Prepare an Expansion-Oriented Business Plan.The expansion-oriented Business Plan is a written summary of what you hope to accomplish by being in business and how you intend to organize your resources to meet your goals. It is the road map for operating your business and measuring progress along the way. 1. The Business Plan identifies the amount of financing or outside investment required and when it is needed. 2. First impressions are important. A well-organized plan is essential for a lender or investor to assess your financing proposal and to assess you as a business manager. 3. By committing your plans to paper, your overall ability to manage the business will improve. You will be able to concentrate your efforts on the deviations from plan before conditions become critical. You will also have time to look ahead and avoid problems before they arise. 4. It encourages realism. 5. It helps you to identify your customers, your market area, your pricing strategy and the competitive conditions under which you must operate to succeed. This process often leads to the discovery of a competitive advantage or new opportunity as well as deficiencies in your plan. 6. Three or four hours spent each month updating your plan will save you time and money in the long run and may even save your business. Resolve now to make planning a part of your management style. Executive Summary The format should start with an executive summary describing the highlights of the business plan. Even though your entire business is well described later on, a crisp, one or two page introduction helps to capture the immediate attention of the potential investor or lender. * Company name (include address and phone number) * Contact person (presenter's name and phone number) * Paragraph about company (nature of business and market area) * Securities offered to investors (preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. , common shares, debentures, etc.) * Business loans sought (term loan, operating line of credit) * Highlights of Business Plan (your project, competitive advantage and "bottom line" in a nutshell--preferably one page maximum)) * This summary page is extremely important in capturing the reader's attention. Make sure it sells your idea so the reader will retain interest and continue reading. Table of Contents * Section titles and page numbers (for easy reference) Business Concept The business concept identifies your market potential within your industry and outlines your action plan for the coming year. Make sure your stated business goals are compatible with your personal goals, your own management ability and family considerations. The heart of the Business Concept is your monthly sales forecast Sales forecast A key input to a firm's financial planning process. External sales forecasts are based on historical experience, statistical analysis, and consideration of various macroeconomic factors. for the coming year. It is your statement of confidence in your marketing strategy and forms the basis for your cash flow forecast and projected income statement. Part I contains an assessment of business risks and a contingency plan A plan involving suitable backups, immediate actions and longer term measures for responding to computer emergencies such as attacks or accidental disasters. Contingency plans are part of business resumption planning. . We urge you to take the offensive and be your own devil's advocate devil's advocate: see canonization. . Being honest about your business risks and how you plan to deal with them is evidence of sound management. Description of the Industry * Industry outlook and growth potential (industry trends, new products and developments. State your sources of information) * Markets and customers (size of total market, new requirements and market trends) * Competitive companies (market share, strengths and weaknesses, profitability) * National and economic trends (population shifts, consumer trends, relevant economic indicators Economic indicators The key statistics of the economy that reveal the direction the economy is heading in; for example, the unemployment rate and the inflation rate. ) Description of Business Venture * Product(s) or service (pictures, drawings, characteristics, quality) * Product protection/exclusive rights (patents, copyrights, trade marks TRADE MARKS. Signs, writings or tickets put upon manufactured goods, to distinguish them from others. 2. It seems at one time to have been thought that no man acquired a right in a particular mark or stamp. 2 Atk. 484. , franchise rights) * Target market (typical customers identified by groups, present buying patterns and average purchase in dollars, wants and needs) * Competitive advantage of your business concept (your market niche, uniqueness, estimated market share) * Business location and size (location(s) relative to market, size of premises) * Staff and equipment needed (overall requirement, capacity) * Brief history (principals involved, development work done) Business Goals * One year (specific goals, such as gross sales Gross Sales A measure of overall sales that isn't adjusted for customer discounts or returns, calculated simply by adding all sales invoices, and not including operating expenses, cost of goods sold, payment of taxes, or any other charge. , profit margins, share of market, opening new store, plant or office, introducing new product, etc.) * Over the longer term (return on investment, business net worth, sale of business) Marketing Plan * Sales strategy (commissioned sales staff, agents, sales objectives, target customers, sales tools, sales support) * Distribution (direct to public, wholesale, retail, multiple outlets) + Pricing (costing, mark-ups, margins, breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations ) * Promotion (media advertising, promotions, publicity-appropriate to reach target market) * Guarantees (product guarantees, service warranties) * Tracking