostoffuelhascausedhardshipthroughoutruralareas,creatingincreased interestinalternativeenergy.ClimatechangeisforcingAlaskanstoadjusttoadifferent reality,whichcreatesopportunitiesforinnovativeandadaptivethinkers.Thefutureis fullofpossibilitiesforAlaskanentrepreneurslikeyou. Peoplewithentrepreneurialspiritareresilient,creative,andteamoriented.Rural Alaskanshavealreadydemonstratedentrepreneurialspiritwiththeirtraditionof creativityandadaptation.Alaskaspeoplehaveunlimitedcapacitytoinventaself sufficientandhealthyfuturefortheircommunities.


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SuccessfactorsSuccessinbusinessresultsfromacombinationoffactors.Ifyouwantto increaseyourchanceofsuccess,focusonthefollowing: Identifyarealbusinessopportunity.Agoodideaisnotenough.Youshouldhave evidencethatpeoplewantandwillpayforwhatyouareselling.Taketimeto investigatewhatyourprospectivecustomeriswillingtobuyandhowmuchthey willpay. Stayfocused.Ifyouconcentrateyoureffortsontherealbusinessopportunity, youwilldobetterthanabusinessthattriestodoeverythingforeverybody. Buildtherightteam.Successfulbusinessesareateameffort.Rarelycanone persondoitall.Onyourteamyouneedsomeonewiththerighttechnicalskills, someonewithaflairformarketing,andsomeonewhocancompetentlymanage thefinancialaffairsofthebusiness.Aninvestorwillalwayschooseanaverage ideawithafirstclassteamoverafirstclassideawithanaverageteam. Provideexcellentcustomerservice.Ifyoushowyourcustomersyoucareabout themandputtheirneedsfirst,theywillkeepcomingbackandalsotelltheir friendsaboutyou. Developasolidbusinessplan.Learnfromyourexperiencesandplansome more.Ifyoudoso,youshouldbeabletoanswerthethreekeyquestions 1 : 1. Areyourgoalswelldefined?Doyouknowwhyyouaregoinginto business,howlargeyouwantittobe,andwhatyourtoleranceforriskis? 2. Doyouhavetherightstrategy?Whatwilltheprofitabilityandgrowth potentialofyourbusinessbe?Whatisthelikelyrateofgrowth?Areyou payingattentiontothebalancesheetratherthantheprofits? 3. Canyoucarryoutthestrategy?Doyouhavethehumanandfinancial resourcesyouneed?Whatwillyourrolebe?Whatprofessionalorhired helpwillyourequireforsuccess?

StartingabusinessinruralAlaskaWhiletheabovefactorsareimportanttobusinesssuccessingeneral,thereareother factorsspecifictoAlaskayoushouldconsider.A2007surveyofsmallbusinessesinrural Alaska 2 foundthatbusinessesinsmallcommunitiesherefacethesamechallengesas mostbusinessesbutunderuniquecircumstances. 1 2

TheQuestionsEveryEntrepreneurMustAnswer,AmarBhide,HarvardBusinessReview,NovemberDecember1996 ViableBusinessEnterprisesforRuralAlaska(ViBEs),http://ced.uaa.aslaka.edu/vibes/index.htm.


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Commonchallengesinstartinganewbusiness Findingtrainingonbusinessmanagement Identifyingamarketandresearchingmarketdemand Establishinginanappropriatelocation Settingupandobtaininglicensing,permitsandinsurance Findingsuppliers Obtainingandmaintaininginventory Hiringemployees Marketingthebusiness,includingproductdevelopmentandadvertising Managingfinances,especiallywithnopriorexperience Obtainingstartupcapital

Commonchallengesinrunninganewbusiness Obtainingthenecessarylicensesandpermits Providingcustomerservice Buildingarelationshipwiththecommunity Hiringandsupervisingemployees Competitionfromotherbusinesses Obtainingorupdatingtheneededtechnology Managingcashflow Growingthebusiness Uniquecircumstancesthatpresentchallenges Smallmarkets(usuallyfamilyandfriends) Remotelocation Highcosts Harshclimate

Advantages Mostofushaveheardthatbusinesssuccessisallaboutlocation,location,location. The2007studymentionedonpage2alsoidentifiedlocationasanimportantfactor.In Alaska,yourchancesofsuccessincreaseifyourlocation: WritingYourSmallBusinessPlan Isclosetonationalparks Includesstronglocalcommercialfisheries HasrelativelylowtravelcoststoAnchorage

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Remembertheseareonlyadvantages.Ifnoneoftheaboveappliestoyourbusiness,this doesnotmeanyoucannotbesuccessful.Youwillultimatelyneedtoidentifytheunique advantagesthatyoucanprovidethatapplytoyourbusinessidea. Lessonsfromcasestudiesofruralbusinesses Thefollowingisasummaryoflessonslearnedbythe23ruralbusinesses profiledintheViBEsreport: Investigate.Takeahardlookatwhethertherewillbeenoughdemandforwhat youplantooffer.Identifyeitheraneededserviceoranopportunityinagrowing industry. Plan,plan,plan.Drawupadetailedbusinessplanthataccountsforallaspectsof thebusiness,includingexpenses,estimatedcashflow,managementandtraining ofemployees,andmarketingstrategies. Seekoutprofessionals.Getexperthelpwheneverpossible.Haveexperiencein managingabusinessorgettraining. Useyourfinancials.Becarefulabouthowmuchdebtyoutakeon,and determinewhetheryoucanstillmakedebtpaymentsifyourbusinessslows down.Findoutaboutgrantprograms. Recognizeyourlimitations.Dontexpandtoofast. Makethemostofyourresources,andinvolvefamilymembersinthebusiness. Getcommunitysupport,hirelocalpeoplewheneverpossible,anddevelopgood relationshipswithotherlocalbusinesses. Bepreparedtodealwithtransportation,weather,communication,andother kindsofdifficulties. Workhard,lovewhatyoudo,andalwaysprovidegoodcustomerservice.


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PERSONALGOALSANDSKILLS Whydoyouwanttogointobusiness?Beforestartingtowriteabusinessplan,youshouldknowwhatyourgoalsare,what skillsyoubringtothebusiness,andwhatresourcesarereadilyavailable. Itsimportanttounderstandyourreasonforstartingyourownbusiness,becausethis affectsthedecisionsyouwillmake.Mostpeoplegointobusinessforoneofthe followingreasons: Tomakemoney Toliveacertainlifestyle Tohelpthecommunity

Whatisyourprimarymotivationforstartingyourbusiness?

Isstartingyourownbusinessrightforyou?Startingabusinessisnotforeveryone.Youshouldgivesomethoughtto whetherornotthisistherightpathforyou. Areyoupassionateaboutyouridea?Doyoureallycareabouttheproductor serviceyouwanttosell?Doyouhavethedriveandambitiontomakeita reality? Areyouwillingtotakecalculatedrisks?Andcanyoulookatyourmistakesas learningexperiencesnotfailure,butfeedback? Areyouabletoworkhardforlonghours?Startingandrunningyourown businessisnota40houraweekjobwithregularhours.Youllspendmuchof yourtimeoutinyourcommunitysellingyourproductorserviceandthengoing hometotakecareofallthatpaperwork.Whileyouareestablishingyour business,youmaynotgetanytimeoffordrawaregularsalary. Areyouselfconfident?Doyouhavepriorexperience?Confidenceand experiencewillhelpyouweatherthedifficulttimesandovercomemistakesyou willmake.Experiencebothgoodandbadiswhatmakesyouabetter businessperson. Doyouhaveselfdiscipline?Canyoumakedecisionsandactonthemquickly? Canyoustayontopofthecriticaldetails? Isstabilityimportanttoyou?Ifyouneedasteadypaycheck,insurance,etc.,you mightbebetteroffworkinginsomebodyelsesbusiness.


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ConsiderwhetherthefollowingstatementsapplytoyouandcircleYesorNo:Imaselfstarter. YN YN YN YN Icanmakegooddecisionsquickly.

Ihaveexperienceinmyfieldofbusiness. Ienjoymychosenbusiness.

Imwillingtosacrificeasteadyincometorunmyownbusiness. YN Imreadyforayearroundcommitmenttomynewbusiness. Icangetalongwithdifferentpersonalities. YN YN YN YN YN YN YN YN YN YN

Impreparedtowork12hoursaday,6or7daysaweek. Ienjoytakingcharge.

IcanfindpeoplewiththeskillsIdonthave. Imstronglymotivatedtorunmyownbusiness. Impatient.

Imconfidentinmyabilitytosucceed. Ihavegoodorganizationalskills.

Imindependent,creative,innovative,andcompetitive.

IfmostorallofyourresponseswereYes,youprobablyhavewhatittakestorunyour ownbusiness.Eventhen,thereisnoguaranteeyourbusinesswillsucceed.However, themoreyouplanandtheharderyouwork,thegreateryourchanceofsuccess.

Whatskillsdoyouhaveandwhatwillyouneedhelpwith?Oneofthekeysuccessfactorsishavingtherightbusinessteam.Good managementskillsarecritical.Considerwhetheryouknowhowtodothefollowing tasks,needsometraining,orneedsomebodyelsetodothemforyou: GeneralManageyourtime;hire,supervise,andtrainemployees;delegate tasks;buildandmotivateateam;andmakeappropriatechangestokeepthe businesssuccessful. OperationalBuyandmanageinventory;scheduleproductionwork;negotiate agreementsorcontracts;andcomplywithregulationsgoverningemployeesand otheraspectsofthebusiness. MarketPrice,promoteandadvertiseyourproductorservicetoensure sufficientsales;andaddresscustomerserviceneeds.


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FinancialSetupandkeeprecords;developoperatingbudgets;compile financialstatements;projectandmonitorcashflow;preparealoanproposal; analyzefinancialperformance;andcomplywithpayrollandtaxrequirements.

