Professional Documents
Culture Documents
Business Plan For A Startup Business
Business Plan For A Startup Business
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Business Plan
OWNERS
YourBusinessName AddressLine1 AddressLine2 City,STZIPCode Telephone Fax EMail
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I.
I. II. III. IV. V. VI.
TableofContents
TableofContents ................................................................................................... 3 ExecutiveSummary............................................................................................... 4 GeneralCompanyDescription ............................................................................ 5 ProductsandServices............................................................................................ 6 MarketingPlan ....................................................................................................... 7 OperationalPlan .................................................................................................. 16
VII. ManagementandOrganization ......................................................................... 21 VIII. PersonalFinancialStatement ............................................................................. 22 IX. X. XI. StartupExpensesandCapitalization ................................................................ 23 FinancialPlan ....................................................................................................... 24 Appendices ........................................................................................................... 27
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II.
Writethissectionlast.
ExecutiveSummary
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III.
GeneralCompanyDescription
Whatbusinesswillyoubein?Whatwillyoudo? MissionStatement:Manycompanieshaveabriefmissionstatement,usuallyin30 wordsorfewer,explainingtheirreasonforbeingandtheirguidingprinciples.Ifyou wanttodraftamissionstatement,thisisagoodplacetoputitintheplan,followedby: CompanyGoalsandObjectives:Goalsaredestinationswhereyouwantyourbusiness tobe.Objectivesareprogressmarkersalongthewaytogoalachievement.Forexample, agoalmightbetohaveahealthy,successfulcompanythatisaleaderincustomer serviceandthathasaloyalcustomerfollowing.Objectivesmightbeannualsalestargets andsomespecificmeasuresofcustomersatisfaction. BusinessPhilosophy:Whatisimportanttoyouinbusiness? Towhomwillyoumarketyourproducts?(Stateitbrieflyhereyouwilldoamore thoroughexplanationintheMarketingPlansection). Describeyourindustry.Isitagrowthindustry?Whatchangesdoyouforeseeinthe industry,shorttermandlongterm?Howwillyourcompanybepoisedtotake advantageofthem? Describeyourmostimportantcompanystrengthsandcorecompetencies.Whatfactors willmakethecompanysucceed?Whatdoyouthinkyourmajorcompetitivestrengths willbe?Whatbackgroundexperience,skills,andstrengthsdoyoupersonallybringto thisnewventure? Legalformofownership:Soleproprietor,Partnership,Corporation,Limitedliability corporation(LLC)?Whyhaveyouselectedthisform?
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IV.
ProductsandServices
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V.
MarketingPlan
Economics
Factsaboutyourindustry: Whatisthetotalsizeofyourmarket?
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Whatpercentshareofthemarketwillyouhave?(Thisisimportantonlyifyou thinkyouwillbeamajorfactorinthemarket.) Currentdemandintargetmarket. Trendsintargetmarketgrowthtrends,trendsinconsumerpreferences,and trendsinproductdevelopment. Growthpotentialandopportunityforabusinessofyoursize. Whatbarrierstoentrydoyoufaceinenteringthismarketwithyournew company?Sometypicalbarriersare: o Highcapitalcosts o Highproductioncosts o Highmarketingcosts o Consumeracceptanceandbrandrecognition o Trainingandskills o Uniquetechnologyandpatents o Unions o Shippingcosts o Tariffbarriersandquotas
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Product
IntheProductsandServicessection,youdescribedyourproductsandservicesasyousee them.Nowdescribethemfromyourcustomerspointofview. FeaturesandBenefits Listallofyourmajorproductsorservices. Foreachproductorservice: Describethemostimportantfeatures.Whatisspecialaboutit? Describethebenefits.Thatis,whatwilltheproductdoforthecustomer?