methods (method for confirming who your customers are and how they heard about you) Sales Forecast * Assumptions (one never has all the necessary information, so state all the assumptions made in developing the forecast) * Monthly forecast for coming year (sales volume in units and dollars) * Annual forecast for following 2-4 years (sales volume in dollars) Note: The sales forecast is the starting point Noun 1. starting point - earliest limiting point terminus a quo commencement, get-go, offset, outset, showtime, starting time, beginning, start, kickoff, first - the time at which something is supposed to begin; "they got an early start"; "she knew from the for your projected income statement and cash flow forecast Production Plan - Manufacturing * Brief description of production process (don't be too technical) * Physical plant requirements (building, utility requirements, expansion capability, layout) * Machinery and equipment (new or used, lease or purchase, capacity) * Raw materials (readily available, quality, sources) * Inventory requirements (seasonal levels, turnover rates, method of control) * Suppliers (volume discounts, multiple sources) * Personnel required (full-time, part-time, skill level, availability, training required) * Cost of facilities, equipment and materials (estimates and quotations) * Capital estimates (one time start-up Start-up The earliest stage of a new business venture. or expansion capital required) Production Plan - Retail or Service * Purchasing plans (volume discounts, multiple sources, quality, price) * Inventory system (seasonal variation, turnover rates, method of control) * Space requirements (floor and office space, improvement required, expansion capability) * Staff and equipment required (personnel by skill level, fixtures, office equipment) Corporate Structure * Legal form (proprietorship Proprietorship An unincorporated business that is owned and operated by only one person who has complete liability for all assets, and complete rights to all profits. proprietorship , partnership, corporation) * Share distribution (list of principal shareholders) * List of contracts and agreements in force (management contract, shareholder or partnership agreement, franchiser service agreement, service contract) * Directors and officers (names and addresses and role in company) * Background of key management personnel (brief resumes of active owners and key employees) * Contract professionals/consultants (possible outside assistance in specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. or deficient de·fi·cient adj. 1. Lacking an essential quality or element. 2. Inadequate in amount or degree; insufficient. deficient a state of being in deficit. areas) * Organization chart (identify reporting relationships) * Duties and responsibilities of key personnel (brief job descriptions -- who is responsible for what?) Risk Assessment * Competitors' reaction (will competitors try to squeeze you out?) * What if...list of critical external factors (identify effects of strikes, recession, new technology, weather, new competition, supplier problems, shifts in consumer demand) * What if...list of critical internal factors (sales off by 30%, sales double, key manager quits quits adj. On even terms with by payment or requital: I am finally quits with the loan. [Middle English, probably alteration (influenced by Medieval Latin , workers unionize) * Dealing with risks (contingency plan to handle the most significant risks) Action Plan * Steps to accomplish this year's goals (flow chart by month or by quarter of specific action to be taken and by whom) * Checkpoints for measuring results (identify significant dates, sales levels, production levels as decision points) Financial Plan The financial plan outlines the level of present financing and identifies the financing sought. This section should be kept concise with supporting material supplied only when requested. The Financial Plan contains pro-forma financial forecasts. In carrying out your action plan for the coming year, these operating forecasts are your guide to business survival and profitability. Resolve now to refer to them often and, if circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or dictate TO DICTATE. To pronounce word for word what is destined to be at the same time written by another. Merlin Rep. mot Suggestion, p. 5 00; Toull. Dr. Civ. Fr. liv. 3, t. 2, c. 5, n. 410. , re-work them as necessary. Before presenting your Business Plan to a lender or investor, review your financial statements with your accountant. This familiarity will increase your credibility and at the same time provide you with a good understanding of what the financial statements reveal about the viability of your business. Financial Statements * Previous years' balance sheets and income statements (include past 2-3 years if applicable) Financial Forecasts * Opening balance sheet (for a new business only) * Projected income statements (detailed operating forecast for next year of operation and less detailed forecast for following two years. Use sales forecast as starting point) * Cash flow forecast (budget of cash inflow in·flow n. 1. The act or process of flowing in or into: an inflow of water; an inflow of information. 