Goingthroughthisexercisewillnotonlyprepareyoutowritesectionsofyourbusiness plan,butwillalsoassistyouindetermininginwhichareasyouwanttoseekemployee orprofessionalsupport.


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THEBUSINESSPLAN Abusinessplandescribesyourbusinessgoalsandhowyouplantoreachthem.Itisthe roadmaptothesuccessfuloperationofyourbusiness,layingoutstepbystepthe detailsofhowyouwillstartandrunyourbusiness.Itshowswhereyoushouldbeand when,soyoucanseeifyouaremeetingyoursalesandfinancialtargets. Thebusinessplanalsocommunicatestointerestedpartiesoutsidethebusinessthat yourbusinessiswellplannedandfeasible.Abusinessplanisaworkingdocumentthat changesasyourbusinesschanges.

Whyshouldyouwriteabusinessplan?Astrongbusinessplanisessentialtothelaunchofasuccessfulbusiness.Itservesfour mainpurposes: 1. IdeaDevelopment:Itdisciplinesyoutowriteyourthoughtsdowninaclearand organizedmanner,soyoucanseewhatyoustillneedtodotogetyourbusiness started.Italsohelpsyoudeterminethefeasibilityofyourideaandestimateyour revenueandexpenses. 2. StrategicPlanningTool:Itmapsoutyourshorttermandlongtermgoalsand marketingstrategy,anddescribeshowyouwillleverageyourstrengthsand reduceyourrisks.Thebusinessplanidentifiestargetsthathelpyoumonitorand measurethesuccessofyourbusiness. 3. Internal/ExternalCommunication:Ittellsyouandothershowthebusinessis run.Internalreadersmightbebusinesspartnersandemployees.External readersmightincludesuppliers,consultants,accountingandlegalservices,or othersourcesofoutsideassistance.Iftheyunderstandyourbusiness,theycan helpyoumoreeffectively. 4. SalesDocument:Itisaninvaluabletoolforsecuringmoneyfrominvestors.It sellsyourbusinessideatobankers,stateagencies,andprivatebackers.Aclear, concise,andcompellingbusinessplanwillconvincepeopletoinvestinyou. Ifyouarelookingforprivateinvestorstoputmoneyintothebusiness,writeyour businessplanasasalesdocumentfocusonthefinancialsandmentionanycontracts youhavewithlargerbusinessesthatinvestorswouldknowandrespect.Ifyouhavejust hirednewmanagersforyourcompanyandwantthemtoknowwhatishappeninginthe business,writethebusinessplanintheformofaninternalcommunicationtoolfocus moreondaytodayoperationaldetails.


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Whydoyouneedthishandbook?Thepurposeofthishandbookistohelpyouwriteabusinessplantosellanyproductor service.Itisintendedasapracticalguidefortheentrepreneurwhohasalreadybeen researchinganideaandfindingoutwhatneedstobedonetoturnitintoabusiness, ratherthansomeonewhohasonlybeenthinkingaboutgoingintobusiness.Whilethis handbookfocusesonstartingupabusiness,itshouldalsobeusefultothosewritinga firsttimebusinessplanforanexistingbusiness. Tohelpyouusethisguideandwriteyourbusinessplan,thefollowingresourcesare included: Glossary(page64)Explanationofcommonbusinessterms; AdditionalResources(page66)FreepublicationsforAlaskasmallbusiness ownersandothersmallbusinessresources.

Isyourideafeasible?Thereareplentyofpossibleideasoutthere.Beforeyoustartyourbusinessplan,you shouldknowwhetherornotyourideaisarealopportunity.Afeasibilityanalysishelps youmakethisdeterminationbeforeyouinvesttime,energy,andmoneyinthebusiness planningprocess. Asimplefeasibilityanalysisconsistsofanindustryandmarketassessmentandfinancial projections.Thisanalysiscanconsistofeducatedguessesbasedonyourownresearch or,ifyouhavetheresources,youcanhireaprofessionaltodotheanalysisforyou. IndustryandMarketAssessment Foryourbusinesstosucceed,youmusthaveenoughcustomersbuyingyourproductor servicetomakeyourbusinessprofitable.Anindustryandmarketassessmentdescribes yourbusinessenvironment,includinglocation,industry,customers,andcompetition.It comparesyourproductorservicetowhatisalreadythereandexplainswhat differentiatesyoufromyourcompetitorsandwhythecustomerwillbuyyourproductor service. Somequestionsyoushouldconsiderandbepreparedtoanswerare: Whatarethelocal,regionalandnationaltrendsandchangesoccurring inthisindustryorlineofbusiness? WritingYourSmallBusinessPlan Arethererawmaterials(suchasfish)orsupplies(suchashides)onwhichyour businesswilldependtobesuccessful,thatmaynotalwaysbeinreadysupply?

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Wherewillyourbusinessbelocatedand,basedonthislocation,howmany potentialcustomersarethere? Whowillbuyyourproductorservice?Whataretheylike?Whataretheywilling topayforthisproductorservice? Howmanybusinessesalreadyprovidethisproductorservice? Howdoeseachcompete?Doanyhaveexpertiseorrelationshipsthatgivethem anadvantage?Whatdotheycharge? Howsuccessfularethey?Aretheygrowing,declining,closing,leavingthearea? Whatisrequiredtosucceedinthisbusiness? Whatisspecialaboutwhatyouareproposing?Efficiency?Quality?Pricing?

Lookathowcompetingbusinessesrunandcompareyourintendedapproachtotheirs. Iftherearefewornobusinessesprovidingtheserviceyouwanttoofferandyouhave manypotentialcustomers,youstandagreaterchanceofsuccess. FinancialProjections Thispartofthefeasibilityanalysisinvolvesprojectingthesalesandrevenueyouthink yourbusinesswillgenerate.Estimatewhatyoursaleswillbeinabestcase,midpoint, conservative,andworstcasescenario.Remember,inorderforyourbusinesstosurvive, youmustcollectmoremoneyfromcustomersthanitcoststodeliveryourproductor service.Youonlyhurtyourselfifyourprojectionsarentbasedinreality,sodont exaggeratewhenyouestimatesalesandsavings. Thereareseveralstepstotakeindevelopingyourfinancialprojections: 1. Startupcosts:Thesearetheonetimeexpendituresnecessaryto operateyourbusiness.Examplesincludeequipment(commercial oven,computer,etc.),furnishings,spaceimprovements,andlegal andincorporationfees.Typically,thesecostsarecoveredthroughaninitial ownerinvestmentinthebusiness. 2. Fixedcostsandoverhead:Thesearetheexpensesyourbusinesswillincurdayin anddayout,regardlessofthenumberofcustomersyousee.Fixedcoststypically includerent,utilities,propertyandliabilityinsurance,andemployeesalaries. Fixedcostsalsoincludethedepreciationofstartupassetseventuallyyouwill needtoreplacestartupitems. 3. Variablecosts:Thesearecoststhatincreaseasyouproducemoregoodsor providemoreservices.Variablecostsalsoincludeinventory,ifyourunageneral storesellingprepackagedproducts,forexample.Ifyouareinthebusinessof repairinghomes,themoreclientsyoudrivetosee,thegreateryourfuel expenditurewillbe,makingfueloneofyourvariablecosts. WritingYourSmallBusinessPlan

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4. Price:Thepriceforyourproductorserviceshouldbedeterminedbya combinationoffactorsincludingthecostsofprovidingyourproductorservice (rawmaterials,labor,overhead,anddesiredprofit)andthepriceyourpotential customersarewillingtopayorhavebeenpayingyourcompetitors. 5. Sales:Doresearchandmakeanestimateofhowmuchofyourproductoryour serviceyouwillsell.Carefullystudyanyexistingcompetitorstotrytodetermine theirsales.Talktoanyoftheircustomersyoucan.Youmaywanttofindasimilar businessthatwontbeadirectcompetitoranddiscussyourbusinessideaand communitycharacteristics.Thiswillhelpyouunderstandwhetherornotyour communitycansupporttwosimilarbusinesses. 6. Cashflowandbreakevendetermination:Thisstepiscriticalyoumust understandthebusinesswellenoughsoyounotonlyknowifrevenueswillbe morethanexpensesbutsoyoualsounderstandtheflowofrevenues.Thisshows youwhatexpensesyouwillneedtocoveruntilyourrevenuescanbecollected. Manybusinessownersobtainloanstocovertheircashflowneedsasthey establishtheirbusiness. Onceyouhaveassessedyourmarketandprojectedyourrevenue,youarewellonthe waytolearningifyourbusinessisfeasible.Onceyoucalculateyouranticipatedcosts, youshouldknowifyourideaisfeasible.Evenifyouknowsaleswillbegood,youmay nothaveaviablebusinessifthecostofmakingtheproductoroperatingtheserviceis greaterthanyoursalesrevenue.Ultimately,youmayneedtheassistanceofa professionaltomakeafeasibilitydeterminationandtoofferunbiasedopinions. Whenyouknowyourbusinessmightbefeasible,youcanmoveontowritingthe businessplan.Besuretodevotethenecessarytimeandenergytothisimportant process.Awellthoughtoutbusinessplanincreasesyourchanceofsuccesssignificantly. Startbywritingaroughdraft,andkeepworkingonituntilitmeetsyourcurrentneeds.


