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Business Plan for Startup Business

The business plan consists of a narrative and several financial spreadsheets. The narrative template is the body of the business plan. It contains over 150 questions divided into several sections. Wor through the sections in any order you li e! e"cept for the Executive Summary #hich should be done last. $ ip any questions that do not apply to your type of business. When you are through #riting your first draft! you #ill have a collection of small essays on the various topics of the business plan. Then you #ill #ant to edit them into a smooth flo#ing narrative. The real value of doing a business plan is not having the finished product in hand% rather! the value lies in the process of research and thin ing about your business in a systematic #ay. The act of planning helps you to thin things through thoroughly! study and research #hen you are not sure of the facts! and loo at your ideas critically. It ta es time no#! but avoids costly! perhaps disastrous! mista es later. This business plan is a generic model suitable for all types of businesses. &o#ever! you should modify it to suit your particular circumstances. 'efore you begin! revie# the section entitled (efining the Plan! found at the end of the narrative. It suggests emphasi)ing certain areas depending upon your type of business *manufacturing! retail! service! etc.+. It also has tips for fine tuning your plan to ma e an effective presentation to investors or ban ers. If this is #hy you are #riting your plan! then pay particular attention to your #riting style. ,ou #ill be -udged by the quality and appearance of your #or as #ell as your ideas. .or your guidance! #e have included a document entitled Writing Guide. This is an e"ample of an e"ecutive summary #ritten in a clear and concise style suitable for this type of document. It typically ta es several #ee s to complete a good plan. /ost of that time is spent in research and re0thin ing your ideas and assumptions. 'ut then! that is the value of the process. $o ma e time to do the -ob properly. Those #ho do! never regret the effort. 1nd finally! be sure to eep detailed notes on your sources of information and the assumptions underlying your financial data.

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Business Plan

OWNERS
'usiness name2 1ddress2 3"ample 4orporation 1ddress 5ine 1 1ddress 5ine 2 4ity! $T 22222 222066607777 111022206666 "y)8e"ample.com

Telephone2 .a"2 3mail2

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I.

Table of contents

I.Table of contents...............................................................................................................6 II.3"ecutive summary..........................................................................................................7 III.9eneral 4ompany :escription.......................................................................................5 I;.Products and services.....................................................................................................< ;./ar eting plan.................................................................................................................= ;I.>perational Plan...........................................................................................................16 ;II./anagement and organi)ation....................................................................................1< ;III.Personal financial statement......................................................................................1= I?.$tartup 3"penses and 4apitali)ation............................................................................1@ ?..inancial plan.................................................................................................................1A ?I.1ppendices...................................................................................................................22 ?II.(efining the Plan.........................................................................................................26

Page 7 of 25

II.

Executive summary

Write this section last! We suggest you ma e it 2 pages or less. Include everything that you #ould cover in a 50minute intervie#. 3"plain the fundamentals of the proposed business2 #hat #ill your product be! #ho #ill be your customers! #ho are the o#ners! #hat do you thin the future holds for your business and your industryB /a e it enthusiastic! professional! complete and concise. If applying for a loan! state clearly ho# much you #ant! precisely ho# you are going to use it! and ho# the money #ill ma e your business more profitable! thereby ensuring repayment.

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III.

General Company Description

What business #ill you be inB What #ill you doB /ission $tatement2 /any companies have a brief mission statement! usually in thirty #ords or less! e"plaining their reason for being and their guiding principles. If you #ant to draft a mission statement! this is a good place to put it in the plan. .ollo#ed by2 4ompany goals and ob-ectives2 9oals are destinations 00 #here you #ant your business to be. >b-ectives are progress mar ers along the #ay to goal achievement. .or e"ample! a goal might be to have a healthy! successful company that is a leader in customer service and has a loyal customer follo#ing. >b-ectives might be annual sales targets and some specific measures of customer satisfaction. 'usiness philosophy2 What is important to you in businessB To #hom #ill you mar et your productsB ,our target mar etB *$tate it briefly here 0 you #ill do a more thorough e"planation in the /ar eting section+. :escribe your industry. Is it a gro#th industryB What changes do you foresee in your industry! short term and long termB &o# #ill your company be poised to ta e advantage of themB ,our most important company strengths and core competencies2 What factors #ill ma e the company succeedB What do you thin your ma-or competitive strengths #ill beB What bac ground e"perience! s ills! and strengths do you personally bring to this ne# ventureB 5egal form of o#nership2 $ole Proprietor! Partnership! 4orporation! 5imited 5iability 4orporation *554+B Why have you selected this formB

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IV.

