Business plan template i

Business Plan for a Startup Business
Introduction
A businessplanconsistsof anarrative andfinancial worksheets.The templateprovidedhere isthe bodyof the
plan.It contains more than100 thoughtprovokingquestions, dividedintosections.Workthroughthe sectionsin
any order;some will come more easily. Althoughthe ExecutiveSummaryisincludedatthe front, holdoff and
write itlast. It’s a summaryof the importantstuff youjustwrote. Skipquestionsthatdonotapplyto your
business.
The real value of creatinga businessplanisnot inhavingthe finishedproductinhand,althoughyouwill be
proudof yourwork. The real benefitisthe processof researching,strategizingandthinkingaboutyourbusiness
fromdifferentareas.Planningwill helpyou thinkthroughthe less“fun”stuff,researchfactsand experience at
your ideas withafreshperspective. Ittakestime now,but cansave you costly,time consumingmistakes later.
Use thistemplate tosuityourspecificconcept.The templatehastipsforfine-tuningyourplantomake an
effectivepresentationtoinvestorsorbankers. If thisiswhyyou’re creatingyourplan,payparticularattentionto
your writingstyle.Youwill be judgedbythe qualityandappearance of yourworkas well as yourideas.
It typicallytakesseveral weekstocomplete agoodplan. Mostof that time isspentinresearchand re-thinking
your ideasandassumptions. Butnowyoualreadyknow,that’sthe value of the process. Somake time to dothe
jobproperly.
We compiledthistemplate fromavarietyof sourcesavailabletoyou,too;SCORE,Microsoft Office templates,
Universityof ChicagoSchool of Business,andseveral blogs.

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Business Plan
OWNERS
Your BusinessName
Address

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I. Table of Contents
I. Table of Contents .........................................................................................................3
II. Executive Summary ......................................................................................................4
III. General Company Description.......................................................................................5
IV. Products and Services...................................................................................................6
V. MarketingPlan.............................................................................................................7
VI. Operational Plan.........................................................................................................15
VII. Management and Organization...................................................................................20
VIII. Personal Financial Statement ......................................................................................21
IX. Startup Expenses and Capitalization ............................................................................22
X. Financial Plan.............................................................................................................23
XI. Appendices ................................................................................................................26
XII. Refining the Plan........................................................................................................27

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II. Executive Summary
Write thissection last.
We suggestthatyou make ittwo pagesor fewer.
Include everythingthatyouwouldcoverina five-minute interview.
Explainthe fundamentalsof the proposed business: Whatwill yourproductbe?Whowill yourcustomers be?
Who are the owners?Whatdo youthinkthe future holdsforyourbusinessandyourindustry?
Make itenthusiastic,professional,complete, andconcise.
If applyingfora loan, state clearlyhowmuch youwant,preciselyhow youare goingtouse it,and howthe
moneywill make yourbusinessmore profitable,therebyensuringrepayment.

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III. General Company Description
What businesswillyoube in? Whatwill youdo?
MissionStatement:Manycompanieshave abrief missionstatement,usuallyin 30 wordsor fewer,explaining
theirreasonforbeing andtheirguidingprinciples. If youwanttodraft a missionstatement,thisisagoodplace
to put itin the plan,followedby:
Company Goalsand Objectives:Goalsare destinations—where youwantyourbusinesstobe. Objectivesare
progressmarkersalongthe wayto goal achievement. Forexample,agoal mightbe to have a healthy,successful
companythat isa leaderincustomerservice and thathasa loyal customerfollowing. Objectivesmightbe
annual salestargetsandsome specificmeasuresof customersatisfaction.
Business Philosophy:Whatisimportanttoyou inbusiness?
To whomwill youmarketyourproducts?(State itbrieflyhere—youwill doamore thoroughexplanationinthe
Marketing Plan section).
Describe yourindustry. Isita growthindustry?Whatchangesdoyou foresee in the industry, shorttermand
longterm?How will yourcompanybe poisedtotake advantage of them?
Describe yourmostimportantcompanystrengthsandcore competencies.Whatfactors will make the company
succeed?Whatdo youthinkyour majorcompetitive strengthswill be? Whatbackgroundexperience,skills,and
strengthsdoyou personallybringtothisnew venture?
Legal formof ownership:Sole proprietor,Partnership,Corporation,Limited liability corporation(LLC)? Why
have youselectedthisform?