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BusinessPlanOutline Thefollowingoutlineliststhekeysectionsofatypicalbusinessplan.Ifyouareseeking moneytostartupyourbusiness,askpotentialfundersiftheyhaveapreferredoutline andusethat. Thishandbookwillwalkyouthroughtheplanwithquestions,alistofpointstoaddress, andexamples.Answeringthequestionsaskedineachsectionwillhelpyoucompilesolid informationforyourbusinessplan.Ifyoufinditdifficulttoansweraquestion,this usuallymeansyouhavenotthoughtoutthisaspectofyourbusinessthoroughly enough.Ifthisisthecasestop,soyoucanresearchandanswerthequestionfully beforecontinuing. Thebulletlistincludesthepointsthatyoushouldaddressinthatsection.Notevery sectionmayapplytoyourbusiness.Forexample,ifyouaretheonlyemployeeand alreadyhavethenecessaryskills,youwillnotneedanemployeetrainingplan.You shouldstillrevieweachsectionclosely,asitmayraiseimportantquestionstoconsider. Makesuretheinformationflowslogicallyandcanbeeasilyunderstoodbyanyreader. 1. ExecutiveSummary 2. BusinessDescription TypeofBusinessMerchandising,manufacturing,service StatusStartup,expansion,takeover Product/ServiceDescription KeyProductionFactorsRawmaterials,labor,technicalorequipment requirements o LocationandFacilitiesRegional,local,andsitespecificfacilities 3. IndustryAnalysis o o o o o IndustryStructure o MajorPlayersAtthelocal,regional,state,andnationallevels o IndustryTrendsandAnticipatedChanges 4. MarketAnalysis o o o o MarketDescriptionKeymarketfactors:price,quality,ontimedelivery MarketTrendsOveralleconomicactivityforproductorservice MarketingStrategySpecificactivitiestobeundertaken MarketProjectionsProvideestimateorprojectionofrevenues


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5. CompetitiveAnalysis CompetitiveEdgeSettingyourbusinessapart CompetitorProfilesSize,location,management,yearsinbusiness Product/ServiceComparison Strengths,Weaknesses,OpportunitiesandThreats 6. Ownership,ManagementandStaffing o o o o o BusinessformSoleproprietorship,partnership,corporation o ManagementPlanKeypersonnelandavailabilityofneededskills o TrainingPlanHowemployeeswillbetrained,ifnecessary 7. FinancialAnalysis o KeyAssumptionsProductioncosts,productpricing,andsalesvolume o ProjectbudgetPreoperational,construction,startup,finaloperational revenue,costanalysis,breakevenestimate,profitandlossstatement, balancesheet o SupportingStatementsOwner/managerresumes,articlesofincorporation, legalcontractsandleaseagreements,lettersofreference) o SourcesofFundsEquity,savings,grants,inkind. 8. ImplementationPlan Althoughthereisasuggestedlengthforeachsection,eachcanbelongerorshorter. Thisdependsonthelengthofthewholebusinessplanandwhatmakessenseforyour business.Besuretoprovidealltherelevantinformation.


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Step1ExecutiveSummary Theexecutivesummarypresentsthekeyfactsofyourbusinessandshouldbenolonger thantwotothreepages.Whenyouareseekingmoneyorothersupportforyour business,theexecutivesummaryiscritical.Afunderwillreadthispartfirst.Ifyoudont engageyourreadersinterestinthefirstparagraph,heorsheisunlikelytoreadthe wholeplan.Makeitclear,concise,andcompelling. Eventhoughitcomesfirstinthebusinessplandocument,thissectionisusuallywritten last,asitisasummaryofthewholebusinessplan.Workontheothersectionsfirstand thenreturntothissectiontowriteyourexecutivesummary. Preparingtowriteastrongexecutivesummary: Whattypeofbusinessareyoudeveloping? Manufacturing/processing Merchandising Distribution Services Other:______________________________________________________ Whatisthecurrentstatusofyourbusiness? Planningstage Development Operational Plannedtakeover Expansion Whatproductsand/orserviceswillyourbusinessoffer? ________________________________________________________________________ ________________________________________________________________________ Whywillcustomersbuytheseproducts/services? ________________________________________________________________________ ________________________________________________________________________


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Whereisyourbusinesslocated?Whataretheadvantagesofthislocation? ________________________________________________________________________ ________________________________________________________________________ Whoisyourtargetmarket?Howwillyouenterthemarket? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Whowillmanagethebusiness?Whatishisorherbackgroundandstrengthsand weaknesses? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Howmuchmoneyisneededforstartup/expansion,andwherewillitcomefrom? ________________________________________________________________________ ________________________________________________________________________ Whatisyouroverallbusinessvisionyourdefinitionofsuccess? ________________________________________________________________________ ________________________________________________________________________ Whatareyourshorttermgoals? ________________________________________________________________________ ________________________________________________________________________


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Writingtheexecutivesummary Incorporatetheinformationfromyouranswerstotheabovequestions andmakeeachpointinalogicalordertomakeacompellingcaseforyourbusiness.The followingisanexampleofhowyoumightorganizeyourresponsesinaconcise summary: Broadoverview:Theopeningstatementshouldaddressthebasicsoflocation, businessform,andstageofyouroperation.Itshouldalsocatchthereaders interesttoencouragefurtherreading. Product/service:Brieflyexplainwhatyouaresellingandwhyyoubelievethereis amarketforit.Usethissectiontosellyourproductorserviceandconvincethe readeroftheprobabilityforsuccess. Market:Describewhichmarketsegmentyouwillcaptureandthesizeofyour initialandlongtermmarketshare.Discussyourproductrolloutplan,marketing strategy,andadvantagesoverthecompetition. Management:Describehowyourbusinesswillbemanagedandbywhom. Describetheskillsandexperiencepossessedbyyouoryourmanagerandhow theseskillswillcontributetothesuccessofthebusiness. Funding:Describefundsandresourcesinvestedtodateandwhatfundsyouare lookingfor. Timeframe:Summarizethecurrentstateofyourbusinessandthetimeframe forstartuporexpansion. Goalsandobjectives:Provideaconciselistofspecificandtangiblegoalsby whichyoucanmeasuresuccesseslater.Provideabriefoverviewofthedesired scopeofyourbusiness.Describehowyouplantoachievesuccess. KeystoSuccess:Whywillyourbusinesssucceedinattractingcustomers?Make short,directstatementsabouthowyourbusinesswilloperateforsuccess.Make abulletedlistofthekeypointsofyourbusinessstrategy,suchas: o Lowpricingandconvenientlocation o Aggressiveadvertisingforvalueaddedproducts o Customerserviceforaloyalcustomerbase. WritingYourSmallBusinessPlan

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Step2BusinessDescription Thissectiontellsreaderswhoyouare,whatyouoffer,whichmarketneedsyouaddress, andwhyyourbusinessisviable.Itisusuallythreetofivepageslong. Gatheringinformationforthebusinessdescriptionsection Whatisthecurrentstatusofthebusiness? Planningstages Development Operational Plannedtakeover Expansion Whydoyouwanttostartthisbusinessorwhydidyoustartthisbusiness?Whenand wherewillyoustartordidyoustartthisbusiness?(Dateandlocationofstart) ________________________________________________________________________ ________________________________________________________________________ Whereisyourbusinesslocated?Whatareitsphysicalattributes?(Size,building description,etc.) ________________________________________________________________________ ________________________________________________________________________ Whatarethebenefitsandchallengesofthislocation?(Locally,regionally,nationally) ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Whoarethekeypeopleinvolvedandwhatexperiencedotheybringtothebusiness? ________________________________________________________________________ ________________________________________________________________________ WritingYourSmallBusinessPlan

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Whatproductsand/orserviceswillyousell? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Whywillyousucceedatsellingtheseproducts/services? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Whatareyourkeyproductionfactors?(Whatdoyouneedtoproduceyourgoodsor services,suchasrawmaterials,labor,space,etc.?) ________________________________________________________________________ ________________________________________________________________________ Whatistherelationshiptothelocaland/orregionaleconomy?(Willyoubesupporting existingbusinessesorstartingsomethingthatmaybecontroversial?Howwillthe businessaffectmajoreconomic,social,technologicalorregulatorytrends?) ________________________________________________________________________ ________________________________________________________________________ Writingthebusinessdescription Rememberyouaretellingthestoryofyourbusinesstothereader.Keepthe informationinthissectionsimple;youwillgointomoredetailinlater sections.Incorporateyouranswerstotheabovequestionsintothefollowing information: Introductoryparagraph:Thisiswhereyoushareyourvisionforthebusiness: whatyouwanttodoandhowyouwilldoit.Inthefirstparagraph,providean overviewofthebusinesswithoutgoingintotoomuchdetail.Describeyour businesslocation,theproductsorservicesyouprovide,andyourtarget customers.


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Businesstypeandstatus:Tellthereaderwhattypeofbusinessyouareoperating orplanningtooperate.Asimpledescriptionofthebusinesstypeandstructure willdo.Saywhetherthisplanisforanewbusiness,abusinessyouarealready running,oranexistingbusinessyouwishtobuy. Futureplansforthebusiness:Whatareyourgoalsforthenexttwotofiveyears? Howareyougoingtoaccomplishthem?Whatwillyouneedtoachievethis? Businessownership:Explainwhoownsyourbusiness,identifyingallparties.The simplestandmostcommonformforasmallbusinessissoleproprietorship,but allformsshouldbeconsidered.Finaldecisionsoftenrequireinputfromalawyer and/oraccountantbeforemovingforward. Businesslocation:Evaluatingyourproposedbusinesslocationtellsthereaderif thisisthebestsiteandifyourcommunitycansupportyourbusiness.Youneed tothinkaboutthisonthreelevels: 1. Regionaloverview:Whatistheregion'seconomybasedon?Howisitdoing? Whatcompetitionisthereonaregionallevel?Howdoesyourbusinessfit intothispicture? 2. Localoverview:Whatbusinessesalreadyexistinthecommunity?Whatisthe communityseconomybasedon?Haveotherrecentbusinessesbeen successfulhere?Doesyourbusinesscomplementwhatalreadyexistsinthe community? 3. Sitespecificlocationoverview:Wherewillyourbusinessbelocated?Are therefacilitiesatthislocationalready?Doyouneedtoaddanythingtothis locationtorunyourbusiness?Isthisagoodsiteforyourkindofbusiness? Whereisyourbusinesslocatedinrelationtootherkeyplacesinthe community?Haveotherbusinessesatthissitefailed?Ifso,why? Productsandservices:Thisiswhereyoutalkaboutwhatyournewbusinesswill offer.Provideadetaileddescriptionofyourproductsandservices.Makesure youdescribethemstepbystep.Startwithyourfirstcontactwithacustomer andfinishwithyourfollowupwiththecustomerafterthesaleorservice.Spend timeonthissection,soyouareclearoneachstepofthebusinessprocess.This reducestheriskofunforeseencostsorproblems.Ifyoudontyetunderstandthe processwellenoughtowritethissection,domoreresearchandplanningand thencomebacktocompletethebusinessplan.Considerillustratingthissection withaflowchart.


