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Business Plan
What is a Business Plan? Why write a Business
Plan?
A Business Plan is a clearly written analysis of your company.
It explains the industry in which you compete, your company’s
goals and objectives, and your plan to meet these goals, as well as
providing a management tool that allows you to guide your business,
and measure your success against projected goals, to allow you to
assess whether you are meeting your goals.
- A business plan can help you obtain
financing or investors.
- A business plan organizes and formalizes
your business thinking process.
- A business plan clarifies the questions
that arise in managing your business.
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How long should the Business Plan be?
The shorter the better (as short as possible without leaving
out important information). It is important to be as realistic and
detailed as possible without being overly repetitious. A concise
plan will be much more effective and yield better results. You
should, however, ensure that enough information is present to allow
you to convey the full scope of important points about your
business, being sure to emphasize the positives and honestly
minimizing the negatives. Often, you can diffuse the potential
impact of negative information by disclosing it and offering a
response, rather than having the reader reach an uninformed
conclusion.
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What financial information do I need to
include?
You should obtain and be prepared to reference the information
contained in the Section on “Financial Data” of the
outline that follows. While it may seem to be cumbersome, remember
that this information will not only be used by others (for bank
financing, investors, etc.), but is information which will build the
goals which you will be striving to achieve, and by which you will
measure your success at the end of each period of time.
- You should include your past three
corporate income tax returns and all financial statements up to
three years in age, if they are available.
- An interim financial statement less than
2 months old, with income statement and balance sheet.
- Three year projections for balance
sheet, income and cash flow statements.
- Personal financial statements on any
persons with more than 10% ownership in the business together
with their personal tax returns for the last three years.
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What topics are covered by the Business
Plan?
The outline which follows is a set of guidelines for you to
follow in developing your business plan. Some questions may not
apply to your particular business, but you should spend some time
thinking about what each section is trying to highlight and base
your narrative on how your particular company operates.
The topics generally covered in a Business
Plan are:
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Cover Sheet and Table of Contents
Should be organized and professional-looking, and should offer
a table of chapters and/or topics so that the reader may easily
reference various topics in the plan.
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Statement of Purpose & Executive Summary
This paragraph outlines your reason for putting the Business
Plan together. It is a brief statement that describes your business
and your reason for writing the business plan, and contains an
overview of the entire plan which briefly describes the
company’s location, target market, products/services offered,
pricing strategy and other highlights in summary. If a loan or
investment is the reason for writing the plan, explain how much
money is needed, what is the money needed for, any other sources of
funding, expected repayment terms, and how the money is expected to
be repaid. It enables a prospective investor to assess the viability
of the company, the industry and the strategic plan.
Try to answer the following questions:
- Who are the principals and how can they
be reached?
- Amount invested in the business by the
owners. Where was the investment obtained?
- What is the purpose and term of the
loan?
- What is the type and value of the
collateral being pledged?
- Itemized Startup costs
- Sources and Applications of funds
- Contractors Estimates
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Business Description, Company History & Time
Table
This section briefly describes your business, how it started
and how it evolved over time. Answer the “who, what, when,
where, why & how ” about your company, and it’s
history. This section should include:
- The names of owners and or major
stockholders.
- Company location.
- Location of your facility and whether
you own or lease. Description of whether your facility has land,
building and or equipment.
- Number of employees.
- Customers background and description.
- Your niche in the market place (what
makes you unique, and what rate of growth have you been
experiencing).
- Mention any awards or accomplishments of
business achievement the company has received.
- If this is a new business discuss the
industry’s history and why you are starting this business.
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Industry and Competitive Analysis & , Market
Analysis with supporting Documentation
Market Analysis
The purpose of this section is to discuss the
overall market (environment/industry) which your firm will be a part
of and how it will affect your business. Do not get too detailed
when discussing your marketing techniques. It will be covered in
detail in the next section.
Customers-- (Your
Market)
Target your market. Remember you cannot be
everything to everyone. Be specific. A good profile of your
customers will help you better define your market --target a place
of expertise within that market and get an idea of the sales and
profit potential.
