business plan writing guidemodule university
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PolyU Innovation & EntrepreneurshipStudent Challenge A Global Competition
Business Plan Writing Guide Module
University Students Version
Copyright Di & Cooke Company Limited
Disclaimer:This content is provided and written by Di & Cooke Company Limited. We arepleased to provide permission to the Hong Kong Polytechnic University for theuse of this material on both of its intranet and internet to support the learningand development of all the challengers who have entered the 2009 PolyUInnovation and Entrepreneurship Student Challenge
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Chapter 1 Introduction What is a Business Plan?
The fundamental role of a business plan is to generate a framework that
evaluates all aspects of the economic feasibility of the business project including
an explanation and analysis of the business prospects.
Functions of a Business Plan:
It can determine and focus your business objective. It can be used as a selling tool to acquire finance. It can reveal omissions and weaknesses in the planning process. It can be used to solicit opinions and advices from experts about your
business.
In order to write a successful business plan, the following steps are important to
notice before you start:
Write out the primitive business concept. Collect all the necessary information on the feasibility and the specifics of
your business concept.
Focus and perfect your concept based on the data you have collected. Draft the particulars of your business. Put your plan into a convincing form.
The course starting from the next chapter will help you create a business plan,
which is divided into seven key elements through chapter two to chapter eight,
including descriptions, guidelines for creation and tips for avoiding common
mistakes, together with a business plan sample and financial statements formats
in the appendices.
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Chapter 2 Introductory Elements
The very first part of your business plan includes the introductory elements,
which is the cover page, executive summary, and table of contents. It creates the
first impression of the whole investment project to your readers. In such case, the
introductory elements, especially the executive summary, decide whether your
readers will read the rest of your plan or not. Furthermore, the table of contents
indicates how well you have organized the entire plan. Therefore, all of your
introductory elements must be of good quality both in appearance and substance.
A) Cover Page
The cover page should be a simple page that contains the project name andthe presenting teams name. Also include the words Business Plan as the
heading of the page.
B) Executive Summary
The executive summary is an introduction to your project. It is the part
within the business plan that most readers will go through first. Investors
will read the executive summary first to get a snapshot of your project andto evaluate your professionalism and the feasibility of your business.
As the executive summary is the most important part in your business plan,
prepare it when you have finished the whole plan. When you write on other
sections of your plan, extract few sentences for insertion in your executive
summary. This work will remind you to include the essence of these
sections. The executive summary should be kept in brief, to the point and
interesting, and should consist of the followings:
A description of your company, including your products or services Your mission statement Your businesss management team The market and your prospect customers Marketing and sales strategy Financial projections
The executive summary will end with a summary statement, usually a
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persuasive sentence, which are designed to convince the readers that your
business is a winner.
It is extremely important to know that the executive summary is the first
thing all readers will examine. If your executive summary is written badly,
then it will be the last thing that people will read and ignore the rest of your
whole plan.
C) Table of Contents
The purpose of the table of contents is to provide readers a quick and easy
way to find particular sections of the plan. All pages of your business plan
should be numbered and the table of contents should include page numbers.After you have assembled your plan and numbered your pages, go back to
the table of contents and insert the page numbers. Make sure you have
created headings for all major sections and subsections.
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Chapter 3 Business Description
Your business plan must be able to project a clear picture of what your business
is about. The business description is your corporate vision that includes: what
industry you are in, what products or services you can offer, what is your
position within the market, and at what price range are you going to sell your
products or services.
A) Industry Overview
This section is a brief overview of the industry you will be setting up your
business in. To impress readers, you will need to demonstrate that you are in
a hot industry with a good prospect.
The following points will help you gather information on describing the
industry circumstances:
What is the size of your industry? Who are the leaders in this industry? What are the markets for this industry?
What economic trends will affect this industry? What is the long-term view for this industry? What are the barriers to entry in this industry?
In order to gain more statistics and information regarding different
industrial sectors, you can visit the government trade department website in
your own country. You can collect more information about industries and
trade demographics from your government statistics department, local
chamber of commerce or economic development center, etc. Try to collect
as up-to-date research information as possible.
The following are some skills for writing on this section:
Dont just base your business plan on assumptions. Backing up withsolid research work and realistic demographics will make your plan
seem more reliable. Quote for all the sources of these data. Collect industry and seasonal trends from business newspapers and
magazines.
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Listing out possible risks your company or your industry mayencounter demonstrates pragmatic research work. Make sure to include
how your companys policy or marketing strategy can overcome such
risks.
B) Company Summary
The purpose of this section is to give the readers a clear point of view about
your company. Start with a mission statement on who your product or
service is targeted to. Then elaborate more on the technical aspects of your
company. Maintain your writing in a story telling form to keep it interesting.
Good points for discussion are:
What kind of role is the company playing? Wholesaler? Retailer?Manufacturer? Service Provider?
What is the legal structure for the business? Sole proprietorship?Corporation? Partnership?
Who are the companys principal owners and what pertinentexperience do they bring?
What market needs will you meet? Who will you sell to? How will
your products or services be sold? What kind of supportive systems will be utilized? Customer service?
Advertising? Promotion?
Overall, this section of your business plan should give the readers a better
understanding of what your company is about. Again, keep it concise and
avoid irrelevant personal information.
C) Products or Services
In this section, provide in details of each of your products or services.
Describe who are the end users. Highlight the specific features or functions
of your products.