Products and services

:escribe in depth your products andCor services *technical specifications! dra#ings! photos! sales brochures! and other bul y items belong in the 1ppendi"+. What factors #ill give you competitive advantages or disadvantagesB .or e"ample! level of quality or unique or proprietary features. What are the pricing! fee or leasing structures of your products andCor servicesB

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V.
Dotes on preparation2

Marketin plan

/ar et research 0 WhyB Do matter ho# good your product and your service! the venture cannot succeed #ithout effective mar eting. 1nd this begins #ith careful! systematic research. It is very dangerous to simply assume that you already no# about your intended mar et. ,ou need to do mar et research to ma e sure they are on trac . Ese the business planning process as your opportunity to uncover data and question your mar eting efforts. ,our time #ill be #ell spent. /ar et research 0 &o#B There are 2 inds of mar et research2 primary and secondary. Secondary research means using published information such as industry profiles! trade -ournals! ne#spapers! maga)ines! census data! and demographic profiles. This type of information is available in public libraries! industry associations! chambers of commerce! vendors #ho sell to your industry! government agencies *4ommerce :ept. and state and local development agencies+! and the $'1 'usiness Information 4enters and >ne $top 4apital $hops. $tart #ith your local library. /ost librarians are pleased to guide you through their business data collection. ,ou #ill be ama)ed at #hat is there. There are more online sources than you could possibly use. 1 good #ay to start is at the $'1 site! http2CC###.sba.govC% clic the >utside (esources button for a great collection of resource lin s. ,our 4hamber of 4ommerce has good information on the local area. Trade associations and trade publications often have e"cellent industry specific data. Primary market research means gathering your o#n data. .or e"ample! you could do your o#n traffic count at a proposed location! use the yello# pages to identify competitors! and do surveys or focus group intervie#s to learn about consumer preferences. Professional mar et research can be very costly! but there are many boo s out that sho# small business o#ners ho# to do effective research by themselves. In your mar eting plan! be as specific as possible% give statistics F numbers and sources. The mar eting plan #ill be the basis! later on! of the all0important sales pro-ection. The /ar eting Plan2 Economics .acts about your industry2 What is the total si)e of your mar etB What percent share of the mar et #ill you haveB *This is important only if you thin you #ill be a ma-or factor in the mar et.+ 4urrent demand in target mar et

Page @ of 25 Trends in target mar et 0 gro#th trends! trends in consumer preferences! and trends in product development. 9ro#th potential and opportunity for a business of your si)e What barriers to entry do you face in entering this mar et #ith your ne# companyB $ome typical ones are2 &igh capital costs &igh production costs &igh mar eting costs 4onsumer acceptanceCbrand recognition TrainingCs ills Enique technologyCpatents Enions $hipping costs Tariff barriersCquotas 1nd of course! ho# #ill you overcome the barriersB &o# could the follo#ing affect your companyB 4hange in technology 9overnment regulations 4hanging economy 4hange in your industry Product In the ProductsC$ervices section! you described your products and services as ,>E see them. Do# describe them from your 4E$T>/3(G$ point of vie#. !eatures and "enefits 5ist all your ma-or products or services. .or each productCservice2 :escribe the most important features. That is! #hat #ill the product do for the customerB What is special about itB Do#! for each produceCservice! describe its benefits. That is! #hat #ill the product do for the customerB Dote the difference bet#een features and benefits! and thin about them. .or e"ample! a house gives shelter and lasts a long time! is made #ith certain materials and to a certain design% those are its features. Its benefits include pride of o#nership! financial security! providing for the family! inclusion in a neighborhood. ,ou build features into your product so you can sell the benefits. What after0sale services #ill be givenB .or e"ample2 delivery! #arranty! service contracts! support! follo# up! or refund policy. Customers