Customers
Identifyyourtargetedcustomers,theircharacteristics,andtheirgeographiclocations, otherwiseknownastheirdemographics. Thedescriptionwillbecompletelydifferentdependingonwhetheryouplantosellto otherbusinessesordirectlytoconsumers.Ifyousellaconsumerproduct,butsellit throughachannelofdistributors,wholesalers,andretailers,youmustcarefullyanalyze boththeendconsumerandthemiddlemanbusinessestowhichyousell. Youmayhavemorethanonecustomergroup.Identifythemostimportantgroups. Then,foreachcustomergroup,constructwhatiscalledademographicprofile: Age Gender Location
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Competition
Whatproductsandcompanieswillcompetewithyou? Listyourmajorcompetitors: (Namesandaddresses) Willtheycompetewithyouacrosstheboard,orjustforcertainproducts,certain customers,orincertainlocations? Willyouhaveimportantindirectcompetitors?(Forexample,videorentalstores competewiththeaters,althoughtheyaredifferenttypesofbusinesses.) Howwillyourproductsorservicescomparewiththecompetition? UsetheCompetitiveAnalysistablebelowtocompareyourcompanywithyourtwo mostimportantcompetitors.Inthefirstcolumnarekeycompetitivefactors.Sincethese varyfromoneindustrytoanother,youmaywanttocustomizethelistoffactors.
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InthecolumnlabeledMe,statehowyouhonestlythinkyouwillstackupincustomers minds.Thencheckwhetheryouthinkthisfactorwillbeastrengthoraweaknessfor you.Sometimesitishardtoanalyzeourownweaknesses.Trytobeveryhonesthere. Betteryet,getsomedisinterestedstrangerstoassessyou.Thiscanbearealeyeopener. Andrememberthatyoucannotbeallthingstoallpeople.Infact,tryingtobecauses manybusinessfailuresbecauseeffortsbecomescatteredanddiluted.Youwantan honestassessmentofyourfirmsstrongandweakpoints. Nowanalyzeeachmajorcompetitor.Inafewwords,statehowyouthinktheycompare. Inthefinalcolumn,estimatetheimportanceofeachcompetitivefactortothecustomer. 1=critical;5=notveryimportant.
Table1:CompetitiveAnalysis
Factor Me
CompetitorB
Importanceto Customer
Products Price Quality Selection Service Reliability Stability Expertise Company Reputation Location Appearance
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Factor
Me
CompetitorB
Importanceto Customer
Now,writeashortparagraphstatingyourcompetitiveadvantagesanddisadvantages.
Niche
Nowthatyouhavesystematicallyanalyzedyourindustry,yourproduct,your customers,andthecompetition,youshouldhaveaclearpictureofwhereyour companyfitsintotheworld. Inoneshortparagraph,defineyourniche,youruniquecornerofthemarket.
Strategy
Nowoutlineamarketingstrategythatisconsistentwithyourniche. Promotion Howwillyougetthewordouttocustomers? Advertising:Whatmedia,why,andhowoften?Whythismixandnotsomeother? Haveyouidentifiedlowcostmethodstogetthemostoutofyourpromotionalbudget? Willyouusemethodsotherthanpaidadvertising,suchastradeshows,catalogs,dealer incentives,wordofmouth(howwillyoustimulateit?),andnetworkoffriendsor professionals? Whatimagedoyouwanttoproject?Howdoyouwantcustomerstoseeyou?