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KeyProductionFactors:Thesearetheelementsessentialtoyourbusiness.This sectionaddresseswhattheyare,wheretheycomefrom,andhowyouwillget them.Describetheresearchyouhavedoneandyourunderstandingofthe productfromdevelopmenttomarket. Ifyourbusinessisgoingtomakeaproduct,explainwhereyouwillgetthe materials,whattoolsyouwilluseintheproductionprocess,andwhereyouwill selltheproduct. AlaskaTribalCacheinSeldoviaproducesjamsandjelliesmanufacturedfromlocally pickedberries.Toestablishtheirbusiness,theyneededacommercialkitchenand freezersaswellasjarsandlabelsfortheirproducts,whichtheyselltosummervisitors andthroughtheirwebsite. ChevakBird&CultureToursguidesguestsfromacampintheYukonKuskokwimDelta, orYupikCountry.Keyproductionfactorsweretents,cots,sleepingmats,chairs,food, andastove,aswellasfuelforthemotorizedboattransportingvisitorstothecampsite.

Ifyourbusinessisgoingtoprovideaservice,describewhattheserviceis,what productsyourequiretoprovidetheservice,howyouwillattractcustomers,and ifyouwillfollowupwithcustomersaftertheyleave. WildIrisBed&BreakfastinRubyprovidesaccommodationandhealthymealsto visitorsandconstructionworkers.Keyproductionfactorsinthistypeofbusinessare bedlinen,soaps,andcleaningproducts.Tofeedherhungryguests,theownerplans mealsaroundtheirdietaryneedsandbuysfoodfromlargestoresinFairbanks.

Inadditiontowhatyouneedtomakeyourproductsorprovideyourservices, thinkaboutyourworkplace.Isyourfacilityinalocationwithaccesstopublic water,electricity,andsewage?Willyourbusinessputastrainonthepublic generator?Willyouneedkeyemployees,andareanylocalpeopleinterested andtrainedinthistypeofemployment?Thesecanallbekeyproductionfactors, dependingonyourtypeofbusinessanditslocation. FacilitiesDescription:Ifthefacilityisintegraltothebusinesssuchasahotelor fishprocessingplantprovideacompletedescription,photos,and,as appropriate,engineeringstudiesandarchitecturaldrawings.


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Step3IndustryOverview Thissectiontalksabouttheindustryyouwillbeworkinginandanyexternalfactorsthat affectyourbusiness.Itdescribeshowyoufitintoyourindustryandexplainsyourunique sellingproposition.Dependingontheindustryandtheamountofanalysisneeded,it canbeasbriefasonetotwopagesoraslongasfiveto10pages. Gatheringinformationfortheindustryoverviewsection Whatindustryareyouin?(E.g.tourism,fisheries,services) ________________________________________________________________________ Whatisthecurrentstateofyourindustry?(Provideasummaryofrelevantdata.) ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Whoarethemajorindustryplayers?(competitors,suppliers,customers) ________________________________________________________________________ ________________________________________________________________________ Howwillcurrenttrendsaffectyourbusiness?(E.g.theeconomy,technology, environmentalregulations,consumerhabitsorpatterns.) ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Ifneeded,canyoucompeteonanindustrywidelevel?How? ________________________________________________________________________ ________________________________________________________________________


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Whywillcustomerschooseyourbusinessoverleadingindustrycompetitors? ________________________________________________________________________ ________________________________________________________________________ Describethestateoftheindustry.(Growing,stable,declining) ________________________________________________________________________ ________________________________________________________________________ Whatarecurrentandprojectedindustrytrends? ________________________________________________________________________ ________________________________________________________________________ Howlikelyisitthatnewcompetitorswillenteryourindustry? ________________________________________________________________________ ________________________________________________________________________ Writingtheindustryoverview Assumeyourreadersareunfamiliarwiththeindustry.Yourjobisto provideanarrativethatwillintroducethemtokeyindustryfactorsand addressquestionsthatarecommonlyaskedabouttheindustry. Introduction:Inthreetofivesentences,provideageneralsummaryofyour businessindustry.Covertheindustrysprofile(size,geographicaldispersion, history),significanteventsinthelastfewyears,andtheindustrysnational growthand/ornationaltrends.EvenifnationaltrendsdonotaffectruralAlaska directly,theymayaffectyourpartnersorsuppliers.Ifyoushowagood understandingofyourindustry,investorswillfeelmorecomfortablelending yourbusinessmoney. Industrystructure:Describetheindustryplayers.Arethereseveralthousand smallcompaniesnationwidewithlittlecompetitionbetweenthemorafew largescalecorporateplayers?WhatdoestheindustrylooklikeinAlaskaandin yourlocalcommunity?


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Majorplayers:Mentionanymajornationalorregionalplayers.Thisincludesnot onlymajorcompetitorsbutalsolargesuppliersandothercompaniesthat providesupportservices.Makeitcleartoreadersthatyouhaveexaminedthe industryandunderstandhowthemajorplayerscouldpotentiallyhelporhurt yourbusiness. Industrytrends:Howistheindustrycurrentlychanging?Dosomeresearchand summarizetheindustrywideviewofitsfuture.Trendsmightincludelarge nationalgrowth,largecompaniesbuyingoutsmallerones,orbusinesses becomingmorespecialized. Impactfromindustrychanges:Howwillexpectedindustrychangesaffectyour businessinthenextthreetofiveyears?Mentionhowyourbusinessmightbe helpedorhurtbythesechangesandhowyouwouldadjust.


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Step4MarketAnalysis Thissectionisaboutdefiningandprovidingadetaileddescriptionofyourtargetmarket thepeoplewhowillbuyyourproductorservice.Startbydefiningyourcustomers theirage,theirgender,wheretheylive,theirincome,theirwork,whattheydo,what theylike,andhowmanytheyare.Thenmakeitclearyouunderstandyourmarketand anytrendsinfluencingthemarketorindustry.Amarketanalysisistypicallythreetofive pagesinlength. Gatheringinformationforthemarketanalysissection Whoisyourtargetmarket? Individuals Companieswhatsize?____________ Governmentagenciesornongovernmentalorganizations Other:____________________________________________________________ Isyourtargetmarket: Basedinyourcommunity? Basedinyourregion? BasedinsidethestateofAlaska? Basedontourismorsomeotherindustrysegment? Other:____________________________________________________________ Whatistheestimatedsizeofyourmarket?(Reviewstatisticaldataandinterview suppliers,yourpotentialcustomers,andyourcompetitionscustomers.) ________________________________________________________________________ ________________________________________________________________________ Describeyourtargetcustomer?(Profession,age,gender,income,location,product interest) ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________


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Whyisthisyourtargetmarket? ________________________________________________________________________ ________________________________________________________________________ Whywouldyourtargetcustomerchooseyourproductorservice? ________________________________________________________________________ ________________________________________________________________________ Whatarecurrentmarkettrends?Isthesizeofyourmarketprojectedtogrow? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Isthemarketseasonal?Doesthisfitwithyourbusinessgrowthgoals? ________________________________________________________________________ ________________________________________________________________________ Whattrends,governmentregulations,newtechnology,etc.willinfluencesales? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Howwillyoudistributeyourproductorservice? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________


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Haveyoualreadyspokentopotentialcustomers?Whatdidyoulearn? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Writingthemarketanalysis Youwillwanttomakeyourreaderfeelcomfortablewithyourlevelof knowledgeaboutthemarketyouareinandhowyouenvisionyourbusinessachieving success.Besuretocitesourcesofinformation,factsyouhavegathered,andtheprocess youhavegonethroughtolearnandobtainexperience. Thisisasuggestedsequenceoftopicstocover: Marketdescriptionandcharacteristics:Thissectiondescribesyourmarketin detail.Researchandquoterelevantfacts,figuresandtrendsreportedaboutthe marketyouaretargetingbyreputablesources.Describethecharacteristicsof yourpotentialcustomersandhowtheyhaveneedsthatyouwilladdresswith yourparticularproductorservice.Afterdescribingyourmarket,separateyour customersintodifferentsegmentsgroupsofpeoplewithsimilarneeds. Segmentationisimportantbecauseitletsyoufocusyourmarketingefforts.You cansegmentbyage,location,specialinterests,andothervariables.Whichever wayyoudothis,itshouldbealogicalmethodofdividingupyourcustomerbase. Targetmarket:Nowthatyouhaveabetterunderstandingofyourmarketandits segmentation,describeyourtargetmarket,includingitssize.Giveacomplete descriptionofyourtargetcustomerandsaywhyyouhavechosenthemover othermarketsegments.Tellthereaderwhyyourtargetcustomerisnotonly readytobuybutwhytheyarelikelytobuyfromyou. Theexamplebelowgivesanexampleofhowabusinessmarketsitselftoappeal toatargetmarket. CoupchiakAviationinTogiakfliescustomersondemandbetweenDillinghamand Bethelandnearbyvillages.Noreservationsarerequired,whichdifferentiatesthe businessfromthelocalcommercialairserviceandfillsanopenmarketniche.


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Markettrends:Describethemarketsgrowthpotential.Discussanychangesor trendsinotherbusinessestargetingthesamemarketsegmentasyou.Say whetheryoubelievedemandinyoursegmentisgoingtoriseorfall.Mention anybusinesssimilartoyoursthathasrecentlyopenedorfailedinyourareaor marketsegment. Theexamplebelowshowshowabusinesshastakenadvantageofevolving fashions.

