Creating Business Plans

A good business plan accomplishes the following:

• It allows the new business owner to determine the feasibility of the proposed business and identifies its start-up requirements.
• It provides a basis for outside investors and banks to determine whether to invest in or lend money to the business.
• It provides the groundwork for more detailed operational plans and serves as a valuable management tool for monitoring and planning future growth.

The Business Plan Outline

1. Name of the business
2. Business location and floor plan descriptions
3. Description of the product or service, marketing techniques, and existing competition
4. Expertise of management
5. Summary of financial projections
6. Amount of financial assistance requested (if applicable)
7. Form of, and purpose for, the financial assistance (if applicable)
8. Purpose for undertaking the project (if financial assistance is sought)
9. Business goals

The company's background

1. Name, date, and place of formation
2. Legal structure (sole proprietorship, partnership, limited liability company, limited partnership, or corporation)
3. Significant changes (including dates) in ownership, structure, new products or product lines, and any acquisitions
4. Principals and the roles they played in forming the company

The product or service

1. Relative importance of each product or service, including sales projections
2. Product evaluation (use, quality, performance)
3. Comparison with competitors' products or services and competitive advantages over other producers
4. Demand for product or service and factors affecting demand other than price

The project

If financing is sought for a specific project, describe the project; the purpose for which it is undertaken; its cost; and the amount, form, and use of the financial assistance.

Management

1. Organizational chart
2. Key individuals (include supervisory personnel with special talents or abilities)
   1. Responsibilities
   2. Personal résumés (describing skills and experience as they relate to activities of the business)
3. Present salaries and other compensation
4. Planned staff additions
5. Other employees
6. Number of employees at year-end and total payroll expenses for each of the previous five years broken down by wages and benefits
7. Method of compensation

Ownership

1. Names, addresses, and business affiliations of principal holders of common stock and other types of equity securities
2. Degree to which principal shareholders are involved in management
3. Principal non-management shareholders
4. Names of directors, areas of expertise, and the role of the board when business becomes operational
5. Amount of stock currently authorized and issued

Marketing strategy/Market analysis

1. Description of the industry
   1. Industry outlook
   2. Principal markets (commercial/industrial, consumer, government, international)
   3. Industry size current as well as anticipated in the next few years
   4. Major characteristics of the industry; effects of major social, economic, technological, or regulatory trends on the industry
2. Description of major customers
   1. Names, locations, products, or services sold to each
   2. Percentage of annual sales volume contributed by each major customer over previous years (if applicable)
   3. Duration and condition of contracts
3. Description of market and its major segments
4. Description of competition: companies with which your business competes and how your business compares with these companies
5. Description of prospective customers
6. Description of firm's marketing activities
   1. Overall marketing strategy
   2. Pricing policy
   3. Method of selling, distributing, and servicing the product
   4. Geographic penetration, field/product support, advertising, public relations and promotions, and priorities among these activities
7. Description of selling activities the methods for identifying prospective customers and how and in what order you will contact the relevant decision makers, your sales effort, number of salespersons, number of sales contacts, initial order size, and estimated sales and market share

Technology

1. Technical status of your product (idea stage, development stage, prototype) and the relevant activities and other steps necessary to bring the product into production
2. Current patent or copyright position (if applicable)
3. New technologies that may become practical during the next five years if they will affect the product
4. New products (derived from first-generation products) the firm plans to develop to meet changing needs
5. Regulatory or approval requirements and status; any other technical and legal considerations that may be relevant to the technological development of the product
6. Research and development efforts and future plans for research and development

Production/Operating plan

1. How the firm will perform production or delivery of service in terms of:
   1. Physical facilities owned or leased, size and location, expansion capabilities, types and quantities of equipment needed
   2. Include a facilities plan and description of planned capital improvements (if any) and a timetable for those improvements.
   3. Suppliers names and locations, length of lead time required, usual terms of purchase, contracts (amounts, duration, and condition) and subcontractors
   4. Labor supply (current and planned) number of employees, unionization, stability (seasonal or cyclical), and fringe benefits
   5. Technologies/skills required to develop and manufacture the products
   6. Cost breakdown for materials, labor, and manufacturing overhead for each product. Include cost versus volume curves for each product or service.
   7. Manufacturing process
2. Discuss whether production or operating advantages enjoyed by your firm will continue.
3. Specify standard product costs at different volume levels.
4. Review the schedule of work for the next one to two years.

Financial

1. Auditor's name and address
2. Legal counsel's name and address
3. Banker's name, location, contact officer
4. Controls: cost system and budgets your firm uses
5. Cash requirements, currently and over the next five years, and how these funds will be used
6. Amount to be raised in debt and/or equity
7. Financial statements and projections for the next five years:
   1. Profit and loss or income statements by month until break-even point and then by quarter
   2. Balance sheets as of the end of each year
   3. Cash budgets and cash flow projections
   4. Capital budgets for equipment and other capital acquisitions
   5. Manufacturing/shipping plan
8. Financial materials for lenders and venture capitalists who will require:
   1. A funding request indicating the desired financing, capitalization, use of funds, and future financing
   2. Financial statements for the past three years
   3. Current financial statements
   4. Monthly cash-flow financial projection, including the proposed financing, for two years
   5. Projected balance sheets, income statement and statement of changes in financial position for two years, including the proposed financing