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Inadditiontoadvertising,whatplansdoyouhaveforgraphicimagesupport?This includesthingslikelogodesign,cardsandletterhead,brochures,signage,andinterior design(ifcustomerscometoyourplaceofbusiness). Shouldyouhaveasystemtoidentifyrepeatcustomersandthensystematicallycontact them? PromotionalBudget Howmuchwillyouspendontheitemslistedabove? Beforestartup?(Thesenumberswillgointoyourstartupbudget.) Ongoing?(Thesenumberswillgointoyouroperatingplanbudget.) Pricing Explainyourmethodormethodsofsettingprices.Formostsmallbusinesses,having thelowestpriceisnotagoodpolicy.Itrobsyouofneededprofitmargin;customers maynotcareasmuchaboutpriceasyouthink;andlargecompetitorscanunderprice youanyway.Usuallyyouwilldobettertohaveaveragepricesandcompeteonquality andservice. Doesyourpricingstrategyfitwithwhatwasrevealedinyourcompetitiveanalysis? Compareyourpriceswiththoseofthecompetition.Aretheyhigher,lower,thesame? Why? Howimportantispriceasacompetitivefactor?Doyourintendedcustomersreally maketheirpurchasedecisionsmostlyonprice? Whatwillbeyourcustomerserviceandcreditpolicies? ProposedLocation Probablyyoudonothaveapreciselocationpickedoutyet.Thisisthetimetothink aboutwhatyouwantandneedinalocation.Manystartupsrunsuccessfullyfromhome forawhile. Youwilldescribeyourphysicalneedslater,intheOperationalPlansection.Here, analyzeyourlocationcriteriaastheywillaffectyourcustomers.
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Isyourlocationimportanttoyourcustomers?Ifyes,how? Ifcustomerscometoyourplaceofbusiness: Isitconvenient?Parking?Interiorspaces?Notoutoftheway? Isitconsistentwithyourimage? Isitwhatcustomerswantandexpect? Whereisthecompetitionlocated?Isitbetterforyoutobenearthem(likecardealersor fastfoodrestaurants)ordistant(likeconveniencefoodstores)? DistributionChannels Howdoyousellyourproductsorservices? Retail Direct(mailorder,Web,catalog) Wholesale Yourownsalesforce Agents Independentrepresentatives Bidoncontracts
Sales Forecast
Nowthatyouhavedescribedyourproducts,services,customers,markets,and marketingplansindetail,itstimetoattachsomenumberstoyourplan.Useasales forecastspreadsheettoprepareamonthbymonthprojection.Theforecastshouldbe basedonyourhistoricalsales,themarketingstrategiesthatyouhavejustdescribed, yourmarketresearch,andindustrydata,ifavailable. Youmaywanttodotwoforecasts:1)abestguess,whichiswhatyoureallyexpect, and2)aworstcaselowestimatethatyouareconfidentyoucanreachnomatterwhat happens.
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VI.
OperationalPlan
Explainthedailyoperationofthebusiness,itslocation,equipment,people,processes, andsurroundingenvironment.
Production
Howandwhereareyourproductsorservicesproduced? Explainyourmethodsof: Productiontechniquesandcosts Qualitycontrol Customerservice Inventorycontrol Productdevelopment
Location
Whatqualitiesdoyouneedinalocation?Describethetypeoflocationyoullhave. Physicalrequirements: Amountofspace Typeofbuilding Zoning Powerandotherutilities
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Legal Environment
Describethefollowing: Licensingandbondingrequirements Permits Health,workplace,orenvironmentalregulations Specialregulationscoveringyourindustryorprofession Zoningorbuildingcoderequirements Insurancecoverage Trademarks,copyrights,orpatents(pending,existing,orpurchased)
Personnel
Numberofemployees Typeoflabor(skilled,unskilled,andprofessional) Whereandhowwillyoufindtherightemployees? Qualityofexistingstaff Paystructure Trainingmethodsandrequirements
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Inventory
Whatkindofinventorywillyoukeep:rawmaterials,supplies,finishedgoods? Averagevalueinstock(i.e.,whatisyourinventoryinvestment)? Rateofturnoverandhowthiscomparestotheindustryaverages? Seasonalbuildups? Leadtimeforordering?
Suppliers
Identifykeysuppliers: Namesandaddresses Typeandamountofinventoryfurnished Creditanddeliverypolicies Historyandreliability
Credit Policies
Doyouplantoselloncredit?
