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  1. 1. The following information was obtained from Project Kick-Start: Start your business plan with a quick assessment. Even for an ongoing business, take the time to step away from the business and look at the basics. Do your business numbers make sense? One of my business school professors used to refer to this process as finding out “is there a there there?” For a first look, consider your objectives, mission statement, market analysis and keys to success. Objectives Objectives are business goals. Set your market share objectives, sales objectives, and profit objectives. Companies need to set objectives and plan to achieve them. Make sure your objectives are concrete and measurable. Be specific, such as achieving a given level of sales or profits, a percentage of gross margin, a growth rate, or a market share. Don’t use generalities like “being the best” or “growing rapidly” as your objectives. For example, “being the best” or “maximize customer satisfaction” cannot really be measured. Much better objectives would set measurable goals, such as holding gross margin to 25 percent as a minimum, or selling more than $3 million, or achieving six percent profit on sales and 10 percent return on equity. If less tangible goals are critical to a plan, find a way to measure them. For example, if image and awareness are vital, then plan for statistically valid surveys to measure the improvements in image and awareness. You can also set goals for market share, and purchase research to measure the actual share. Or, if you want to focus on customer satisfaction, plan for a survey to quantify satisfaction or specify numerical objectives regarding returns or complaints. Mission Statement Use the mission statement to define your business concept. A company mission statement should define underlying goals (such as making a profit) and objectives in broad strategic terms, including what market is served and what benefits are offered. What Business Are You In Ask yourself what business you are in, and don’t narrow yourself down. One of the classic business examples is the railroads, which lost a chance to expand in the twentieth century because they misdefined themselves. They thought they were in the business of running trains on tracks. They didn’t understand they were in the business of transporting goods and people. When trucks and buses and highways grew, the railroads were left behind. My company, Palo Alto Software, is not in the business of software development. It is in the business of helping people do their own business plans, by providing business know-how through software and documentation. The broader definition helps us understand what we’re up to. Customer Satisfaction Leading experts in developing customer satisfaction look to a mission statement to define customer satisfaction goals. Developing customer care programs depends on spreading the idea and importance within a company. That should normally start with a statement included in your mission statement. Workplace Philosophy Some mission statements also define internal goals such as maintaining a creative work environment and building respect for diversity. Experts in employee relations look immediately to a mission statement for a definition of a company’s stand on some of these fundamental issues. Value-Based Marketing Experts developed the value-based marketing framework to help companies understand their business better. This framework starts with a business value proposition, which states what benefits a business offers, to whom, and at what relative price level. For example: • This automobile manufacturer offers reliable, safe automobiles for families at a relative price premium. • This fast food restaurant offers quick and consistent lunches at a low price.
  2. 2. Keys to Success Focusing on what I call “keys to success” is a good idea for getting a better view of the priorities in your business. Just about any business imaginable is going to depend a lot on three or four most important factors. For example, in a retail business, the classic joke is that “location, location, and location” are the keys to success. In truth, that might be, for example, location, convenient parking, and low prices. A computer store’s keys to success might be knowledgeable salespeople, major brands, and newspaper advertising. Focus is very important, and the keys to success framework helps you develop focus. There is what I call a law of inverse focus. I can’t prove it with detailed research but I’ve seen many times that, beyond three or four key items, the more items on a priority list, the less chance of implementation. Thinking about keys to success is a great way to focus on the main elements that make your business work. Break-even Analysis Next comes a simple Break-even Analysis table as shown in Illustration 1. Illustration 1: Break-even Analysis The Break-even Analysis table calculates a break-even point based on fixed costs, variable costs per unit of sales, and revenue per unit of sales. Make the following three simple assumptions: • Average per-unit sales price (per-unit revenue): The price that you charge per unit. Take into account sales discounts and special offers. For non- unit based businesses, make the per-unit revenue $1 and enter your costs as a percent of a dollar. • Average per-unit cost: The incremental cost of each unit of sale. If you are using a Units-Based Sales Forecast table (for manufacturing and mixed business types), you can project unit costs from the Sales Forecast table. If you are using the basic Sales Forecast table for retail, service and distribution businesses, use a percentage estimate. For example, a retail store running a 50% margin would have a per-unit cost of .5, and a per-unit revenue of 1. • Monthly fixed costs: Technically, a break-even analysis defines fixed costs as costs that would continue even if you went broke. Instead, you may want to use your regular running fixed costs, including payroll and normal expenses. This will give you a better insight on financial realities. Illustration 2 shows a Break-even chart. As sales increase, the profit line passes through the zero or break- even line at the break-even point.
