business plan for a startup business (1)

8/13/2019 Business Plan for a Startup Business (1)

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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 15

!uestions divided into several sections. "ork through the sections in any order that

you want# e$cept for the Executive Summary,which should be done last. %kip any

!uestions that do not apply to your type of business. "hen 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 throughthoroughly# 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. )owever#

you should modify it to suit your particular circumstances. *efore you begin# review

the section titled Refining the Plan# found at the end. It suggests emphasi+ing 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. ou will be /udged by the !uality and appearance of your work as well

as by your ideas.

It typically takes several weeks to complete a good plan. 0ost of that time is spent

in research and re'thinking your ideas and assumptions. *ut then# that&s the value

of the process. %o make time to do the /ob properly. Those who do never regret the

effort. nd finally# be sure to keep detailed notes on your sources of information and

on the assumptions underlying your financial data.


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Business Plan

OWNERS

Your Business Name

%treet ddress

ddress 2

ity# %T 3IP ode

Telephone

4a$

'0ail


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I. Table of Contents

I.Table of ontents...........................................................................................6

II.$ecutive %ummary...................................................................................... 7

III.8eneral ompany escription......................................................................5

I:.Products and %ervices..................................................................................;

:.0arketing Plan.............................................................................................. .%tartup $penses and apitali+ation..........................................................21

>.4inancial Plan..............................................................................................22

>I.ppendices................................................................................................ 25

>II.?efining the Plan....................................................................................... 2;


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II. Executive Summar

"rite this section last.

"e suggest that you make it two pages or fewer.

Include everything that you would cover in a five'minute interview.

$plain the fundamentals of the proposed business@ "hat will your product beA

"ho will your customers beA "ho are the ownersA "hat do you think the future

holds for your business and your industryA

0ake it enthusiastic# professional# complete# and concise.

If applying for a loan# state clearly how much you want# precisely how you are going

to use it# and how the money will make your business more profitable# thereby

ensuring repayment.


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III. !eneral Compan "escription

"hat business will you be inA "hat will you doA

0ission %tatement@ 0any companies have a brief mission statement# usually in 6

words or fewer# e$plaining 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@

ompany 8oals and =b/ectives@ 8oals are destinationsBwhere you want your

business to be. =b/ectives are progress markers along the way to goal

achievement. 4or e$ample# a goal might be to have a healthy# successful company

that is a leader in customer service and that has a loyal customer following.

=b/ectives might be annual sales targets and some specific measures of customer

satisfaction.

*usiness Philosophy@ "hat is important to you in businessA

To whom will you market your productsA ,%tate it briefly hereByou will do a more

thorough e$planation in the Marketing Plansection-.

escribe your industry. Is it a growth industryA "hat changes do you foresee in the

industry# short term and long termA )ow will your company be poised to take

advantage of themA

escribe your most important company strengths and core competencies. "hat

factors will make the company succeedA "hat do you think your ma/or competitive

strengths will beA "hat background e$perience# skills# and strengths do you

personally bring to this new ventureA

Cegal form of ownership@ %ole proprietor# Partnership# orporation# Cimited liability

corporation ,CC-A "hy have you selected this formA


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I#. Pro$ucts an$ Services

escribe in depth your products or services ,technical specifications# drawings#

photos# sales brochures# and other bulky items belong in Appendices-.

"hat factors will give you competitive advantages or disadvantagesA $amples

include level of !uality or uni!ue or proprietary features.

"hat are the pricing# fee# or leasing structures of your products or servicesA


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"hat is the total si+e of your marketA

"hat percent share of the market will you haveA ,This is important only if youthink you will be a ma/or factor in the market.-

urrent demand in target market.

Trends in target marketBgrowth trends# trends in consumer preferences# andtrends in product development.

8rowth potential and opportunity for a business of your si+e.

