How to Get Your Business Funded By Tim Berry June 08, 2004 Contrary to popular belief, business plans do not

generate business financing. True, there are many kinds of financing options that require a business plan, but nobody invests in a business plan. Investors need a business plan as a document that communicates ideas and information, but they invest in a company, in a product, and in people. Small Business Financing Myths Venture capital financing is very rare. I'll explain more later, but assume that very few high-growth plans with high-power management teams are venture opportunities. Banks don't finance business start-ups. I'll have more on that later, too. Banks aren't supposed to invest depositors' money in new businesses. Business plans don't sell investors. Where to Look for Money The process of looking for money must match the needs of the company. Where you look for money, and how you look for money, depends on your company and the kind of money you need. There is an enormous difference, for example, between a high-growth Internet-related company looking for second-round venture funding and a local retail store looking to finance a branch store. In the following sections of this article, I'll talk more specifically about the types of investment and lending available. Venture Capital The business of venture capital is frequently misunderstood. Many start-up companies resent venture capital companies for failing to invest in new ventures or risky ventures. People talk about venture capitalists as sharks— because of their supposedly predatory business practices—or sheep—because they supposedly think like a flock, all wanting the same kinds of deals. This is not the case. The venture capital business is just that—a business, and the people we call venture capitalists are business people who are charged with investing other people's money. They have a professional responsibility to reduce risk as much as possible. They should not take more risk than is absolutely necessary to produce the risk/return ratios that the sources of their capital ask of them. Venture capital shouldn't be thought of as a source of funding for any but a very few exceptional start-up businesses. Venture capital can't afford to invest in start-ups unless there is a rare combination of product opportunity, market opportunity, and proven management. A venture capital investment has to have a reasonable chance of producing a tenfold increase in business value within three years. It needs to focus on newer products and markets that can reasonably project increasing sales by huge multiples over a short period of time. It needs to work with proven managers who have dealt with successful start-ups in the past. If you are a potential venture capital investment, you probably know it already. You have management team members who have been through that already. You can convince yourself and a room full of intelligent people that your company can grow ten times over in three years. If you have to ask whether your new company is a possible venture capital opportunity, it probably isn't. People in new growth industries, multimedia communications, biotechnology, or the far reaches of high-technology products, generally know about venture capital and venture capital opportunities. If you are looking for names and addresses of venture capitalists, you can look for the Resources links on Palo Alto Software's website These are updated regularly and are likely to have more specific information. Otherwise, start with the Internet, with the net search engines. For example, you'll get at least 50 venture capital firms when you search for "venture capital." The names and addresses of venture capitalists are also available in a couple of annual directories: The Western Association of Venture Capitalists publishes an annual directory. This organization includes most of the California venture capitalists based in Menlo Park, CA, which is the headquarters of an amazing percentage of the nation's venture capital companies. Pratt's Guide to Venture Capital Sources is an annual directory available online or in print format. Contact Venture Economics, 40 W. 57th St., 11th Floor, New York, NY 10019 (212) 765-5311. It is also available from for $425 (prices may change) plus shipping. "Sort-of" Venture Capital: Angels and Others Venture capital is not the only source of investment for start-up businesses or small businesses. Many companies are financed by smaller investors in what is called "private placement." For example, in some areas there are groups of potential investors who meet occasionally to hear proposals. There are also wealthy individuals who occasionally invest in new companies. In the lore of business start-ups, groups of investors are often referred to as "doctors and dentists," and individual investors are often called "angels." Many entrepreneurs turn to friends and family for investment. Your next question of course is how to find the "doctors, dentists, and angels" that might want to invest in your business. Some government agencies, business development centers, business incubators, and similar organizations that will be tied into the investment communities in your area. Turn first to the local Small Business Development Center