  3. 3. Illustration 2: Break-even Chart Illustration 2 shows that the company needs to sell approximately 1,200 units in order to cross the break- even line. This is a classic business chart that helps you consider your bottom-line financial realities. Can you sell enough to make your break-even volume? Of course the break-even analysis depends on assumptions made for average per-unit revenue, average per-unit cost, and fixed costs. These are rarely exact assumptions. Market Analysis You don’t need to do major market research for this initial market analysis. You may want to, and even need to, do real research later on (nowadays that is almost all Internet research). For now, however, you want to get a good educated guess about how many potential customers you might have. What you want at this point is a reality check. You’ve already developed a quick break-even analysis that ties your initial business numbers to your required sales. So now you’re going to look at how many customers you might have, so you can think about the importance of breaking even. Develop a basic Market Analysis table. This table gives you a simple list of market segments. Illustration 3 shows a Market Analysis table. Illustration 3: Market Analysis Table This analysis table lets you show the estimated total customer base and your projected growth rate for each group. Each segment is a group of customers. Define the groups according to what needs you supply, demographic characteristics, buying habits, preferences, or whatever other classification system works for your plan. Fill in the total potential customers estimated and the annual growth rate expected for each segment. You can also use a Market Analysis chart as a visual guide to your market segments.
  4. 4. Illustration 4: Market Analysis Pie Chart This simple pie chart shows the potential market as the plan starts. The different segments of the pie show the relative sizes of different target market groups. Pause for Reflection At this point, you’ve defined your business, your financial break-even point, and your total potential market. How does your business look from this viewpoint? Does it make sense? Can you make the sales you need to break even? Is the market big enough? Are your projections realistic? Can you bring together the keys to success? Especially for potential start-up companies, a moment of reflection is critical. Many people dream of starting a business, but that dream turns into a nightmare if the new business isn’t successful. Summary If you think you can make your break-even numbers work, and you believe you have enough customers to make it, then go on to develop the plan. If not, either do more research and revise the idea, or give up and try something else. 1. Executive Summary: Write this last. It’s just a page or two of highlights. 2. Company Description: Legal establishment, history, start-up plans, etc. 3. Product or Service: Describe what you’re selling. Focus on customer benefits. 4. Market Analysis: You need to know your market, customer needs, where they are, how to reach them, etc. 5. Strategy and Implementation: Be specific. Include management responsibilities with dates and budgets. Make sure you can track results. 6. Web Plan Summary: For e-commerce, include disucssion of website, development costs, operations, sales and marketing strategies. 7. Management Team: Describe the organization and the key management team members. 8. Financial Analysis: Make sure to include at the very least your projected Profit and Loss and Cash Flow tables. Writing a Project Plan Standard Tables and Charts There are also some business tables and charts that are normally expected in a standard business plan. Cash flow is the single most important numerical analysis in a plan, and should never be missing. Most plans will also have Sales Forecast and Profit and Loss statements. I believe they should also have separate Personnel listings, projected Balance sheet, projected Business Ratios, and Market Analysis tables. I also believe that every plan should include bar charts and pie charts to illustrate the numbers.
