Download Business Plan for a Startup Business Template and more Study notes Business in PDF only on Docsity! Page 1 of 31 Business Plan for a Startup Business The business plan consists of a narrative and several financial worksheets. The narrative template is the body of the business plan. It contains more than 150 questions divided into several sections. Work through the sections in any order that you like, except for the Executive Summary, which should be done last. Skip any questions that do not apply to your type of business. When you are finished writing your first draft, you’ll have a collection of small essays on the various topics of the business plan. Then you’ll want to edit them into a smooth‐flowing narrative. The real value of creating a business plan is not in having the finished product in hand; rather, the value lies in the process of researching and thinking about your business in a systematic way. The act of planning helps you to think things through thoroughly, study and research if you are not sure of the facts, and look at your ideas critically. It takes time now, but avoids costly, perhaps disastrous, mistakes later. This business plan is a generic model suitable for all types of businesses. However, you should modify it to suit your particular circumstances. Before you begin, review the section titled Refining the Plan, found at the end. It suggests emphasizing certain areas depending upon your type of business (manufacturing, retail, service, etc.). It also has tips for fine‐tuning your plan to make an effective presentation to investors or bankers. If this is why you’re creating your plan, pay particular attention to your writing style. You will be judged by the quality and appearance of your work as well as by your ideas. 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. But then, that’s the value of the process. So 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 on the assumptions underlying your financial data. If you need assistance with your business plan, contact the SCORE office in your area to set up a business counseling appointment with a SCORE volunteer or send your plan for review to a SCORE counselor at www.score.org. Call 1‐800‐634‐0245 to get the contact information for the SCORE office closest to you. Page 2 of 31 Business Plan OWNERS Your Business Name Address Line 1 Address Line 2 City, ST ZIP Code Telephone Fax E‐Mail Page 5 of 31 III. General Company Description What business will you be in? What will you do? Mission Statement: Many companies have a brief mission statement, usually in 30 words or fewer, explaining their reason for being and their guiding principles. If you want to draft a mission statement, this is a good place to put it in the plan, followed by: Company Goals and Objectives: Goals are destinations—where you want your business to be. Objectives are progress markers along the way to goal achievement. For example, a goal might be to have a healthy, successful company that is a leader in customer service and that has a loyal customer following. Objectives might be annual sales targets and some specific measures of customer satisfaction. Business Philosophy: What is important to you in business? To whom will you market your products? (State it briefly here—you will do a more thorough explanation in the Marketing Plan section). Describe your industry. Is it a growth industry? What changes do you foresee in the industry, short term and long term? How will your company be poised to take advantage of them? Describe your most important company strengths and core competencies. What factors will make the company succeed? What do you think your major competitive strengths will be? What background experience, skills, and strengths do you personally bring to this new venture? Legal form of ownership: Sole proprietor, Partnership, Corporation, Limited liability corporation (LLC)? Why have you selected this form? Page 6 of 31
IV. Products and Services
Describe in depth your products or services (technical specifications, drawings, photos,
sales brochures, and other bulky items belong in Appendices).
What factors will give you competitive advantages or disadvantages? Examples include
level of quality or unique or proprietary features.
What are the pricing, fee, or leasing structures of your products or services?
Page 7 of 31 V. Marketing Plan Market research - Why? No matter how good your product and your service, the venture cannot succeed without effective marketing. And this begins with careful, systematic research. It is very dangerous to assume that you already know about your intended market. You need to do market research to make sure you’re on track. Use the business planning process as your opportunity to uncover data and to question your marketing efforts. Your time will be well spent. Market research - How? There are two kinds of market research: primary and secondary. Secondary research means using published information such as industry profiles, trade journals, newspapers, magazines, census data, and demographic profiles. This type of information is available in public libraries, industry associations, chambers of commerce, from vendors who sell to your industry, and from government agencies. Start with your local library. Most librarians are pleased to guide you through their business data collection. You will be amazed at what is there. There are more online sources than you could possibly use. Your chamber of commerce has good information on the local area. Trade associations and trade publications often have excellent industry‐specific data. Primary research means gathering your own data. For example, you could do your own traffic count at a proposed location, use the yellow pages to identify competitors, and do surveys or focus‐group interviews to learn about consumer preferences. Professional market research can be very costly, but there are many books that show small business owners how to do effective research themselves. In your marketing plan, be as specific as possible; give statistics, numbers, and sources. The marketing plan will be the basis, later on, of the all‐important sales projection. Economics Facts about your industry: • What is the total size of your market? Page 10 of 31 • Income level • Social class and occupation • Education • Other (specific to your industry) • Other (specific to your industry) For business customers, the demographic factors might be: • Industry (or portion of an industry) • Location • Size of firm • Quality, technology, and price preferences • Other (specific to your industry) • Other (specific to your industry) Competition What products and companies will compete with you? List your major competitors: (Names and addresses) Will they compete with you across the board, or just for certain products, certain customers, or in certain locations? Will you have important indirect competitors? (For example, video rental stores compete with theaters, although they are different types of businesses.) How will your products or services compare with the competition? Use the Competitive Analysis table below to compare your company with your two most important competitors. In the first column are key competitive factors. Since these vary from one industry to another, you may want to customize the list of factors. Page 11 of 31 In the column labeled Me, state how you honestly think you will stack up in customersʹ minds. Then check whether you think this factor will be a strength or a weakness for you. Sometimes it is hard to analyze our own weaknesses. Try to be very honest here. Better yet, get some disinterested strangers to assess you. This can be a real eye‐opener. And remember that you cannot be all things to all people. In fact, trying to be causes many business failures because efforts become scattered and diluted. You want an honest assessment of your firmʹs strong and weak points. Now analyze each major competitor. In a few words, state how you think they compare. In the final column, estimate the importance of each competitive factor to the customer. 1 = critical; 5 = not very important. Table 1: Competitive Analysis Factor Me Strength Weakness Competitor A Competitor B Importance to Customer Products Price Quality Selection Service Reliability Stability Expertise Company Reputation Location Appearance Page 12 of 31 Factor Me Strength Weakness Competitor A Competitor B Importance to Customer Sales Method Credit Policies Advertising Image Now, write a short paragraph stating your competitive advantages and disadvantages. Niche Now that you have systematically analyzed your industry, your product, your customers, and the competition, you should have a clear picture of where your company fits into the world. In one short paragraph, define your niche, your unique corner of the market. Strategy Now outline a marketing strategy that is consistent with your niche. Promotion How will you get the word out to customers? Advertising: What media, why, and how often? Why this mix and not some other? Have you identified low‐cost methods to get the most out of your promotional budget? Will you use methods other than paid advertising, such as trade shows, catalogs, dealer incentives, word of mouth (how will you stimulate it?), and network of friends or professionals? What image do you want to project? How do you want customers to see you? Page 15 of 31
Remember to keep notes on your research and your assumptions as you build this sales
forecast and all subsequent spreadsheets in the plan. This is critical if you are going to
present it to funding sources.
Page 16 of 31 VI. Operational Plan Explain the daily operation of the business, its location, equipment, people, processes, and surrounding environment. Production How and where are your products or services produced? Explain your methods of: • Production techniques and costs • Quality control • Customer service • Inventory control • Product development Location What qualities do you need in a location? Describe the type of location you’ll have. Physical requirements: • Amount of space • Type of building • Zoning • Power and other utilities Access: Is it important that your location be convenient to transportation or to suppliers? Do you need easy walk‐in access? What are your requirements for parking and proximity to freeway, airports, railroads, and shipping centers? Page 17 of 31 Include a drawing or layout of your proposed facility if it is important, as it might be for a manufacturer. Construction? Most new companies should not sink capital into construction, but if you are planning to build, costs and specifications will be a big part of your plan. Cost: Estimate your occupation expenses, including rent, but also including maintenance, utilities, insurance, and initial remodeling costs to make the space suit your needs. These numbers will become part of your financial plan. What will be your business hours? Legal Environment Describe the following: • Licensing and bonding requirements • Permits • Health, workplace, or environmental regulations • Special regulations covering your industry or profession • Zoning or building code requirements • Insurance coverage • Trademarks, copyrights, or patents (pending, existing, or purchased) Personnel • Number of employees • Type of labor (skilled, unskilled, and professional) • Where and how will you find the right employees? • Quality of existing staff • Pay structure • Training methods and requirements Page 20 of 31 Managing Your Accounts Payable You should also age your accounts payable, what you owe to your suppliers. This helps you plan whom to pay and when. Paying too early depletes your cash, but paying late can cost you valuable discounts and can damage your credit. (Hint: If you know you will be late making a payment, call the creditor before the due date.) Do your proposed vendors offer prompt payment discounts? A payables aging looks like the following table. Total Current 30 Days 60 Days 90 Days Over 90 Days Accounts Payable Aging Page 21 of 31 VII. Management and Organization Who will manage the business on a day‐to‐day basis? What experience does that person bring to the business? What special or distinctive competencies? Is there a plan for continuation of the business if this person is lost or incapacitated? If you’ll have more than 10 employees, create an organizational chart showing the management hierarchy and who is responsible for key functions. Include position descriptions for key employees. If you are seeking loans or investors, include resumes of owners and key employees. Professional and Advisory Support List the following: • Board of directors • Management advisory board • Attorney • Accountant • Insurance agent • Banker • Consultant or consultants • Mentors and key advisors Page 22 of 31
VIII. Personal Financial Statement
Include personal financial statements for each owner and major stockholder, showing
assets and liabilities held outside the business and personal net worth. Owners will
often have to draw on personal assets to finance the business, and these statements will
show what is available. Bankers and investors usually want this information as well.