(SBDC), which is most likely associated with your local community college, or the Small Business Administration (SBA)

offices in your area. You may want to try some secondary listing services and online sourcing businesses. I know the owners and operators of the American Venture Capital Exchange, and I know that they have been working to provide fair and respectful matching services between investors and companies needing investment. However, I haven't actually used the service. I've just dealt with the people (they have occasionally included literature in Palo Alto Software product boxes). They offer an online database of financing sources and a forum to list businesses seeking financing. Their phone number is 650-494-3356, fax number is 765-449-1913; and email is On my personal website, I have listed several consultants with whom I've had dealings, including people I worked with while consulting for Apple Computers and other companies. For legal reasons, I have to insist that my recommendation is at your risk, not mine, and I can't be responsible for third parties. I should also note that my recommendation has never and will never be sold for money or compensation of any kind, even in trade. At your own risk, the following are some of the online services available through bulletin boards and similar sources. Deal with them carefully: • Venture Capital Resource Library at • Venture Capital Online at • Business Funding Directory at • The Capital Network, 3925 W. Braker Lane, Austin, TX 78759, Telephone (512) 305-0826.

Important: Be careful dealing with anyone who offers to help you find financing as a service for money. These are shark-infested waters. I am aware of some legitimate providers of business plan consulting, but legitimate providers are harder to find than the sharks. Commercial Lenders Banks are even less likely than venture capitalists to invest in, or loan money to, start-up businesses. They are, however, the most likely source of financing for most small businesses. Start-up entrepreneurs and small business owners are too quick to criticize banks for failing to finance new businesses. Banks are not supposed to invest in businesses, and are strictly limited in this respect by federal banking laws. The government prevents banks from investment in businesses because society, in general, doesn't want banks taking savings from depositors and investing in risky business ventures; obviously when (and if) those business ventures fail, bank depositors' money is at risk. Would you want your bank to invest in new businesses (other than your own, of course)? Furthermore, banks should not loan money to start-up companies either, for many of the same reasons. Federal regulators want banks to keep money safe, in very conservative loans backed by solid collateral. Start-up businesses are not safe enough for bank regulators and they don't have enough collateral. Why then do I say that banks are the most likely source of small business financing? Because small business owners borrow from banks. A business that has been around for a few years generates enough stability and assets to serve as collateral. Banks commonly make loans to small businesses backed by the company's inventory or accounts receivable. Normally there are formulas that determine how much can be loaned, depending on how much is in inventory and in accounts receivable. A great deal of small business financing is accomplished through bank loans based on the business owner's personal collateral, such as home ownership. Some would say that home equity is the greatest source of small business financing. The Small Business Administration (SBA) The SBA makes loans to small businesses and even to start-up businesses. SBA loans are almost always applied for and administered by local banks. You normally deal with a local bank throughout the process. For start-up loans, the SBA will normally require that at least one third of the required capital be supplied by the new business owner. Furthermore, the rest of the amount must be guaranteed by reasonable business or personal assets. The SBA works with "certified lenders," which are banks. It takes a certified lender as little as one week to get approval from the SBA. If your own bank isn't a certified lender, you should ask your banker to recommend a local bank that is. Other Lenders Aside from standard bank loans, an established small business can also turn to accounts receivable specialists to borrow against its accounts receivables. The most common accounts receivable financing is used to support cash flow when working capital is hung up in accounts receivable. For example, if your business sells to distributors that take 60 days to pay, and the outstanding invoices waiting for payment (but not late) come to $100,000, your company can probably borrow more than $50,000. Interest rates and fees may be relatively high, but this is still often a good source of small business financing. In most cases, the lender doesn't take the risk of payment—if your customer doesn't pay you, you have to pay the money back anyhow. These lenders will often review your debtors, and choose to finance some or all of the invoices outstanding. Another related business practice is called factoring. So-called factors actually purchase obligations, so if a customer owes you $100,000 you can sell the related paperwork to the factor for some percentage of the total amount.

