New Business Development Business Plan
With your financial information completed, you now have all the various elements to be incorporated into one key document: your business plan. A well-written business plan is not only an important tool for you, but it is essential if you are going to be borrowing money or raising capital to start your enterprise. Lenders and investors will want to know as much as possible about the feasibility of your business and about your strategies for success. They would also want to examine how realistically you have assessed your potential venture – and whether you’ve prepared for the worst, as well as the best, your business can do.
Lenders usually have some degree of experience in the field of small business, because so many independent entrepreneurs approach them for assistance. When you approach them with a business plan in hand, therefore, they are often in a position to tell you how to improve it, if necessary.
Cautious investors, too, will want to consider every aspect of your proposal, Investment implies risk – and those who will be buying equity in your company deserve as much information as possible.
Another point to bear in mind is that federal and provincial governments are often a source of funding. You can strengthen your case with them if, for example, your business plan indicates you will be creating new jobs.
Business Plan Components
Introductory letter This introduces your business plan to the reader. It explains why you are writing the plan and highlights the major features. Give the name of your business in this letter.
Title page This should list the company name, address and phone number, as well as your own, and should be dated according to when the plan was completed.
Table of contents Outline the major headings and subheadings of the material that will follow.
Your business plan should start off with a brief summary of your proposed venture. It must grab and hold the attention of the reader and should run no longer than three double-spaced pages. The following elements should be covered:
· A description of the business. To be included here is whether yours is a service, retail, wholesale or manufacturing business. Keep it short because you will be given more information later.
· The amount of money you will need to operate your business and how you plan to use it. Again, at the summary stage, this information does not need to be lengthy. You will go into greater detail throughout the body of the plan.
· The amount you and your partners have invested to date. Explain briefly how the money has been spent.
· Information on what security you have in order to support loan financing. Here you might list such items as property, stock or other assets you won which could be used as collateral.
· An assessment of your projected earnings from the business. This is simply a short summary of your anticipated earnings, based on the information derived from the various financial statements discussed in chapter seven. If you will not be drawing a salary immediately from your business, explain briefly how you will cope until you can.
Here is where you are effectively setting the stage for readers to get a stronger sense of you venture. You should include:
· The start-up of your enterprise. If your company is already functioning, give a short report on when it started, how large a concern it was at the time and how it has grown.
· The legal standing of your firm. Is it a sole proprietorship, a partnership or a corporation? List the names and addresses of all owners and/or shareholders and state what percentage of the business they won. (You might also want to include a statement of each of the principal’s net worth.) Also indicate where applicable, the date of your company’s incorporation.
· PESTEL ANALYSIS
· SWOT ANALYSIS
· PORTER’S FIVE FORCES ANALYSIS
From your market research data, you should have a solid idea about whether your chosen business is in a growth industry, a new industry or whether there is a niche for your business in the industry as it now exists. Detail this information here, making sure to include:
· The principal characteristics of your industry: How big is it? What are its total sales? What are its characteristic financial ratios? Are there seasonal factors to consider? etc.
· The players. Who are your competitors and what share of the market do they have? What are their strong points? Their weak points? How do you measure up to them?
· The trends. Can you predict where your business will be in five or 10 years? Is the particular industry you’re entering in growth or decline?
· The barriers to entry and exit within your industry. It is relatively easy to start a business. Does it require a substantial amount of capital? Of specialized knowledge? Are there already too many players in the field?
Products and services
This is a critical part of your business plan. By giving a clear picture of your venture’s perceived place in the market, you will allow a lender/investor to begin evaluating the risks. This part of the plan outlines:
· A thorough description of your product or service. Give an honest assessment of its strengths and weaknesses. Make sure to outline what makes it unique and describe how you will position it to earn an advantage over your competitors.
· Patents, trademarks, copyright protection. Give the status of any element that can distinguish your product or service from the competition. Describe how you plan to protect your intellectual property and indicate how long it can be protected under law.
· The technology you will use. You may be acquiring state-of-the-art machinery that will give your business an edge over a similar existing enterprise. If so, state what this technology is and how it will help your business succeed.
Your lender/investor will want to know who the key personnel will be in your business, the strength of their commitment to your enterprise, and how you will divide the work. In this section, include:
· Your business’s organization. If you have designed an organization chart, include it here. Otherwise, explain the functions of yourself and key partners.
· Curricula vitae. Give solid biographies of each of the key players, including any experience they have in the kind of enterprise you are starting.
· Management compensation. Explain your proposed salary and benefit schedule for yourself, any partners and key employees.
If you wish, you may include in this section your entire marketing plan, as outlined in chapter four. But whether you use this plan or not, you should identify the following in this section:
· The total market, as you see it. Estimate the size of the total market in terms of dollars and units of product or services sold. Explain how sales are distributed within this market.
· Your target market. Can you define your potential customers by where they live? Their age? Their income level? Who are the buyers or purchase decision-makers? Are they individuals or will you be selling to other companies? Where are these companies located? What are their particular needs? Include all the relevant data.
