Page1of31

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

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

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

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

Ifyouneedassistancewithyourbusinessplan,contacttheSCOREofficeinyourareatosetupabusinesscounselingappointmentwithaSCOREvolunteerorsendyourplanforreviewtoaSCOREcounseloratwww.score.org.Call18006340245togetthecontactinformationfortheSCOREofficeclosesttoyou.

Page2of31

Business Plan

OWNERS

YourBusinessNameAddressLine1AddressLine2City,STZIPCodeTelephone Fax EMail

Page3of31

I. TableofContents

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

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

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

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

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

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

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

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

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

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

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

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

Page4of31

II. ExecutiveSummary

Writethissectionlast.

Wesuggestthatyoumakeittwopagesorfewer.

Includeeverythingthatyouwouldcoverinafiveminuteinterview.

Explainthefundamentalsoftheproposedbusiness:Whatwillyourproductbe?Whowillyourcustomersbe?Whoaretheowners?Whatdoyouthinkthefutureholdsforyourbusinessandyourindustry?

Makeitenthusiastic,professional,complete,andconcise.

Ifapplyingforaloan,stateclearlyhowmuchyouwant,preciselyhowyouaregoingtouseit,andhowthemoneywillmakeyourbusinessmoreprofitable,therebyensuringrepayment.

Page5of31

III. GeneralCompanyDescription

Whatbusinesswillyoubein?Whatwillyoudo?

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

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

BusinessPhilosophy:Whatisimportanttoyouinbusiness?

Towhomwillyoumarketyourproducts?(StateitbrieflyhereyouwilldoamorethoroughexplanationintheMarketingPlansection).

Describeyourindustry.Isitagrowthindustry?Whatchangesdoyouforeseeintheindustry,shorttermandlongterm?Howwillyourcompanybepoisedtotakeadvantageofthem?

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

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

Page6of31

IV. ProductsandServices

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

Whatfactorswillgiveyoucompetitiveadvantagesordisadvantages?Examplesincludelevelofqualityoruniqueorproprietaryfeatures.

Whatarethepricing,fee,orleasingstructuresofyourproductsorservices?

Page7of31

V. MarketingPlan

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

Market research - How? Therearetwokindsofmarketresearch:primaryandsecondary.

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

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

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

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

Economics Factsaboutyourindustry:

Whatisthetotalsizeofyourmarket?

Page8of31

Whatpercentshareofthemarketwillyouhave?(Thisisimportantonlyifyouthinkyouwillbeamajorfactorinthemarket.)

Currentdemandintargetmarket. Trendsintargetmarketgrowthtrends,trendsinconsumerpreferences,and

trendsinproductdevelopment.

Growthpotentialandopportunityforabusinessofyoursize. Whatbarrierstoentrydoyoufaceinenteringthismarketwithyournew

company?Sometypicalbarriersare:

o Highcapitalcosts

o Highproductioncosts

o Highmarketingcosts

o Consumeracceptanceandbrandrecognition

o Trainingandskills

o Uniquetechnologyandpatents

o Unions

o Shippingcosts

o Tariffbarriersandquotas

Andofcourse,howwillyouovercomethebarriers? Howcouldthefollowingaffectyourcompany?

o Changeintechnology

o Changeingovernmentregulations

o Changeintheeconomy

o Changeinyourindustry

Page9of31

Product IntheProductsandServicessection,youdescribedyourproductsandservicesasyouseethem.Nowdescribethemfromyourcustomerspointofview.

FeaturesandBenefits

Listallofyourmajorproductsorservices.

Foreachproductorservice:

Describethemostimportantfeatures.Whatisspecialaboutit? Describethebenefits.Thatis,whatwilltheproductdoforthecustomer?

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

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

Customers Identifyyourtargetedcustomers,theircharacteristics,andtheirgeographiclocations,otherwiseknownastheirdemographics.

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

Youmayhavemorethanonecustomergroup.Identifythemostimportantgroups.Then,foreachcustomergroup,constructwhatiscalledademographicprofile:

Age Gender Location

Page10of31

Incomelevel Socialclassandoccupation Education Other(specifictoyourindustry) Other(specifictoyourindustry)

Forbusinesscustomers,thedemographicfactorsmightbe:

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

Competition Whatproductsandcompanieswillcompetewithyou?