In this case, the factor takes the risk of payment, so discounts are obviously quite steep. Ask your banker for additional information about factoring. Friends and Family Funding If I could make only one point with budding entrepreneurs, it would be that you should know what money you need, and understand that it is at risk. Don't bet money you can't afford to lose. Know how much you are betting. I'll always remember a talk I had with a man who had spent 15 years trying to make his sailboat manufacturing business work, achieving not much more than aging and more debt. "If I can tell you only one thing," he said, "it is that you should never take money from friends and family. If you do, then you can never get out. Businesses sometimes fail, and you need to be able to close it down and walk away. I wasn't able to do that." The story points out why the U.S. government securities laws discourage getting business investments from people who aren't wealthy, sophisticated investors. They don't fully understand how much risk there is. If your parents, siblings, good friends, cousins, and in-laws will invest in your business, they have paid you an enormous compliment. Please, in that case, make sure that you understand how easily this money can be lost, and that you make them understand as well. Although you don't want to rule out starting your company with investments from friends and family, don't ignore some of the disadvantages. Go into this relationship with your eyes wide open. Words of Warning Don't take private placement, angels, friends and family as good sources of investment capital just because they are described here or taken seriously in some other source of information. Some investors are a good source of capital, and some aren't. These less established sources of investment should be handled with extreme caution. Never, NEVER spend somebody else's money without first doing the legal work properly. Have the papers done by professionals, and make sure they're signed. Never, NEVER spend money that has been promised but not delivered. Often companies get investment commitments and contract for expenses, and then the investment falls through. Avoid turning to friends and family for investment. The worst possible time to not have the support of friends and family is when your business is in trouble. You risk losing friends, family, and your business at the same time. Submitting a Plan The information you submit to investors depends a great deal on what your objective is. Sometimes you'll submit a complete business plan, sometimes a Summary Memo. In most cases, even if you submit a short summary, you have to have the complete business plan ready to go as soon as the investors or lenders ask for it. If you're looking for lease financing, receivables, or a bank loan, you'll want to submit a loan support document to the lender. When the search has provided you with a list of useful names, you can print your Summary Memo or loan support documents and send a copy to each of the investors, along with a brief cover letter. Summary Most businesses are financed by home equity or savings as they start. Only a few can attract outside investment. Venture capital deals are extremely rare. Borrowing will always depend on collateral and guarantees, not on business plans or ideas.

Find Your Best Path to Start by Tim Berry June 15, 2004 I've spent many years as an entrepreneur and working with entrepreneurs. I understand and sympathize with the urge to create something, to build your own and make it work. This is a fabulous thing when it happens. I've also seen the disaster of the business start-up that absorbs more money than it should, and optimistic owners who keep dumping more money into a lost cause, digging themselves deeper into a hole instead of getting out of it. With some planning, you can predict, before you start, what you're going to need. Some businesses are a lot more expensive to start than others. Try to understand the difference. The following illustrations outline the start-up costs for three different companies. The first illustration shows actual numbers for a successful service company. Successful Service Start-Up

The next illustration shows a successful product company. Successful Product Start-up

This illustration shows a failed product company. Failed Product Start-Up

The final illustration in this comparison is a chart of all three of these start-up companies. It shows simple lines indicating the cumulative balance for each business. This cumulative balance stands for how much money is spent or received, and how much money is at risk. The Start-up Curve and Risk

The lines indicate the cumulative cash balance positions for each business. This balance stands for how much money is spent or received, and how much money is at risk. Both the successful and the failed product company launches look the same in the beginning. The successful launch turns upward and generates money, but the unsuccessful launch never does. The service company, in contrast, generates less money but also risks less money. The chart comparison makes two extremely important points about the money at risk in different kinds of businesses: • Product businesses usually require more investment than service businesses. • "Bootstrapping" (starting the business without start-up capital) is much harder for product businesses than service businesses.