· The names of your competition, your assessment of their market share and your sense of their financial health. Compare their product or service to yours in terms of quality, price, service, warranties, image, etc.
· The marketing advantages that give you an edge over your competitors. What separates your business from the rest? Packaging? Service? Product quality? Price? Indicate your finding here.
· Your pricing policy. Provide data on your fixed and variable costs and other means used to arrive at your pricing.
· Your selling policy (include credit terms). Will your salespeople work on commission, salary or a combination of the two? Will you distribute through wholesalers, to retailers or directly to consumers? What discounts will you offer? Describe your policies here.
· Your distribution plan. How will you distribute your product or service? By mail? Through export trading companies? Direct to the consumer? Answer these questions in this segment.
· Your advertising and promotional plan. Describe the program you have devised in detail. Which media will you use? What consumers or other businesses are you trying to reach?
· Service and warranties. How will you handle service problems? Will you have a system to deal with complaints? How does your system compare to those of your competitors?
Land, buildings and equipment
In this section, you will describe the physical requirements of your enterprise:
· Location. Give a description of the site you have chosen and outline why it’s suitable. Include a diagram of the layout of your plant or store. Detail the factors that went into your decision to choose this site. Is it close to your target market? Does it reflect your company’s image?
· Land requirements. If your company needs land in order to operate, detail the information here. Include a site plan and an estimated cost of the land and the buildings, including costs for the installation of services.
· Equipment requirements. Explain here what capital equipment and machinery your enterprise will need to get under way. Outline the cost of this equipment and from whom you are likely to purchase it. For example, is the supplier financing a possibility?
Particularly if you will be manufacturing a product, it’s essential to show lenders that you will have the full necessary control over the process. In this portion of the business plan indicate:
· Workflow. Here you should offer diagrams (Gantt charts), where applicable, of the procedures required to manufacture your product. Also show what quality control measures you will apply.
· Inventory control. How will you keep track of your product? Will inventory control be computerized or done manually? Describe briefly what inventory system you have set up and how it operates.
· Supplies and materials. From whom will you be getting these? What will they cost you? How available are they? What are the terms and conditions? Give a detailed account of the answers to these questions.
· Personnel plan. How many employees will you be hiring? Will they be unionized? If so, what are the possible repercussions? Also, briefly describe the jobs each employee will perform. Outline the salaries and benefits they will receive.
· Operations schedule. If you have a critical path for the manufacture of your product, include it here. The critical path should indicate when you can expect to produce a set number of units of your product and should outline factors that can affect the time frame anticipated – such as rush orders or shortage of materials.
Your good reputation will serve you well with investors and lenders. The stronger the references you can supply, the better your case for obtaining financing will be. List:
· Existing investors or partners.
· Banks or other financial institutions who have lent you money in the past or with whom you have had long- standing accounts.
· Professionals, such as accountants, lawyers or business consultants with whom you have done business.
· Former employers who can vouch for your knowledge and integrity.
Your financial plan should reflect all the data you have collected as described in chapter seven. It must cover:
· All your capital requirements and your sources of financing to date.
· Profit and loss statements for as long as your company has been functioning.
· Cash flow budgets showing projections for at least one year.
· Projected income statement outlining expected sales and expenses for at least one year. Keep the estimates realistic.
· Pro forma balance sheet showing your projected current and fixed assets and projected current and fixed liabilities.
· Break-even calculations indicating your variable costs, your fixed costs and what you will be charging for each unit of your product or service.
Risks and problems
Outline the risks you may be facing. Include:
· A worst-case scenario. What if the demand for your goods or services goes down? What if the number of competitors increases? What happens if your overhead costs shoot up? Explain what you would do in these circumstances. What could you save from your business if you fail?
· Avoidance of risk. Detail your plans for steering clear of the risks you have identified.
· Impact of risk. Describe how you intend to minimize risks you may not be able to avoid.
Your business plan should be as vital and strong as the dream you have for your company. A good plan can be a powerful tool, one that will help you determine how much money you need and set you on your way to finding it. With a well-researched, realistic business plan in hand, you can meet potential lenders and investors with confidence – and you will be a step closer to making your dream a reality.
Business Plan Guidelines
· The maximum length of the plan is 25 (twenty) pages (1.5 times spaced) NOT INCLUDING the cover letter and appendices (which will include your financial statements and other supporting material).
· Use font Times New Roman size 12.
· General Outline:
· Cover letter
· Title Page
· Table of Contents
· Executive Summary
· Background Information
· The Industry
· Products and/or Services
· Financial Plan
· Risks and Problems
· Appendices (will include your financial schedules and other supporting information)
· The references section is to cite all sources of information in APA style
· Suggestion: Since this is to be a professional document that could be presented to lenders or investors you should have your plan “bound” as opposed to just stapled. Give some thought to an effective design for your cover page and the formatting of the report.
· Please do not use three-ring binders.