Here, you have to emphasize your USP, Unique Selling Point. This is
what most bankers and investors would like to explore. Without a Unique
Selling Point, your products or services will not be interesting at all and you
will not be able to convince people to consume them.
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Examples of USP for several different products:
Head & Shoulders: You get rid of dandruff Olay: You get younger-looking skin Red Bull: Gives you wings Domino's Pizza: You get fresh, hot pizza delivered to your door in 30
minutes or less - or it's free. FedEx: When your package absolutely, positively has to get there
overnight M&Ms: The milk chocolate only melts in your mouth, not in your
hand
Also, you may mention a comparison of the products or services your
competitors are offering in relation to yours, and how your products can
prevail in this market. Think of a number of reasons for this it is a new
technology to the market, the location is excellent, the market is ready for
your product, the product has a competitive production cost such that it can
be sold at a lower price, etc.
D) Positioning
Your position is your standing point in the marketplace. It is about where
your products and those of your competitors will set in the market. As you
cannot sell your products to all customers within the market, your
positioning is based on how much you will charge and which group of
customers you are targeting. The following factors can help you find your
position in the market:
What uniqueness does your product or service have? What customer demand does your product satisfy? How do you want people to view your products or services? Hi-tech
and expensive products with better design or cheaper products with
fewer functions? How do your competitors position themselves within the market?
After analyzing the above factors yon can now clearly know where you can
position yourself, and show the readers a clear picture of which part of the
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market your products will be sold.
E) Pricing Strategy
Your pricing strategy demonstrates how you will make a profit while
allowing the price to remain competitive. When calculating the price,
identify fixed costs and variable costs. Determine a breakeven point, that is,
how many products do you have to sell in order to cover your fixed costs.
These can be derived from the financial section later in the plan. You may
have to consider constructing your financial section before completing this
topic.
You may also discuss whether your price will be lower or higher than yourcompetitors and why you can maintain your market share in the presence of
competition so that your can make profits. For example, a souvenir shop
sets higher prices since it considers its products to be luxury items. A caf in
an expensive location may charge slightly more than other restaurants to
cope with higher spending customers.
However, investors are trained to reject business plans in which the
products or services will be higher in quality and lower in price than thoseof their competitors. This creates a bad impression since it is inherently
unrealistic. If you really have a higher quality product, it is more likely that
you will charge more to consumers with a higher demand.
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Chapter 4 Market Analysis
This section is to provide facts to convince readers that your business has enough
customers in an industry, and can create sales in the face of competition. It is one
of the most important parts of the plan. Taking into account the current market
size and trends, you may have to perform extensive research on this. Many of the
financial requirements, such as manufacturing and marketing costs, and the
amount of capital that you need, will be based on the sales estimation you have
created here.
A) Customer Analysis
The description of your target customers defines the characteristics of thepeople whom you want to sell your products to. In here you will describe
whether your customers are price elastic or quality conscious.
Before analyzing your customers, research work is necessary. Use the
following questions to start with your analysis:
How old are they?
What gender are they? Where do they live? What is their family structure? (Married? Number of kids?) How much do they earn? What do they do for a living? What is their lifestyle like? How do they like to spend their spare time?
When writing on this section, avoid describing customers in unclear general
terms, such as all people who want to buy cars or anyone who needs a
mobile phone. You may also need to include details of what geographic
region you plan to sell in. Is your market national, regional, international, or
local?
B) Market Size and Trends
This section defines the total market size as well as the segment of the
market your business will target. You will have to use numbers as well as
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trend information to make a case for a feasible current market as well as its
growth potential.
Follow these questions in order to determine the size of the market:
What proportion of your target market has already consumed on asimilar product to yours before?
How much of your product or service might your target market buy?(In terms of sales amount and/or in units of products sold.)
What proportion of your target market might be repeat customers? How might your target market be affected by economic events (e.g.
during stock market crash)?
How might your target market be affected by government policies (e.g.changes in tax rates)?
Once you have all this information, you can start writing on this section in
the form of several short paragraphs. Describe whether these events will
have a positive or negative impact on your specific business. If you have
several target markets for different products, you will have to divide them
into sub-sections. Remember to properly quote your sources of information
within the section.
C) Competition
Competition is a way of life. Presenting your business in the face of
competition proves that you understand your market. Advances in invention
technology can wipe out the profit margins of a successful business and
cause them to collapse overnight. Because of this unpredictability, it is
important to know your competitors well.
Questions like these can help you identify your competitors:
Who are your nearest direct competitors? Who are your indirect competitors (e.g. substitute products)? How are their businesses? Steady? Increasing? Decreasing? What are their strengths and weaknesses? How do their products differ from yours? Who is the price leader?
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Who is the quality leader? Who has the largest market share?
Furthermore, pay attention to your competitors sales and promotion
strategies. When did they reduce prices for sales? Using this technique can
help you understand your competitors better on how they operate their
businesses.
When writing on this section, begin with a short discussion of each of your
primary competitors. If possible, include their annual sales and their market
shares. Explain why you can capture a share of their business through their
weaknesses. Is it price? Value? Service? Convenience? Reputation?
Even if your product or service is truly innovative, you need to look at what
else your customers could buy instead (substitute products). Remember, the
first personal computer competed with calculators and typewriters; the first
calculator competed with abacuses.