Estimating Realistic Start-up Costs by Tim Berry June 15, 2004 Businesses spend money before they ever open their doors. Start-up expenses are those expenses incurred before the business is running. Many people underestimate start-up costs and start their business in a haphazard, unplannned way. This can work......but is usually a harder way to do it. Customers are wary of brand new businesses with makeshift logistics. Use a start-up worksheet to plan your initial financing. You'll need this information to set up initial business balances and to estimate start-up expenses. Don't underestimate costs. • Start-up Expenses. These are expenses that happen before the beginning of the plan, before the first month. For example, many new companies incur expenses for legal work, logo design, brochures, site selection and improvements, and other expenses. • Start-up Assets. Typical start-up assets are cash (the money in the bank when the company starts), and in many cases starting inventory. Other starting assets are both current and long-term, such as equipment, office furniture, machinery, etc. • Start-up Financing. This includes both capital investment and loans. The only investment amounts or loan amounts that belong in the Start-up table are those that happen before the beginning of the plan. Whatever happens during or after the first month should go instead into the Cash Flow table, which will automatically adjust the Balance Sheet. Timing is Everything Some people are confused by the specific definition of start-up expenses, start-up assets, and start-up financing. They would prefer to have a broader, more generic definition that includes, say, expenses incurred during the first year, or the first few months, of the plan. Unfortunately this would also lead to double counting of expenses and non standard financial statements. All the expenses incurred during the first year have to appear in the Profit and Loss statement of the first year, and all expenses incurred before that have to appear as start-up expenses. Don’t count expenses twice: they go in Start-up or Profit and Loss, but not both. The only difference is timing. Don’t buy assets twice: they go into the Start-up if you acquire them before the starting date. Otherwise, put them in the Profit and Loss. Expenses vs. Assets Many people can be confused by the accounting distinction between expenses and assets. For example, they’d like to record research and development as assets instead of expenses, because those expenses create intellectual property. However, standard accounting and taxation law are both strict on the distinction: Expenses are deductible against income, so they reduce taxable income. Assets are not deductible against income.

What a company spends to acquire assets is not deductible against income. For example, money spent on inventory is not deductible as expense. Only when the inventory is sold, and therefore becomes cost of goods sold or cost of sales, does it reduce income. Generally companies want to maximize deductions against income as expenses, not assets, because this minimizes the tax burden. With that in mind, seasoned business owners and accountants will always want to account for money spent on development as expenses, not assets. This is generally much better than accounting for this expenditure as buying assets, such as patents or product rights. Assets look better on the books than expenses, but there is rarely any clear and obvious correlation between money spent on research and development and market value of intellectual property. Companies that account for development as generating assets can often end up with vastly overstated assets, and questionable financials statements. Another common misconception involves expensed equipment. The U.S. Internal Revenue Service allows a limited amount of office equipment purchases to be called expenses, not purchase of assets. You should check with your accountant to find out the current limits of this rule. As a result, expensed equipment is taking advantage of the allowance. After your company has used up the allowance, then additional purchases have to go into assets, not expenses. This treatment also indicates the general preference for expenses over assets, when you have a choice. Why You Don’t Want to Capitalize Expenses Sometimes people want to treat expenses as assets. Ironically, that’s usually a bad idea, for several reasons: • Money spent buying assets isn’t tax deductible. Money spent on expenses is deductible. • Capitalizing expenses creates the danger of overstating assets. • If you capitalized the expense, it appears on your books as an asset. Having useless assets on the accounting books is not a good thing. Types of Start-up Financing • Investment is you or someone esle puts in the company. It ends up as Paid-in Capital in the Balance Sheet. This is the classic concept of business investment, taking ownership in a company, risking money in the hope of gaining money later. • Accounts Payable are debts that will end up as Accounts Payable in the Balance Sheet. Generally this means credit-card debt. This number becomes the starting balance of your Balance Sheet. • Current Borrowing is standard debt, borrowing from banks, Small Business Administration, or other current borrowing. • Other Current Liabilities are additional liabilities that don’t have interest charges. This is where you put loans from founders, family members, or friends. We aren’t recommending interest-free loans for financing, by the way, but when they happen, this is where they go. • Long-term Liabilities are long-term debt, long-term loans.

Expect a Loss at Start-up The loss at start-up is very common…at this point in the life of the company, you’ve already incurred taxdeductible expenses, but you don’t have sales yet. So you have a loss. Don’t be surprised; it’s normal. Cash Balance on Starting Date Cash requirements is an estimate of how much money your start-up company needs to have in its checking account when it starts. I general, your Cash Balance on Starting Date is the money you raised as investments or loans

minus the cash you spend on expenses and assests. As you build your plan, watch your cash flow projections. If your cash balance drops below zero then you need to increase your financing or reduce expenses. Many entrepreneurs decide they want to raise more cash than they need so they’ll have money left over for contingencies. However, although that makes good sense when you can do it, it is hard to explain that to investors. The outside investors don’t want to give you more money than you need, for obvious reasons—it’s their money!

