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Business_Plan by fsd5695


									Colorado SBDC Network                                BUSINESS PLAN

                                                       An effective business plan serves at least four useful
    A well written business plan is an important       purposes:
document for any business seeking financing.           1) It helps entrepreneurs focus their ideas. It also helps
However, a thorough business plan is an essen-         determine whether a business idea is feasible
tial tool for all businesses, regardless of finan-     2) It creates a track for management to follow in the early
cial needs. Most lenders will not even discuss         stages of the business
financing without a business plan. The busi-           3) It creates benchmarks against which the entrepreneur
ness plan brings together all the goals, plans,        and management can measure progress
strategies and resources of a business. In ad-         4) It provides a vehicle for attracting capital to help
dition, if you write a comprehensive business          finance the business
plan prior to the commencement of operations,
it may save you from significant financial and       will read, so it must capture his/her attention.   •	Your target market and competitive strategy
professional losses in an unprofitable busi-         An effective summary will properly position your     - an overall description of the market for
ness. Both the federal and state governments         company and help to distinguish your concept         your products/services detailing your market
provide assistance in helping you create your        from the competition. It should be concise, per-     success factors, customer demographics,
business plan and in locating financing oppor-       suasive and no more than two to three pages in       phychographics (lifestyle traits), present and
tunities. Refer to the Sources of Assistance and     length. If the executive summary fails to move       future markets, how you will sell to each
Financing Options chapters of this Guide.            your potential investor into the depths of your      market segment, special characteristics of
                                                     plan, it has failed to do its job. The Executive     your products/ services and of the overall
                                                     Summary should include:                              general market and current and future com-
                                                      •	A description of your business and its target     petitive strategies
                                                        markets, what differentiates your company’s
                                                        product or service and your company’s strat-       A SOUND BUSINESS
                                                        egy for success                                    PLAN IS IMPORTANT TO
                                                      •	A description of your management team,             THE SUCCESS OF ANY
                                                        including their skills, experience and weak-       BUSINESS AND REQUIRES
                                                        nesses                                             AN INVESTMENT OF
                                                      •	A summary of key financial projections over        SUBSTANTIAL TIME AND
                                                        the next three years                               RESOURCES.
                                                      •	A summary of funding requirements, when
                                                        the funds will be needed, where the funding     •	Your marketing plan, including a description
                                                        will come from and how it will be spent           of the marketing goals, how the company
                                                                                                          expects to achieve those goals - promotion,
                                                     The Business                                         pricing and distribution plans, use of the
                                                         The purpose of this section is to explain in     Internet and associated expenses
BUSINESS PLAN OUTLINE                                detail who you are, what you do, what your         •	Your management and personnel, including
    There are no hard and fast rules in format-      goals are and how you plan to get there. This        a description of the principals of the com-
ting your business plan. However, the owner          section should include:
of the business, with outside assistance as          •	A general description of your business,
necessary, should write it. A business plan            including: a history of the business, the con-
                                                                                                           SAMPLE BALANCE SHEET
written by an outside consultant is someone            cept of the company, form of legal structure
else’s business plan. The length and content           and business organization, products and                      q Current Assets
often vary depending on such factors as the            services offered, customers sought and the                   q Fixed Assets
company’s maturity, the nature and complexity          competitive advantages you offer                             q Other Assets
of the business and the market it serves. The        •	A list of the products and services your                     q Total Assets
following outline is effective and comparatively       company provides including an outline of                     Total Assets
easy to develop.                                       your competitive advantages, distribution               Liabilities
                                                       methods	and	unique	product	qualities	•	An	                   q Current Liabilities
The Executive Summary                                                                                               q Long-term Liabilities
                                                       analysis of your major competitors and prod-
                                                                                                                    q Equity
  This section is a summary of the key ele-            uct/service cycles, including who they are,
                                                                                                                    Total Liabilities & Equity
ments of your plan. The executive summary is           their strengths and weaknesses and how
sometimes all the potential investor or lender         your company compares