Consider using a table to present your analysis, since it will allow your
competition to be evaluated at a glance. Columns should include the names
of your competitors and rows can include market share, annual sales (if available), strengths, weaknesses, and comments, etc.
D) Sales Forecast
The sales forecast is based on the estimation of the size of your market and
your market share. This should include sales in units and dollars for the first
five years, with the first year broken down into months, and the second year
into quarters, if applicable. These numbers are so important to the financial
sections which you will present later in the plan.
For projecting a sales forecast, you may have to find out answers like:
How many customers will consume the same kind of product as yours? How much will the customer spend on these items annually? What percentage of their spending will you get, comparing to
competitors?
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Instead of forecasting the annual sales as a single figure, use the assumption
derived from above and generate three figures: pessimistic, optimistic, and
realistic. Then put the figures in by months, as depending on your business,
there could be huge variations by seasons. In fact, a good method to do
forecasting is to ascertain the average sale per customer from trade
associations.
Once you have made assumptions on the inflation rates and your annual
growth rates, you will be able to forecast the sales from the second year to
the fifth year by multiplying your first year sales with these factors. Besides
using tables or graphs to show your annual sales at a glance, write in short
paragraphs describing the market trends and seasonal trends on the three
circumstances mentioned above.
All this work can be time-consuming, but it has to be done in order to make your
business plan valid. Lastly, dont forget to quote all your sources of information
within the body of this section. All readers of your plan will need to know the
sources of the statistics or opinions that you have gathered from others.
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Chapter 5 Start-up Summary
This section will describe the start-up plan for your products development. It
gives details of how your product is being developed and what resources are
required to get it produced. You should include details of development costs,
location and labor requirements.
A) Start-up Process
Before launching your product into the market, your product has to be
developed and produced. Demonstrate with a schedule showing when this
work will be completed. Include time provisions for obtaining a patent or a
trademark where applicable.
In detail, also project a timeline you will need to set up factories and offices.
This may include renovations, purchasing necessary machinery and
furniture, and other important stages in this development cycle. Then
describe in small paragraphs to elaborate the whole development process.
B) Start-up Cost
For every item described in (A) above, construct a simple budget table and
put in numbers for the amount of capital that will be required to incur for all
these expenditures. This budget may include rent (if factory and/or office
are hired), insurance, labor, materials, patents, and the cost of professionals
such as accountants and lawyers, etc. It should also include the cost of the
design of sample products as well as the expense to take it into production.
C) Operating Requirements
In respect of the day-to-day operations, you may have to explain about the
industrys standards and regulations and describe which industry
organizations or associations you prepare to join, and what you should
perform to comply with the laws and regulations that apply to your industry.
Secondly, give details of your suppliers and their prices, terms, and
conditions. Describe if there are any alternative arrangements you have to
make if these suppliers fail to deliver. You may also explain the quality
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control measures that you are going to establish on your suppliers material
and your own finished products.
The aim for writing this section of the business plan is to demonstrate your
understanding of the manufacturing and operating process of your business.
Therefore you should carefully plan every procedure of the operation on a
step-to-step basis so that you wont omit any important part of it.
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Chapter 6 Marketing Plan
This section of your business plan explains how you are going to get your
customers to buy your products and/or services. Strong marketing tactics can
show readers that you have effective ideas for promoting and selling your
products.
A) Marketing Strategy
The marketing strategy defines what customers you are targeting and how
you are going to approach them. This includes the method of educating
them about your product. Refer again to your Unique Selling Point and
explain that you will get your customers to notice about this.
Describe if any new sales technique will be introduced, such as online sales
ordering system through the Internet while your competitors are still using
traditional retail channels.
Remember, the essence of your marketing strategy is the message you want
your customers to receive about your products or services. The marketing
plan is all about communicating this central message to your customers. Sodemonstrating to readers on how you can emphasize your selling point to
your customers is the aim for this section.
B) Distribution Plan
In this section you will describe how you get the products to the end users,
that is, your method of distribution and sales.
Explain what kind of salespersons and how many of them you will employ.
Are they on commission basis? Are they product promoters? Are they
telemarketing personnel? Describe your expectations of the effectiveness
from these salespeople.
You may also need to elaborate on the management system of your sales
team such as whether a sales training program is needed, any incentives
they will be offered to encourage their achievements, as well as any
appraisal method going to be applied.
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If you are outsourcing the sales function to an external force such as sales
agents or a sole distributor, describe the benefits of using these specific
firms and the expertise that they can bring into your operation.
C) Advertising and Promotion
This section describes how youre going to deliver the message of your
Unique Selling Point to your target customers. This involves both
advertising and sales promotion plans.
For advertising, describe which media will be the most effective in reaching
your target market and how much you have prepared for your annualadvertising budget on each medium such as the Internet, television, radio,
newspapers, magazines, subway banners, direct mails, etc. Besides, you can
also put down your sales projections about how much business the
advertising will bring in.
As for sales promotion, you may want to incorporate marketing materials
into your plan, such as free samples, coupons, displays, brochures and
pamphlets, etc. Any publicity activities like press releases, product launchesand trade shows can also be introduced in this area.
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Chapter 7 The Management Plan
The Management Plan describes your management team and staff and how your
business is structured. Readers will be looking to see not only whos on your
management team but also how their skills will contribute to the success of the
business.
A) Ownership Structure
This section describes the legal structure of your business. You have to
explain whether your business is a sole proprietorship, a partnership or a
limited liability company. For partnership and limited liability company,
you have to identify who will hold what percentage of ownership within thestructure.