Know Your Industry Before You Start July 13, 2004 You also need to explain the type of business you're in. You'll be expected to explain the general state of your industry and the nature of the business, especially if your plan is going outside your company to banks or investors. Whether you're a service business, manufacturer, retailer, or some other type of business, you should do an Industry Analysis, describing: • Industry Participants. • Distribution Patterns. • Competition and Buying Patterns. Industry Analysis Everything in your industry that happens outside of your business will effect your company. The more you know about your industry the more advantage and protection you will have. A complete business plan discusses general industry economics, participants, distribution patterns, factors in the competition, and whatever else describes the nature of this business to outsiders. The Internet has had an enormous impact on the state of business information. Finding information isn't really the problem any more, after the information explosion and the huge growth in the Internet beginning in the 1990s and continuing in the 21st Century. Even 10 or 15 years ago, dealing with information was more a problem of sorting through it all than of finding raw data. That generality is more true every day. There are Web sites for business analysis, financial statistics, demographics, trade associations, and just about everything you'll need for a complete business plan. Industry Participants You should know who else sells in your market. You can't easily describe a type of business without describing the nature of the participants. There is a huge difference, for example, between an industry like broadband television services, in which there are only a few huge companies in any one country, and one like dry cleaning, in which there are tens of thousands of smaller participants. This can make a big difference to a business and a business plan. The restaurant industry, for example, is what we call "pulverized," which, like the dry cleaning industry, is made up of many small participants. The fast food business, on the other hand, is composed of a few national brands participating in thousands of branded outlets, many of them franchised. Economists talk of consolidation in an industry as a time when many small participants tend to disappear and a few large players emerge. In accounting, for example, there are a few large international firms whose names are well known and tens of thousands of smaller firms. The automobile business is composed of a few national brands participating in thousands of branded dealerships. In computer manufacturing, for example, there are a few large international firms whose names are well known, and thousands of smaller firms. Distribution Patterns Products and services can follow many paths between suppliers and users. Explain how distribution works in your industry. Is this an industry in which retailers are supported by regional distributors, as is the case for computer products, magazines, or auto parts? Does your industry depend on direct sales to large industrial customers? Do manufacturers support their own direct sales forces, or do they work with product representatives? Some products are almost always sold through retail stores to consumers, and sometimes these are distributed by distribution companies that buy from manufacturers. In other cases, the products are sold directly from manufacturers to stores. Some products are sold directly from the manufacturer to the final consumer through mail campaigns, national advertising, or other promotional means. In many product categories there are several alternatives, and distribution choices are strategic. Encyclopedias and vacuum cleaners are traditionally sold door-to-door, but are also sold in stores and direct from manufacturer to consumer through radio and television ads. Many products are distributed through direct business-to-business sales, and in long-term contracts such as the ones between car manufacturers and their suppliers of parts, materials, and components. In some industries companies use representatives, agents, or commissioned salespeople. Technology can change the patterns of distribution in an industry or product category. The Internet, for example, is changing the options for software distribution, books, music, and other products. Cable communication is changing the options for distributing video products and video games. Distribution patterns may not be as critical to most service companies, because distribution is normally about physical distribution of specific physical products such as a restaurant, graphic artist, professional services practice, or architect. For a few services, distribution may still be relevant. A phone service or cable provider, or an Internet provider, might describe distribution related to physical infrastructure. Some publishers may prefer to treat their business as a service rather than a manufacturing company, and in that case distribution may also be relevant. Competition and Buying Patterns