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IV. Products and Services
Describe indepthyourproductsor services(technical specifications,drawings,photos,salesbrochures,and
otherbulkyitemsbelongin Appendices).
What factors will give youcompetitive advantagesordisadvantages? Examplesinclude level of qualityorunique
or proprietaryfeatures.
What are the pricing,fee,orleasingstructuresof yourproductsor services?

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V. Marketing Plan
Market research - Why?
No matterhowgood yourproductand your service,the venture cannotsucceedwithouteffectivemarketing.
Andthisbeginswithcareful,systematicresearch. Itisverydangeroustoassume thatyoualreadyknowabout
your intendedmarket. Youneedtodomarketresearchto make sure you’re on track. Use the businessplanning
processas youropportunitytouncoverdata and toquestionyourmarketingefforts. Yourtime will be well
spent.
Market research - How?
There are twokindsof marketresearch:primary and secondary.
Secondaryresearchmeansusingpublishedinformationsuchasindustryprofiles,trade journals,newspapers,
magazines,censusdata,anddemographicprofiles. Thistype of informationisavailable inpubliclibraries,
industryassociations,chambersof commerce, fromvendorswhosell toyourindustry, andfromgovernment
agencies.
Start withyourlocal library. Most librariansare pleasedtoguide youthroughtheirbusinessdatacollection. You
will be amazedatwhat isthere. There are more online sourcesthanyoucouldpossiblyuse. Yourchamberof
commerce hasgood informationonthe local area. Trade associationsandtrade publicationsoftenhave
excellentindustry-specificdata.
Primaryresearchmeansgatheringyourowndata.For example,youcoulddoyourowntrafficcountat a
proposedlocation,use the yellow pagestoidentifycompetitors,anddosurveysorfocus-groupinterviewsto
learnaboutconsumerpreferences. Professional marketresearchcanbe verycostly,butthere are manybooks
that showsmall businessownershowtodoeffectiveresearchthemselves.
In yourmarketingplan,be as specificaspossible;give statistics, numbers,andsources. The marketingplanwill
be the basis,lateron,of the all-importantsalesprojection.
Economics
Facts aboutyour industry:
 What isthe total size of your market?

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 What percentshare of the marketwill youhave?(Thisisimportantonlyif youthinkyouwill be amajor
factor inthe market.)
 Currentdemandintargetmarket.
 Trendsintarget market—growthtrends,trendsinconsumerpreferences,andtrendsinproduct
development.
 Growth potential andopportunityforabusinessof yoursize.
 What barriersto entrydo youface in enteringthismarketwithyournew company? Some typical
barriers are:
o Highcapital costs
o Highproductioncosts
o Highmarketingcosts
o Consumeracceptance andbrandrecognition
o Trainingandskills
o Unique technology andpatents
o Unions
o Shippingcosts
o Tariff barriers and quotas
 Andof course,howwill youovercome the barriers?
 How couldthe followingaffectyourcompany?
o Change intechnology
o Change ingovernmentregulations
o Change inthe economy
o Change inyour industry
Product
In the Products and Services section,youdescribedyourproductsandservicesas yousee them. Now describe them
fromyour customers’ pointof view.
Featuresand Benefits
List all of your majorproductsor services.
For eachproduct or service:
 Describe the mostimportantfeatures.Whatisspecial aboutit?

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 Describe the benefits.Thatis,whatwill the productdofor the customer?
Note the difference betweenfeaturesandbenefits,andthinkaboutthem. Forexample,ahouse thatgives
shelterandlastsa longtime ismade withcertainmaterialsandto a certaindesign;those are itsfeatures. Its
benefitsinclude pride of ownership,financial security,providingforthe family,andinclusioninaneighborhood.
You buildfeaturesintoyourproductso that youcan sell the benefits.
What after-sale serviceswill yougive?Some examplesare delivery,warranty,service contracts,support, follow-
up,and refundpolicy.
Customers
Identifyyourtargetedcustomers,theircharacteristics,andtheirgeographiclocations,otherwise knownastheir
demographics.
The descriptionwill be completelydifferentdependingonwhetheryouplantosell tootherbusinessesor
directlytoconsumers. If yousell aconsumerproduct,but sell itthrougha channel of distributors,wholesalers,
and retailers,youmustcarefullyanalyze boththe endconsumerandthe middlemanbusinessesto whichyou
sell.
You may have more thanone customergroup. Identify the mostimportantgroups. Then,foreachcustomer
group,construct whatis calledademographicprofile:
 Age
 Gender
 Location
 Income level
 Social class and occupation
 Education
 Other(specifictoyourindustry)
For businesscustomers,the demographicfactorsmightbe:
 Industry(orportionof an industry)