Page A of 25 Identify your targeted customers! their characteristics! and their geographic locations% i.e.! demographics. The description #ill be completely different depending on #hether you plan to sell to other businesses or directly to consumers. If you sell a consumer product! but sell it through a channel of distributors! #holesalers and retailers! then you must carefully analy)e both the end consumer and the middlemen businesses to #hom you sell. ,ou may #ell have more than one customer group. Identify the most important groups. Then! for each consumer group! construct #hat is called a demographic profile2 1ge 9ender 5ocation Income level $ocial classCoccupation 3ducation >ther *specific to your industry+ >ther *specific to your industry+ .or business customers! the demographic factors might be2 Industry *or portion of an industry+ 5ocation $i)e of firm HualityCtechnologyCprice preferences >ther *specific to your industry+ >ther *specific to your industry+ Competition What products and companies #ill compete #ith youB 5ist your ma-or competitors2 Dames F addresses Will they compete #ith you in across the board! or -ust for certain products! certain customers! or in certain locationsB Will you have important indirect competitorsB *.or e"ample! video rental stores compete #ith theaters! though they are different types of business.+ &o# #ill your productsCservices compare #ith the competitionB Ese the table called 4ompetitive 1nalysis! belo# to compare your company #ith your three most important competitors. In the first column are ey competitive factors. $ince these vary from one industry to another! you may #ant to customi)e the list of factors.

Page 10 of 25 In the cell labeled I/eI! state ho# you honestly thin you #ill li ely stac up in customersG minds. Then chec #hether you thin this factor #ill be a strength of a #ea ness for you. $ometimes it is hard to analy)e our o#n #ea nesses. Try to be very honest here. 'etter yet! get some disinterested strangers to assess you. This can be a real eye0opener. 1nd remember that you cannot be all things to all people. In fact! trying to be so! causes many business failures because it scatters and dilutes your efforts. ,ou #ant an honest assessment of your firmGs strong and #ea points. Do# analy)e each ma-or competitor. In a fe# #ords! state ho# you thin they compare. In the final column! estimate the importance of each competitive factor to the customer. 1 J critical% 5 J not very important.
Table #$ Competitive %nalysis
!actor Products Price )uality &election &ervice *eliability &tability Expertise Company *eputation +ocation %ppearance &ales Met'od Credit Policies %dvertisin Ima e Me &tren t' (eakness Competitor % Competitor " Competitor C Importance to Customer

&aving done the competitive matri"! #rite a short paragraph stating your competitive advantages and disadvantages. Niche Do# that you have systematically analy)ed your industry! your product! your customers and the competition! you should have a clear picture or #here your company fits into the #orld. In one short paragraph! define your niche! your unique corner of the mar et.

Page 11 of 25 Strategy Do# outline a mar eting strategy that is consistent #ith your niche. Promotion &o# #ill you get the #ord out to customersB 1dvertising2 #hat media! #hy! and ho# oftenB Why this mi" and not some otherB &ave you identified lo# cost methods to get the most out of your promotional budgetB Will you use methods other than paid advertising! such as trade sho#s! catalogs! dealer incentives! #ord of mouth *ho# #ill you stimulate itB+! net#or of friends or professionalsB What image do you #ant to pro-ectB &o# do you #ant customers to see youB In addition to advertising! #hat plans do you have for graphic image supportB This includes things li e logo design! cards and letterhead! brochures! signage! and interior design *if customers come to your place of business+. $hould you have a system to identify repeat customers! and then systematically contact themB Promotional "ud et &o# much #ill you spend on the items listed aboveB 'efore startupB *These numbers #ill go into your $tartup budget.+ >ngoingB *These numbers #ill go into your >perating Plan budget.+ Pricin 3"plain your method*s+ of setting process. .or most small businesses! having the lo#est price is not a good policy. It robs you of needed profit margin% customers may not care as much about price as you thin % and large competitors can under0price you any#ay. Esually you #ill do better to have average prices and compete on quality and service. :oes your pricing strategy fit #ith #hat #as revealed in your competitive analysisB 4ompare your prices #ith those of the competition. 1re they higher! lo#er! the sameB WhyB &o# important is price as a competitive factorB :o your intended customers really ma e their purchase decisions mostly on priceB What #ill be your customer service and credit policiesB Proposed +ocation Probably you do not have a precise location pic et out yet. This is the time to thin about #hat you #ant and need in a location. /any startups run successfully from home for a #hile. ,ou #ill describe your physical needs later! in the >perational section of your business plan. &ere in the mar eting section! analy)e your location criteria as they #ill affect your customers.