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Doyoureallyneedtoselloncredit?Isitcustomaryinyourindustryand expectedbyyourclientele? Ifyes,whatpolicieswillyouhaveaboutwhogetscreditandhowmuch? Howwillyoucheckthecreditworthinessofnewapplicants? Whattermswillyouofferyourcustomers;thatis,howmuchcreditandwhenis paymentdue? Willyouofferpromptpaymentdiscounts?(Hint:Dothisonlyifitisusualand customaryinyourindustry.) Doyouknowwhatitwillcostyoutoextendcredit?Haveyoubuiltthecostsinto yourprices?
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Current
30Days
60Days
90Days
Over90Days
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VII. ManagementandOrganization
Whowillmanagethebusinessonadaytodaybasis?Whatexperiencedoesthatperson bringtothebusiness?Whatspecialordistinctivecompetencies?Isthereaplanfor continuationofthebusinessifthispersonislostorincapacitated? Ifyoullhavemorethan10employees,createanorganizationalchartshowingthe managementhierarchyandwhoisresponsibleforkeyfunctions. Includepositiondescriptionsforkeyemployees.Ifyouareseekingloansorinvestors, includeresumesofownersandkeyemployees.
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VIII. PersonalFinancialStatement
Includepersonalfinancialstatementsforeachownerandmajorstockholder,showing assetsandliabilitiesheldoutsidethebusinessandpersonalnetworth.Ownerswill oftenhavetodrawonpersonalassetstofinancethebusiness,andthesestatementswill showwhatisavailable.Bankersandinvestorsusuallywantthisinformationaswell.
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IX.
StartupExpensesandCapitalization
Youwillhavemanystartupexpensesbeforeyouevenbeginoperatingyourbusiness. Itsimportanttoestimatetheseexpensesaccuratelyandthentoplanwhereyouwillget sufficientcapital.Thisisaresearchproject,andthemorethoroughyourresearch efforts,thelesschancethatyouwillleaveoutimportantexpensesorunderestimate them. Evenwiththebestofresearch,however,openinganewbusinesshasawayofcosting morethanyouanticipate.Therearetwowaystomakeallowancesforsurprise expenses.Thefirstistoaddalittlepaddingtoeachiteminthebudget.Theproblem withthatapproach,however,isthatitdestroystheaccuracyofyourcarefullywrought plan.Thesecondapproachistoaddaseparatelineitem,calledcontingencies,to accountfortheunforeseeable.Thisistheapproachwerecommend. Talktootherswhohavestartedsimilarbusinessestogetagoodideaofhowmuchto allowforcontingencies.Ifyoucannotgetgoodinformation,werecommendaruleof thumbthatcontingenciesshouldequalatleast20percentofthetotalofallotherstart upexpenses. Explainyourresearchandhowyouarrivedatyourforecastsofexpenses.Givesources, amounts,andtermsofproposedloans.Alsoexplainindetailhowmuchwillbe contributedbyeachinvestorandwhatpercentownershipeachwillhave.
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X.
FinancialPlan
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aboutthemperhapscutexpenses,orperhapsnegotiatealoan.Butforemost,you shouldntbetakenbysurprise. Thereisnogreattricktopreparingit:Thecashflowprojectionisjustaforwardlookat yourcheckingaccount. Foreachitem,determinewhenyouactuallyexpecttoreceivecash(forsales)orwhen youwillactuallyhavetowriteacheck(forexpenseitems). Youshouldtrackessentialoperatingdata,whichisnotnecessarilypartofcashflowbut allowsyoutotrackitemsthathaveaheavyimpactoncashflow,suchassalesand inventorypurchases. Youshouldalsotrackcashoutlayspriortoopeninginaprestartupcolumn.You shouldhavealreadyresearchedthoseforyourstartupexpensesplan. Yourcashflowwillshowyouwhetheryourworkingcapitalisadequate.Clearly,if yourprojectedcashbalanceevergoesnegative,youwillneedmorestartupcapital. Thisplanwillalsopredictjustwhenandhowmuchyouwillneedtoborrow. Explainyourmajorassumptions,especiallythosethatmakethecashflowdifferfrom theProfitandLossProjection.Forexample,ifyoumakeasaleinmonthone,whendo youactuallycollectthecash?Whenyoubuyinventoryormaterials,doyoupayin advance,upondelivery,ormuchlater?Howwillthisaffectcashflow? Aresomeexpensespayableinadvance?When? Arethereirregularexpenses,suchasquarterlytaxpayments,maintenanceandrepairs, orseasonalinventorybuildup,thatshouldbebudgeted? Loanpayments,equipmentpurchases,andownersdrawsusuallydonotshowon profitandlossstatementsbutdefinitelydotakecashout.Besuretoincludethem. Andofcourse,depreciationdoesnotappearinthecashflowatallbecauseyounever writeacheckforit.