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 Location
 Size of firm
 Quality,technology,andprice preferences
Competition
What productsand companieswill compete withyou?
List yourmajorcompetitors:
(Namesandaddresses)
Will theycompete withyou acrossthe board,or just forcertainproducts,certaincustomers,orin certain
locations?
Will youhave importantindirectcompetitors? (Forexample,videorental storescompete withtheaters,
althoughtheyare differenttypesof businesses.)
How will yourproducts orservicescompare withthe competition?
Use the Competitive Analysis table below tocompare yourcompanywithyourtwomost important
competitors. Inthe firstcolumnare keycompetitivefactors. Since these varyfromone industrytoanother,you
may wantto customize the listof factors.
In the column labeled Me, state howyouhonestlythinkyouwillstackupincustomers'minds. Thencheck
whetheryouthinkthisfactorwill be astrengthor a weaknessforyou. Sometimesitishardto analyze ourown
weaknesses.Trytobe veryhonesthere. Betteryet,getsome disinterestedstrangerstoassessyou.Thiscanbe a
real eye-opener. Andrememberthatyoucannot be all thingsto all people. Infact,tryingtobe causesmany
businessfailuresbecause effortsbecomescatteredanddiluted. Youwantanhonestassessmentof your firm's
strongand weakpoints.
Now analyze eachmajorcompetitor. Ina few words,state how youthinktheycompare.
In the final column,estimatethe importance of eachcompetitivefactortothe customer. 1 = critical; 5 = not
veryimportant.

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Table 1: Competitive Analysis
FACTOR Me Strength Weakness Competitor A Competitor B
Importance to
Customer
Products
Price
Quality
Selection
Service
Reliability
Stability
Expertise
Company
Reputation
Location
Appearance
Sales Method
Credit Policies
Advertising
Image
Include ashort paragraph stating yourcompetitiveadvantagesanddisadvantages.
Niche
Nowthat youhave systematicallyanalyzedyourindustry,yourproduct,yourcustomers,andthe competition,
youshouldhave a clearpicture of where yourcompanyfitsintothe world.
In one shortparagraph, define yourniche,yourunique cornerof the market.

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Strategy
Nowoutline amarketingstrategythatisconsistentwithyourniche.
Promotion
How will yougetthe wordout to customers?
Advertising:Whatmedia,why,andhowoften? Whythismix andnot some other?
Have you identifiedlow-costmethodstogetthe most outof yourpromotional budget?
Will youuse methodsotherthanpaidadvertising,suchastrade shows,catalogs,dealerincentives,wordof
mouth(howwill youstimulate it?), andnetworkof friendsorprofessionals?
What image doyou wantto project? How doyou wantcustomersto see you?
In additiontoadvertising,whatplansdo youhave forgraphic image support? Thisincludesthingslike logo
design,cardsand letterhead,brochures,signage,andinteriordesign(if customerscome toyourplace of
business).
Shouldyouhave a systemtoidentifyrepeatcustomersandthensystematicallycontactthem?
Promotional Budget
How muchwill youspendonthe itemslistedabove?
Before startup? (These numberswill gointoyour startupbudget.)
Ongoing?(These numberswillgointoyour operatingplanbudget.)
Pricing
Explainyourmethod ormethods of settingprices.Formostsmall businesses,havingthe lowestprice isnota
goodpolicy. Itrobs youof neededprofitmargin;customersmaynotcare as much aboutprice as you think;and
large competitorscanunderprice youanyway. Usually youwill dobettertohave average pricesandcompete
on qualityandservice.
Doesyour pricingstrategyfitwithwhatwasrevealedinyourcompetitive analysis?
Compare yourprices withthose of the competition. Are theyhigher,lower,the same? Why?