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Is your location important to your customersB If yes! ho# soB If customers come to your place of business2 Is it convenientB Par ingB Interior spacesB Dot out of the #ayB Is it consistent #ith your imageB Is it #hat customers #ant and e"pectB Where is the competition locatedB Is it better for you to be near them *li e car dealers or fast food restaurants+ or distant *li e convenience food stores+B Distribution C'annels &o# do you sell your productsCservicesB (etail :irect *mail order! #eb! catalog+ Wholesale ,our o#n sales force 1gents Independent reps 'id on contracts Sales Forecast Do# that you have described your products! services! customers! mar ets! and mar eting plans in detail! it is time to attach some numbers to your plan. Ese the Sales Forecast spreadsheet to prepare a month0by0month pro-ection. The forecast should be based upon your historical sales! the mar eting strategies that you have -ust described! upon your mar et research! and industry data! if available. ,ou may #ish to do t#o forecasts2 1+ a Ibest guessI! #hich is #hat you really e"pect! and 2+ a I#orst caseI lo# estimate that you are confident you can reach no matter #hat happens. .or this section! please refer to the Twelve-Month Sales Forecast S readsheet. (emember to eep notes on your research and your assumptions as you build this sales forecast! and all subsequent spreadsheets in the plan. This is critical if you are going to present it to funding sources.

Page 16 of 25

VI.

,perational Plan

3"plain the daily operation of the business! its location! equipment! people! processes! and surrounding environment. Production &o# and #here are your productsCservices producedB 3"plain your methods of2 Production techniques F costs Huality control 4ustomer service Inventory control Product development Location What qualities do you need in a locationB :escribe the type of location you #ill have. Physical requirements2 $pace% ho# muchB Type of building Koning Po#er and other utilities 1ccess2 Is it important that your location be convenient to transportation or to suppliersB :o you need easy #al 0in accessB What are your requirements for par ing! and pro"imity to free#ay! airports! railroads! shipping centersB Include a dra#ing or layout of your proposed facility if it is important! as it might be for a manufacturer. 4onstructionB /ost ne# companies should not sin capital into construction! but if you are planning to build! then costs and specifications #ill be a big part of your plan. 4ost2 3stimate your occupation e"penses! including rent! but also including2 maintenance! utilities! insurance! and initial remodeling costs to ma e it suit your needs. These numbers #ill become part of your financial plan. What #ill be your business hoursB Legal Environment :escribe the follo#ing 5icensing and bonding requirements Permits &ealth! #or place or environmental regulations

Page 17 of 25 $pecial regulations covering your industry or profession Koning or building code requirements Insurance coverage Trademar s! copyrights! or patents *pending! e"isting! or purchased+ Personnel Dumber of employees Type of labor *s illed! uns illed! professional+ Where and ho# #ill you find the right employeesB Huality of e"isting staff Pay structure Training methods and requirements Who does #hich tas sB :o you have schedules and #ritten procedures preparedB &ave you drafted -ob descriptions for employeesB If not! ta e time to #rite some. They really help internal communications #ith employees. .or certain functions! #ill you use contract #or ers in addition to employeesB Inventory What ind of inventory #ill be ept2 ra# materials! supplies! finished goodsB 1verage value in stoc *i.e.! #hat is your inventory investment+B (ate of turnover and ho# this compares to industry averagesB $easonal buildupsB 5ead0time for orderingB Suppliers Identify ey suppliers. Dames F addresses Type F amount of inventory furnished 4redit F delivery policies &istory F reliability $hould you have more than one supplier for critical items *as a bac up+B :o you e"pect shortages or short term delivery problemsB 1re supply costs steady or fluctuatingB If fluctuating! ho# #ould you deal #ith changing costsB Credit Policies :o you plan to sell on creditB

Page 15 of 25 :o you really need to sell on creditB Is it customary in your industry and e"pected by your clienteleB If yes! #hat policies #ill you have about #ho gets credit and ho# muchB &o# #ill you chec the credit#orthiness of ne# applicantsB What terms #ill you offer your customers% i.e.! ho# much credit and #hen is payment dueB Will you offer prompt payment discounts *hint2 do this only if it is usual and customary in your industry+. :o you no# #hat it #ill cost you to e"tend creditB &ave you built the costs into your pricesB Mana in your %ccounts *eceivable If you do e"tend credit! you should do an aging at least monthly! to trac ho# much of your money is tied up in credit given to customers! and to alert you to slo# payment problems. 1 receivables aging loo s li e this2 Total 1ccounts (eceivable 1ging 4urrent 60 :ays <0 :ays A0 :ays >ver A0 :ays

,ou #ill need a policy for dealing #ith slo# paying customers. When do you ma e a phone callB When send a letterB When get your attorney to threatenB Mana in your %ccounts Payable ,ou should also age your 1ccounts Payable! #hat you o#e to your suppliers. This helps you plan #ho to pay and #hen. Paying too early depletes your cash! but paying late can cost you valuable discounts and damage your credit. *&int2 if you no# you #ill be late ma ing a payment! call the creditor before the due date. It tends to rela" them.+ 1re prompt payment discounts offered by your proposed vendorsB 1 payables aging loo s li e this2 Total 1ccounts Payable 1ging 4urrent 60 :ays <0 :ays A0 :ays >ver A0 :ays

Page 1< of 25

VII. Mana ement and or ani-ation

Who #ill manage the business on a day to day basisB What e"perience does that person bring to the businessB What special or distinctive competenciesB Is there a plan for continuation of the business if this person lost or incapacitatedB If you #ill have more than about ten employees! create an organi)ational chart sho#ing the management hierarchy and #ho is responsible for ey functions. Include position descriptions for ey employees. If you are see ing loans or investors! then also include resumes of o#ners and ey employees. Professional and dvisory Support 5ist board of directors and management advisory board. 1ttorney 1ccountant Insurance agent 'an er 4onsultant*s+ /entors and ey advisors in addition to the above

Page 1= of 25

VIII. Personal financial statement

Include personal financial statements for each o#ner and ma-or stoc holder! sho#ing assets and liabilities held outside the business and personal net #orth. >#ners #ill often have to dra# on personal assets to finance the business! and these statements #ill sho# #hat is available. 'an ers and investors usually #ant this information as #ell. Please refer to the Personal Financial Statement $preadsheet.

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I..

&tartup Expenses and Capitali-ation

,ou #ill have many e"penses before you even begin operating your business. It is important to estimate these e"penses accurately! and then to plan #here you #ill get sufficient capital. This is a research pro-ect! and the more thorough your research! the less chance you #ill leave out important e"penses or underestimate them. 3ven #ith the best of research! ho#ever! opening a ne# business has a #ay of costing more than you anticipate. There are t#o #ays to ma e allo#ances for surprise e"penses. The first is to add a little LpaddingM to each item in the budget. The problem #ith that approach! ho#ever! is that it destroys the accuracy of your carefully #rought plan. The second approach is to add a separate line item! #hich #e call contingencies! to account for the unforeseeable. This is the approach #e recommend! and you #ill see a L4ontingenciesM line in our spreadsheet. Tal to others #ho have started similar businesses to get a good idea of ho# much to allo# for contingencies. If you cannot get good information! #e recommend a rule of thumb that contingencies should equal at least 20N of the total of all other startup e"penses. .or this section! please refer to the Startu Ex enses S readsheet. 3"plain your research and ho# you arrived at your forecasts of e"penses. 9ive sources! amounts! and terms of proposed loans. 1lso e"plain in detail ho# much #ill be contributed by each investor and #hat percent o#nership each #ill have.

Page 1A of 25

..

!inancial plan

The financial plan consists of a 120month profit and loss pro-ection! a four0year profit and loss pro-ection *optional+! a cash flo# pro-ection! a pro-ected balance sheet! and a brea even calculation. Together they constitute a reasonable estimate of your companyGs financial future. /ore importantly! ho#ever! the rocess of thin ing through the financial plan #ill improve your insight into the inner financial #or ings of your company. !"elve #onth Profit and Loss Pro$ection /any business o#ners thin of this as the centerpiece of their plan. This is #here you put it all together in numbers and get an idea of #hat it #ill ta e to ma e a profit and be successful. .orecast sales! cost of goods sold! e"penses! and profit month by month for one year. ,our sales pro-ections #ill come from the Twelve-Month Sales Forecast you did in the /ar eting Plan section. Please refer to the Twelve-Month Pro!it and "oss $preadsheet. Profit pro-ections should be accompanied by a narrative e"plaining the ma-or assumptions used to estimate company income F e"penses. (esearch Dotes2 In addition! eep careful notes on your research and assumptions! so you can e"plain them later if necessary! and also so you can go bac to your sources #hen it is time to revise your plan later on. Four %ear Profit Protection &optional' Please refer to the Four-#ear Pro!it Pro$ection spreadsheet. The 120month pro-ection is the heart of your financial plan. &o#ever! #e provide this #or sheet for those #ho #ant to carry their forecasts beyond the first year. It is e"pected of those see ing venture capital. 'an ers pay more attention to the 12 month pro-ection. >f course! eep notes of your ey assumptions! especially about things you e"pect to change dramatically after the first year. Pro$ected Cash flo" Please refer to the Twelve-Month %ash Flow $preadsheet. If the profit pro-ection is the heart of your business plan! then cash flo# is the blood. 'usinesses fail because at some point they cannot pay their bills. 3very part of your business plan is important! but none of it means a thing if you run out of cash. The point of this #or sheet is to plan ho# much you need before startup! for preliminary e"penses! operating e"penses! and reserves. ,ou should eep updating it and using it after#ards

Page 20 of 25 as #ell. It #ill enable you to foresee shortages in time to do something about them% perhaps to cut e"penses! or perhaps to negotiate a loan. 'ut at least not to be ta en by surprise. There is no great tric to preparing it2 the cash flo# pro-ection is -ust a for#ard loo at your chec ing account. Ese the &'-month Pro!it and "oss statement for a starting point. .or each item! determine #hen you actually e"pect to receive cash *for sales+ or #hen you #ill actually have to #rite a chec *for e"pense items+ The bottom section! L3ssential >perating :ataM! is not part of cash flo# but allo#s you to trac items #hich have a heavy impact upon cash flo#! such as sales and inventory purchases. The IPre $tartupI column is for cash outlays prior to opening. ,ou have already researched those for your Startu Ex enses plan. ,our cash flo# #ill sho# you #hether your #or ing capital is adequate. 4learly! if your pro-ected cash balance ever goes negative! you #ill need more startup capital. This plan #ill also predict -ust #hen and ho# much you #ill need to borro#. De# loans go on the line called L5oan C other in-.M. 3"plain your ma-or assumptions% especially! those #hich ma e the cash flo# differ from the Pro!it and "oss Pro$ection. .or e"ample2 If you ma e a sale in month one! #hen do you actually collect the cashB When you buy inventory or materials do you pay in advance! upon delivery! or much laterB &o# #ill this affect cash flo#B 1re some e"penses payable in advanceB WhenB 1re there irregular e"penses such as quarterly ta" payments! maintenance and repairs! or seasonal inventory buildup #hich should be budgetedB 5oan payments! equipment purchases! and o#nerGs dra#s usually do not sho# on profit and loss statements! but definitely do ta e cash out. 'e sure to include them. 1nd of course! depreciation does not appear in the cash flo# at all because you never #rite a chec for it. Opening (ay )alance Sheet 1 balance sheet is one of the fundamental financial reports #hich any business needs for reporting and financial management. 1 balance sheet sho#s #hat items of value are held by the company *1ssets+! and #hat its debts are *5iabilities+. When liabilities are subtracted from assets! the remainder is >#nersO 3quity. Ese your Startu Ex enses and %a itali(ation spreadsheet as a guide to preparing a balance sheet as of opening day. Please refer to the >pening :ay )alance Sheet $preadsheet.

Page 21 of 25 In this section of your business plan e"plain ho# you calculated the account balances on your * ening +ay )alance Sheet. >PTI>D152 $ome people #ant to add a pro-ected balance sheet sho#ing the estimated financial position of the company at the end of the first year. This is especially useful #hen selling your proposal to investors. If you #ant to do this! use the Pro$ected )alance Sheet spreadsheet template in our 3stablished 'usiness plan. )rea*even nalysis 1 brea even predicts the sales volume! at a given price! required to recover total costs. In other #ords! itOs the sales level that is the dividing line bet#een operating at a loss and operating at a profit . 3"pressed as a formula! brea even is2 'rea even $ales J .i"ed 4osts 10 ;ariable 4osts

*Where fi"ed costs are e"pressed in dollars! but variable costs are e"pressed as a percent of total sales.+ Please refer to the )reakeven ,nalysis $preadsheet. Include all assumptions upon #hich your brea even calculation is based.

Page 22 of 25

.I.