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Colorado SBDC Network                     BUSINESS PLAN

  pany, their backgrounds and experience and            FIND YOUR NEAREST SMALL                             •	A breakeven analysis allows you to dem-
  the company structure                                                                                       onstrate when your business will reach its
                                                        BUSINESS DEVELOPMENT
•	The physical geography of your business,                                                                    breakeven point - when sales will reach a
                                                        CENTER FOR A LIST OF
  including a description of each location and                                                                level to cover expenses. A breakeven analy-
  facility, whether you lease or own, previous
                                                        BUSINESS CLASSES.                                     sis can tell you quickly if your costs are too
  or planned renovations, what zoning restric-
                                                                                high or if the price of your product or service
  tions or permits are required and transporta-         available collateral and how you will pay it          is too low. A basic breakeven formula is:
  tion access for customers and shipping                back if something goes wrong
                                                      •	A list of your capital equipment, including         BE = FC/(P-VC)
Financial Data                                          equipment used to manufacture or deliver
     The purpose of the financial plan is to pro-       your product or service (not the equipment or       BE = Breakeven: The point where total costs
vide the reader with vital financial information        merchandise you sell directly to a customer)        equal total revenue
about your business. The financial plan should          such as manufacturing machinery and delivery
                                                                                                            FC = Fixed Costs: Costs that remain constant
include projections for two to five years mini-         fleets, permanent fixtures such as special
                                                                                                            over time such as rent insurance, interest,
mum. Projections, as realistic as possible, are         lighting, air conditioning, office equipment,
                                                                                                            salaries, etc.
vital for the success of a new business. If you         computers, etc. If financing will be used to pur-
have not had experience in preparing financial          chase some of this equipment, list it separately    P = Price: Money received for a product or
information, you may need to obtain profes-             from the equipment you already own                  service
sional assistance with this section of your busi-     •	A balance sheet provides a snapshot of what
ness plan. This section should include:                 you own and what you owe at a particular            VC = Variable Costs per unit: The per unit
 •	Projected start-up costs that include the cost       point in time. It contains the same categories      costs that vary directly with sales volume such
   of equipment, inventory and real estate as           of information regardless of the type of busi-      as manufacturing labor, materials, sales costs,
   well as operating expenses until the busi-           ness. Assets should be ranked in a decreas-
   ness is profitable                                   ing order of liquidity while liabilities should     •	Financial projections demonstrate what your
 •	A description of the type of loan/financing          be listed in decreasing order beginning with          business will look like at a certain future pe-
   you desire, including the amount, the length         the most immediate due. A balance sheet is            riod of time. Projections should be prepared
   of the loan, desired terms, how you will use         in balance when Total Assets = Total Liabili-         on a month-by-month basis for the first year
   the money, how you are going to pay it back,         ties + Total Equity                                   and by quarters for the second and third
                                                                                                              years. They should be organized in a sum-
     PLANNING HINTS                                                                                           mary type financial format and should cover
                                                                                                              your company’s sales revenues, costs and
     A sound business plan requires an investment of substantial time and resources. You                      income (Income Statement) and cashflows
     may require the assistance of qualified professionals to complete your plan. Refer to the                (Statements of Cash Flows)
     Choosing Advisors and Sources of Assistance chapters of this Guide.                                    •	A deviation analysis recalculates your finan-
                                                                                                              cial projections from the aforementioned
     Suggestions on Format and Approach                                                                       based on changes in your income, cash flow,
     •	Provide a table of contents and tab each section                                                       etc. Typically, this analysis is performed for
     •	Type the plan on 81/2” x 11” paper                                                                     two situations. First, based on a 50 percent
     •	Use charts, graphs and other visual aids, as well as color, to add interest and improve                increase in your projections, and second
       comprehension                                                                                          based on a 50 percent decrease
     •	Indicate on the cover and the title page that all information is proprietary and confi-              •	Historical financial reports should be includ-
       dential                                                                                                ed for an existing business such as balance
     •	As you complete sections of the plan, ask impartial third parties to review them and                   sheets, income statements and tax returns
       give their perspective on the quality, clarity and thoroughness of your plan.                          for the past three years if available
     •	There are sixteen Small Business Development Centers listed in the Sources of Gov-
       ernment Assistance that provide free one-on-one counseling in many areas, including                  Supporting Documents
       business plans                                                                                          You may include personal resumes and fi-
     •	Finally, if you intend to use your plan to attract capital, honestly ask yourself whether            nancial statements, credit reports, letters of
       you would invest in the business based on reading the plan. If you can’t honestly                    reference, letters of intent, copies of leases,
       answer yes, then the plan needs more work.                                                           legal documents and anything else relevant to
                                                                                                            your plan.

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