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How importantisprice as a competitive factor?Doyourintendedcustomersreallymake theirpurchase
decisionsmostlyonprice?
What will be yourcustomerservice andcreditpolicies?
ProposedLocation
Probablyyoudonot have a precise locationpickedoutyet.Thisisthe time tothinkaboutwhat youwant and
needina location.Manystartups runsuccessfullyfromhome forawhile.
You will describe yourphysical needslater,inthe Operational Plan section.Here,analyze yourlocationcriteriaas
theywill affectyourcustomers.
Is yourlocationimportanttoyour customers? If yes,how?
If customerscome to your place of business:
Is itconvenient?Parking?Interiorspaces? Notoutof the way?
Is itconsistentwithyourimage?
Is itwhat customerswantand expect?
Where isthe competitionlocated? Isitbetterforyouto be near them(like cardealersorfast-foodrestaurants)
or distant(like convenience-foodstores)?
DistributionChannels:How do you sell your products or services?
Retail
Direct(mail order, Web, catalog)
Wholesale
Your ownsalesforce
Agents/Independentrepresentatives
Bidon contracts

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Sales Forecast
Nowthat youhave describedyourproducts,services,customers,markets,andmarketingplansindetail,it’s
time to attach some numberstoyourplan.Use a salesforecastspreadsheettoprepare amonth-by-month
projection.The forecastshouldbe basedonyourhistorical sales,the marketingstrategiesthatyouhave just
described,yourmarketresearch,andindustrydata,if available.
You may wantto do twoforecasts:1) a "bestguess",whichiswhatyou reallyexpect,and2) a "worstcase"low
estimate thatyouare confidentyoucanreachno matter whathappens.
Remembertokeepnotesonyourresearchandyour assumptionsasyoubuildthissalesforecast andall
subsequentspreadsheetsinthe plan. Thisiscritical if youare goingto presentittofundingsources.

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VI. Operational Plan
Explainthe dailyoperationof the business,itslocation,equipment,people,processes,andsurrounding
environment.
Production
How andwhere are your products or servicesproduced?
Explainyourmethodsof:
 Productiontechniques andcosts
 Qualitycontrol
 Customerservice
 Inventorycontrol
 Productdevelopment
Location
What qualitiesdoyouneedinalocation? Describe the type of locationyou’llhave.
Physical requirements:
 Amountof space
 Type of building
 Zoning
 Powerandotherutilities
Access:
Is itimportantthat yourlocationbe convenienttotransportationortosuppliers?
Do youneedeasywalk-inaccess?
What are yourrequirementsforparkingandproximitytofreeway,airports,railroads, andshippingcenters?

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Include adrawingor layoutof your proposedfacilityif itisimportant,asitmightbe for a manufacturer.
Construction?Mostnewcompaniesshouldnotsinkcapital intoconstruction,butif youare planningtobuild,
costs andspecificationswill be abigpart of your plan.
Cost:Estimate youroccupationexpenses,includingrent,butalsoincluding maintenance,utilities, insurance,and
initial remodelingcoststomake the space suityour needs. These numberswillbecome partof yourfinancial
plan.
What will be yourbusinesshours?
Legal Environment
Describe the following:
 Licensingandbondingrequirements
 Permits
 Health, workplace, orenvironmental regulations
 Special regulationscoveringyourindustryorprofession
 Zoningor buildingcode requirements
 Insurance coverage
 Trademarks,copyrights,orpatents(pending,existing,orpurchased)
Personnel
 Numberof employees
 Type of labor(skilled,unskilled, andprofessional)
 Where and howwill youfindthe right employees?
 Qualityof existingstaff
 Pay structure
 Trainingmethodsandrequirements
 Who doeswhichtasks?

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 Do youhave schedulesandwrittenproceduresprepared?
 Have you draftedjobdescriptionsforemployees?If not,take time towrite some. Theyreallyhelp
internal communicationswithemployees.
 For certainfunctions,willyouuse contractworkersinadditiontoemployees?
Inventory
 What kindof inventorywill youkeep:raw materials,supplies,finishedgoods?
 Average value instock(i.e.,whatisyourinventoryinvestment)?
 Rate of turnoverandhow thiscomparesto the industryaverages?
 Seasonal buildups?
 Lead-time forordering?
Suppliers
Identifykeysuppliers:
 Namesandaddresses
 Type and amountof inventoryfurnished
 Creditanddeliverypolicies
 History and reliability
Shouldyouhave more than one supplierforcritical items(asabackup)?
Do youexpectshortagesorshort-termdeliveryproblems?
Are supplycostssteadyor fluctuating?If fluctuating,how wouldyoudeal withchangingcosts?
Credit Policies
 Do youplan to sell oncredit?
 Do youreallyneedtosell oncredit? Isit customaryinyour industryandexpectedbyyourclientele?
 If yes,what policieswill youhave aboutwhogetscreditandhow much?