%ppendices

.ollo#ing is a list of all the spreadsheets required in this business plan in order of appearance2 /ame of spreads'eet !ilename 120month $ales .orecast T': Personal .inance $tatement T': $tartup 3"penses T': 120month Profit and 5oss T': 70year Profit pro-ection T': 120/onth 4ash .lo# T': >pening :ay 'alance $heet T': 'rea even 1nalysis T': Include details F studies used in your 'usiness Plan% for e"ample2 'rochures F advertising materials Industry studies 'lueprints F plans /aps F photos of location /aga)ine or other articles :etailed lists of equipment o#ned or to be purchased 4opies of leases F contracts 5etters of support from future customers 1ny other materials needed to support the assumptions in this plan /ar et research studies 5ist of assets available as collateral for a loan

Page 26 of 25

.II. *efinin t'e Plan

The generic business plan presented above should be modified to suit your specific type of business and the audience for #hich the plan is #ritten. For Raising Capital !or "ankers 'an ers #ant assurance of orderly repayment. If you intend using this plan to present to lenders! include2 1mount of loan &o# the funds #ill be used What #ill this accomplish *ho# #ill it ma e the business strongerB+ (equested repayment terms *number of years to repay+. ,ou #ill probably not have much negotiating room on interest rate! but may be able to negotiate a longer repayment term! #hich #ill help cash flo#. 4ollateral offered! and list of all e"isting liens against collateral !or Investors Investors have a different perspective. They are loo ing for dramatic gro#th! and they e"pect to share in the re#ards. .unds needed short term .unds needed in 2 to 5 years &o# company #ill use funds! and #hat this #ill accomplish for gro#th. 3stimated return on investment 3"it strategy for investors *buybac ! sale! or IP>+ Percent of o#nership you #ill give up to investors /ilestones or conditions you #ill accept .inancial reporting to be provided Involvement of investors on the 'oard or in management Refine for type of +usiness Manufacturin Planned production levels 1nticipated levels of direct production costs and indirect *overhead+ costs 00 ho# do these compare to industry averages *if available+ Prices per product line 9ross profit margin! overall and for each product line ProductionC 4apacity limits of planned physical plant ProductionC 4apacity limits of equipment Purchasing and inventory management procedures De# products under development or anticipated to come on line after startup

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&ervice "usinesses $ervice businesses sell intangible products. They are usually more fle"ible than other types of business! but they also have higher labor costs and generally very little in fi"ed assets. What are the ey competitive factors in this industryB ,our prices /ethods used to set prices $ystem of production management Huality control procedures. $tandard or accepted industry quality standards &o# #ill you measure labor productivityB Percent of #or subcontracted to other firms. Will you ma e a profit on subcontractingB 4redit! payment! and collections policies and procedures $trategy for eeping client base 0i ' Tec'nolo y Companies 3conomic outloo for the industry. Will the company have info systems in place to manage rapidly changing prices! costs! and mar etsB Will you be on the cutting edge #ith your products and servicesB What is the status of (F:B 1nd #hat is required to2 1. 'ring productCservice to mar etB 2. Peep the company competitiveB &o# does the company2 1. Protect intellectual propertyB 2. 1void technological obsolescenceB 6. $upply necessary capitalB 7. (etain ey personnelB &igh tech companies sometimes have to operate for a long time #ithout profits! and sometimes even #ithout sales. If this fits you! then ban er probably #ill not #ant to lend to you. ;enture capitalists may invest! but your story must be very good. ,ou must do longer term financial forecasts to sho# #hen profit ta e0off is e"pected occur. 1nd your assumptions must be #ell documented and #ell argued. *etail "usiness 4ompany image. Pricing2 3"plain mar up policies. Prices should be profitable! competitive and in accord #ith company image. Inventory2 $election and price should be consistent #ith company image. Inventory 5evel2 .ind industry average numbers for annual inventory turnover rate *available in (/1 boo +. /ultiply your initial inventory investment times the average

Page 25 of 25 turnover rate. The result should be at least equal to your pro-ected first yearGs 4ost of 9oods $old. If it is not! then you may not have enough budgeted for startup inventory. 4ustomer service policies2 should be competitive and in accord #ith company image. 5ocation2 :oes it give the e"posure you needB Is it convenient for customersB Is it consistent #ith company imageB Promotion2 methods used! cost. :oes it pro-ect a consistent company imageB 4redit2 :o you e"tend credit to customersB If yes! do you really need to! and do you factor the cost into pricesB