AlaskaGlacialMudCo.inCordovahasrespondedtothetrendfornaturalingredients andthedemandinthedayspaindustryforhighqualityproductsbydevelopingafacial maskderivedfrommineralrichCopperRivermudandtraditionalnativebotanicals.


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Step5CompetitiveAnalysis Thissectionfocusesonwhyorhowyouaregoingtosucceedinattractingbusinessover yourcompetitionandshouldincludeadetailedanalysisofyourdirectandindirect competition.Youshouldbeabletonameandprovideafulldescriptionofyourlocal, regionalandevennationalcompetitorsifrelevant. Yourproductshouldthenbecomparedtoyourcompetitors,basedonprice, performance,quality,service,andotherimportantfeatures.Describethestrengthsthat giveyouanadvantageoverthecompetition.Identifyyourweaknessesandsayhowyou plantoovercomethem.(RefertoSWOTAnalysisonpage32.)Yourcompetitiveanalysis willbeapproximatelythreetosixpages,butcanbeanylength,aslongasyouaddress yourcompetitionadequately. Gatheringinformationforthecompetitiveanalysissection Whoisyourmostseriouscompetitor? ________________________________________________________________________ Why?(Proximity,size,yearsinbusiness,etc.) ________________________________________________________________________ ________________________________________________________________________ Howistheirbusinessdoing?(Growing,declining,addingnewproducts,etc.) ________________________________________________________________________ ________________________________________________________________________ Whoareyourotherdirectcompetitorsandwhataretheirstrengthsandweaknesses? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________


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Whoareyourindirectcompetitors?(E.g.substituteproductsorservices) ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Howdoesyouproductcomparetoyourcompetitors?(Price,quality,specialfeatures) ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Whatarethesimilaritiesanddifferencesbetweenyouandyourcompetition? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Howareyourtargetmarketsegmentsdifferentfromthecompetitions? ________________________________________________________________________ ________________________________________________________________________ Whatdoyoudobetterthanyourcompetition? ________________________________________________________________________ ________________________________________________________________________ Canyouandyourcompetitionbothsurviveinyourmarketplace? ________________________________________________________________________ ________________________________________________________________________


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Howdoyourproductsorservicescomparetothoseofyourcompetition? ________________________________________________________________________ ________________________________________________________________________ Ifyouhavenocompetitors,whatisyourprojectionforthefuture?(Whomightenterthe marketlater?) ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Writingthecompetitiveanalysis Thepurposeofyourwriteupistoidentifyforyourreaderallyourcurrentandpotential competitors.Youshouldbeabletonameyourcompetitorsandbrieflydescribethe relevantaspectsoftheirbusiness:whotheirtargetcustomeris,whatbenefitsthey offer,whatproductorservicecustomersbuyfromthem,andinformationontheir pricing,goods/services,andpromotionefforts.Thisprovidessomebasisforcomparison. Iftherearenocompetitors,youshoulddiscussthepossibledevelopmentof competitors.Itissuggestedyoucoverthefollowingareas: Competitorsprofile:Takethemajorcompetitorsyouanalyzedaboveandcreate anindividualprofileforeachone.Theprofileshouldinclude: o o o o o Competitiveedge:Thisisanopportunitytodiscussthesimilaritiesand differencesbetweenyourproductorserviceandthatofyourcompetitors. Highlightthoseattributesthatyoubelievesetyourbusinessapartorhowyou willmeetyourcustomersneedsinabetterway. Sizeofbusinessandsalesvolume Location(s) Managementandstaffexperience Yearsinbusiness Marketniche


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Theexamplebelowshowshowonebusinesskeepsacompetitiveedge. MorrisTradingPostinNoorvikisoneoftwogeneralstoresinthevillage.Tokeepher clienteleloyal,theownermakescustomerserviceapriority,placingspecialordersand largeseasonalorders,andputtingholidayitemsonsaleimmediatelyafterwards.

Marketnicheandshare:Identifythekeyfindingsfromyourcompetitoranalysis andifyouareabletoestimatethepercentmarketshareyoubelieveyour competitorshold.Ideally,youhaveidentifiedanichethatnobodyelseisfilling sodescribehowyourbusinessisuniqueandfillinganunmetneed.Consider whatmarketshareyoumightneedtotakefromyourcompetitortomakeyour businessprofitable. Strengthsandweaknessescomparison:Completethestrengths,weaknesses, opportunities,andthreats(SWOT)analysisbelowbeforewritingthissection. Compareyourstrengthsandweaknessestothoseofthecompetition.Highlight thestrengthsthatgiveyouanadvantageovercompetitorsandexplainhowyour businesswillovercomeanyweaknesses.


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SWOTANALYSIS Analyzingbothyourstrengthsandweaknessesandyouropportunitiesandthreats pinpointswhatisgoingwellinyourbusinessandwhatneedsimprovement.This exercisealsohighlightsyourcompetitiveadvantagesandidentifieswheretheremight bepotentialrisks.Itshowsyouwhichvariablesyoucontrolandwhichyoucanonly preparefor.Thisshouldtakefromonetothreepages.StrengthsIsyourbusinessinagoodfinancialposition? Isyourworkforceskilled? Isyourbusinessnamerecognizedbypotential customers? Istherelittleornocompetition? Istransportationto/fromyourbusinesseasily accomplished? Doyouhavebusinessconnections? Whatgivesyourbusinessanedgeovercompetitors? Doyouownyourbusinesspremises? Doyouhaveexperienceinyourbusiness? Doyouhavegoodprice,value,andquality? Isthereincreasedspendinginyourarea?

WeaknessesDoesyourbusinesshavealargedebt? Doesyourworkforceneedalotoftraining? Isyourmachineryoutofdateorinefficient? Doyouhavetopayrentforyourofficespace? Isyourbusinessunknowntopotentialcustomers? Doyouwastealotofproductortime? Isyourbusinessholdingtoomuchortoolittleproduct? Aretoofewpeopleusingyourservice? Inwhatareasdoyouhavelittleexperience? Aretheregapsinyourcapabilities? Doyouhaveupcomingdeadlinesorpressures?

Opportunities

Threats

Willyourgoodfinancialpositionallowyoutoacquire Istherelargeandincreasingcompetition? futureloansmoreeasily? Arewagesrising? Doesyourworkforcerequirelittletraining? Isyourproductorservicelosingmarketshareorbuyer Ifyourcompetitionisgoingbankrupt,couldyoutake interest? themover? Areyouaseasonalbusiness? Whattrendswillworkinyourfavor? Areinterestratesincreasing? Whatopportunitiesdoesyourbusinesshave? Willyouneedtorelocateinthefuture? Whatnewcustomerneedscouldyoumeet? Willyourstaffcontinueworkingforyou? Whatnewtrendsrelatingtoyourproductorservice Isyourfinancialbackingsustainable? areemergingtoincreasedemand? Willfuturepoliticaldecisionsaffectyourbusiness? Whatnicheshaveyourcompetitorsmissed? Willyoubeabletosustainyourbusiness? Whateconomictrendscouldbenefityou?


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Strengths:_______________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Weaknesses:_____________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Opportunities:___________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Threats:_________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ OnceyouhavecompletedtheSWOTanalysis,spendsometimeanalyzingeach response.Strengthsandweaknessesareinternalelementsyourbusinesscaneither capitalizeorimproveon.Whenyouaddressyourweaknesses,besuretoexplainhow youwillovercomethem.Convinceyourreadersyoucandealwithadversity. Opportunitiesandthreatsareexternalelementsoverwhichyouhavelittlecontrol.Even ifyoucannotchangethese,yourplanshouldaddresshowyouwillminimizethreats.


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Step6MarketingStrategy Thissectiontellsreadershowyouwillgetpeopletobuyyourproductorservice.It describeswhatyouaresellingandyouruniquesellingposition,yourpricingstrategy, yoursalesanddistributionplan,andyouradvertisingandpromotionsplan.Itexplains howyouwillenterthemarket,andhowyouwillusepromotionsandmarketingtomeet yoursalesgoals.Themarketingstrategyisgenerallythreetofivepages. Gatheringinformationforthemarketingstrategysection Whatarethefeaturesofyourproductorservice? ________________________________________________________________________ ________________________________________________________________________ Whatarethesellingpointsofyourproductorservices? ________________________________________________________________________ ________________________________________________________________________ Whatmakesyourproductdifferentfromthatofyourcompetition? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Howwillyouattractandretainyourcustomers? ________________________________________________________________________ ________________________________________________________________________ Howwillyourproductorservicebenefityourcustomers? ________________________________________________________________________ ________________________________________________________________________ WritingYourSmallBusinessPlan

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Howwillyourmarketingfocusonyourmarketsegment? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Whatdoprospectivecustomersthinkofyourproduct? ________________________________________________________________________ ________________________________________________________________________ Whatmarketingmethodswillyouuse,andhowmanypeoplewilleachmethodreach? Wordofmouth Directmail Conventionalpromotion(radio,newspaper,magazines,internet) Directpresentationstopotentialclients Howmuchmoneyareyouwillingtospendonadvertising?Howmuchdoyou needtospend? ________________________________________________________________________ ________________________________________________________________________ Whatincentiveswillyouoffercustomers?(E.g.discountstobulkbuyers) ________________________________________________________________________ ________________________________________________________________________ Whatkindofguaranteesandwarrantieswillyouofferwithyourproduct? ________________________________________________________________________ ________________________________________________________________________ WritingYourSmallBusinessPlan

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Howwillyoupackageandlabelyourproducttoencouragebrandloyaltyandincrease sales? ________________________________________________________________________ ________________________________________________________________________ Writingthemarketingstrategy Estimatedsalesandmarketpenetration:Basedonyour understandingofthecompetitionandmarket,statewhatyou believeyourbusinesswillbeabletocaptureinmarketshareboth fortheshortandlongterm.Asasellingpoint,youshouldalso identifyanymajorcustomerswhohavemadeorarewillingto makecommitments.