  5. 5. Expanded Plan Outline 1.0 Executive Summary 1.1 Objectives 1.2 Mission 1.3 Keys to Success 2.0 Company Summary 2.1 Company Ownership 2.2 Company History (for ongoing companies) or Start-up Plan (for new companies). 2.3 Company Locations and Facilities 3.0 Products and Services 3.1 Product and Service Description 3.2 Competitive Comparison 3.3 Sales Literature 3.4 Sourcing and Fulfillment 3.5 Technology 3.6 Future Products and Services 4.0 Market Analysis Summary 4.1 Market Segmentation 4.2 Target Market Segment Strategy 4.2.1 Market Needs 4.2.2 Market Trends 4.2.3 Market Growth 4.3 Industry Analysis 4.3.1 Industry Participants 4.3.2 Distribution Patterns 4.3.3 Competition and Buying Patterns 4.3.4 Main Competitors 5.0 Strategy and Implementation Summary 5.1 Strategy Pyramids 5.2 Value Proposition 5.3 Competitive Edge 5.4 Marketing Strategy 5.4.1 Positioning Statements 5.4.2 Pricing Strategy 5.4.3 Promotion Strategy 5.4.4 Distribution Patterns 5.4.5 Marketing Programs 5.5 Sales Strategy 5.5.1 Sales Forecast 5.5.2 Sales Programs 5.6 Strategic Alliances 5.7 Milestones 6.0 Web Plan Summary 6.1 Website Marketing Strategy 6.2 Development Requirements 7.0 Management Summary 7.1 Organizational Structure 7.2 Management Team 7.3 Management Team Gaps 7.4 Personnel Plan 8.0 Financial Plan 8.1 Important Assumptions 8.2 Key Financial Indicators 8.3 Break-even Analysis 8.4 Projected Profit and Loss 8.5 Projected Cash Flow 8.6 Projected Balance Sheet 8.7 Business Ratios 8.8 Long-term Plan
  6. 6. Marketing Plan The Marketing Plan Text Outline by Tim Berry The exact nature of your plan, and your marketing situation, dictates its contents. You add detail or take it away to suit your needs. In the real world you'll want to customize your outline according to whether you are selling products or services, to businesses or consumers, or you're a nonprofit organization. Although the outline does change in some respects as a result, this is a good standard sample outline for a basic marketing plan. Expanded Plan Outline 1.0 Executive Summary 2.0 Situation Analysis 2.1 Market Summary 2.1.1 Market Demographics 2.1.2 Market Needs 2.1.3 Market Trends 2.1.4 Market Growth 2.2 SWOT Analysis 2.2.1 Strengths 2.2.2 Weaknesses 2.2.3 Opportunities 2.2.4 Threats 2.3 Competition 2.4 Services 2.5 Keys to Success 2.6 Critical Issues 2.7 Channels 2.8 Macroenvironment 3.0 Marketing Strategies 3.1 Mission 3.2 Marketing Objectives 3.3 Financial Objectives 3.4 Target Marketing 3.5 Positioning 3.6 Strategy Pyramids 3.7 Marketing Mix 3.7.1 Services and Service Marketing 3.7.2 Pricing 3.7.3 Promotion 3.7.4 Service 3.7.5 Channels of Distribution 3.8 Marketing Research 4.0 Financials, Budgets, and Forecasts 4.1 Break-even Analysis 4.2 Sales Forecast 4.2.1 Sales Breakdown 1 4.2.2 Sales Breakdown 2 4.2.3 Sales Breakdown 3 4.3 Expense Forecast
  7. 7. 4.3.1 Expense Breakdown 1 4.3.3 Expense Breakdown 2 4.3.3 Expense Breakdown 3 4.4 Linking Sales and Expenses to Strategy 4.5 Contribution Margin 5.0 Controls 5.1 Implementation Milestones 5.2 Marketing Organization 5.3 Contingency Planning Break Even Analysis Break-even Analysis by Tim Berry March 13, 2003 The Break-even Analysis lets you determine what you need to sell, monthly or annually, to cover your costs of doing business—your break-even point. Illustration 1 shows the Break-even Analysis table from Business Plan Pro 2003. Illustration 1: Break-even Analysis The Break-even Analysis table calculates a break-even point based on fixed costs, variable costs per unit of sales, and revenue per unit of sales. Understanding Break-even The break-even analysis is not our favorite analysis because: • It is frequently mistaken for the payback period, the time it takes to recover an investment. There are variations on break-even that make some people think we have it wrong. The one we do use is the most common, the most universally accepted, but not the only one possible. • It depends on the concept of fixed costs, a hard idea to swallow. Technically, a break-even analysis defines fixed costs as those costs that would continue even if you went broke. Instead, you may want to use your regular running fixed costs, including payroll and normal expenses. This will give you a better insight on financial realities. We call that “burn rate” these post-Internet days. • It depends on averaging your per-unit variable cost and per-unit revenue over the whole business. However, whether we like it or not, this table is a mainstay of financial analysis. You may choose to leave it out, but really, a business plan would not be complete without it. And, although there are some other ways to do a Break-even Analysis, this is the most standard.