B) Internal Management Team
The Internal Management Team section will describe the key positions
required to manage the core business within the organization, identify who
will have responsibility for these positions, and outline their expertise.
These people may include the board of directors, the chief executive officer,the chief financial officer, and controllers for different departments.
Most businesses have various departments to perform different functions
such as sales, marketing, administration, production and accounting, etc.
Some companies may need additional departments such as research and
development as well as human resources. In fact, some key management
people, especially directors, may fill up more than one of these roles as
department heads. In this section therefore, you will have to identify these
key people and explain which role each of them will fill. Sometimes you
may wish to present this by using an organizational chart. You can also
attach complete resumes for each member of the management team as
appendices to your business plan.
Furthermore, You can talk about how your management team will be
remunerated. What salaries and benefits will they receive? Are they entitled
to any profit sharing or any other emoluments? Indicate if there is any work
contract the business may offer to any of these key members.
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C) External Management Team
Apart from your internal management team, your business may use external
management resources. These resources somehow act as your internal
management teams backup. Usually there are two main types of external
resources you will procure, which are Professional Services and an
Advisory Board.
The Professional Services represent external expertise that most businesses
will use such as accountants, bankers, lawyers, IT consultants, business
consultants, management trainers, etc.
An Advisory Board is like a mastermind to the management. The members
of this board will provide your organization counsel to run the business
effectively. They may be some senior or retired executives or entrepreneurs
who have run this type of business for years and are only serving your
company in part-time or ad-hoc basis. Their function is simply to provide
expertise that your internal management team lacks. List out their names,
titles and experience, and explain how each advisor will contribute to assist
you to run a profitable business.
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Chapter 8 Financial Plan
This is the last part of your business plan. The financial plan is the section that
determines whether or not your business is feasible, and is an important element
in deciding whether you will attract any investment to your business idea.
Ultimately, the financial plan will comprise three financial statements: the cash
flow statement, the profit and loss statement and the balance sheet. You will also
indicate in this section that you have evaluated the risks associated with your
business and the funding capital that you require.
Before constructing the three financial statements, mention about the risks that
your organization will encounter during the course of your business as anopening scene.
A) Risks
All businesses contain their own risks. The approach to determine risks in
your plan indicates that you have carried out extensive and reliable market
research and this will make your plan look more realistic and appealing to
the readers.
Things listed below are possible risks that a business would face typically:
A large cut or promotion by a competitor An important customer drifted away The economy goes downhill Your suppliers increase their prices Your suppliers fail to deliver on time A better product launched by your competitor Scarcity of qualified labor
Put in all assumptions about the risks that you may face during the course of
business. List out the actions that you are prepared to take in order to handle
these risks. This will increase your credibility in front of the readers since
you have demonstrated that you are alert to these issues and be able to
overcome them.
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B) Profit and Loss Statement
The Profit and Loss Statement is the very first statement you have to create
out of the three financial statements in the Financial Plan section. This
statement records revenues, expenses and cost of goods sold. The bottom
line is how much profit or loss your business will make at the end of the
accounting period.
First, input your revenue from which you have generated in the Sales
Forecast section earlier in the business plan. If you are in a manufacturing
business, the revenue will be called sales, and cost of goods sold will need
to be accounted for. Next, you will need to gather the financial data on all
expenses, including your start-up cost and your operating expenses. Thedifference between revenues and expenses is therefore you gross profit
before taxation. Net profit will be the bottom line after subtracting taxation
and/or dividends distributed to equity owners.
Appendix 1 is a worksheet of a standard Profit and Loss Statement
structure.
C) Cash Flow Statement
A cash flow statement illustrates how much money will come into the
business and how much money will be flowing out during the financial
period. In another sense, it shows readers how much money you will need
and when you will need it from time to time during the course of business.
Generally, only cash items will be accounted for in the correct accounting
period. For example, Sales made last month in credit (account receivables)
may be collected this month and the statement will only record an inflow
for such when it is received.
The cash flow projection is an important tool for cash flow management,
letting you know when you might want to arrange short-term finance as
well as to seek for long-term capital injections.
There are three elements included in the cash flow statement: the cash
revenues, the cash disbursements, and the reconciliation of cash revenues to
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cash disbursements. The reconciled balance will be exactly equal to the cash
balance recorded in the balance sheet at the end of the financial period.
See Appendix 2 for a worksheet of the Cash Flow Statement Outline.
D) Balance Sheet
The balance sheet is created only once a year to determine the net worth of
a business. It is the last part of the three statements in the Financial Plan
section. The balance sheet represents the businesss financial status at a
particular point of time. It is divided into three main categories: the assets,
the liabilities, and owners equity. Assets are tangible and intangible objects
that are in the ownership of the company. Liabilities are debts owed tocreditors and suppliers. Owners equity is the net difference when the total
liabilities are subtracted from the total assets.
Once you have your balance sheet completed, you can write a brief analysis
for each of the three financial statements. Keep them concise and cover the
highlights. The financial statements themselves can be either displayed in
this section or as appendices to the business plan.
Appendix 3 is a worksheet of a Balance Sheet outline.
E) Funding Request and Return
This comes to the last part of the business plan. In this section you will
clearly state the amount of funding whether in debt or equity for the
investment you will need. Indicate when the money is needed in different
phases, and tell the investors what they will receive in return for their
capital.
