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  • 1. BUSINESS PLAN INVENTORY A Tool for Preparing Your Business Plan Small Business Development Center Eastern Iowa Community College District 320 West 3rd Street Davenport, Iowa 52801 563-336-3401
  • 2. Introduction A business plan is a road map to success for your business. You must write it; you must understand it; and you must be able to explain it to others. Your business plan is an operating tool, which, if carefully crafted and properly used will help you manage your business and work toward its success. The importance of planning in business can never be overemphasized. Whether you are starting a new business, expanding an existing business or evaluating the success of your business, you must take an objective look at four key areas of the business – mission, marketing, operations and profitability. Writing or updating an existing business plan forces you to identify strengths and weaknesses, forecast opportunities and spot problems early. A well-prepared business plan can even help you learn from the mistakes of others and avoid some problems altogether. The business plan also provides information to others who can be key to the financial success of your business, specifically investors and lenders who can provide the needed equity to assure your success. The plan is the most important tool they have to evaluate your business. It should be clear and concise, while providing enough information to allow them to make an informed and accurate decision. Remember the goals of the business plan are:  Take your business from concept to reality.  Define the purpose of the business, the product and the market.  Understand the market and how your product or service will meet its needs.  Assist in capitalization by helping to secure financing or equity investment.  Become a tool to guide and measure results. This business plan inventory will assist you in bringing together your thoughts and ideas and accumulating the information you will need to write a successful plan. It is not a template. Don’t just fill in the blanks with short yes or no answers. Every plan and every business is as unique as you are. Take time to do your research and answer the questions as thoroughly as possible. While the business plan is first and foremost a tool for you and your business, remember that you will use this tool to convey the essence and form of your business to others who have no other information than the plan before them. Good luck! 2
  • 3. I. DESCRIPTION OF THE BUSINESS This section will provide a detailed description of the business. Ask yourself, “What business am I in?” Include your products, market and services as well as a thorough description of what makes your business unique. This section is divided into three subsections: a) describing the business; b) describing the product or service; and c) identifying the location of the business. Describe the Business: 1. In a single sentence of 25 words or less, describe the business. 2. What is the form of the business? _____ Sole proprietorship _____ “S” Corporation _____ Partnership _____ “C” Corporation _____ Limited Liability Company 3. What is the type of business? _____ Retail _____ Manufacturing _____Service 4. Is this business _____ New _____ Existing _____ Takeover _____Expansion 5. If this is a new business, is it independent or a franchise? 6. If the business is a franchise, describe your franchise territory. 3
  • 4. 7. Why will your business be profitable? What is unique about the business? 8. Is there opportunity for the business to grow? If so, under what conditions would expansion be considered. If the business is a franchise, discuss under what conditions can the business expand? 9. When will the business open? 10. What have you learned about your kind of business from outside sources (trade suppliers, bankers, other franchise owners, franchisor, publications)? Describe the Product or Service: 1. What are you selling? 2. How will your product or service benefit the customer? 3. Is the product or service in steady demand or is it seasonal? 4
  • 5. 4. What is different about the product or service you are offering? Describe the Location: 1. Where will the business be located? 2. What kind of space is required? 3. Why is the area and/or building desirable? 4. Is the location easily accessible from all directions? Describe any ingress/egress problems, traffic signals, etc.? Is public transportation available? Is parking adequate and reasonably priced? Is the area considered safe by your market? Is adequate lighting available? Is the location properly zoned? 5
  • 6. 5. Is the makeup of the neighborhood stable or is it changing in character? Describe the changes and whether they will impact your business. II. The Marketing Plan Understanding your market and knowing how to reach that market is vital to the success of any business venture. A marketing plan is not simply an advertising plan. A successful marketing plan proves that you understand who your customers are and what their likes, dislikes and expectations are. The plan acknowledges and identifies the competition you have in trying to satisfy the needs of the market. It analyzes your ability to penetrate the market and determines your pricing structure. And after all that work is completed it details how you will reach your market and what your advertising strategy will be. The Customers: 1. Who is your typical customer? Gender: _____________________________________________ Age Range: _____________________________________________ Race/Ethnicity: _____________________________________________ Household Income: _____________________________________________ Family Size: _____________________________________________ Homeowner?: _____________________________________________ Geographic area: Urban________ Suburban_________ Rural_________ Education Level: _____________________________________________ Other: 2. Define your physical limits of your target market. How far will customer’s travel to purchase your product or service? 3. How many of your potential customers are located within the physical limits you have outlined? 6