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 How will youcheckthe creditworthinessof new applicants?
 What termswill youofferyourcustomers; thatis,how much creditandwhen ispaymentdue?
 Will youofferpromptpaymentdiscounts?(Hint:Dothisonlyif itis usual andcustomary inyour
industry.)
 Do youknowwhat it will costyou to extendcredit? Have youbuiltthe costsintoyourprices?
Managing Your Accounts Receivable
If you do extendcredit,youshoulddoanagingat leastmonthlytotrack how much of your moneyistiedupin
creditgiventocustomersandto alert you to slow paymentproblems. A receivablesaginglookslikethe
followingtable:
Total Current 30 Days 60 Days 90 Days Over 90 Days
Accounts
Receivable
Aging
You will needapolicyfordealingwithslow-payingcustomers:
 Whendo youmake a phone call?
 Whendo yousenda letter?
 Whendo youget yourattorneyto threaten?
Managing Your Accounts Payable
You shouldalsoage youraccounts payable, whatyouowe toyour suppliers. Thishelps youplanwhomtopay
and when. Payingtooearlydepletesyourcash,butpayinglate cancost you valuable discountsand candamage
your credit. (Hint:If youknowyouwill be late makingapayment,call the creditorbefore the due date.)
Do your proposedvendorsoffer promptpaymentdiscounts?
A payablesaginglookslikethe followingtable.
Total Current 30 Days 60 Days 90 Days Over 90 Days
Accounts
Payable Aging

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VII. Management and Organization
Who will manage the businessonaday-to-daybasis?Whatexperience doesthat personbringtothe business?
What special ordistinctive competencies?Isthere aplanfor continuationof the businessif thisperson islostor
incapacitated?
If you’ll have more than 10 employees,create anorganizational chartshowingthe managementhierarchyand
whois responsible forkeyfunctions.
Include positiondescriptionsforkeyemployees. If youare seekingloansorinvestors,include resumesof owners
and keyemployees.
Professional andAdvisory Support
List the following:
 Board of directors
 Managementadvisoryboard
 Attorney
 Accountant
 Insurance agent
 Banker
 Consultantorconsultants
 Mentors and keyadvisors

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VIII. Personal Financial Statement
Include personal financial statementsforeach ownerandmajorstockholder,showingassetsandliabilitiesheld
outside the businessandpersonal networth.Ownerswill oftenhave todraw on personal assetstofinance the
business,andthese statementswill show whatisavailable.Bankersandinvestors usuallywantthisinformation
as well.

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IX. Startup Expenses and Capitalization
You will have manyexpensesbefore youeven beginoperatingyourbusiness. It’simportanttoestimate these
expensesaccuratelyandthentoplanwhere youwill getsufficientcapital. Thisisaresearchproject,andthe
more thoroughyour research efforts,the lesschance thatyouwill leaveoutimportantexpensesor
underestimatethem.
Evenwiththe bestof research,however,openinganew businesshasawayof costingmore than youanticipate.
There are twowaysto make allowancesforsurprise expenses. The firstistoadda little “padding”toeachitem
inthe budget. The problemwiththatapproach,however,isthatitdestroysthe accuracy of yourcarefully
wroughtplan. The secondapproachis to add a separate line item, calledcontingencies,to accountfor the
unforeseeable. Thisisthe approachwe recommend.
Talk to otherswhohave startedsimilarbusinessestogeta goodideaof how muchto allow forcontingencies. If
youcannot getgood information,we recommendarule of thumbthatcontingenciesshouldequal atleast20
percentof the total of all otherstart-upexpenses.
Explainyourresearchandhowyou arrived at yourforecastsof expenses. Give sources,amounts,andtermsof
proposedloans. Alsoexplainindetail howmuchwill be contributedbyeachinvestorandwhatpercent
ownershipeachwill have.