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Break-Even Analysis
Abreakevenanalysispredictsthesalesvolume,atagivenprice,requiredtorecover totalcosts.Inotherwords,itsthesaleslevelthatisthedividinglinebetweenoperating atalossandoperatingataprofit. Expressedasaformula,breakevenis:
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XI.
Appendices
Includedetailsandstudiesusedinyourbusinessplan;forexample: Brochuresandadvertisingmaterials Industrystudies Blueprintsandplans Mapsandphotosoflocation Magazineorotherarticles Detailedlistsofequipmentownedortobepurchased Copiesofleasesandcontracts Lettersofsupportfromfuturecustomers Anyothermaterialsneededtosupporttheassumptionsinthisplan Marketresearchstudies Listofassetsavailableascollateralforaloan
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XII. RefiningthePlan
Thegenericbusinessplanpresentedaboveshouldbemodifiedtosuityourspecifictype ofbusinessandtheaudienceforwhichtheplaniswritten.
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HighTechnologyCompanies Economicoutlookfortheindustry Willthecompanyhaveinformationsystemsinplacetomanagerapidlychanging prices,costs,andmarkets? Willyoubeonthecuttingedgewithyourproductsandservices? Whatisthestatusofresearchanddevelopment?Andwhatisrequiredto: o Bringproduct/servicetomarket? o Keepthecompanycompetitive? Howdoesthecompany: o Protectintellectualproperty? o Avoidtechnologicalobsolescence? o Supplynecessarycapital? o Retainkeypersonnel? Hightechcompaniessometimeshavetooperateforalongtimewithoutprofitsand sometimesevenwithoutsales.Ifthisfitsyoursituation,abankerprobablywillnot wanttolendtoyou.Venturecapitalistsmayinvest,butyourstorymustbeverygood. Youmustdolongertermfinancialforecaststoshowwhenprofittakeoffisexpectedto occur.Andyourassumptionsmustbewelldocumentedandwellargued.
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RetailBusiness Companyimage Pricing: o Explainmarkuppolicies. o Pricesshouldbeprofitable,competitive,andinaccordancewithcompany image. Inventory: o Selectionandpriceshouldbeconsistentwithcompanyimage. o Inventorylevel:Findindustryaveragenumbersforannualinventory turnoverrate(availableinRMAbook).Multiplyyourinitialinventory investmentbytheaverageturnoverrate.Theresultshouldbeatleast equaltoyourprojectedfirstyearscostofgoodssold.Ifitisnot,youmay nothaveenoughbudgetedforstartupinventory. Customerservicepolicies:Theseshouldbecompetitiveandinaccordwith companyimage. Location:Doesitgivetheexposurethatyouneed?Isitconvenientfor customers?Isitconsistentwithcompanyimage? Promotion:Methodsused,cost.Doesitprojectaconsistentcompanyimage? Credit:Doyouextendcredittocustomers?Ifyes,doyoureallyneedto,anddo youfactorthecostintoprices?