  8. 8. The Break-even Analysis depends on three key assumptions: 1. Average per-unit sales price (per-unit revenue): This is the price that you receive per unit of sales. Take into account sales discounts and special offers. Get this number from your Sales Forecast. For non-unit based businesses, make the per- unit revenue $1 and enter your costs as a percent of a dollar. The most common questions about
  9. 9. this input relate to averaging many different products into a single estimate. The analysis requires a single number, and if you build your Sales Forecast first, then you will have this number. You are not alone in this, the vast majority of businesses sell more than one item, and have to average for their Break-even Analysis. 2. Average per-unit cost: This is the incremental cost, or variable cost, of each unit of sales. If you buy goods for resale, this is what you paid, on average, for the goods you sell. If you sell a service, this is what it costs you, per dollar of revenue or unit of service delivered, to deliver that service. If you are using a Units- Based Sales Forecast table (for manufacturing and mixed business types), you can project unit costs from the Sales Forecast table. If you are using the basic Sales Forecast table for retail, service and distribution businesses, use a percentage estimate, e.g., a retail store running a 50% margin would have a per-unit cost of .5, and a per-unit revenue of 1. 3. Monthly fixed costs: Technically, a break-even analysis defines fixed costs as costs that would continue even if you went broke. Instead, we recommend that you use your regular running fixed costs, including payroll and normal expenses (total monthly Operating Expenses). This will give you a better insight on financial realities. If averaging and estimating is difficult, use your Profit and Loss table to calculate a working fixed cost estimate—it will be a rough estimate, but it will provide a useful input for a conservative Break-even Analysis. Illustration 2 shows a Break-even chart. As sales increase, the profit line passes through the zero or break- even line at the break-even point. Illustration 2: Break-even Chart The illustration shows that the company needs to sell approximately 1,222 units in order to cross the break- even line. This is a classic business chart that helps you consider your bottom-line financial realities. Can you sell enough to make your break-even volume? The break-even analysis depends on assumptions made for average per-unit revenue, average per-unit cost, and fixed costs. These are rarely exact. We recommend that you do the break-even table twice: first, with educated guesses for assumptions, as part of the initial assessment, and later on, using your detailed Sales Forecast and Profit and Loss numbers. Both are valid uses. Budgeting is as Much About People as it is About Numbers by Tim Berry April 08, 2003 Managing the budget numbers can be simple, but managing a budget takes people, not spreadsheets. While budget numbers are simple, budget management isn't. To make a budget work, you need to add real management:
  10. 10. 1. Understand that it's about people: Successful budgeting depends on people management more than anything else. Every budgeted item must be "owned" by somebody, meaning that the owner has responsibility for spending, authority to spend, and the belief that the spending limit is realistic. People who don't believe in a budget won't try to implement it. People who don't believe that it matters won't worry about a budget either. 2. Budget "ownership" is critical: To "own" a budget item is to have the authority to spend and responsibility for spending. Ideally a budget management system makes plan-vs.-actual results visible to a group of managers, so that there is peer pressure that rewards budgeting successes and penalizes budgeting failures. 3. Budgets need to be realistic: Nobody really owns a budget item until they believe the budget amount is realistic. You can't really commit to a budget you don't believe in. 4. It's also about following up: Unless the people involved know that somebody will be tracking and following up, they won't honor a budget. Publishing budget plan and actual results will make a world of difference. Rewards for budget success and penalties for budget failures can be as simple as peer group managers sharing results.