"hat barriers to entry do you face in entering this market with your newcompanyA %ome typical barriers are@

o )igh capital costs

o )igh production costs

o )igh marketing costs

o onsumer acceptance and brand recognition

o Training and skills

o Eni!ue technology and patents

o Enions

o %hipping costs

o Tariff barriers and !uotas

nd of course# how will you overcome the barriersA

)ow could the following affect your companyA

o hange in technology

o hange in government regulations

o hange in the economy

o hange in your industry

Pro$uctIn the Products and Servicessection# you described your products and services as you

see them. Dow describe them from your customers& point of view.


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-eatures an$ Benefits

Cist all of your ma/or products or services.

4or each product or service@

escribe the most important features. "hat is special about itA

escribe the benefits. That is# what will the product do for the customerA

Dote the difference between features and benefits# and think about them. 4or

e$ample# a house that gives shelter and lasts a long time is made with certain

materials and to a certain design( those are its features. Its benefits include pride of

ownership# financial security# providing for the family# and inclusion in a

neighborhood. ou build features into your product so that you can sell the benefits.

"hat after'sale services will you giveA %ome e$amples are delivery# warranty#

service contracts# support# follow'up# and refund policy.

CustomersIdentify your targeted customers# their characteristics# and their geographic

locations# otherwise known as their demographics.

The description will be completely different depending on whether you plan to sell

to other businesses or directly to consumers. If you sell a consumer product# but sell

it through a channel of distributors# wholesalers# and retailers# you must carefully

analy+e both the end consumer and the middleman businesses to which you sell.

ou may have more than one customer group. Identify the most important groups.

Then# for each customer group# construct what is called a demographic profile@

ge

8ender

Cocation

Income level

%ocial class and occupation

ducation

=ther ,specific to your industry-



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4or business customers# the demographic factors might be@

Industry ,or portion of an industry-

Cocation

%i+e of firm

Guality# technology# and price preferences



Competition"hat products and companies will compete with youA

Cist your ma/or competitors@

,Dames and addresses-

"ill they compete with you across the board# or /ust for certain products# certain

customers# or in certain locationsA

"ill you have important indirect competitorsA ,4or e$ample# video rental stores

compete with theaters# although they are different types of businesses.-

)ow will your products or services compare with the competitionA

Ese the Competitive nalsistable below to compare your company with your

two most important competitors. In the first column are key competitive factors.

%ince these vary from one industry to another# you may want to customi+e the list

of factors.

In the column labeled %e# state how you honestly think you will stack up in

customersH minds. Then check whether you think this factor will be a strength or a

weakness for you. %ometimes it is hard to analy+e our own weaknesses. Try to be

very honest here. *etter yet# get some disinterested strangers to assess you. This

can be a real eye'opener. nd 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. ou want an honest assessment of your firmHs strong and

weak points.


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Dow analy+e each ma/or 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 /0 Competitive nalsis

-CTOR %e Stren't( Wea&nessCompetito

r Competito

r B

Importance to

Customer

Pro$ucts

Price

1ualit

Selection

Service

Reliabilit

Stabilit

Expertise

CompanReputation

2ocation

ppearance

Sales%et(o$

Cre$itPolicies

$vertisin'

Ima'e

Dow# write a short paragraph stating your competitive advantages and

disadvantages.


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Nic(eDow that you have systematically analy+ed 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 uni!ue corner of the market.

Strate'Dow outline a marketing strategy that is consistent with your niche.

Promotion

)ow will you get the word out to customersA

dvertising@ "hat media# why# and how oftenA "hy this mi$ and not some otherA

)ave you identified low'cost methods to get the most out of your promotional

budgetA

"ill you use methods other than paid advertising# such as trade shows# catalogs#

dealer incentives# word of mouth ,how will you stimulate itA-# and network of friends

or professionalsA

"hat image do you want to pro/ectA )ow do you want customers to see youA

In addition to advertising# what plans do you have for graphic image supportA Thisincludes things like logo design# cards and letterhead# brochures# signage# and

interior design ,if customers come to your place of business-.