Lastly, suggest an attractive exit strategy that you will apply, that is, how
investors will get their money back. Often, it can be accomplished either by
a cash-out option in five years or an IPO (Initial Public Offer) plan when the
business has achieved its target profit over the foreseeable period.
As you can see, writing a business planning is not easy at all. However, by following
these critical steps provided from all of the chapters above, you will ensure your
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business has a fine chance at seeking funds from investors and success in the future.
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Insert your company's figures into this template to prepare an income statement for your business.
Page 1
January February March April May June July August September October November December Year Two 1ST QTR 2ND QTR 3RD QTR 4TH QTR Year Three Year Four Year Five
VENUE
VENUE: Product Sales
oduct 1
oduct 2
oduct 3
TAL REVENUE: Product Sales
VENUE: Miscellaneous
nk Interest
TAL REVENUE: MISCELLANEOUS
AL REVENUE
T OF SALES
RECT COSTS
rect Material
rect Laborctory Overhead
TAL DIRECT COSTS
NERAL AND ADMINISTRATION
counting and Legal Fees
vertising and Promotion
d Debts
nk Charges
preciation and Amortization
urance
erest
fice Rent
aries (Owner or Directors)
aries (Staff)
ephone
lities
TAL GENERAL AND ADMINISTRATION
AL EXPENSES
OSS PROFIT BEFORE TAX
FITS TAX
PROFIT
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Insert your company's figures into this template to prepare a cash flow statement for your business plan.
Page 1
January February March April May June July August September October November December Year Two 1ST QTR 2ND QTR 3RD QTR 4TH QTR Year Three Year Four Year Five
H REVENUES
nue from Product Sales
nue from Service Sales
AL CASH REVENUES
H DISBURSEMENTS
Payments to Trade Suppliers
agement Draws
ies and Wages
motion Expense Paid
essional Fees Paid
/Mortgage Payments
rance Paid
communications Payments
ties PaymentsAL CASH DISBURSEMENTS
ONCILIATION OF CASH FLOW
NING CASH BALANCE
D: TOTAL CASH REVENUES
DUCT: TOTAL CASH DISBURSEMENTS
SING CASH BALANCE
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Insert your company's financials here to create a balance sheet for your business plan.
Page 1
Year One Year Two Year Three Year Four Year Fiveets
Long-Term AssetsCapital/plantInvestmentMiscellaneous assetsTotal long-term assets
Current AssetsCashAccounts receivableInventoryTotal current assets
Total Assets
bilities
Current LiabilitiesAccounts payableAccrued expensesTaxes payableTotal current liabilities
Long-Term liabilitiesBonds payableMortage payableNotes payableTotal long-term liabilities
Total Liabilities
ner's EquityShare Capital (For Ltd Co)Retained Earnings
Total Owner's Equity
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1
CYBER CAF BUSINESS PLAN
JEDI CAF
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2
TABLE OF CONTENT
1. Executive Summary 3
2. Company Summary 5
3. Services 7
4. Market Analysis 8
5. Marketing Strategy 11
6. Management Summary 13
7. Financial Plan 14
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3
1. Executive Summary
Jedi Caf, a cyber caf located in Happy Valley, Hong Kong Island, offers a perfect spot
for the public in social gathering and leisure. It provides customers free access to the
Internet as well as an area for to meet together in a casual environment under aneconomical manner.
The business intends to obtain finance from external equity in the amount of USD61,538,
for which the application will be for commencing work on shop renovation, equipment
purchases, and as operating cash flow. Preliminary capital injection has already been
secured by the initial owners, Obewon Kinobi and Alex Skywalker, in the amounts of
USD24,359 and USD15,385 respectively.
Jedi Caf will be incorporated as a limited liability company. The two initial owners will be
the shareholders and their personal liabilities will be subject to a ceiling at the amount of
their respective investments.
The finance acquired through this business proposal will allow Jedi Caf to successfully
open and operate as a cyber caf. A comfortable and innovative environment is provided
to the customers with a casual atmosphere. Operations in year one will generate Jedi
Caf a regular customer base that will allow it to be self-maintained in year two.
1.1 Objectives
Jedi Cafs objectives for the first year of operation inclu de:
The creation of an exclusive, stylish, innovative environment that will
distinguish Jedi Caf from other coffee shops.
The creation of a comfortable and casual environment that will bring people
with different interests and backgrounds together for socialization.
High-quality coffee and bakeries at a reasonable price.
Free access to online services.
1.2 Mission
As Internet has become more popular and grown at an expeditious pace, easy
access has become a part of life. Jedi Caf provides the public free access to the
Internet, high-quality food and beverages in a comfortable environment. People
from different backgrounds will come to enjoy the exclusive, stylish, and innovative
environment that Jedi Caf offers.
1.3 Risks
The risks involved with Jedi Caf s business are:
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Insufficient demand for the services provided by Jedi Caf in Happy Valley.
The popularity of the Internet stops to grow.
The opening of new cafs in the same area which offers the exact services
that Jedi Caf provides.
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2. Company Summary
Jedi Caf, soon to be opened at Shing Wo Road in Happy Valley, Hong Kong Island, will
provide the public free access to the Internet and a special and innovative environment
for enjoying top quality coffee and bakeries.