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X. Financial Plan
The financial planconsistsof a 12-monthprofitandlossprojection,afour-yearprofitandlossprojection
(optional),acash-flowprojection,aprojectedbalancesheet,anda break-evencalculation. Togetherthey
constitute areasonable estimateof yourcompany'sfinancial future. More important,the process of thinking
throughthe financial planwill improve yourinsightintothe innerfinancial workingsof yourcompany.
12-MonthProfit andLoss Projection
Many businessownersthinkof the 12-monthprofitandlossprojection asthe centerpiece of theirplan. Thisis
where youputit all togetherinnumbers andgetan ideaof what itwill take to make a profitandbe successful.
Your salesprojectionswill come from asalesforecastinwhichyouforecastsales,costof goodssold,expenses,
and profitmonth-by-monthforone year.
Profitprojectionsshouldbe accompaniedbyanarrative explainingthe majorassumptionsusedtoestimate
companyincome andexpenses.
ResearchNotes:Keep careful notesonyourresearchandassumptions,so thatyoucan explainthemlaterif
necessary,andalsoso thatyou can go back to yoursourceswhenit’stime torevise yourplan.
Four-Year Profit Projection(Optional)
The 12-month projectionisthe heartof your financial plan. Thissectionisforthose whowanttocarry their
forecastsbeyondthe firstyear.
Of course,keepnotesof yourkeyassumptions,especiallyaboutthings thatyouexpectwill change dramatically
afterthe firstyear.
ProjectedCash Flow
If the profitprojectionisthe heartof yourbusinessplan,cashflow isthe blood. Businessesfail because they
cannot paytheirbills. Everypartof your businessplanisimportant,butnone of itmeansa thingif yourun out
of cash.
The pointof thisworksheetistoplanhowmuch youneedbefore startup,forpreliminaryexpenses,operating
expenses, andreserves. Youshouldkeepupdatingitandusingitafterward. Itwill enable youtoforesee

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shortagesintime todo somethingaboutthem—perhapscutexpenses,orperhapsnegotiatealoan. But
foremost,youshouldn’tbe takenbysurprise.
There isno great trickto preparingit: The cash-flow projectionisjustaforwardlookat your checkingaccount.
For eachitem,determine whenyouactuallyexpecttoreceive cash(forsales) orwhenyouwill actuallyhave to
write a check(forexpense items).
You shouldtrackessential operatingdata,whichis notnecessarily partof cashflow butallowsyouto track items
that have a heavyimpacton cash flow,suchas salesandinventorypurchases.
You shouldalsotrack cash outlayspriortoopening ina pre-startupcolumn.Youshould have alreadyresearched
those foryour startupexpenses plan.
Your cash flowwill showyouwhetheryourworkingcapital isadequate.Clearly,if yourprojectedcashbalance
evergoesnegative,youwill needmore start-upcapital.Thisplanwill alsopredictjustwhenandhow muchyou
will needtoborrow.
Explainyourmajorassumptions,especiallythose thatmake the cashflow differfromthe Profit and Loss Projection.
For example,if youmake asale inmonthone,whendoyouactuallycollectthe cash?Whenyou buyinventory
or materials, doyoupay inadvance,upondelivery,ormuchlater?How will thisaffectcashflow?
Are some expensespayable inadvance?When?
Are there irregularexpenses,suchasquarterlytax payments,maintenance andrepairs,orseasonal inventory
buildup, thatshouldbe budgeted?
Loan payments,equipmentpurchases,andowner'sdrawsusuallydonotshow on profitandlossstatementsbut
definitelydotake cashout. Be sure to include them.
Andof course,depreciationdoesnotappear inthe cash flow atall because youneverwrite acheck forit.
Opening Day Balance Sheet
A balance sheetisone of the fundamental financial reports thatanybusinessneedsforreportingandfinancial
management. A balance sheetshowswhatitemsof value are heldbythe company(assets),andwhatitsdebts
are (liabilities). Whenliabilitiesare subtractedfromassets,the remainderis owners’ equity.

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Use a startup expensesand capitalizationspreadsheetasa guide topreparinga balance sheetasof openingday.
Thendetail howyoucalculatedthe accountbalances onyour openingdaybalance sheet.
Optional: Some peoplewanttoadd a projectedbalance sheetshowingthe estimatedfinancial positionof the
company at the endof the firstyear. This isespeciallyuseful whensellingyourproposal toinvestors.
Break-EvenAnalysis
A break-evenanalysispredictsthe salesvolume,atagivenprice,requiredto recovertotal costs.Inotherwords,
it’sthe saleslevel thatisthe dividingline betweenoperatingatalossand operatingat a profit.
Expressedasa formula,break-evenis:
Breakeven Sales = Fixed Costs
1- Variable Costs
(Where fixedcostsare expressedindollars,butvariable costsare expressedasapercentof total sales.)
Include all assumptionsuponwhichyourbreak-evencalculationisbased.