Page 25 of 31 about them—perhaps cut expenses, or perhaps negotiate a loan. But foremost, you shouldn’t be taken by surprise. There is no great trick to preparing it: The cash‐flow projection is just a forward look at your checking account. For each item, determine when you actually expect to receive cash (for sales) or when you will actually have to write a check (for expense items). You should track essential operating data, which is not necessarily part of cash flow but allows you to track items that have a heavy impact on cash flow, such as sales and inventory purchases. You should also track cash outlays prior to opening in a pre‐startup column. You should have already researched those for your startup expenses plan. Your cash flow will show you whether your working capital is adequate. Clearly, if your projected cash balance ever goes negative, you will need more start‐up capital. This plan will also predict just when and how much you will need to borrow. Explain your major assumptions, especially those that make the cash flow differ from the Profit and Loss Projection. For example, if you make a sale in month one, when do you actually collect the cash? When you buy inventory or materials, do you pay in advance, upon delivery, or much later? How will this affect cash flow? Are some expenses payable in advance? When? Are there irregular expenses, such as quarterly tax payments, maintenance and repairs, or seasonal inventory buildup, that should be budgeted? Loan payments, equipment purchases, and ownerʹs draws usually do not show on profit and loss statements but definitely do take cash out. Be sure to include them. And of course, depreciation does not appear in the cash flow at all because you never write a check for it. Opening Day Balance Sheet A balance sheet is one of the fundamental financial reports that any business needs for reporting and financial management. A balance sheet shows what items of value are Page 26 of 31 held by the company (assets), and what its debts are (liabilities). When liabilities are subtracted from assets, the remainder is owners’ equity. Use a startup expenses and capitalization spreadsheet as a guide to preparing a balance sheet as of opening day. Then detail how you calculated the account balances on your opening day balance sheet. Optional: Some people want to add a projected balance sheet showing the estimated financial position of the company at the end of the first year. This is especially useful when selling your proposal to investors. Break-Even Analysis A break‐even analysis predicts the sales volume, at a given price, required to recover total costs. In other words, it’s the sales level that is the dividing line between operating at a loss and operating at a profit. Expressed as a formula, break‐even is: Fixed Costs Break‐Even Sales = 1‐ Variable Costs (Where fixed costs are expressed in dollars, but variable costs are expressed as a percent of total sales.) Include all assumptions upon which your break‐even calculation is based. Page 27 of 31 XI. Appendices Include details and studies used in your business plan; for example: • Brochures and advertising materials • Industry studies • Blueprints and plans • Maps and photos of location • Magazine or other articles • Detailed lists of equipment owned or to be purchased • Copies of leases and contracts • Letters of support from future customers • Any other materials needed to support the assumptions in this plan • Market research studies • List of assets available as collateral for a loan Page 30 of 31 • How will you measure labor productivity? • Percent of work subcontracted to other firms. Will you make a profit on subcontracting? • Credit, payment, and collections policies and procedures • Strategy for keeping client base High Technology Companies • Economic outlook for the industry • Will the company have information systems in place to manage rapidly changing prices, costs, and markets? • Will you be on the cutting edge with your products and services? • What is the status of research and development? And what is required to: o Bring product/service to market? o Keep the company competitive? • How does the company: o Protect intellectual property? o Avoid technological obsolescence? o Supply necessary capital? o Retain key personnel? High‐tech companies sometimes have to operate for a long time without profits and sometimes even without sales. If this fits your situation, a banker probably will not want to lend to you. Venture capitalists may invest, but your story must be very good. You must do longer‐term financial forecasts to show when profit take‐off is expected to occur. And your assumptions must be well documented and well argued. Page 31 of 31 Retail Business • Company image • Pricing: o Explain markup policies. o Prices should be profitable, competitive, and in accordance with company image. • Inventory: o Selection and price should be consistent with company image. o Inventory level: Find industry average numbers for annual inventory turnover rate (available in RMA book). Multiply your initial inventory investment by the average turnover rate. The result should be at least equal to your projected first yearʹs cost of goods sold. If it is not, you may not have enough budgeted for startup inventory. • Customer service policies: These should be competitive and in accord with company image. • Location: Does it give the exposure that you need? Is it convenient for customers? Is it consistent with company image? • Promotion: Methods used, cost. Does it project a consistent company image? • Credit: Do you extend credit to customers? If yes, do you really need to, and do you factor the cost into prices?