It is essential to understand the nature of competition in your market. This is still in the general area of describing the industry, or type of business. Explain the general nature of competition in this business, and how the customers seem to choose one provider over another. What are the keys to success? What buying factors make the most difference--Price? Product features? Service? Support? Training? Software? Delivery dates? Are brand names important? In the computer business, for example, competition might depend on reputation and trends in one part of the market, and on channels of distribution and advertising in another. In many business-to-business industries, the nature of competition depends on direct selling, because channels are impractical. Price is vital in products competing with each other on retail shelves, but delivery and reliability might be much more important for materials used by manufacturers in volume, for which a shortage can affect an entire production line. In the restaurant business, for example, competition might depend on reputation and trends in one part of the market, and on location and parking in another. In many professional service practices the nature of competition depends on word of mouth, because advertising is not completely accepted. Is there price competition between accountants, doctors, and lawyers? How do people choose travel agencies or florists for weddings? Why does someone hire one landscape architect over another? Why choose Starbucks, a national brand, over the local coffee house? All of this is the nature of competition. Main Competitors Do a very complete analysis of your main competitors. List the main competitors. What are the strengths and weaknesses of each? Consider their products, pricing, reputation, management, financial position, channels of distribution, brand awareness, business development, technology, or other factors that you feel are important. In what segments of the market do they operate? What seems to be their strategy? How much do they impact your products, and what threats and opportunities do they represent?

Business Start-up Strategy by Greg Balanko-Dickson July 20, 2004 I strongly suggest that would-be entrepreneurs do a business plan. As a result of completing the plan you will be much better prepared and know whether or not your business idea is feasible. Try the following article for a short-cut. However, I caution you on following a short-cut unless you have substantial experience or knowledge about your area. Proceed with caution without a business plan! Six-Step Business-Start-Up Strategy by Greg Balanko-Dickson ( How is your business unique, and why will your goods or services appeal to customers? What are the primary differences between your company and your competitors? What are the driving factors to choose your business over another? In other words, what is the underlying reason a customer would do business with your company? 1) Define Your Business & Vision Defining your vision is important. It will become the driving force of your business. Here are questions that will help you clarify your vision: • Who is the customer? • What business are you in? • What do you sell (product/service)? • What is your plan for growth? • What is your primary competitive advantage? 2) Write Down Your Goals Create a list of goals with a brief description of action items. If your business is a start up, you will want to put more effort into your short-term goals. Often a new business concept must go through a period of research and development before the outcome can be accurately predicted for longer time frames. Create two sets of goals: 1. Short term: range from six to 12 months. 2. Long term: can be two to five years. Explain, as specifically as possible, what you want to achieve. Start with your personal goals. Then list your business goals. Answer these questions: • As the owner of this business, what do you want to achieve? • How large or small do you want this business to be? • Do you want to include family in your business? • Staff: do you desire to provide employment, or perhaps, you have a strong opinion on not wanting to manage people. • Is there some cause that you want the business to address? • Describe the quality, quantity and/or service and customer satisfaction levels. • How would you describe your primary competitive advantage? • How do you see the business making a difference in the lives of your customers? 3) Understand Your Customer It is not realistic to expect you can meet the needs of everyone, no business can. Choose your target market carefully. Overlook this area, and I guarantee you will be disappointed with the performance of your business. Get this right and you will be more than pleased with the results. • Needs: what unmet needs do your prospective customers have? How does your business meet those needs? It is usually something the customer does not have or a need that is not currently being met. Identify those unmet needs. • Wants: think of this as your customer's desire or wish. It can also be a deficiency. • Problems: remember people buy things to solve a specific problem. What problems does your product or service solve? • Perceptions: what are the negative and positive perceptions that customers have about you, your profession and its products or services? Identify both the negative and positive consequences. 4) Learn From Your Competition You can learn a lot about your business and customers by looking at how your competitors do business. Here are some questions to help you learn from your competition and focus on your customer: • What do you know about your target market? • What competitors do you have? • How are competitors approaching the market?