2. and outflow on a monthly basis for next year of operation) Financing and Capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. * Term loan applied for (amount, term, when required) * Purpose of term loan (attach detailed description of assets to be financed with cost quotations) * Owners' equity owners' equity The owners' interest in the assets of a business. Owners' equity includes the amount invested by the owners plus the profits (or minus the losses) in the enterprise. Owners' equity and liabilities are used to finance a firm's assets. (your level of commitment to the program) * Summary of term loan requirements (for a particular project or for business as a whole) Operating Loan * Line of credit applied for (new or increase, security offered) * Maximum operating cash requirement (amount, timing--refer to cash flow forecast) Present Financing (If Applicable) * Term loans outstanding (balance owing, repayment terms, purpose, security held) * Current operating line of credit (amount, security held) References * Name of present lending institution Noun 1. lending institution - a financial institution that makes loans financial institution, financial organisation, financial organization - an institution (public or private) that collects funds (from the public or other institutions) and invests them in (branch, type accounts) * Lawyer's name (include address and phone number) * Accountant's name (include address and phone number) Appendix The following documents may be requested by your banker or potential investor. * Personal net worth statement (including personal property values, investments, cash, bank loans, charge accounts, mortgages, other liabilities other liabilities Small and relatively insignificant liabilities. For financial reporting purposes, firms often combine small liabilities into this single category rather than listing each liability separately. . This will substantiate To establish the existence or truth of a particular fact through the use of competent evidence; to verify. For example, an Eyewitness might be called by a party to a lawsuit to substantiate that party's testimony. the value of your personal guarantee if required for security.) * Letters of intent (potential orders, customer commitments, letters of support) * List of inventory (type, age, value) * List of leasehold improvements Leasehold Improvement Improvements on a leased asset that increase the value of the asset. Notes: A leasehold improvement is classified as an asset that must be depreciated over time. (description, when made) * List of fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → (description, age, serial numbers) * Price lists (to support cost estimates) * Description of insurance coverage (insurance policies, amount of coverage) * Accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying summary (include aging schedule Aging schedule A table of accounts receivable broken down into age categories (such as 0-30 days, 30-60 days, and 60-90 days), which is used to determine if customer payments are keeping close to schedule. ) * Accounts payable summary (include schedule of payments) * Copies of legal agreements (contracts, lease, franchise agreement, mortgage, debenture debenture (dəbĕn`chər), document acknowledging indebtedness. In Great Britain a debenture is practically the same as a bond, and debenture stock is similar to preferred stock. ) * Appraisals (property, equipment) * Financial statements for associated companies associated company associate n → Partnerfirma f associated company n → società collegata (where appropriate) Finally... Preparing a business plan will generate a lot of thought and a lot of paper Keep in mind, however, that the final document is a summary of your planning process. You can always refer to your working papers working papers pl.n. Legal documents certifying the right to employment of a minor or alien. Noun 1. working papers later on to substantiate a particular point. Have your key employees and two or three impartial Favoring neither; disinterested; treating all alike; unbiased; equitable, fair, and just. outsiders review the finished plan in detail. There may be something you overlooked or underemphasized. Also a critical review will be good preparation for your presentation to potential investors and lenders. Approaching Lenders When approaching any financial institution, you are effectively selling the merits of your business proposal. As in all sales, consider the needs of the other party: * Ability to service the debt with sufficient surplus to cover contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. (carry interest charges, eventually repay in full - cash flow forecast and projected income statement will show this) * Track record/integrity (personal credit history, management ability as demonstrated in your Business Plan, company results) * Your level of commitment (your equity in the business or cash investment in the particular asset being purchased) * Secondary source of repayment (this includes security in the event of default and other sources of income--discuss this subject with your lawyer before submitting your proposal) * Lead time (lender needs a reasonable time to assess your proposal - also, the loan may have to be referred to another level within the financial institution) * Don't overdo it (be sensible with the amount of documentation you provide initially--for example, the Introductory Page, Summary and Financial Plan sections provide a good basic loan submission if the amount requested is small) Attracting Investors Start first by approaching people you know, i.e. friends, bank, credit union or trust company manager, lawyer accountant, doctor. They, in, turn, may know of possible investors. If your business concept exhibits, high growth potential, a second alternative is to approach a venture, capital company. Either way, take a moment to consider the investors, needs which may differ from a lenders needs: * Your level of commitment (to be sure that you are sharing the risk) * Share participation (investors may demand more equity than you are willing to give) * Rate of return (investors are willing to take a high risk but expect a high rate of return, i.e. to double their money in 2-3 years) * Involvement in key decisions (possibly as a Director or even an Officer of the company) * Regular financial reporting (investors usually want to see tight financial controls in place and prompt financial reporting) Kevin Hernie is a freelance writer and business consultant based in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. . |
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