Pricingandpackaging:Discussthepricestobechargedforyourproductor serviceandhowthiscompareswithyourcompetitorsfeesandpolicies.Discuss howyoudeterminedyourpricestructureandhowthispricingwillsupport ultimateprofitability.Mentionanyspecialdiscountsyoumightofferto customers.Discussyourpackagingandlabelingplans.Describehowpricingand packagingwillenticenewcustomersandencouragecustomerloyalty. Theexamplesbelowshowtwobusinesseswithuniquepackagingdesignedto attractandretaincustomers. AlaskaTribalCacheinSeldoviadevotedconsiderabletimeandefforttopackagingand presentationintheirsearchfortherightjarsandlabelstoestablishtheirbrand.The distinctivelogoadorningtheirturquoiseandgoldlabelsisimmediatelyrecognizableon theshelf. AlaskaGlacialMudCo.designedasimplepastelblueandgreenlabelfortheirsilver liddedglassjar,whichconveysthesenseofclassandstylethatappealstotheirhigher endspaandretailmarket.

Salesanddistribution:Describehowyouplantodistributeyourproductand overwhatgeographicareayouwillprovideservices.Discussrelationshipsyou havedevelopedwithsuppliersanddistributors.Describewhetheryourproduct saleswillberetail,wholesale,ordirect.Addresshowyouwillhandleyour billings,accountsreceivable,credit,andcustomerfinancing.


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Serviceandwarrantypolicies:Describewhatkindofguaranteeandwarranty optionsyouwillprovidewithyourproduct/service.Discusshowthesepolicies aredesignedtomakeyoumorecompetitiveinthemarketplaceandthecosts associatedwiththesepolicies.Detailhowcustomercomplaintsandclaimswill behandled. Promotion,advertising,andpublicrelations:Promotionandadvertisingare necessarysothatpotentialcustomersknowyouexist.Describeanypromotions youwillusetoattractcustomerswhenyouopen.Youshouldalsodescribeyour plansforadvertising.Giveexactdetailsonhowmuchyouareplanningtospend onadvertisingyourfirstyearandtheyearsfollowingthat.Thereareseveral differentmedia(suchasradio,TV,internet,magazines,newspapers, newsletters,andbrochures)youcanusetoattractattention.Explainwhichof theseyouhavedecidedtousetoadvertiseyourbusiness,howmuchtheycost, andwhyyouhavechosenthesemethods.Tellreadershowyouwillenter, capture,andretainashareofthemarket. Theexamplesbelowshowhowtwobusinessesusedadvertisingtoincreasetheir numberofcustomers.

KodiakCombosinOldHarbor,acharterboatoperationprovidingfishingandhunting experiences,pursuedandacquiredaCabelasendorsement.Cabelasreferralsnow makeuphalfofthebusinessclientele. KianaLodgeinKianadevelopedawebsitewithphotographsshowingthefishing, wildlife,andsceneryoftheKobukRiver,whichgiveastrongsenseofthisAlaska experience.


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Step7Ownership,Staffing,andManagementPlan Thissectionoutlineshowyouwillrunyourbusiness,whowillworkinthebusiness,and howthebusinesswillbestructured.Theexperience,talent,andreputationofyour managementandstaffwilllendconfidencetoapotentialfunder.Thissectiontypically takestwotothreepages. Gatheringinformationfortheownership,management,andstaffing plansection Whoownsyourbusinessandwhatisitslegalstatus? Soleproprietorship Partnership Cooperative Other:____________________________________________________________ Describeyourcompanysownership.(Isownershipdistributedamongmanagers?) ________________________________________________________________________ ________________________________________________________________________ Whoisyourbusinessmanager?Whatishis/hereducationlevel,experienceandskillset? ________________________________________________________________________ ________________________________________________________________________ Whoareyourcurrentinvestors,partners,andsourcesofstartupcapital? ________________________________________________________________________ ________________________________________________________________________ Whatmanagerialpositionswillyourbusinesshave?Doyoufillone? ________________________________________________________________________ ________________________________________________________________________


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Whattaskswillmanagersandstaffneedtocompleteonadailybasis?(Jobdescriptions) ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Howmanystaffmemberswillyouemploy?Howmuchwillyoupayeachemployee? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Areanyofyourstaffedpositionsseasonal? ________________________________________________________________________ Whatskillsdoyourmanagers/staffneedtobesuccessfulattheirjobs? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Howwillyoutrainthemintheseneededskills? ________________________________________________________________________ ________________________________________________________________________ Whatotherprofessionalrelationshipshaveyouestablished?(Lawyer,accountant,other partiesinvolvedinthebusiness) ________________________________________________________________________ ________________________________________________________________________ WritingYourSmallBusinessPlan

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Writingtheownership,staffing,andmanagementplan Itisimportanttodemonstratethatyouhaveanadequateplantoaddress yourbusinesssoperationalneedsandthatkeypositionsareheldbypersonswith adequateexpertise.Includeinyourbusinessplanappendixarsumandshort biographyforeachmemberofthemanagementteam.Reportwhowillberesponsible forwhat,andhowtheirskillswillbenefityourbusiness.Sufficientlyaddresshowyour businessesmanagement,marketing,andfinancialreportingneedswillbemet.Describe theownershipstructureandexplainwhoownswhatpercentageofthebusiness,aswell aswhetherthebusinessisacorporationorasoleproprietorship. Asyouexplainwhatpersonnelareneededyoumayfinditusefultodevelopan organizationalcharttomoreeasilyshowlinesofauthority,responsibilityand delegation. Ownership:Describehowyourbusinessissetuplegallyandwhether,for example,itisasoleproprietorship,partnership,orcooperative.Informreaders whotheowner(s)ofthebusinesswillbeandthelegalramificationsoftheir ownership.Ifyourbusinessisacooperativeorcorporation,describehowyou willchooseaboardofdirectors.Ifitisasoleproprietorship,describeany experienceyouhaveinowningabusinessor,ifyouhavenone,howyouwill compensateforthatlack. Managementplan:Askilled,devoted,andinvolvedmanageriskeytoalmostany successfulbusiness.Ifyouareplanningonmanagingyourownbusiness,tell readerswhyyouarequalifiedandwhichneededmanagerialskillsyoupossess. Reportherehowyourmanagementwillbeorganizedandtheskills,education, andqualificationsofyourmanagers.Discusshowthemanagementstructureand manageryouhavechosenwillleadtoasuccessfulbusiness. Staffingplan:Describetheroleyourcompanysstaffwillplay,theactivitiesthey willperform,andtheskillstheywillneedtocompletethesetasks.Discussthe plannedsalariesofemployeesandhowtheycomparewithotherjobsinyour area.Mentionwhetherstaffwillbeemployedseasonallyoryearround. Trainingplan:Identifytheskillsbothstaffandmanagementneedanddescribea plantofosterthegrowthoftheseskills.Discusshowmuchtimeyouwillallocate totrainingduringstartup.Describehowappropriatetrainingwillleadtoa successfulbusiness.


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Professionalsupportresources:Describewhatrelationshipsyouhavedeveloped withlawyers,accountants,and/orotherprofessionalsupportresourcesthatwill contributetoyourbusinessssuccess.Inthissection,youcouldalsodiscuss relationshipswithmarketingagencies,suppliers,and/ordistributingagencies andhowtheywillassistyou.CoupchiakAviationinTogiakhasareliablemechanicinDillinghamwhochecksthe planeoutseveraltimesaweektoensureitisrunningoptimally. ChevakBird&CultureToursbroughtinteamsofstatewideandnationallyknown birdersonanassessmenttriptohelpspreadthewordabouttherichbirdingexperience inthisarea. HunaToteminHoonahbroughtinexpertsfromthecruiseindustrywhentheywere negotiatingacruiseshipstopintheircommunity.


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Step8FinancialPlan Thissectionofyourbusinessplanexplainshowyouwillfundthestartupofyour business,howmuchrevenueitwillbringin,andwhatthestartupandoperationalcosts willbe.Mostimportantly,ittellsthereaderhowandwhenyourbusinesswillbe profitable.Yourfinancialplanshouldbethreetofivepages. Tomanagethefinancesofyourbusinesseffectively,youmusthaveafirmgraspofyour projectedstartupandoperationalcosts.Thefirststepistodeterminehowmuch moneyyouneedtoopenyourbusiness(startupcosts).Next,youshouldcalculatehow muchyourequiretokeepitopen(operationalcosts).Operationalcostsarebroken downintofixedcostsandvariablecosts. Topreparethesefinancialestimates,youneedtocomeupwithassumptionsaboutthe averagecostofyourproductorservice,yournumberofcustomers,andyourgeneral operatingexpenses.Assumptionsareeducatedguessesbasedonthebestinformation available. STARTUP Gatheringinformationonyourbusinessstartup Estimatingstartupcosts Thesemightincludeonetimeexpensessuchasdownpayments,utilitydeposits, majorequipment,legalassistance,employeetraining,andlicenses.Usethe EstimatedStartupCostsworksheetonpage57tocalculatethestartupcostsfor yourbusiness. Howmuchmoneydoyouneedforstartup?______________________________ Financingstartupcosts Smallbusinessownersusuallycoverstartupcostswithpersonalsavingsor throughasmallloan.Duetothedifficultyofqualifyingforandobtainingbank loansinruralAlaska,aloanmaynotbeareadilyavailableoption.Ifthisisthe caseforyourbusiness,considerrentingorleasinginsteadofbuying,whichturns somestartupcostsintofixedcosts.Whilerentingandleasingmightbemore expensiveinthelongterm,ifyourbusinessfails,youwillhavespentor borrowedlessmoney.Forpossiblefundingsources,refertothefreepublications listedonpage66.