Individuals of all ages and backgrounds will find Jedi Caf appealing. The staffs of Jedi
Caf provide not only top quality service but also helpful instructions to customers in
computer usage. This educational aspect will attract elderly customers and youngsters
who do not own computers at home. The easy access location also provides residents in
the same area convenience to their gourmet and online needs.
2.1 Company Ownership
Jedi Caf will be privately owned by Obewon Kinobi, the founder and CEO, and Alex Skywalker, a second shareholder.
2.2 Start-up Summary
Jedi Cafs start -up costs will cover renovation, furniture, computers, coffee
machines and cooking equipment, and running capital to cover expenses in the first
year.
The equipment provided to Jedi Cafs customers with high -speed connection to
the Internet forms a large portion of the start-up costs. These costs will include
computers, two laser printers and a scanner.
Besides, the start-up costs will comprise the coffee machines such as one espresso
machine, one automatic coffee grinder, and other additional equipment. The shop
will also require funds for renovation and modification. Breakdown of the start-up
costs is illustrated as follows:
Start-up Costs USD
Legal Fee 641
Stationeries 641
Tableware 641
Consultants 2,564
Insurance 897
Rent 1,853
Coffee Machines 13,718
Bean Grinder 1,019
Computer Systems (x11), Software, Printer, Scanner 31,167
Internet Lines 1,077
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Fixtures/Renovation 25,641
Total Start-up Costs 79,859
Start-up Assets
Running Cash 30,769
Start-up Inventory 2,564
Total Assets 33,333
Total Requirements 113,192
2.3 Company Location
A site has been chosen in Shing Wo Road in Happy Valley for the following
reasons:
Nearness to the close-by residents.
Proximity to stylish, upscale restaurants in the same area.
High visibility.
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3. Services
Jedi Caf will provide free access to the Internet and computer services such as printing,
scanning to customers. It will also provide customers with a unique and innovative
environment for enjoying top quality coffee and bakeries.
3.1 Service Description
Jedi Caf will provide its customers free access to the Internet and common
computer software and hardware. Some of the Internet and computing services
available to Jedi Caf s customers are listed below:
Internet browsers.
Laser color printing, copying and scanning.
Popular software applications.
Also, top quality food and beverages, and a comfortable environment will provide
Jedi Cafs customers with a second home, a place to enjoy the benefits of
computing in a comfortable environment.
3.2 Competitive Comparison
Jedi Caf will be the first cyber caf in Happy Valley. It will differentiate itself from
other ordinary coffee shops in the same area by providing its customers with free
Internet and computing services.
3.3 Technology
Jedi Caf will invest in high-speed computers to provide its customers with a fast
and efficient connection to the Internet. The computers will be reliable and fun to
work with. Jedi Caf will continue to upgrade and modify the systems to stay with
current technologies.
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4. Market Analysis
Jedi Caf is facing the opportunity of being the pioneer in the Happy Valley cyber caf
market. The consistent popularity of coffee, combined with the growing interest in the
Internet, has been proven to be a winning concept in other markets and will produce thesame results in Happy Valley.
4.1 Market Segmentation
Jedi Cafs customers can be divided into two groups. The first group is familiar
with the Internet and desires a progressive and inviting atmosphere where they can
get out of their offices or bedrooms and enjoy a great cup of coffee. The second
group is not familiar with the Internet, yet, and is just waiting for the right opportunity
to enter the online community. Jedi Cafs ta rget market falls anywhere between
the ages of 15 and 70. This extremely wide range of ages is due to the fact that
both coffee and the Internet appeal to a variety of people. In addition to these two
broad categories, Jedi Cafs target market can be divi ded into more specific
market segments. The majority of these individuals are students and business
people. See the Market Analysis table below for more specifics.
Market Analysis
2009 2010 2011 2012 2013
Potential Customers Growth
University Students 4% 1,923 2,000 2,080 2,163 2,250
Office Workers 3% 3,205 3,301 3,400 3,502 3,607
Seniors 5% 2,372 2,490 2,615 2,746 2,883
Teenagers 2% 1,603 1,635 1,667 1,701 1,735
Others 0% 3,205 3,205 3,206 3,205 3,205
Total 2.68% 12,308 12,631 12,968 13,317 13,680
4.2 Target Market Segment Strategy
Jedi Caf intends to cater to people who want a guided tour on their first spin
around the Internet and to experienced users eager to indulge their passion for
computers in a social setting. Furthermore, Jedi Caf will be a magnet for local and
traveling professionals who desire to work or check their email messages in a
friendly atmosphere. These professionals will either use Jedi Cafs PCs, or plug
their notebooks into Internet connections.
4.2.1 Market Trends
A market survey was conducted recently with key questions asked to fifty
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potential customers in Happy Valley. Some key findings include:
40 people said they enjoyed free access to the Internet.
44 subjects use the Internet to communicate with others on a daily basis.
4.2.2 Market Needs
Factors such as current trends, addiction, and historical sales data ensure that
the high demand for coffee and Internet access will remain constant over the
next five years. Being the first cyber caf in Happy Valley, Jedi Caf will enjoy
the pioneer advantages of name recognition and customer loyalty. Initially,
Jedi Caf will hold a 100 percent share of the cyber caf market in Happy
Valley. In the next five years, competitors will enter the market. Jedi Caf has
set a goal to maintain greater than a 50 percent market share.