- Describe your customers: consumers,
retailers, manufacturers, etc.
- What are they like?
- Consumers...age, sex, education,
lifestyle and spending habits.
- Industry...Use standard industrial
classifications and detail the segment you intend to capture.
- What are their needs (long and short
term) ?
- How will your product or service fill
these needs?
- What is the present market size,
potential size and percentage you expect to capture?
- How sensitive are they to price or brand
changes?
- What economic, social, technological or
legal issues are currently affecting or are anticipated to
affect your business (in either a positive or negative manner)?
Competition
List and describe your competitors and answer
the following questions about them:
- How does your product or service compare
with competitors in terms of price, service, location, etc.?
- What is the market share and potential
of each competitor?
- What is their reputation and image in
the market?
Discuss the advantages and disadvantages of
each firm, their related products/services and marketing techniques.
Address how your firm will respond to the competition and changes in
the market, and how you will differentiate yourself from the
competition in order to gain market share.
Marketing
Strategy
Explain how your market should be segmented
and how you will sell and deliver your product or service and why
your customers will buy from you.
- Identify your target markets and perhaps
a special niche.
- Estimate the percent of market share you
expect to capture and relate that to sales.
- Discuss pricing strategy and policy for
your product or service. Show how this strategy will make a
profit, penetrate and maintain market share.
- Describe your sales plan. Discuss method
of distribution (i.e. sales staff, distributors, direct mail,
etc.)
- Discuss your promotion
plans.
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Industry and Competitive Analysis, Products and
Services
Describe in detail the product line and services offered by
your company. Outline the need for your product or service and how
your unique offering is unique.
- List any patents or product innovations
that make your company different from it’s competitors.
- If you plan to introduce new products,
describe them and mention when they will be introduced into the
market.
- Discuss any additional uses or movement
into additional markets your products might have.
- Discuss your Product packaging.
- Discuss your Product
servicing.
Include photographs, samples, or illustrations
as part of your supporting documentation.
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Management and Operations
This section describes the structure and key management team
members, the function of each position, strengths (background) and
the decision making process.
- Give a brief overview of upper
management and their responsibilities. Their involvement in the
day-to-day operations, and how many employees they oversee.
- List key personnel (i.e. decision
makers), and give a brief description of their job description,
qualifications and salary.
- Discuss the company’s
compensation/benefit programs (i.e. profit sharing), who will be
allowed to participate and to what degree.
- As part of your supporting
documentation, include an organization chart which explains the
various layers of management. You should also attach resumes for
your key personnel to justify their expertise.
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Financial Data, Financial Analysis and
Projections
A startup business owner should provide:
- Copies of personal income statements or
payroll information, or tax forms. This is especially helpful
when applying for a loan.
- Business Income Statement and Balance
Sheet (Interim) less than 90 days old.
- Historical (Annual) Business Financial
Statements for the past 3 years.
- Business tax returns for the past 3
years.
- Aging of accounts receivable and
accounts payable.
- ProForma Financial Statements.
- Income statement & Cash flow
Projections for 3 years, detailed by month with accompanying
assumptions.
- Personal Income Tax returns for the past
3 years and a current Personal Financial Statement for each
principal with a minimum of 10% ownership.
- Credit reports from a reliable reporting
agency - generally, you are entitled to one free report per
year.
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Supplemental Information
- Certificate of Incorporation and Bylaws,
or Trade Name Certificate, or partnership agreement, as well as
any bylaws, Stock Certificates or Stockholder agreements.
- Copy of Lease or Contingent Letter of
Lease Agreement.
- Resumes of all principals with a minimum
of 10% ownership as well as significant management personnel.
- Bank and Trade References.
- Name and Contacts for Accountant and
Attorney.
- Any Contracts, Legal documents, letters
of intent, articles and advertisements.
- If a Franchise, copy of Franchise
offering and Franchise agreement.
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