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Business Plan

No matter what kind or size of business you are starting, it is very important to create a business plan. It will be your road map to success. It communicates your understanding of the business and it makes reasonable assumptions and forecasts of sales, expenses, and cash flow.

When writing your business plan, it is important to keep in mind for whom you are writing it. If you are writing a business plan for an investor or a bank you should assume that they know nothing about your business and industry. Also, keep your business plan short and to the point. If, on the other hand, you are writing a business plan just for yourself, you should construct it to suit your needs. It should indicate what your goals are and what strategies you will put in place to achieve these goals.

If you are writing a business plan for an investor or a bank, the following information and format is recommended.

  1. EXECUTIVE SUMMARY
    + This is a one page summary of your business plan. It should include:
    • A very short history of the business.
    • The amount and type of financing required.
    • The amount of equity (money) already invested and collateral offered.
    • The purpose for which the money will be used.
    • A very short summary of the owner's experience in the industry.

  2. TABLE OF CONTENTS
    + The table of contents lists the major divisions of your plan. The page numbers where each section begins should also be indicated.
    a. The Business
    b. Products/Services Offered
    c. Market Analysis
    d. Approach to selling
    e. Management and Personnel
    f.  Financial Data 
       i.  Sources and uses of funds
       ii. Balance sheet
       iii.Cash flow projection
       iv.Financial assumptions

    APPENDICE and SUPPORTING DOCUMENTS

  3. THE BUSINESS 
    + This section describes your business and the industry you are in. It should include:
    • The current status of the business (start-up, existing, acquisition).
    • The business structure (sole-proprietor, partnership, limited liability, corporation).
    • Products/services your business offers.
    • Suppliers of your products.
    • What differentiates your business from you competitors.
    • Description of business location and hours of operation.
    • Short and long term goals.

  4. PRODUCTS/SERVICES OFFERED
    + This section describes the products and/or services that your business provides. It should be written so that a lay person can easily understand. Write a short paragraph about your primary products/services and indicate:
    • A short description of products/services.
    • Price structure of the products/services.
    • Percentage of total gross sales that the products/services comprises.
    • Which products/services are the most profitable.
    • Any changes you foresee.
    You should also include a list of other products/services and any special or unique features.

  5. MARKET ANALYSIS
    + This section is one of the most important . It is imperative that you demonstrate that you are knowledgeable about your business' environment. The primary components of this section are:
    • The Industry:
      • What specific industry are you in?
      • What are the major trends?
      • Is the industry in a growth phase?
      • Tip: Trade associations are great sources of industry information.
    • Your Customers:
      • Who are your customers? (individuals, small businesses, etc.)
      • What is their demographic makeup? (age, sex, profession, etc.)
    • Market Size:
      • What is your market area? (Example: 20 mile radius of Towson)
      • How many potential customers are within your market area?
    • Competition:
      + Write a short paragraph on each of your primary competitors and discuss:
      • How long they've been in business.
      • Approximately how much business they do.
      • Their strengths and weaknesses.
      • Why customers will go to you instead of your competitor.

  6. APPROACH TO SELLING
    + Now that you have identified your target market, this section allows you to explain how you will get these customers to purchase your products or services. You should write a short paragraph on each method of advertising and include:
    • Short description of advertising method (flyers, radio spots, newspaper ads, etc.).
    • The frequency that it will be used.
    • The cost of the method of advertising.
    • How many potential customers will be reached.

  7. MANAGEMENT AND PERSONNEL
    + Your business is only as strong as the people running it. This section showcases the key members of your team and their responsibilities. A short paragraph should be written on each position in your company. Include for each position:
    • The position title.
    • The name of the person in the position.
    • A short description of the person's business background and experience.
    • A description of the person's responsibilities.
    + For less significant positions or positions that are not yet filled, only the position title and description are necessary. You will also want to include your team of professionals: your accountant, attorney, SBDC counselor, etc.
    Tip: Organizational charts are very helpful.

  8. FINANCIAL DATA
    + This is the most important part of your plan. The discussions contained in the other sections of this plan should be reflected in the financial information.
    • Sources and Uses of Funds - This basically states where the businesses funds will come from and where they will be spent. It should look similar to this:
    • Sources:
      Cash from owner .......................................................................... $____________
      Investor contribution .......................................................................... $____________
      Bank loan .......................................................................... $____________
      Total .......................................................................... $____________
      Uses:
      Remodel Space .......................................................................... $____________
      Equipment .......................................................................... $____________
      Rent Deposit .......................................................................... $____________
      Utilities Deposit .......................................................................... $____________
      Office Supplies .......................................................................... $____________
      Initial Inventory .......................................................................... $____________
      Working Capital .......................................................................... $____________
      Total .......................................................................... $____________
      The totals of the sources and uses of funds must be equal.

      Balance Sheet
      The balance sheet states the businesses assets, liabilities, and net worth. It is a snapshot in time of your business's financial strength. It should look like this:
      Assets:
      Cash .......................................................................... $____________
      Accounts Receivable .......................................................................... $____________
      Inventory .......................................................................... $____________
      Real Estate .......................................................................... $____________
      Fixtures, Equipment .......................................................................... $____________
      Other Assets .......................................................................... $____________
      Total .......................................................................... $____________
      Liabilities:
      Short-Term Notes Payable .......................................................................... $____________
      Accounts Payable .......................................................................... $____________
      Salaries & Wages .......................................................................... $____________
      Taxes Owed .......................................................................... $____________
      Long-Term Notes Payable .......................................................................... $____________
      Total .......................................................................... $____________
      Net Worth .......................................................................... $____________
      Total Assets minus total Liabilities must equal Net Worth.

  9. CASH FLOW PROJECTION
    + The cash flow projection shows how cash flows into and out of your business on a monthly basis. This table will be of particular interest to the bank as it shows that your business will have the ability to make regular monthly note payments in addition to you other expenses.

  10. FINANCIAL ASSUMPTIONS
    + This section explains how you came up with the numbers in you your cash flow projection. You can't just pull numbers out of the air; they must be validated by your research. Any category that would not be obvious to the reader should be explained. An example of this section would look like this:
    • Gross Sales - Projected sales are base on (1) the average sales of four hardware stores in our same market area, (2) the national average of gross sales per square foot for hardware stores,and (3) the independent surveys of 12 hardware stores in similar demographic areas.
    • Cost of Goods Sales - The cost of goods is based on an 80% average markup on inventory.
    • Payroll - Payroll expense includes a $24,000 salary for the owner ($2000/mo.)

  11. APPENDICES AND SUPPORTING DOCUMENTS
    + This section consists of any reference that was made earlier in the business plan. Such documents include:
    • Extended version of tax report
    • Credit history
    • Listing of assets owned
    • Certificates of qualification
    • Documentation of cash currently held (i.e. bank statement)

  12. FOR FURTHER INFORMATION
    + For a more detailed guide for business plan development contact the SBDC and request "Let's Write Your Business Plan Workbook" by Ginny L. Kuebler. The booklet is an extremely helpful Step-By-Step guide at a cost of $20, which easily integrates your ideas onto written paper.

Additional Buisness Plan Resources

 

 



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