Listyourmajorcompetitors:

(Namesandaddresses)

Willtheycompetewithyouacrosstheboard,orjustforcertainproducts,certaincustomers,orincertainlocations?

Willyouhaveimportantindirectcompetitors?(Forexample,videorentalstorescompetewiththeaters,althoughtheyaredifferenttypesofbusinesses.)

Howwillyourproductsorservicescomparewiththecompetition?

UsetheCompetitiveAnalysistablebelowtocompareyourcompanywithyourtwomostimportantcompetitors.Inthefirstcolumnarekeycompetitivefactors.Sincethesevaryfromoneindustrytoanother,youmaywanttocustomizethelistoffactors.

Page11of31

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

Nowanalyzeeachmajorcompetitor.Inafewwords,statehowyouthinktheycompare.

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

Table1:CompetitiveAnalysis

Factor Me Strength Weakness CompetitorA CompetitorB ImportancetoCustomer

Products

Price

Quality

Selection

Service

Reliability

Stability

Expertise

CompanyReputation

Location

Appearance

Page12of31

Factor Me Strength Weakness CompetitorA CompetitorB ImportancetoCustomer

SalesMethod

CreditPolicies

Advertising

Image

Now,writeashortparagraphstatingyourcompetitiveadvantagesanddisadvantages.

Niche Nowthatyouhavesystematicallyanalyzedyourindustry,yourproduct,yourcustomers,andthecompetition,youshouldhaveaclearpictureofwhereyourcompanyfitsintotheworld.

Inoneshortparagraph,defineyourniche,youruniquecornerofthemarket.

Strategy Nowoutlineamarketingstrategythatisconsistentwithyourniche.

Promotion

Howwillyougetthewordouttocustomers?

Advertising:Whatmedia,why,andhowoften?Whythismixandnotsomeother?

Haveyouidentifiedlowcostmethodstogetthemostoutofyourpromotionalbudget?

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

Whatimagedoyouwanttoproject?Howdoyouwantcustomerstoseeyou?

Page13of31

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

Shouldyouhaveasystemtoidentifyrepeatcustomersandthensystematicallycontactthem?

PromotionalBudget

Howmuchwillyouspendontheitemslistedabove?

Beforestartup?(Thesenumberswillgointoyourstartupbudget.)

Ongoing?(Thesenumberswillgointoyouroperatingplanbudget.)

Pricing

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

Doesyourpricingstrategyfitwithwhatwasrevealedinyourcompetitiveanalysis?

Compareyourpriceswiththoseofthecompetition.Aretheyhigher,lower,thesame?Why?

Howimportantispriceasacompetitivefactor?Doyourintendedcustomersreallymaketheirpurchasedecisionsmostlyonprice?

Whatwillbeyourcustomerserviceandcreditpolicies?

ProposedLocation

Probablyyoudonothaveapreciselocationpickedoutyet.Thisisthetimetothinkaboutwhatyouwantandneedinalocation.Manystartupsrunsuccessfullyfromhomeforawhile.

Youwilldescribeyourphysicalneedslater,intheOperationalPlansection.Here,analyzeyourlocationcriteriaastheywillaffectyourcustomers.

Page14of31

Isyourlocationimportanttoyourcustomers?Ifyes,how?

Ifcustomerscometoyourplaceofbusiness:

Isitconvenient?Parking?Interiorspaces?Notoutoftheway?

Isitconsistentwithyourimage?

Isitwhatcustomerswantandexpect?

Whereisthecompetitionlocated?Isitbetterforyoutobenearthem(likecardealersorfastfoodrestaurants)ordistant(likeconveniencefoodstores)?

DistributionChannels

Howdoyousellyourproductsorservices?

Retail

Direct(mailorder,Web,catalog)

Wholesale

Yourownsalesforce

Agents

Independentrepresentatives

Bidoncontracts

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

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

Page15of31

Remembertokeepnotesonyourresearchandyourassumptionsasyoubuildthissalesforecastandallsubsequentspreadsheetsintheplan.Thisiscriticalifyouaregoingtopresentittofundingsources.