  11. 11. Your Budget and Milestones Work Together As you develop your budget, keep in mind your business plan milestones. That's where you set specific goals, dates, responsibilities, and budgets for your managers. It makes a plan concrete. Make sure your budget matches your milestones. Ideally, every line in a budget is assigned to somebody who is responsible for managing that budget. In most cases you'll have groups of budget areas assigned to specific people, and a budgeting process that emphasizes commitment and responsibility. You'll also need to make sure that everybody involved knows that results will be followed up. The ideal plan relates the budgets to the Milestones table. The Milestones table takes all the important activities included in a business plan and assigns them to specific managers, with specific dates and budgets. It also tracks completion of the milestones and actual results compared to planned results.
  12. 12. Milestones Table Another source of plan information outline.asp Developing a Business Plan outline.asp l Writing a High-Tech Business Plan _high_tech.html
  13. 13. The following information found at m/objectID/8AE4F799- 0038- 4471- B573659C196695D2/catID/E67C08E9- 9FAE- 4 AD8- 840371947878E573 The Essentials of a Business Plan All business plans must show two things: a winning idea and a clear shot at a profit. A good business plan has two basic goals: It should describe the fundamentals of your business idea and provide financial data to show that you will make good money. Beyond that, the content of your business plan depends on how you intend to use it. How Will You Use Your Business Plan? Depending on whether you're trying to attract investors or are creating a blueprint for your own use, a business plan can take somewhat different forms. Attracting Investors If you will use your business plan to borrow money or interest investors, you should carefully design your plan so that it sells your vision to skeptical people. Normally this means your business plan should include: • a persuasive introduction and request for funds • a statement of the purpose of your business • a detailed description of how the business will work (including what your product or service will be, whether you'll have employees, who will supply your goods and where you will be located) • an analysis of your market (who your customers are) • an evaluation of your main competitors • a description of your marketing strategy (how your business will reach plenty of customers and fend off your competitors) • a résumé setting forth your business accomplishments, and • detailed financial information, including your best estimates of start-up costs, revenues and expenses, and your ability to make a profit.
  14. 14. Together, all the parts of your plan should reveal the beauty of your business idea. You want to show potential lenders, investors or people you want to work with that you've hit upon a product or service that customers really want. In addition, you should prove that you are exactly the right person to make your fine idea a roaring success. Get Help If You Need It Because your business plan will be submitted to people you don't know well, the writing should be polished and the format clean and professional. Your numbers must also be accurate and clearly presented. But not all business people are great writers or mathematicians. Consider paying a freelance writer with small business savvy to help you polish your plan. Similarly, if you are challenged by numbers, find a bookkeeper or accountant to provide needed help. Funding the Venture Yourself If you're not looking for outside money, your financial projections will be the most important part of your business plan. These projections will tell you the cost of your products or services, the amount of sales revenue and profit you can anticipate and, perhaps most importantly, how much you'll have to invest or borrow to get your business off the ground. Because you won't use your plan to ask for money, you can create an informal business plan that omits some of the elements listed above. For example, you don't need to worry so much about making a sales pitch or a slick presentation, and you may decide to skip the résumé of your own business accomplishments. But think twice before leaving out too much. Any new business will need to introduce itself to people -- for example, suppliers, contractors, employees and key customers -- and showing them part or all of your business plan can be a great way to do it. Financial Projections Forecasting the finances of your business may seem intimidating or difficult, but in reality it's not so bad. Good planning consists of making educated guesses as to how much money you'll take in and how much you'll need to spend -- and then using these estimates to calculate whether your business will be profitable. Here are the financial projections you should make: • A break-even analysis. Here you'll use income and expense estimates to determine whether, in theory at least, your business will bring in enough money to meet its costs. (To learn how to perform a break-even analysis, read Will Your Business Make Money?)