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Remembertofactoranyloanrepaymentsintooperationalcosts,soyouknow yourbusinesscanbeprofitablewhilepayingoffyourdebt.Ruralstartupgrants maybeavailableforyourtypeofbusinessbutdonotrelyongrantmoneyfor yourstartup. Howmuchmoneyhaveyousavedtostartupyourbusiness?________________ Howmuchmoneydoyouneedtoborrowforstartup?_____________________ Wherewillyoufindfundingforstartupcosts? __________________________________________________________________ __________________________________________________________________ WhatagenciesinyourareaofferstartupassistancetoruralAlaskanbusinesses? Willtheyprovideyouwithfinancialaid? __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ Ifyouplantotakeoutaloanorlineofcredit,whatistheinterestrate?________ Howlongisthepaybackperiodforthisloan?_____________________________ OPERATIONS Gatheringinformationonyourbusinessoperations Estimatingsales(revenue) Toestimateyourbusinessrevenueyouwillneedtoestimatehowmanyproducts orservicesyouwillsell.Thisdependsonthepriceofyourproductorserviceand howmanycustomersyouestimateareinyourtargetmarket.UsetheEstimated Revenueworksheetonpage58tocalculateyourrevenue. Whatareyourestimatedyearlysales?__________________________________ WritingYourSmallBusinessPlan

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Estimatingoperationalcosts Everybusinesshasfixedandvariableoperationalcosts,andyoushouldestimate thesecoststothebestofyourability. Fixedoperationalcosts Theseareexpensesyoumustpayaslongasyouoperateyourbusiness,whether ornotyouhaveanycustomers.Oftenyoumustcoverthesecostsalsoreferred toasoverheadjusttoopenthedoor.Examplesoffixedcostsarerent,utilities, interest,anddepreciation.Otherfixedcostsmightbebusinesslicenses,loan payments,andprofessionalassociationfees.Minimumstaffingandmanagers arealsofixedcosts.However,anyextrastaffmembersyouemploytoproduce yourproductorprovideyourserviceareavariablecost. Itisimportanttoincludeallstaffingorlaborcoststogetacompleteand accuratepictureofyourfixedexpenses.Inadditiontowages,youneedto calculateFederalInsuranceContributionAct(FICA)tax,WorkersCompensation, federalandstateunemploymenttaxes,medicalinsurance,andanyholidayor vacationpay.Thesecostscanamountto1520percentofyourtotallaborcosts. Whatareyourfixedcosttotalsonamonthlyandyearlybasis?(Usethe EstimatedFixedCostsworksheetonpage59tocalculatethisamount.) Monthly:____________________ Yearly:_____________________

Variableoperationalcosts Variablecostsaretheinventoryyoucarry(e.g.ageneralstore)orthecostof makingandpackagingthegoodsyouproduce(e.g.jarsofwildberryjelly)orthe costofprovidingtheserviceyouoffer(e.g.guidedbirdingtours.)Variablecosts canbetrickytocalculate,butitisimportanttotakethetimetoestimatethis expense.Theloweryourvariablecosts,themoreprofityoumakeoneachsale. Whatisyourperproductcostofproduction?(UsetheEstimatedVariableCosts worksheetonpage60tocalculatethiscostforyourbusiness.Dependingonyour business,youmayneedtorepeatthisexercise.) Product1:__________Product2:__________Product3:__________ Whatisyouryearlycostofgoodssold?__________________________________ WritingYourSmallBusinessPlan

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Howcouldyouloweryourcostofgoodssold? __________________________________________________________________ __________________________________________________________________ Howmuchmoneydoyouneedforworkingcapital?(RefertoyourEstimated FixedCostsandEstimatedVariableCostsworksheets.) __________________________________________________________________ __________________________________________________________________ Howwillyouearnenoughworkingcapitalasthebusinessbuildsupaclientele? __________________________________________________________________ __________________________________________________________________ EstimatingBreakEvenPoint Atooloftenusedinbusinessplanningiscalledabreakevenanalysis.Abreak evenanalysistellsyouhowmanysalesyouneedtomaketocoverallyourcosts (fixedandvariable).Thisisyourbreakevenpoint. Tocalculateabreakevenpoint,takethefollowingfewsimplesteps: 1. Determinethesalespriceofyourproductorservice; 2. Calculatethetotalvariablecosts; 3. Subtractthetotalvariablecostsfromthesalespricetheremainderiscalled theunitcontributionoramountyouhavetocoverfixedcosts; 4. Totalyourfixedcosts(insurance,licensing,utilities)alsoknownasoverhead; and 5. Divideyourtotalfixedcostsbyyourunitcontributiontodetermineyour breakevenpoint. Forexample,ifyousellabotanicalcreamfor$11ajarthatcostsyou$5ajarto produce,yourunitcontributionis$6(thedifferencebetweenthesalespriceof $11andthevariablecostof$5).This$6differenceistheamountpersaleyoucan usetocoveryourfixedcosts.Ifyouryearlyfixedcoststotal$4,800,yourbreakeven pointwouldbesalesof800jarsofcreamperyear($4,800/$6=800).


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BreakEvenAnalysis CalculatingUnitContribution PerUnitSalePriceVariableCost=Unitcontribution OR$11/jar$5/jar=$6/jar CalculatingBreakEvenPoint _FixedCosts___=$4,800=800jars UnitContribution $6

Salesofthefirst800jarswillcoveryourfixedcosts.Withyour801stjar,youstart makingmoney.Abreakevencalculationisusefulinseveralways.Whenyouare startingyourbusiness,itgivesyouaminimumtarget.Ifyoucantrealisticallyhitthis target,youhadbetterreconsider.Ifyouhavebeeninbusinessforawhile,youcan useabreakevenanalysistobetterunderstandhowmuchyouneedtoincrease salestopurchaseequipment,ortoexpand. EstimatingGrossProfits Grossprofitsarethetotalrevenuesminusthefixedcostsandvariablecosts. Continuingthebotanicalcreamexampleforthefirstyearofbusiness,youget: GrossProfitatDifferentSalesVolumes(Year1)JarsSold 500 1000 2000 3000 4000 Revenue $5,500 $11,000 $22,000 $33,000 $44,000 Cost $7,300 $9,800 $14,800 $19,800 $24,800 Profit $(1,800) $1,200 $7,200 $13,200 $19,200

Thistableillustrateshowthebreakevenpointworkswithgrossprofit.You calculatedthatyourbreakevenpointwouldbe800jars.Thegrossprofitstable showsthatyoulose$1,800ifyousellonly500jars.Butifyousell1,000jars,you make$1,200.Breakevenanalysisshowswhereyoustoplosingmoney.Calculating grossprofitsshowshowmuchmoneyyoucanmake. Thisexampleissimplifiedforclarity.Whenyouaremakingthesecalculationsfor yourownbusiness,remembertoaccountforallexpensesfully,andtobe conservativewhenestimatingrevenues. WritingYourSmallBusinessPlan

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FactoringInStartUpCosts Thesimplifiedexampledidnotshowstartupcosts.Youcanseefromthegross profitstablethatifyouhadstartupcostsofmorethan$19,200,youwouldhaveno profitinthefirstyear.Thisassumesyouhadtopayoffallstartupcostsinthefirst year.Manyofthethingsyouwillbuytostartyourbusinesswilllastseveralyears,if notseveraldecades.Herearetwowaystofitthemintoyourfinancialanalysis. Thesimplestwayistolumpthestartupcostsintoyourfirstyearfixedcosts.You mightlosemoneythefirstyearbuteventuallythebusinessshouldpaythemoff. Saywehad$20,000instartupcostsforourexample.Thenourgrossprofitstable wouldlooklikethis:

JarsSold 500 1,000 2,000 3,000 4,000 Revenue(jarssold xpriceperjar) $5,500 $11,000 $22,000 $33,000 $44,000 OperatingCosts (Fixed+Variable) $7,300 $9,800 $14,800 $19,800 $24,800 StartUpCosts $20,000 $20,000 $20,000 $20,000 $20,000 Profit $(21,800) $(18,800) $(12,800) $(6,800) $(800)

Ifyousold4,000jars,youcouldexpecttoshowaprofitearlyinyoursecondyear.If youusethismethod,makesureyoucalculateabreakevenpointoragrossprofit withoutthestartupcosts.Thisensuresyourbusinessisatleastcoveringits operatingexpenses(fixedandvariablecosts). Anothermethodofdealingwithstartupcostsistospreadthemoutoverseveral years.Sayyouknowthateverythingyouboughttostartupinthisexamplewilllast fortenyears.Ifyoudivide$20,000byten,youget$2,000ayear.Thenyoucould showagrossprofitinyearoneifyousell2,000jars. JarsSold 500 1000 2000 3000 4000 Revenue(jarssold Xpriceperjar) $5,500 $11,000 $22,000 $33,000 $44,000 OperatingCosts (Fixedplus Variable) $7,300 $9,800 $14,800 $19,800 $24,800 Startupcost $2,000 $2,000 $2,000 $2,000 $2,000 Profit $(3,800) $(800) $5,200 $11,200 $17,200

Thistypeofcalculationissimilartowhatyouwoulddoifyoutakeoutaloantopay forstartupcostsitjustdoesnotincludeinterestpayments. WritingYourSmallBusinessPlan

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Writingthefinancialplan Thefinancialplanshowsthecostofrunningyourbusiness,providesan estimateofyourprofits,anddetermineswhetheryourbusinesswillbeasuccessfrom yeartoyear.Potentiallendersorinvestorswillreadthissectioncarefully,somakesure itisaccurateandwellpresented. Thestandardfinancialstatementsincludedinabusinessplanare: Yearonecashflowstatement Profitandlossstatement Balancesheetprojections