Page16of31

VI. OperationalPlan

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

Production Howandwhereareyourproductsorservicesproduced?

Explainyourmethodsof:

Productiontechniquesandcosts Qualitycontrol Customerservice Inventorycontrol Productdevelopment

Location Whatqualitiesdoyouneedinalocation?Describethetypeoflocationyoullhave.

Physicalrequirements:

Amountofspace Typeofbuilding Zoning Powerandotherutilities

Access:

Isitimportantthatyourlocationbeconvenienttotransportationortosuppliers?

Doyouneedeasywalkinaccess?

Whatareyourrequirementsforparkingandproximitytofreeway,airports,railroads,andshippingcenters?

Page17of31

Includeadrawingorlayoutofyourproposedfacilityifitisimportant,asitmightbeforamanufacturer.

Construction?Mostnewcompaniesshouldnotsinkcapitalintoconstruction,butifyouareplanningtobuild,costsandspecificationswillbeabigpartofyourplan.

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

Whatwillbeyourbusinesshours?

Legal Environment Describethefollowing:

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

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

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,howwouldyoudealwithchangingcosts?

Credit Policies Doyouplantoselloncredit?

Page19of31

Doyoureallyneedtoselloncredit?Isitcustomaryinyourindustryandexpectedbyyourclientele?

Ifyes,whatpolicieswillyouhaveaboutwhogetscreditandhowmuch? Howwillyoucheckthecreditworthinessofnewapplicants? Whattermswillyouofferyourcustomers;thatis,howmuchcreditandwhenis

paymentdue?

Willyouofferpromptpaymentdiscounts?(Hint:Dothisonlyifitisusualandcustomaryinyourindustry.)

Doyouknowwhatitwillcostyoutoextendcredit?Haveyoubuiltthecostsintoyourprices?

ManagingYourAccountsReceivable

Ifyoudoextendcredit,youshoulddoanagingatleastmonthlytotrackhowmuchofyourmoneyistiedupincreditgiventocustomersandtoalertyoutoslowpaymentproblems.Areceivablesaginglookslikethefollowingtable:

Total Current 30Days 60Days 90Days Over90Days

AccountsReceivableAging

Youwillneedapolicyfordealingwithslowpayingcustomers:

Whendoyoumakeaphonecall? Whendoyousendaletter? Whendoyougetyourattorneytothreaten?

Page20of31

ManagingYourAccountsPayable

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

Doyourproposedvendorsofferpromptpaymentdiscounts?

Apayablesaginglookslikethefollowingtable.

Total Current 30Days 60Days 90Days Over90Days

AccountsPayableAging

Page21of31

VII. ManagementandOrganization

Whowillmanagethebusinessonadaytodaybasis?Whatexperiencedoesthatpersonbringtothebusiness?Whatspecialordistinctivecompetencies?Isthereaplanforcontinuationofthebusinessifthispersonislostorincapacitated?

Ifyoullhavemorethan10employees,createanorganizationalchartshowingthemanagementhierarchyandwhoisresponsibleforkeyfunctions.

Includepositiondescriptionsforkeyemployees.Ifyouareseekingloansorinvestors,includeresumesofownersandkeyemployees.

Professional and Advisory Support Listthefollowing:

Boardofdirectors Managementadvisoryboard Attorney Accountant Insuranceagent Banker Consultantorconsultants Mentorsandkeyadvisors

Page22of31

VIII. PersonalFinancialStatement

Includepersonalfinancialstatementsforeachownerandmajorstockholder,showingassetsandliabilitiesheldoutsidethebusinessandpersonalnetworth.Ownerswilloftenhavetodrawonpersonalassetstofinancethebusiness,andthesestatementswillshowwhatisavailable.Bankersandinvestorsusuallywantthisinformationaswell.

Page23of31

IX. StartupExpensesandCapitalization

Youwillhavemanystartupexpensesbeforeyouevenbeginoperatingyourbusiness.Itsimportanttoestimatetheseexpensesaccuratelyandthentoplanwhereyouwillgetsufficientcapital.Thisisaresearchproject,andthemorethoroughyourresearchefforts,thelesschancethatyouwillleaveoutimportantexpensesorunderestimatethem.

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

Talktootherswhohavestartedsimilarbusinessestogetagoodideaofhowmuchtoallowforcontingencies.Ifyoucannotgetgoodinformation,werecommendaruleofthumbthatcontingenciesshouldequalatleast20percentofthetotalofallotherstartupexpenses.

Explainyourresearchandhowyouarrivedatyourforecastsofexpenses.Givesources,amounts,andtermsofproposedloans.Alsoexplainindetailhowmuchwillbecontributedbyeachinvestorandwhatpercentownershipeachwillhave.

Page24of31

X. FinancialPlan

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

12-Month Profit and Loss Projection Manybusinessownersthinkofthe12monthprofitandlossprojectionasthecenterpieceoftheirplan.Thisiswhereyouputitalltogetherinnumbersandgetanideaofwhatitwilltaketomakeaprofitandbesuccessful.

Yoursalesprojectionswillcomefromasalesforecastinwhichyouforecastsales,costofgoodssold,expenses,andprofitmonthbymonthforoneyear.

Profitprojectionsshouldbeaccompaniedbyanarrativeexplainingthemajorassumptionsusedtoestimatecompanyincomeandexpenses.

ResearchNotes:Keepcarefulnotesonyourresearchandassumptions,sothatyoucanexplainthemlaterifnecessary,andalsosothatyoucangobacktoyoursourceswhenitstimetoreviseyourplan.

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

Ofcourse,keepnotesofyourkeyassumptions,especiallyaboutthingsthatyouexpectwillchangedramaticallyafterthefirstyear.

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

Thepointofthisworksheetistoplanhowmuchyouneedbeforestartup,forpreliminaryexpenses,operatingexpenses,andreserves.Youshouldkeepupdatingitandusingitafterward.Itwillenableyoutoforeseeshortagesintimetodosomething

Page25of31

aboutthemperhapscutexpenses,orperhapsnegotiatealoan.Butforemost,youshouldntbetakenbysurprise.

Thereisnogreattricktopreparingit:Thecashflowprojectionisjustaforwardlookatyourcheckingaccount.

Foreachitem,determinewhenyouactuallyexpecttoreceivecash(forsales)orwhenyouwillactuallyhavetowriteacheck(forexpenseitems).

Youshouldtrackessentialoperatingdata,whichisnotnecessarilypartofcashflowbutallowsyoutotrackitemsthathaveaheavyimpactoncashflow,suchassalesandinventorypurchases.

Youshouldalsotrackcashoutlayspriortoopeninginaprestartupcolumn.Youshouldhavealreadyresearchedthoseforyourstartupexpensesplan.

Yourcashflowwillshowyouwhetheryourworkingcapitalisadequate.Clearly,ifyourprojectedcashbalanceevergoesnegative,youwillneedmorestartupcapital.Thisplanwillalsopredictjustwhenandhowmuchyouwillneedtoborrow.

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

Aresomeexpensespayableinadvance?When?

Arethereirregularexpenses,suchasquarterlytaxpayments,maintenanceandrepairs,orseasonalinventorybuildup,thatshouldbebudgeted?

Loanpayments,equipmentpurchases,andownersdrawsusuallydonotshowonprofitandlossstatementsbutdefinitelydotakecashout.Besuretoincludethem.

Andofcourse,depreciationdoesnotappearinthecashflowatallbecauseyouneverwriteacheckforit.

Opening Day Balance Sheet Abalancesheetisoneofthefundamentalfinancialreportsthatanybusinessneedsforreportingandfinancialmanagement.Abalancesheetshowswhatitemsofvalueare

Page26of31

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

Useastartupexpensesandcapitalizationspreadsheetasaguidetopreparingabalancesheetasofopeningday.Thendetailhowyoucalculatedtheaccountbalancesonyouropeningdaybalancesheet.

Optional:Somepeoplewanttoaddaprojectedbalancesheetshowingtheestimatedfinancialpositionofthecompanyattheendofthefirstyear.Thisisespeciallyusefulwhensellingyourproposaltoinvestors.

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

Expressedasaformula,breakevenis:

FixedCostsBreakEvenSales=

1VariableCosts

(Wherefixedcostsareexpressedindollars,butvariablecostsareexpressedasapercentoftotalsales.)

Includeallassumptionsuponwhichyourbreakevencalculationisbased.

Page27of31

XI. Appendices

Includedetailsandstudiesusedinyourbusinessplan;forexample:

Brochuresandadvertisingmaterials Industrystudies Blueprintsandplans Mapsandphotosoflocation Magazineorotherarticles Detailedlistsofequipmentownedortobepurchased Copiesofleasesandcontracts Lettersofsupportfromfuturecustomers Anyothermaterialsneededtosupporttheassumptionsinthisplan Marketresearchstudies Listofassetsavailableascollateralforaloan

Page28of31

XII. RefiningthePlan

Thegenericbusinessplanpresentedaboveshouldbemodifiedtosuityourspecifictypeofbusinessandtheaudienceforwhichtheplaniswritten.

For Raising Capital ForBankers

Bankerswantassuranceoforderlyrepayment.Ifyouintendusingthisplantopresenttolenders,include:

o Amountofloan

o Howthefundswillbeused

o Whatthiswillaccomplishhowwillitmakethebusinessstronger?

o Requestedrepaymentterms(numberofyearstorepay).Youwillprobablynothavemuchnegotiatingroomoninterestratebutmaybeabletonegotiatealongerrepaymentterm,whichwillhelpcashflow.

o Collateraloffered,andalistofallexistingliensagainstcollateral

ForInvestors

Investorshaveadifferentperspective.Theyarelookingfordramaticgrowth,andtheyexpecttoshareintherewards:

o Fundsneededshortterm

o Fundsneededintwotofiveyears

o Howthecompanywillusethefunds,andwhatthiswillaccomplishforgrowth.

o Estimatedreturnoninvestment

o Exitstrategyforinvestors(buyback,sale,orIPO)

o Percentofownershipthatyouwillgiveuptoinvestors

Page29of31

o Milestonesorconditionsthatyouwillaccept

o Financialreportingtobeprovided

o Involvementofinvestorsontheboardorinmanagement

For Type of Business Manufacturing

Plannedproductionlevels Anticipatedlevelsofdirectproductioncostsandindirect(overhead)costshow

dothesecomparetoindustryaverages(ifavailable)?

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

ServiceBusinesses

Servicebusinessessellintangibleproducts.Theyareusuallymoreflexiblethanothertypesofbusinesses,buttheyalsohavehigherlaborcostsandgenerallyverylittleinfixedassets.

Whatarethekeycompetitivefactorsinthisindustry? Yourprices Methodsusedtosetprices Systemofproductionmanagement Qualitycontrolprocedures.Standardoracceptedindustryqualitystandards.

Page30of31

Howwillyoumeasurelaborproductivity? Percentofworksubcontractedtootherfirms.Willyoumakeaprofiton

subcontracting?

Credit,payment,andcollectionspoliciesandprocedures Strategyforkeepingclientbase

HighTechnologyCompanies

Economicoutlookfortheindustry Willthecompanyhaveinformationsystemsinplacetomanagerapidlychanging

prices,costs,andmarkets?

Willyoubeonthecuttingedgewithyourproductsandservices? Whatisthestatusofresearchanddevelopment?Andwhatisrequiredto:

o Bringproduct/servicetomarket?

o Keepthecompanycompetitive?

Howdoesthecompany:o Protectintellectualproperty?

o Avoidtechnologicalobsolescence?

o Supplynecessarycapital?

o Retainkeypersonnel?

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

Page31of31

RetailBusiness

Companyimage Pricing:

o Explainmarkuppolicies.

o Pricesshouldbeprofitable,competitive,andinaccordancewithcompanyimage.

Inventory:o Selectionandpriceshouldbeconsistentwithcompanyimage.

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

Customerservicepolicies:Theseshouldbecompetitiveandinaccordwithcompanyimage.

Location:Doesitgivetheexposurethatyouneed?Isitconvenientforcustomers?Isitconsistentwithcompanyimage?

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

youfactorthecostintoprices?