  15. 15. • A profit-and-loss forecast. Next you'll refine the sales and expense estimates that you used for your break-even analysis into a formal, month-by-month projection of your business's profit for the first year of operations. • A cash flow projection. Even if your profit-and-loss forecast tells you that your business will have higher revenues than expenses -- in other words, that it will be profitable -- those numbers won't tell you if you'll have enough cash on hand from month to month to pay your rent or buy more inventory. A cash flow projection shows how much money you'll have -- or how much you'll be short -- each month. This lets you know if you'll need a credit line or other arrangement to cover periodic shortfalls. • A start-up cost estimate. This is simply the total of all the expenses you'll incur before your business opens. If you need to pay off these costs during the first year or two of business, they should be included in your month-to-month cash-flow projection. Again, no matter who your audience is, you should be as thorough as possible when calculating your break-even analysis and profit-and-loss forecast. The last thing you want is to experience the very real misery of starting a business that never had a chance to make a solid profit. The following information obtained from Writing An Effective Business Plan Introduction A good business plan is not just for others to see. It is also a valuable tool for managing your business, and for comparing your expectations with what you have actually accomplished. If the material that follows is too detailed, or if you feel it does not fit well with your needs, you can create a completely original plan. However, your plan will be more effective if it resembles those produced by others. So, whether you follow our guidelines or not, please consider following a standard outline. Also, you are more likely to include all the necessary financial details if you download our forms spreadsheet.
  16. 16. The Four Main Sections Of A Business Plan 1. the description of the business 2. the marketing plan 3. the management plan 4. the financial management plan In addition, a business plan must include supporting documents and financial projections. Description of the business 1. General Description Start the first section with a cover sheet. It should include the name, address, telephone number, fax number and email of the business and the names of all principals. We also recommend an executive summary that immediately follows the cover sheet. Follow that with the description itself. When describing your business, you should explain (in whatever order you feel is logical): • The form of the business: proprietorship, partnership, corporation • Your primary services and products and their main applications • Your inception (a new business, a takeover or an expansion) • Your expectations regarding profit and growth • What distinguishes your business from other, similar ones • If there is recognized support for your idea (e.g., published articles) A key point: The description of your business should clearly identify your goals and objectives and it should clarify why you are, or why you want to be in business. 2. Services and Products Try to describe the benefits of the service and products you will offer from your customers' perspective. Describe: • What you are selling • How your services and products will benefit the customer • Which services and products will have the greatest demand • What is special or unusual about your services and products The Marketing Plan
  17. 17. A successful marketing plan demonstrates that you know your customers: their needs, their likes, their dislikes and their expectations: • Who are your customers? • Are your markets growing? steady? declining? • How will you attract, hold, increase your market share? • What pricing strategy, if any, give you an advantage? Four Special Topics You Should Explore: Competition, Pricing, Sales and Advertising 1. Competition Competition is a way of life. It is important to know your competitors and their capabilities. • Who are your five most direct competitors? • Who are your indirect competitors? • How are their businesses: steady? increasing? decreasing? • What have you learned about their operations? • What do you know about their marketing and advertising? • What do you know about their participation in trade shows and similar events? • What are their strengths and weaknesses? • How does their services and products differ from yours? A bit of advice: Start a file on each of your competitors. Save their advertising and promotional materials and any pricing information you can gather. Review these files periodically, determining when and how often they advertise, how they participate at industry gatherings and anything else you can about the way they bring in business. 2. Pricing Your pricing strategy is another marketing technique you can use to improve your overall competitiveness. Although your pricing will be based on whatever is customary in the RP industry (or your segment), it may be a good idea to get a feel for the pricing strategies your competitors are using. That way you can determine if your prices are in line and see if you can either do better or provide more value at the same price. The key to success is to have a well-planned strategy, to establish your policies and to constantly monitor prices and operating costs to ensure profits. It is a good practice to keep abreast of the changes in the marketplace or in the underlying technologies you use, because these changes can affect your competitiveness and profit margins. 3. Sales RP services can have a long selling cycle and fast turnaround requirements. By this, we mean that is can take quite a while to get new customers, or to win a participation in a