4.3 Service Business Analysis
The retail coffee industry in Happy Valley experienced rapid growth from the 1990 s
and is now moving into the mature stage of its life cycle. Many factors contribute to
the large demand for high-quality coffee in Happy Valley. The yuppies is a main
source of demand for coffee retailers. The climate in Happy Valley is extremely
favorable to coffee consumption. Current trends in this high-spending residential
area reflect the popularity of fresh and strong coffee. Happy Valley is a haven for
coffee lovers.
The popularity of the Internet is growing exponentially. Those who are familiar with
the Internet are well aware of how fun and addictive going online can be. Those
who have not yet experienced with the Internet need a convenient, relaxed
atmosphere where they can feel comfortable learning about and utilizing the current
technologies. Jedi Caf seeks to provide its customers with affordable Internet
access in an innovative and supportive environment.
Due to intense competition, caf owners must look for ways to differentiate their
place of business from others in order to achieve and maintain a competitive
advantage. The founder of Jedi Caf realizes the need for differentiation and
strongly believes that combining a caf with complete Internet service is the key to
success. The fact that no cyber cafs are established in Happy Valley, presents
Jedi Caf with a great opportunities to enter into a profitable niche in the market.
4.3.1 Competition and Buying Patterns
The main competitors in the retail coffee segment within the same location areStarBugs and Cathay Coffee. These businesses target a similar segment to
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Jedi Cafs (i.e. educated, upwardly -mobile students and business people).
However, Jedi Caf will offer substantial computing services to its customers
which these competitors are not providing at the moment.
4.3.2 Distributing a ServiceThe dual product/service nature of Jedi Cafs business faces competition on
two levels. Jedi Caf competes not only with coffee shops, but also with
Internet service providers. The good news is that Jedi Caf does not currently
face any direct competition from other cyber cafs in the Happy Valley market.
Heavy competition between coffee shops in Happy Valley creates an industry
where all firms face the same costs. There is a positive relationship between
price and quality of coffee. Some coffees retail at USD2.56/cup while other,
more exotic beans may sell for as high as USD3.85/cup. Wholesalers sell
beans to retailers at an average of a 50 percent discount. For example, a
pound of Sumatran beans wholesales for USD8.97 and retails for USD17.95.
And as in most industries, price decreases as volume increases.
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5. Marketing Strategy
Jedi Caf will position itself as a stylish coffee house and Internet service provider. It will
serve high-quality coffee and specialty beverages at competitive prices. Due to the
number of cafs in Happy Valley, it is important that Jedi Caf sets fair prices for itsproducts. Jedi Caf will use advertising as its main source of promotion. Ads placed in
food magazines will help build customer awareness. Accompanying the ad will be a
coupon for discounted coffee and nice bakeries.
5.1 Promotion Strategy
Jedi Caf will implement a pull strategy in order to build consumer awareness and
demand. Initially, Jedi Caf has budgeted USD6,410 for promotional efforts which
will include advertising with food magazines and in-house promotions such as
offering customers free drinks.
Jedi Caf realizes that in the future, when competition enters the market, additional
revenues must be allocated for promotion in order to maintain market share.
5.2 Pricing Strategy
Determining a fair market for cyber caf is more difficult because there is no direct
competition from another cyber caf in Happy Valley. Therefore, Jedi Caf has to
base its prices for coffee and specialty drinks on the retail profit analysi s providedby our supplier, Jenson Coffee, which has been in the coffee business for over 50
years and has developed a solid pricing strategy.
5.3 Sales Strategy
As a retail establishment, Jedi Caf employs people to handle sales transactions.
Computer knowledge is a prerequisite for Jedi Caf employees. If an employee
does not possess basic computer skills when they are hired, they are trained by our
full-time technician. Our full-time technician is also available for customers in need
of assistance. Jedi Cafs commitment to friendly, helpful service is one of the key
factors that distinguishes itself from other cyber cafs.
5.4 Sales Forecast
Cost of Sales: The cost of goods sold for coffee-related products was determined
by the "retail profit analysis" we obtained from Jenson Coffee. The cost of bakery
items is 20% of the selling price. The cost of Internet access is USD846 per month,
paid to PC-Net for networking fees.
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2009 2010 2011
Unit Sales
Coffee 53,844 64,990 71,490
Specialty Drinks 40,136 48,352 49,708
Baked Goods 20,420 26,342 23,180
Total Unit Sales 114,399 139,684 144,378
Unit Prices USD USD USD
Coffee 2.56 2.56 2.56
Specialty Drinks 3.21 3.21 3.21
Baked Goods 2.56 2.56 2.56
Sales USD USD USD
Coffee 137,841 166,374 183,014
Specialty Drinks 128,837 155,210 159,563
Baked Goods 52,275 67,436 59,341
Total Sales 318,953 389,020 401,918
Direct Cost of Sales USD USD USD
Coffee (based on average) 34,515 41,659 45,827
Specialty Drinks (based on average) 32,160 38,744 39,828
Baked Goods (based on average) 13,090 16,887 14,862
Subtotal Direct Cost of Sales 79,765 97,290 100,517
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6. Management Summary
Jedi Caf is owned and operated by Mr. Obewon Kinobi. The company, being small in
nature, requires a simple organizational structure. Implementation of this organizational
form calls for the owner, Mr. Kinobi, to make all of the major management decisions inaddition to monitoring all other business activities.