• What are the competitor's weaknesses and strengths? • How can you improve upon the competition's approach? • What are the lifestyles, demographics and psychographics of your ideal customer? 5) Financial Matters How will you make money? What is your break-even point? How much profit potential does your business have? Take the time to invest in preparing financial projections. These projections should take into account the collection period for your accounts receivables (outstanding customer accounts) as well as the payment terms for your suppliers. For example, you may pay your bills in 30 days, but have to wait 45-60 days to get paid from your customers. A cash flow projection will show you how much working capital you will need during those "gaps" in your cash position. We now offer a really neat, FREE, tool to help you do an initial financial analysis of your business called the Seven Step Starting Costs Wizard. This tool is not designed to replace detailed projections for cash flow and financial statements. However, this is a handy tool to test your assumptions and determine your break-even point and the validity of your plan. It produces a report and charts seven key areas: 1. Start up Investment 2. Assumptions 3. Running Monthly Overhead 4. Streamlined Sales Forecast 5. Cumulative Cash Chart 6. Break-even Charts 7. Conclusion 8. Identify Your Marketing Strategy There are four steps to creating a marketing strategy for your business: Identify All Target Markets: define WHO is your ideal customer or target market. Most companies experience 80% of their business from 20% of their customers. It makes sense then to direct your time and energy toward those customers who are most important. Qualify the Best Target Markets: the purpose of this step is to further qualify and determine which customer profile meets the best odds of success. The strategy is to position your business at the same level as the majority of the buyers you are targeting. It is critical to figure out who your best customers are and how to best position your company in the marketplace. Identify Tools, Strategies and Methods: a market you cannot access is a market you cannot serve. Marketing is the process of finding, communicating and educating your primary market about your products and services. Choose a combination of tools and strategies, that when combined, increase your odds of success. Test Marketing Strategy and Tools: the assumptions we do not verify are typically the ones that have the potential to create business problems. Take the time to test all business assumptions, especially when you are making major expenditures. Other related articles can be found at:

Bakery Business Plan Jolly's Java and Bakery 1.0 Executive Summary Introduction Jolly's Java and Bakery (JJB) is a start-up coffee and bakery retail establishment located in southwest Washington. JJB expects to catch the interest of a regular loyal customer base with its broad variety of coffee and pastry products. The company plans to build a strong market position in the town, due to the partners' industry experience and mild competitive climate in the area. JJB aims to offer its products at a competitive price to meet the demand of the middleto higher-income local market area residents and tourists. The Company JJB is incorporated in the state of Washington. It is equally owned and managed by its two partners. Mr. Austin Patterson has extensive experience in sales, marketing, and management, and was vice president of marketing with both Jansonne & Jansonne and Burper Foods. Mr. David Fields brings experience in the area of finance and administration, including a stint as chief financial officer with both Flaxfield Roasters and the national coffee store chain, BuzzCups. The company intends to hire two full-time pastry bakers and six part-time baristas to handle customer service and day to day operations. Products and Services JJB offers a broad range of coffee and espresso products, all from high quality Columbian grown imported coffee beans. JJB caters to all of its customers by providing each customer coffee and espresso products made to suit the customer, down to the smallest detail. The bakery provides freshly prepared bakery and pastry products at all times during business operations. Six to eight moderate batches of bakery and pastry products are prepared during the day to assure fresh baked goods are always available. The Market The retail coffee industry in the U.S. has recently experienced rapid growth. The cool marine climate in southwest Washington stimulates consumption of hot beverages throughout the year. JJB wants to establish a large regular customer base, and will therefore concentrate its business and marketing on local residents, which will be the dominant target market. This will establish a healthy, consistent revenue base to ensure stability of the business. In addition, tourist traffic is expected to comprise approximately 35% of the revenues. High visibility and competitive products and service are critical to capture this segment of the market. Financial Considerations JJB expects to raise $110,000 of its own capital, and to borrow $100,000 guaranteed by the SBA as a ten-year loan. This provides the bulk of the current financing required. JJB anticipates sales of about $491,000 in the first year, $567,000 in the second year, and $655,000 in the third year of the plan. JJB should break even by the fourth month of its operation as it steadily increases its sales. Profits for this time period are expected to be approximately $13,000 in year 1, $36,000 by year 2, and $46,000 by year 3. The company does not anticipate any cash flow problems. Highlights

1.1 Mission JJB aims to offer high quality coffee, espresso, and pastry products at a competitive price to meet the demand of the middle- to higher-income local market area residents and tourists. 1.2 Keys to Success Keys to success for JJB will include:


Providing the highest quality product with personal customer service.

2. Competitive pricing.

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