  • 7. 4. Is the pool of potential customers in your area growing, steady or declining? 5. Is the pool of potential customers, in general, growing steady or declining? 6. If you are purchasing a franchise, how is your market defined? Do you have the opportunity to expand the market? If so, how? 7. Is your pool of potential customers large enough to allow your business to expand? Under what conditions would you grow the business? The Competition: 1. Who are your five nearest direct competitors? 2. How is their business – steady, increasing or decreasing? 7
  • 8. 3. How are their operations similar or dissimilar to yours? 4. What are their strengths or weaknesses? 5. How does their product or service differ from yours? 6. What have you learned from watching their operations? What works for them? What doesn’t work? What have you learned from their advertising? 7. How will your business be better than theirs? 8
  • 9. 8. Who are your indirect competitors? How will they impact your sales? What factors could make them direct competitors? Pricing and Sales: Pricing is a strategic marketing tool. You must be clear on your objectives in setting the price of your product or service. Price is important, but it is not the main reason people buy a certain product or service. Perceived value is a vital consideration in your customer’s decision. Price, quality, service and profitability are interwoven to create perceived value. Honestly assess your pricing objective in the following question. 1. What is your pricing objective? Rank these objectives in order of importance, with 1 being most important and 5 being least important. _____ Be the lowest price in town _____ Maximize profits _____ Remain Competitive _____ Build up a new product line _____ Create a quality image _____ Offer a good value at a fair price 2. Is there an industry standard overhead percentage available for pricing your product or service? Advertising and Public Relations: 1. If you were looking to purchase the product or service you are selling, where would you look first, second and third for information? 9
  • 10. 2. Develop a short, descriptive word or phrase that describes your product or service? Test them out on friends to see if they accurately describe the product. 3. How will you determine your advertising and promotional budget – fixed dollar or percent of sales? 4. List five things you can do for free advertising for your business. Ex. Press release for grand opening; flyers on windshields, etc. III. The Management Plan Managing your own business is a demanding job that requires patience, dedication and a variety of skills. You may possess some of these skills; others may be provided by employees or consultants. You must recognize your own personal strengths and weaknesses in order to be able to realistically assess your personnel needs and costs. People are the most valuable resource any business has and they should be treated as an asset. Recruiting the right people to help you manage and run your business takes time and forethought. Keeping the right people requires good management, a pleasant work environment and competitive salaries and benefits. Building a sense of teamwork is important. Keep your employees informed and solicit their ideas on products and services, innovations and cost containment. They are your front line of communication with your target market. 1. Describe your education? 2. List your business experience? 10
  • 11. 3. How does your background or business experience help you in this business? 4. What are your weaknesses and how can you compensate for them? 5. Who will be on your management team and what will their duties be? Have you clearly defined those duties in job descriptions? 6. If this is a franchise, what type of assistance can you expect from the franchisor? Will that assistance be ongoing? 7. What are your current personnel needs? Are they full-time or part-time? What will be your personnel needs in 3 years and 5 years? 8. How do you plan to hire and train personnel? How will you build a sense of ownership among your employees? 9. What salaries, benefits, vacations, holidays will you offer? What is the cost of your benefit package as a percentage of salary? 11