  18. 18. series of projects that are undertaken by one of your established customers. By contrast, once you win business, it is very likely that your customer will want rapid response and instant reaction to any changes he requests. This "hurry up and wait" characteristic of the business can be tough on nerves and tougher on budgets. You must show that you are prepared to cope with this aspect of the business. Specifically, you must show that you are prepared to locate more prospects than you will actually need to succeed, because not all the prospects will become customers and not all the customers will bring you work as quickly as you would like. You must also show that you can provide customers with excellent support no matter how demanding they are . . . and do so without losing sales momentum at any accounts. Finally, it will sometimes be necessary to redo work at your expense, or to do more than you included in your estimate (at no additional charge) to satisfy your customers. Your sales plan and your overall financial plan must include allowances for the costs in sales time and production resources that might be consumed by an intensive and supportive marketing effort. It is up to you whether you include any work done to prove your competency during the sales cycle in the sales budget or elsewhere, but you should make your reckoning explicit and explain how you arrived at your estimate. 4. Advertising and Public Relations How you advertise and promote your business is very important. You may do all your selling by direct contact. But there are many additional opportunities to make yourself known, including Yellow Pages listings, industrial reference listings, Internet sites, trade shows and trade press articles and ads. Some of these options (e.g., the Internet) can be very inexpensive. The Management Plan Your management plan must demonstrate that you have the requisite skills in your firm to compete and succeed. It also should show that you understand how to retain personnel as your business grows and changes. Your management plan should answer questions such as: • How does your background and business experience help you in this business? • What are your weaknesses and how can you compensate for them? • Who will be on the management team? • What are their strengths and weaknesses? • What are their duties? • Are these duties clearly defined? • What are your current personnel needs? • What are your plans for hiring and training personnel? • If additional training is needed, how will you accomplish this? • What salaries, benefits, vacations, holidays will you offer?
  19. 19. The Financial Management Plan To effectively manage your finances, plan a sound, realistic budget by determining the actual amount of money needed to open your business (start-up costs) and the amount needed to keep it open (operating costs). The first step to building a sound financial plan is to devise a start-up budget. Your start-up budget will usually include such one-time- only costs as major equipment, utility deposits, down payments, etc. The start-up budget should allow for these expenses, among others: • personnel (costs prior to opening) • legal and professional fees • occupancy costs • business licenses and permits • equipment • insurance • supplies • startup promotion and advertising • accounting fees • utilities • payroll expenses Once you are open, you will control your costs with an operating budget. The operating budget will reflect your priorities in terms of the expenses you will incur and how you will meet those expenses (income). Your operating budget should include sources of funds sufficient to cover the first three to six months of operation. It should allow for the following expenses: • personnel • insurance • rent • depreciation • loan payments • sales, advertising and promotion • legal and accounting fees • supplies • payroll expenses • utilities • taxes • repairs and maintenance The financial section of your business plan should include any loan applications you've filed, a capital equipment and supply list, balance sheet, breakeven analysis, pro-forma income projections (profit and loss statement) and pro-forma cash flow. The income statement and cash flow projections should include a three-year summary, detail by month for the first year, and detail by quarter for the second and third years. If operational factors loom large in your plan, for example if you expect to handle many small accounts, describe the accounting system and controls you will put in place to keep overhead to an acceptable level. Other questions that you will need to consider are: • What are your sales goals and profit goals for the coming year?
  20. 20. • What financial projections will you need to include in your business plan? • What kind of inventory control system will you use? Your plan should include an explanation of all projections. Unless you are thoroughly familiar with financial statements, get help preparing your cash flow, income statements and balance sheet. Your aim is not to become a financial wizard, but to understand financial tools well enough to gain their benefits. Your accountant or financial advisor can help you accomplish this. Source: