Preparing A Business Plan

Components Of A Business Plan

1. Business Plan Overview
2. Executive Summary
3. Your Company
   • Background
   • Current Situation
   • Future Plan
4. The Industry
   • Principal Characteristics
   • Major Participants
   • Industry Trends
5. Your Product / Service
   • Description
   • Proprietary Position
   • Potential
6. Market Analysis
   • Target Market and Customers
   • Market Size and Trends
   • Competition
   • Estimated Sales and Market Share
7. Marketing Plan
   • Pricing
   • Sales and Distribution
   • Advertising and Promotion
   • Service and Warranty Program
8. Development Plan
   • Development Status
   • Costs
   • Proprietary Issues
9. Operations Plan
   • Location
   • Facilities and Equipment
10. Management Team
    • Description of Management Team
11. Implementation Schedule
    • Milestones
    • Schedule
    • Risks and Problems
12. Financial Plan
    • Funding Requirements (current and future)
    • Start Up Budget
    • Income Statement
    • Balance Sheet
    • Monthly Cash Flow
13. Apendices And Exhibits

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BUSINESS PLAN OVERVIEW

This business plan is a generic outline suitable for all types of businesses. However, you should modify it to suit your particular circumstances. It typically takes several weeks to complete a good plan. Most of that time is spent in research and re-thinking your ideas and assumptions. Make time to do the job properly. Those who do, never regret the effort. And finally, be sure to keep detailed notes on your sources of information and the assumptions underlying your financial data.

The business plan should be prepared in a professional manner while considering the reader's reason for reviewing the plan. Therefore, the plan should be organized with easy find sections and exhibits. After you have completed the plan, it would be very useful to have others review the plan prior to forwarding it to potential lenders or investors. In light of the confidential nature of the content contained within the business plan, it is important to carefully control its distribution.

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Executive Summary

The purpose of the Executive Summary is to provide a concise overview of the business. Although this section appears first, it should always be written after the rest of the plan has been completed.

The Executive Summary is a description of the business that provides the following information:

• The name of your business
• The location of your business
• The form of ownership (sole proprietorship, partnership, corporation)
• Details of the product/ service you intend to offer
• The reasons your product/ service is needed
• Additional financing required

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Your Company

Background

Discuss the following:

• The date your business was started
• The present form of organization
• The business location
• Pertinent historical information of the business
• The name of the owner and key individuals
• How you chose product/ service
• What success the business has achieved to date

Current Situation

Discuss the following:

• Have you identified your market opportunities?
• Have you assessed the competition?
• Have you developed unique factors that will make your product/ service stand out from the rest?

Future Plan

Discuss the following:

• Your goals for the business
• Your ambitions for the business
• Your strategy for achieving them
• Your personal goals (income, self-employment, etc.)

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THE INDUSTRY

Principal Characteristics

Describe:

• The current status and prospects for the industry
• How big is the industry?
• What are its total sales in dollars?
• What are its total sales in units?
• What are typical industry standards?
• What are typical gross margins?
• What are typical seasonal patterns?

Major Participants

Identify:

• The major industry participants, their role, market share and performance measures
• What are their strengths and weaknesses?
• How will you be able to successfully compete in this situation?

Industry Trends

Discuss:

• How you feel the industry will evolve in the future?
• What do you feel industry sales will be five and ten years from now?
• What general trends are evident?
• How is the industry likely to be affected by economic, social and technological trends?

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YOUR PRODUCT / SERVICE

Description

Describe the product/ service you plan to sell in detail explaining:

• Any unique characteristics or particular advantages
• How will features of your product or service give you some advantage over competitors?
• The stage of development your product is at
• Whether prototypes, working models or finished production units are available
• Include photographs if possible

Proprietary Position

Describe:

• Any patents or trademarks you may hold or have applied for?
• Any licensing agreements or other legal contracts that may provide some protection for your product/ service?
• Are there any regulatory or government-approved standards or requirements your product must meet?
• How and when do you plan to obtain this certification?

Potential

Outline:

• Your market opportunity as you see it
• How you plan to take advantage of it
• What are the key success factors in this business, and how do you plan to exploit them to your advantage?

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MARKET ANALYSIS

This section of your plan should convince the reader that you thoroughly understand the market for your product/ service, that you can deal with the competition and achieve sufficient sales to develop a viable and growing business. You should describe:

• The total market.
• How you feel it can be broken down into segments?
• Indicate these segments or niche you plan to concentrate on.
• What share of this business you will be able to obtain?

Target Market and Customers

Identify:

• Who constitutes your primary target market (individuals, companies, institutions)?
• Who and where are they?
• What are the principal bases for their purchase decisions?
• What are their major applications for your product?
• What principal benefit will they obtain from using your product?

Market Size and Trends

Estimate:

• The size of the current total market for your product/ service (unit and dollars)
• How are sales distributed among different segments?
• Are there any strong patterns (weekly, monthly, seasonal)
• Are there any trends in the industry (population shifts, government policy)

Competition

Identify:

• Each of your principal competitors and their product/ service
• Compare these competing product/ service on the basis of price, quality, performance etc.

Estimated Sales and Market Share

Estimate:

• The share of each segment of the market and the sales in unit and dollars that you feel you will acquire for each of the next 3 -5 years.

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MARKETING PLAN

This section outlines how your sales projections will be achieved. It details the marketing strategy you plan to use to establish your product/ service in the marketplace and obtain a profitable share of the overall market.

Pricing

Discuss:

• The price you plan to charge for your product/ service.
• How does it compare with your major competitors?
• Is your gross margin sufficient to cover your costs (sales - cost of goods sold)?
• Indicate normal terms of sale.

Sales and Distribution

Indicate:

• The methods you will use to sell and distribute your product/ service
• If you plan to use your own sales force, describe how large it will be and how it will be structured.
• If you plan to use wholesalers, indicate how they have been or will be selected.

Advertising and Promotion

Describe:

• The program you plan to use to make consumers aware of your product/ service.
• What consumers are you trying to reach?
• Do you plan to use the services of an advertising agency?
• What media do you plan to use (radio, television, newspaper…)?
• How much do you plan to spend on each medium?
• Outline plans to obtain any free publicity

Service and Warranty Program

Indicate:

• Your service arrangements, warranty terms and method of handling service problems.
• How will you handle customer complaints and other problems?
• Will service be handled by the company, dealers and distributors or service centres?
• How do these arrangements compare with those of your competitors?

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DEVELOPMENT PLAN

If you product/ service involves some further technical development, the planned extent of this work should be discussed in your business plan. Indicate how much it will cost, and how long it will take before your business has a finished marketable product.

Development Status

Describe:

• The current status of your product and outline what still remains to be done
• Do you presently have only a concept, detailed drawings, a laboratory prototype or a finished product?
• Is further engineering work required or planned?
• Has the necessary tooling to produce the product been adequately developed?

Costs

Indicate:

• How much money has been spent on product development and where it has been spent
• Present development budget

Proprietary Issues

Indicate:

• Do you have any patents or trademarks?
• Are there any regulatory requirements to produce or to market the product?

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OPERATIONS PLAN

Your operations plan outlines the operating side of your business.

Location

Describe:

• The planned location of your business and discuss any advantages or disadvantages of this location
• Discuss the characteristics of your location in relation to market size, traffic flows, income levels etc.

Facilities and Equipment

Describe:

• The property and facilities currently used or that will be required to operate your business
• Will these facilities be leased or purchased?
• New or used?
• What is the cost?

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MANAGEMENT TEAM

Your management team and your directors are the key to success. Concentrate on the key players, indicating their education, qualifications and past business achievements.

Description of Management Team

Outline:

• The exact duties and responsibilities of each key member
• Prepare a brief resume of each individual

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IMPLEMENTATION SCHEDULE

It is necessary to present an overall schedule indicating the tasks and time allotted for each of them.

Milestones

Summarize:

• The significant goals that you and your business have already reached
• What still needs to be done for the business to succeed?
• Who is responsible for things that need to be done?
• When will they be completed?

Schedule

Develop a schedule of significant events.

Risks and Problems

Describe:

• What major problems have you already encountered?
• How were they resolved?
• The risks your business may be faced with in the future
• How will you deal with them?

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FINANCIAL PLAN

The financial section of the business plan will help you and potential investors or bankers estimate how will be required as well as an estimation of sales with corresponding profit levels. This process will force you to think through the various scenarios that may arise throughout the course of business and the respective responses to each.

Funding Requirements (current and future)

Include:

• The current financial status of your business and
• Representation of your best estimate of its future operations
• The type of financing you are seeking
• The amount of money you are looking for
• How you plan to use these funds in the business
• The terms of repayment and desired interest rate

Start Up Budget

The start-up budget is needed to identify how much money you will need to start-up and possibly how much you will need to borrow.

Item	Estimated Cost	Actual Cost
Name Registration /Permits
Insurance
Stationary
Phone line set up
Computer
ETC.
Total Start-Up Costs

Income Statement

The purpose of the Income Statement is to summarize the operating activities of a business over a specific twelve month period. This statement is valuable as both a planning tool and a key management tool and can be used to help control business operations.

The following is an example of an Income Statement and a template for you to input your figures.

INCOME STATEMENT
Shelving Company
Date: [015/06/05]
Period: [06/04] to [05/05]
Revenue:
Gross Sales (Cash and Credit)	$390,200
Less Returns and Allowances	0
Net Sales		390,200
Expenses:
Accounting & Legal Fees	24,000
Facilities - Property Taxes	9,000
Facilities - Rent	24,000
Facilities - Telephone	4,200
Facilities - Utilities	16,200
Facilities - Insurance	10,200
IT Consulting	6,350
Miscellaneous	8,920
Office & Operating Supplies	15,025
Gross Wages	93,000
Payroll Taxes	17,600
PR / Advertising	10,850
Repairs & Maintenance	0
Car, Delivery & Travel	2,400
Capital Purchase (Software Licences)	59,000
Total Expenses		300,745
Net Operating Income		89,455
Other Income
Gain (Loss) on Sale of Assets	0
Interest Income	0
Total Other Income
Net Income (Loss)		89,455

Balance Sheet

Your balance sheet indicates the assets you feel will be required to support your projected level of operations and how you plan to finance these assets.

• Assets
• List of anything of value that is owned by the business.
• Liabilities
• All debts, monetary obligations and claims payable within 12 months
• Net Worth
• Also called "owner's equity". The net worth is the claim of the owner(s) on the assets of the business. In a sole proprietorship or partnership, equity is each owner's original investment plus earnings after withdrawals.

Balance sheet
Shelving Company
Assets
Current Assets
Cash in bank	$10,000
Inventory	5,000
Prepaid expenses	750
Other (security deposit)	2,000
Total current assets	$17,750
Fixed Assets
Machinery & Equipment	$3,500
Furniture & Fixtures	4,000
Real estate / Buildings	5,000
Other	-
Total fixed assets	$12,500
Total assets	$30,250
Liabilities & Net worth
Current liabilities
Accounts Payable	$3,500
Taxes payable	1,200
Notes payable (due within 12 months)	2,000
Current portion long-term debt	10,000
Other current liabilities (specify)	-
Total current liabilities	$ 16,700
Long-term liabilities
Bank loans payable (greater than 12 months)	$13,000
Less: Short-term portion	(2,500)
Notes payable to stockholders	-
Other long-term debt (specify)	-
Total long-term liabilities	$10,500
Total liabilities	$27,200
Owners' equity (net worth)	$ 3,050
Total liabilities & net worth	$ 30,250

Monthly Cash Flow

Your cash flow forecasts are probably your most important statements. The Cash Flow Statement, on a month - by - month basis, summarizes cash coming in and cash going out of the business. It shows how much cash a business will have at the end of each month.

Here is an example cash flow forecast that will help identify exactly why and when moneys will be needed:

Twelve Month Cash Flow

1

2

3

4

5

6

7

8

9

10

11

12

TOTAL

Cash on Hand (beginning of month)

CASH RECEIPTS

Cash Sales

Collections from credit accounts

Loan/ other cash

TOTAL CASH RECEIPTS

Total Cash Available

CASH PAID OUT

Gross wages

Payroll expenses

Outside services

Suppliers

Repairs & Maintenance

Advertising

Car, delivery & travel

Accounting & Legal

Rent

Telephone

Utilities

Insurance

Taxes (property, etc.)

Interest

Other expenses (specify)

Miscellaneous

SUBTOTAL

Loan principal payment

Capital purchase

Other start-up costs

Owners' Drawings

TOTAL CASH PAID OUT

Cash Position (end of the month)

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APPENDICES AND EXHIBITS

Separate from the body of your business plan it is important to include any other additional information that will help support your business idea. This may include:

• Marketing studies
• Patent information
• Photographs or sketches of product/ service
• Resumes of key managers
• Legal agreements

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