Personnel Plan
The staff will consist of six part-time employees working thirty hours a week at USD7.05
per hour. In addition, one full-time technician (who is more technologically oriented to
handle minor terminal repairs/inquiries) will be employed to work forty hours a week at
USD12.82 per hour. The other shareholder, Alex Skywalker, will not be included in
management decisions. This simple structure provides a great deal of flexibility and
allows communication to disperse quickly and directly. Because of these characteristics,
there are few coordination problems seen at Jedi Caf that are common within larger
organizational chains. This strategy will enable Jedi Caf to react quickly to changes in
the market.
2009 2010 2011
Total People 9 9 9
USD USD USD
Owner 30,769 33,846 37,231
Part Time 1 10,154 10,154 10,154
Part Time 2 10,154 10,154 10,154
Part Time 3 10,154 10,154 10,154
Part Time 4 10,154 10,154 10,154
Part Time 5 10,154 10,154 10,154
Part Time 6 5,077 10,154 10,154
Technician 27,860 30,646 33,710
Manager 5,128 30,769 33,845
Total Payroll 119,604 156,185 165,710
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7. Financial Plan
The following sections lay out the details of our financial plan for the next three years.
7.1 Start-up Funding
This business plan is prepared to obtain financing in the amount of USD61,538.
The supplemental financing is required to begin work on site preparation and
modifications, equipment purchases, and to cover expenses in the first year of
operations. This amount is planned to be repaid by USD15,385 each year by four
years.
Owner s investments has already been secured as follows:
1. USD24,359 of personal savings from owner Obewon Kinobi.
2. USD15,385 from the second shareholder, Alex Skywalker.
3. USD11,190 in the form of short-term bank loans.
USD
Start-up Expenses to Fund 79,859
Start-up Assets to Fund 33,333
Total Funding Required 113,192
AssetsInventory 2,564
Cash Balance 30,769
Total Assets 33,333
Liabilities
Short Term Bank Loans 11,910
Funds Needed to Raise 61,539
Total Liabilities 73,449
Capital
Obewon Kinobi 24,359
Alex Skywalker 15,385
Total Planned Investment 39,744
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7.2 Projected Profit and Loss
Payroll Expense: The founder of Jedi Caf, Obewon Kinobi, will receive a salary of USD30,769 in year one, USD33,846 in year two, and USD37,185 in year three.
Jedi Caf intends to hire six part-time employees in year one at USD7.05/hour anda full-time technician at USD12.82/hour.
Rent Expense: Jedi Caf is leasing a 400 square foot facility at USD2,564/monthfor a total of 36 months. At the end of the third year, the lease is open for
negotiations and Jedi Caf may or may not re-sign the lease depending on the
demands of the lessor.
Utilities Expense: As stated in the contract, the lessor is responsible for thepayment of utilities including gas, garbage disposal, and real estate taxes. The only
utilities expenses that Jedi Caf must pay are electricity and the phone bill
generated by fifteen phone lines; thirteen will be dedicated to broadband and two
for business purposes.
Marketing Expense: Jedi Caf will allocate USD43,269 for promotional expensesover the first year. This amount will be used for advertising in food magazines in
order to build consumer awareness.
Insurance Expense: Jedi Caf has allocated USD1,846 for insurance for the firstyear. As revenue increases in the second and third year of business, Jedi Caf
intends to invest more money for additional insurance coverage.
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Projected Profit and Loss data is presented in the table below:
2009 2010 2011
USD USD USD
Sales 318,953 389,020 401,918
Direct Cost of Sales 79,765 97,290 100,517
Gross Margin 239,188 291,730 301,401
Expenses
Payroll 119,604 156,185 165,710
Marketing/Promotion 43,269 51,282 55,128
Rent 30,769 30,769 30,769
Utilities 11,692 11,692 11,692
Depreciation 14,309 14,308 14,309
Start-up Cost 8,314 0 0
Insurance 7,693 7,693 7,693
Total Operating Expenses 235,650 271,929 285,301
Profit Before Interest and Tax 3,538 19,801 16,100
Interest Expense 2,981 1,885 1,410
Taxes Incurred 100 2,708 2,226
Net Profit 457 15,208 12,464
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7.3 Projected Cash Flow
2009 2010 2011
USD USD USD
Cash Received
Cash from Operations
Cash Sales 318,953 389,020 401,918
Subtotal Cash from Operations 318,953 389,020 401,918
Additional Cash Received
Capital Investment 39,744 0 0
Short Term Bank Loan 11,910 0 0
Long Term Funding 61,538 0 0
Subtotal Cash Received 432,145 389,020 401,918
Expenditures
Expenditures from Operations 375,732 359,503 375,145
Additional Cash Spent
Repayment of Short Term Loan 11,910 0 0
Long-term Liabilities Repayment 15,385 15,385 15,385
Subtotal Cash Spent 403,027 374,888 390,530
Net Cash Flow 29,118 14,132 11,388
Cash Balance 29,118 43,250 54,638
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7.4 Projected Balance Sheet
2009 2010 2011
USD USD USD
Assets
Fixed Assets 57,236 42,927 28,619
Current Assets
Cash 29,118 43,250 54,638
Total Current Assets 29,118 43,250 54,638
Total Assets 86,354 86,177 83,257
Liabilities
Long-term Liabilities 46,154 30,769 15,385
Total Liabilities 46,154 30,769 15,385
Net Assets 40,200 55,408 67,872
Shareholders Equity
Paid-in Capital 39,743 39,743 39,743
Retained Earnings 457 15,665 28,129
Net Worth 40,200 55,408 67,872