%hould you have a system to identify repeat customers and then systematically

contact themA

Promotional Bu$'et

)ow much will you spend on the items listed aboveA

*efore startupA ,These numbers will go into your startup budget.-

=ngoingA ,These numbers will go into your operating plan budget.-

Pricin'

$plain your method or methods of setting prices. 4or most small businesses#

having the lowest price is not a good policy. It robs you of needed profit margin(


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customers may not care as much about price as you think( and large competitors

can under price you anyway. Esually you will do better to have average prices and

compete on !uality and service.

oes your pricing strategy fit with what was revealed in your competitive analysisA

ompare your prices with those of the competition. re they higher# lower# the

sameA "hyA

)ow important is price as a competitive factorA o your intended customers really

make their purchase decisions mostly on priceA

"hat will be your customer service and credit policiesA

Propose$ 2ocation

Probably you do not have a precise location picked out yet. This is the time to thinkabout what you want and need in a location. 0any startups run successfully from

home for a while.

ou will describe your physical needs later# in the OperationalPlan section. )ere#

analy+e your location criteria as they will affect your customers.

Is your location important to your customersA If yes# howA

If customers come to your place of business@

Is it convenientA ParkingA Interior spacesA Dot out of the wayA

Is it consistent with your imageA

Is it what customers want and e$pectA

"here is the competition locatedA Is it better for you to be near them ,like car

dealers or fast'food restaurants- or distant ,like convenience'food stores-A

"istribution C(annels)ow do you sell your products or servicesA

?etail

irect ,mail order# "eb# catalog-

"holesale


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our own sales force

gents

Independent representatives

*id on contracts

Sales -orecastDow that you have described your products# services# customers# markets# and

marketing plans in detail# it&s time to attach some numbers to your plan. Ese a sales

forecast spreadsheet to prepare a month'by'month pro/ection. The forecast should

be based on your historical sales# the marketing strategies that you have /ust

described# your market research# and industry data# if available.

ou may want to do two forecasts@ 1- a Jbest guessJ# which is what you really

e$pect# and 2- a Jworst caseJ low estimate that you are confident you can reach no

matter what happens.

?emember to keep notes on your research and your assumptions as you build this

sales forecast and all subse!uent spreadsheets in the plan. This is critical if you are

going to present it to funding sources.


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#I. Operational Plan

$plain the daily operation of the business# its location# e!uipment# people#

processes# and surrounding environment.

Pro$uction)ow and where are your products or services producedA

$plain your methods of@

Production techni!ues and costs

Guality control

ustomer service

Inventory control

Product development

2ocation"hat !ualities do you need in a locationA escribe the type of location you&ll have.

Physical re!uirements@

mount of space

Type of building

3oning

Power and other utilities

ccess@

Is it important that your location be convenient to transportation or to suppliersA

o you need easy walk'in accessA

"hat are your re!uirements for parking and pro$imity to freeway# airports#

railroads# and shipping centersA


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Include a drawing or layout of your proposed facility if it is important# as it might be

for a manufacturer.

onstructionA 0ost 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.

ost@ stimate your occupation e$penses# 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.

"hat will be your business hoursA

2e'al Environmentescribe the following@

Cicensing and bonding re!uirements

Permits

)ealth# workplace# or environmental regulations

%pecial regulations covering your industry or profession

3oning or building code re!uirements

Insurance coverage

Trademarks# copyrights# or patents ,pending# e$isting# or purchased-

Personnel Dumber of employees

Type of labor ,skilled# unskilled# and professional-

"here and how will you find the right employeesA

Guality of e$isting staff

Pay structure

Training methods and re!uirements

"ho does which tasksA

o you have schedules and written procedures preparedA


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)ave you drafted /ob descriptions for employeesA If not# take time to writesome. They really help internal communications with employees.

4or certain functions# will you use contract workers in addition to employeesA

Inventor "hat kind of inventory will you keep@ raw materials# supplies# finished goodsA

verage value in stock ,i.e.# what is your inventory investment-A

?ate of turnover and how this compares to the industry averagesA

%easonal buildupsA

Cead'time for orderingA

SuppliersIdentify key suppliers@

Dames and addresses

Type and amount of inventory furnished

redit and delivery policies

)istory and reliability

%hould you have more than one supplier for critical items ,as a backup-A

o you e$pect shortages or short'term delivery problemsA

re supply costs steady or fluctuatingA If fluctuating# how would you deal with

changing costsA

Cre$it Policies o you plan to sell on creditA

o you really need to sell on creditA Is it customary in your industry ande$pected by your clienteleA

If yes# what policies will you have about who gets credit and how muchA

)ow will you check the creditworthiness of new applicantsA

"hat terms will you offer your customers( that is# how much credit and whenis payment dueA


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#II. %ana'ement an$ Or'ani7ation

"ho will manage the business on a day'to'day basisA "hat e$perience does that

person bring to the businessA "hat special or distinctive competenciesA Is there a

plan for continuation of the business if this person is lost or incapacitatedA

If you&ll have more than 1 employees# create an organi+ational 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 an$ $visor SupportCist the following@

*oard of directors

0anagement advisory board

ttorney

ccountant

Insurance agent

*anker

onsultant or consultants

0entors and key advisors


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#III. Personal -inancial Statement

Include personal financial statements for each owner and ma/or stockholder#

showing assets and liabilities held outside the business and personal net worth.

=wners will often have to draw on personal assets to finance the business# and

these statements will show what is available. *ankers and investors usually want

this information as well.


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I8. Startup Expenses an$ Capitali7ation

ou will have many e$penses before you even begin operating your business. It&s

important to estimate these e$penses accurately and then to plan where you will

get sufficient capital. This is a research pro/ect# and the more thorough your

research efforts# the less chance that you will leave out important e$penses or

underestimate them.

ven with the best of research# however# opening a new business has a way of

costing more than you anticipate. There are two ways to make allowances for

surprise e$penses. The first is to add a little KpaddingL to each item in the budget.

The problem with that approach# however# is that it destroys the accuracy of your

carefully wrought plan. The second approach is to add a separate line item# calledcontingencies# to account for the unforeseeable. This is the approach we

recommend.

Talk to others who have started similar businesses to get a good idea of how much

to allow for contingencies. If you cannot get good information# we recommend a

rule of thumb that contingencies should e!ual at least 2 percent of the total of all

other start'up e$penses.

$plain your research and how you arrived at your forecasts of e$penses. 8ive

sources# amounts# and terms of proposed loans. lso e$plain in detail how much willbe contributed by each investor and what percent ownership each will have.


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8. -inancial Plan

The financial plan consists of a 12'month profit and loss pro/ection# a four'year

profit and loss pro/ection ,optional-# a cash'flow pro/ection# a pro/ected balance

sheet# and a break'even calculation. Together they constitute a reasonable estimate

of your companyHs financial future. 0ore important# the processof thinking through

the financial plan will improve your insight into the inner financial workings of your

company.

/9)%ont( Profit an$ 2oss Pro:ection0any business owners think of the 12'month profit and loss pro/ection as the

centerpiece of their plan. This is where you put it all together in numbers and get an

idea of what it will take to make a profit and be successful.

our sales pro/ections will come from a sales forecast in which you forecast sales#

cost of goods sold# e$penses# and profit month'by'month for one year.

Profit pro/ections should be accompanied by a narrative e$plaining the ma/or

assumptions used to estimate company income and e$penses.

?esearch Dotes@ Meep careful notes on your research and assumptions# so that you

can e$plain them later if necessary# and also so that you can go back to your

sources when it&s time to revise your plan.

-our)Year Profit Pro:ection ;Optional

business plan for a startup business (1)

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