  • 12. IV. The Financial Management Plan Sound financial management is the key to a successful business. It is imperative that a business owner have a basic understanding of financial statements and key financial analysis tools. Throughout the life of your business you must constantly analyze the financial health of your company and make changes to assure its future. To build a sound financial base, you must realistically budget to determine the amount of money needed to open your business (start-up costs) and the amount needed to keep it open (operating costs). Many new businesses fail before they open the doors because they are under-capitalized. The following is a list of common start-up costs. Amount Start-up Costs Purchase Real Estate & Closing Costs $__________________ Remodeling Costs $__________________ Machinery and Equipment $__________________ Furniture & Fixtures $__________________ Supplies $__________________ Inventory $__________________ Licenses/Permits $__________________ Advertising/Promotional Costs $__________________ Rental Deposit $__________________ Utilities Deposits $__________________ Insurance (One Year up-front cost) $__________________ Legal/Professional Fees $__________________ Accounting Fees $__________________ Salaries (Prior to opening) $__________________ Franchise Purchase $__________________ Other _______________________ $__________________ Other _______________________ $__________________ Total $__________________ The financial section of your plan should include a capital equipment and supply list, balance sheet, pro-forma income projections and pro-forma cash flow statements. The income and cash flow projections should include a three year summary. A cash flow statement is included at the back of this packet. 1. How much money will you need for start-up costs? 12
  • 13. 2. How long will your business be open before you expect to generate revenue? 3. How much salary do you need? 4. How much cash do you have to invest in the business? 5. Where will the additional cash (equity) injection come from? Do you have outside investors or family members who can invest in the company? What are the terms, if any, of repayment of their loan or investment? 6. If you are seeking financing, what are the terms of the financing you are requesting (rate, term in months, payments)? 7. What are your sales goals for each of the next three years? What are your profit goals? 8. What kind of inventory control system will you use, if applicable? 9. Who will do your daily and monthly accounting? If you are doing accounting in- house, what type of accounting system will you be using? 10. Who assisted in preparing your financial reports and projections? 13
  • 14. PROJECTED INCOME STATEMENT (PROFIT AND LOSS) ANNUAL SALES $____________ LESS: COST OF GOODS SOLD $____________ GROSS PROFIT $____________ OPERATING EXPENSES PAYROLL (EXCLUDING OWNER'S DRAW) $____________ PAYROLL TAXES $____________ ADVERTISING $____________ CAR, DELIVERY, TRAVEL $____________ DEPRECIATION $____________ DUES AND SUBSCRIPTIONS $____________ INSURANCE $____________ LAUNDRY $____________ LICENSES & BUSINESS TAXES $____________ MAINTENANCE & REPAIRS $____________ PROFESSIONAL FEES $____________ RENT $____________ SUPPLIES $____________ TELEPHONE $____________ UTILITIES $____________ MISCELLANEOUS EXPENSE $____________ TOTAL OPERATING EXPENSES $____________ PROFIT OR (LOSS) $____________ 14
  • 15. V. WRITING THE PLAN Congratulations! You have completed the business plan inventory. Now you are ready to put these thoughts together in the form of a business plan. A business plan needs to be descriptive enough that others reading the plan can understand your business. It does not need to be overly lengthy. A good business plan can be 5-10 pages in length plus accompanying documents, depending on the nature of your business. Your business plan should contain the following sections using the information gathered in the business plan inventory. Remember, you’re telling your story. You may want to practice telling your story to a friend or family member before you start writing. a. Executive Summary i. This is written last and summarizes the entire plan in one page or less. b. Information on the Business i. Describe the type of business and product or service ii. History of the business, if existing iii. Address and description of location iv. Present and future personnel needs v. Description of pricing strategy vi. Description of business form and other legal issues vii. Plans for the future of the business c. Market Analysis i. Description of market and customers ii. Why the market needs this product or service iii. Future needs of product or service iv. Demographic information on the market v. What differentiates your product or service in the market vi. Estimate of market penetration vii. Identify your competition and discuss their products/services d. Market Strategy i. Present your strategy for selling your product/service ii. Describe your pricing strategy iii. Describe how you will promote your product.service iv. Describe your advertising plans v. State how you will describe and differentiate your product/service to potential customers e. Management Plan i. Describe your role in company management and your qualifying experience ii. Identify other key management personnel and their experience iii. Identify other management roles that will be filled on a contractual basis and discuss why iv. Identify staffing levels over next three years f. Financial Information 15
  • 16. i. Identify sources and uses of cash needed for the business; describe in detail where the money will come from and where it will be used ii. Include business statements: 1. Balance Sheet – 3 years 2. Projected Income Statements – 3 years 3. Projected Cash Flow Statements – 3 years 4. Break-even Analysis 5. Accounts Receivable and Aging – Existing Business only 6. Accounts Payable and Aging – Existing Business only 7. Reconciliation of Net Worth – Existing Business only To review an actual business plan, go to the SBA website,; click on Starting Your Business; Planning Topics, Writing the Plan; Review Examples of Real Business Plans. 16