Manyfundingagenciesaskforathreetofiveyearprojectionaswell.Whenmaking financialprojections,backupanyspreadsheetswithawriteupofallyourassumptions. Yourfinancialplanshouldinclude: Startupsummary:Writeoutyourplanofactionandincludethetimelinefor gettingyourbusinessupandrunning.Thisgivesyoudirectionandaframework forjudgingyourprogress.Italsoallowsinvestorstoevaluateyoursuccess. Thetimelinecanbeachartofweeklyactionsoralistofstartuptaskstobe completed.Assignatargetdatetoeachactionortask.Describeyourstartup costsandhowyouwillfinanceyourstartup. Projectbudget:Walkyourreaderthroughwhatrevenueorincomewillbe generatedthroughbusinesssalesforinitialyearsandhowthesefundswillbe usedtosupplementtheworkingcapitalandeventuallypayoffstartupcosts. Thenwalkthereaderthroughbothyourfixedandvariablecostssothatthey fullyunderstandtheexpensesassociatedwithyourbusinessandareconfident thatyouhaveaddressedallpotentialcosts.Usethisnarrativetoexplainyour assumptions,preferablyfollowingtheorderofyourproformastatements (balancesheetandcashflowstatement). Sourcesandusesoffunds:Describehowyouwillpayforyourstartupcostsand securethenecessaryworkingcapitalforyourbusiness.Discusshowmuch moneyyouwillneedandexplainclearlyhowyouintendtospendthismoney overthefirstfewyears.Allplansshouldbeconsistentwithyourfinancial projections.Forinstance,ifyouneedworkingcapital,youmightstatethatthe fundswillbeusedforproductdevelopmentandinitialmarketing.


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Supportingdocuments:Provideashortnarrativeintroducingyourfinancial documents.Becauseyourbusinesshasnotyetopened,yourbalancesheetand cashflowstatementwillbeproforma.Thatmeanstheyareapredictionor estimateofwhatwillhappen.Ifpossible,createyourfinancialdocumentsand proformaestimatesinanExceltypespreadsheet.Inmostcases,apotential investorwillwanttoseethreebasicfinancialstatements: o ProfitandlossstatementAlsoknownasanincomestatement,this financialstatementletsyouknowhowmuchyourbusinessismakingor losingoveraspecificperiodoftime(monthly,quarterly,oryearly).This statementsimplysubtractsexpensesfromrevenuestoarriveatanet profitorloss.(SeeProfitandLossStatementworksheetonpage61.) o BalancesheetAlsoreferredtoasasnapshotfinancialpictureofa business,itsummarizesyourassets,liabilities,andownershipequityona specificdate.(SeeBalanceSheetworksheetonpage62.) o CashflowstatementAlsoknownasyourstatementofcashflows,this financialstatementshowstheinflowsandoutflowsoffinancialactivity foraspecifiedperiod(usuallymonthlyorquarterly.)Yournetcashflowis thedifferencebetweenincomingcashandoutgoingcash.Thisstatement shouldtellyouifyouaregeneratingenoughrevenuetocoveryour expenses.(SeeCashFlowStatementworksheetonpage63.)

Performancemeasures:Basedonyourfinancialestimates,setsomegoalsfor yourself.Youshouldhaveafinancialgoal(howmuchmoneyyoumake),a productiongoal(howmanyproducts/servicesyouwillmakeand/orsell),anda breakevengoal(thepointatwhichyourrevenuescoverbothfixedandvariable costs.)Usetheseindicatorstoevaluateyourprogressandsuccessoverthenext fewyears.

Financialmanagementofyourbusiness Aprimaryindicatoroftheoverallhealthofyourbusinessisitsfinancialstatus.Itis criticalthatyoudeveloptheskillsneededtotrackandmonitorthefinancialprogressof yourbusiness.Thereisawiderangeofcomputersoftwarepackagesavailabletohelp smallbusinessesmanagetheirfinances.Ifyouareunfamiliarwiththeseprograms,you mightconsidercontractingwithanaccountanttosetupyouraccountingsystemsand providetrainingsoyoucantrackyourownprogress.Alternatively,youmightpreferto paysomeonetodoyourmonthlyaccountingforyou.Whateversystemyouuse,itis importanttokeepyourbusinessrecordscurrent. WritingYourSmallBusinessPlan

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Monitoringandunderstandingyourcashflowisextremelyimportanttothesuccessof yourbusiness.Smallbusinessownershavebeenknowntotakeinrevenuewithout accountingfullyforthecoststobecovered.Startupcostsandunforeseenand unbudgetedexpensescanquicklyeatupyourcashreserves.Ifyoupreparecashflow reports,youwillbebetterpreparedasabusinessownertoplanforpaymentofyour billsandemployeewages. Finally,allbusinesseshaveasalescyclethismightfollowtheseasons,community events,oreventhedaysoftheweek.Yourfinancialprojectionsshouldtakeinto accounteventsandknownactivitiesthatwillimpactyoursalesandexpenses.


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Step9ImplementationSummary Thisiswhereyoutellreadershowyouwillputintopracticewhatyouhavedescribed. Makeacompletelistofeverythingthatneedsbedonetomoveyourbusinessforward. Estimatethedateyouwillbeginandendtheactivity.Notethedateyouexpectto receivethenecessaryfundingforeachactivity.Thissummaryshouldbethreetofive pagesinlength. TASK EstimatedTime


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Schedule:Onceyouhavecreatedyourlistofactivitiesandestimatedhowlongtheywill take,orderthesetasksintheformatbelowaccordingtopriority.Thefinaltablewillbea listofactivitieswithstartandenddatesandanopeningdateforyourbusiness.Thiswill becrucialtokeepingtrackofwhatneedstobedoneandhowyouarestayingon scheduleforstartup.Thetablebelowisasampleimplementationsummarythat includescostestimatesandassignsresponsibilityforeachtask,andhasbeenorganized bystartdateforsimplicity. Milestone BusinessPlan Financial backing Makesigns Develop website Mail(1st) advertisements Openstore Mail(Ongoing) advertisements StartDate 15Nov07 1Jan08 15Mar08 31Mar08 1April08 30Apr08 1May08 EndDate 15Feb08 31May08 31May08 30Jun08 30Apr08 31Jul08 30Jun08 Budget $5,000 $10,000 $2,000 $1,500 $3,000 $30,000 $3,000 Manager Me Me ABC ABC ABC Me ABC

Implementation:Tellreaderswhatneedstobedonetoaccomplisheachofthese activitiesonscheduleandwithinbudget.Ifnecessary,explainwhyitisimportantthese tasksbecompletedbytheassigneddate.


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Step10ConcludingComments Anyconclusionshouldbeashortsummaryofwhatyouhavewritten.Itdoesnotneed tobeaformalconclusionbutcansimplybeareworkedversionofyourexecutive summary.Dependingonwhoyourreaderis,youcanemphasizehowsuccessfulyour businesswillbefinanciallyortheworkyourmanagementteamneedstodo.In summary,yourplanshouldultimatelydescribeyour: Companyandindustry Productorservice Marketandmarketingapproach Managementandstaffingteam Financialprojections. Finishingthefirstdraftofyourbusinessplanisamonumentalstepforwardforyour business.Keeponeditingit.Ifthisplanisaworkingcopyforyourownuse,thereisno needtospendalotoftimeonpresentation.Ifyouareusingtheplantoaskforfinancial support,itshouldlookprofessionalandbeeasytoread.Makesureyourspelling, punctuation,andgrammararecorrect.Youmayevenwanttohavethedocument reviewedbysomeoneyoutrustand/oranoutsideexpert,suchasaprofessionalfrom theUniversityofAlaska. Afteryougetyourbusinessstarted,continuetoupdateandevolveyour businessplan.Yoursituationorthebusinessmaychange,andthisshouldbe reflectedintheplan.Keepyourfinancialanalysiscurrent,asyoulearnfrom experience.Useyourimplementationscheduleandcontinuallyupdateit. Yourbusinessplanisyourroadmapfornavigatingyourbusinessstartup.Ifyouhita largebumpthatthrowsyouoff,reviseyourplanningand/orimplementationschedule. Congratulations!Youhavefinishedthefirstdraftofyourbusinessplan.


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APPENDICES


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EstimatedStartupCostsWorksheet

Startupcostsareexpensesyouneedtomakeasyoupreparetoopenyourbusiness. Examplesareequipment,legalfees,websitedevelopment,andtraining.Ifyouare goingtoquitanotherjobbeforeyournewbusinessstartsmakingmoney,includea salaryorlivingstipendinthestartupcosts.Usethetablebelowtolistallyourstart upexpenses.Makeyourestimateascompleteandaccurateaspossible. STARTUPEXPENSE Cost

TOTAL:


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EstimatedRevenueWorksheet

Usethissectiontoestimateyouryearlyrevenue: Price: Priceofproduct/service1 $____________________ $____________________ $____________________ $____________________

Priceofproduct/service2

Priceofproduct/service3 Averagepriceperproduct (Addeachpriceperproductanddivideby numberofproducts) Quantity:

Numbersoldofproduct/service1 Numbersoldofproduct/service2

____________________ ____________________ ____________________

Numbersoldofproduct/service3 RevenuefromProducts/Services: Pricexquantityofproduct/service1

$____________________ $____________________

Pricexquantityofproduct/services2

Pricexquantityofproduct/Service3 $____________________ Total: OtherRevenue: $____________________

Allotherrevenue $____________________ TOTALREVENUE: $____________________


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EstimatedFixedCostsWorksheet

Fixedcostsareexpensesyoumustpayeveryyear,nomatterhowmanyproductsor servicesyousell.Marketingexpenses,loanpayments,maintenancefees,equipment payments,accountingfees,andutilitiesareexamplesoffixedcosts.Again,makeyour listascompleteandaccurateaspossible. FIXEDEXPENSE TOTALYEARLYFIXEDCOSTS: EstimatedYearlyCost

Wri

Documents

Rural Entrepreneurs - Writing Your Small Business Plan