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XI. Appendices
Include details andstudiesusedinyourbusiness plan;forexample:
 Brochures and advertisingmaterials
 Industry studies
 Blueprints andplans
 Maps and photosof location
 Magazine or otherarticles
 Detailed listsof equipmentownedortobe purchased
 Copies of leases andcontracts
 Lettersof supportfrom future customers
 Any othermaterialsneededtosupportthe assumptionsinthisplan
 Market researchstudies
 List of assetsavailable ascollateral foraloan

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XII. Refining the Plan
The genericbusinessplanpresentedabove shouldbe modifiedto suityourspecifictype of businessandthe
audience forwhichthe planiswritten.
For Raising Capital
For Bankers
 Bankerswantassurance of orderlyrepayment.If youintendusingthisplantopresenttolenders,
include:
o Amountof loan
o How the fundswill be used
o What thiswill accomplish—howwillitmake the businessstronger?
o Requestedrepaymentterms(numberof yearsto repay).Youwill probablynothave much
negotiatingroomoninterestrate butmaybe able tonegotiate alongerrepaymentterm,which
will helpcashflow.
o Collateral offered,and a listof all existingliensagainstcollateral
For Investors
 Investorshave adifferentperspective.Theyare lookingfordramaticgrowth,andtheyexpecttoshare in
the rewards:
o Fundsneededshort-term
o Fundsneededin twotofive years
o How the companywill use the funds,andwhatthiswill accomplishforgrowth.
o Estimatedreturnoninvestment
o Exitstrategyfor investors(buyback,sale,orIPO)
o Percentof ownership thatyouwill give uptoinvestors
o Milestonesorconditions thatyouwill accept
o Financial reportingtobe provided
o Involvementof investorsonthe boardor inmanagement
For Type of Business
Manufacturing
 Plannedproductionlevels
 Anticipatedlevelsof directproductioncostsandindirect (overhead) costs—how dothese compare to
industryaverages(if available)?

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 Pricesperproductline
 Gross profitmargin,overall andforeachproduct line
 Production/capacitylimitsof plannedphysical plant
 Production/capacitylimitsof equipment
 Purchasingandinventorymanagementprocedures
 Newproductsunderdevelopmentoranticipatedtocome online afterstartup
Service Businesses
 Service businessessellintangibleproducts.Theyare usuallymore flexible thanothertypesof
businesses,buttheyalsohave higherlaborcostsandgenerallyverylittleinfixedassets.
 What are the keycompetitivefactorsinthisindustry?
 Your prices
 Methodsusedto setprices
 Systemof productionmanagement
 Qualitycontrol procedures.Standardoracceptedindustryquality standards.
 How will youmeasure laborproductivity?
 Percentof worksubcontractedto otherfirms.Will youmake aprofiton subcontracting?
 Credit,payment,andcollectionspoliciesandprocedures
 Strategyfor keepingclientbase
High TechnologyCompanies
 Economicoutlookforthe industry
 Will the companyhave informationsystemsinplace tomanage rapidlychangingprices,costs,and
markets?
 Will yoube on the cuttingedge withyourproductsand services?
 What isthe statusof researchanddevelopment? Andwhatisrequiredto:
o Bringproduct/service tomarket?
o Keepthe companycompetitive?

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 How doesthe company:
o Protectintellectual property?
o Avoidtechnological obsolescence?
o Supplynecessarycapital?
o Retainkeypersonnel?
High-techcompaniessometimeshave tooperate foralongtime withoutprofitsandsometimesevenwithout
sales.If thisfitsyoursituation,abankerprobablywill notwanttolendtoyou. Venture capitalistsmayinvest,
but yourstory mustbe verygood. You must do longer-termfinancial forecaststoshow whenprofittake-off is
expected tooccur. Andyour assumptionsmustbe well documentedandwell argued.
Retail Business
 Companyimage
 Pricing:
o Explainmarkuppolicies.
o Pricesshouldbe profitable,competitive,andinaccordance withcompanyimage.
 Inventory:
o Selectionandprice shouldbe consistentwithcompanyimage.
o Inventory level:Findindustryaverage numbersforannual inventoryturnover rate (available in
RMA book). Multiplyyourinitial inventoryinvestment bythe average turnoverrate. The result
shouldbe at leastequal toyourprojectedfirstyear'scost of goodssold. If it isnot, youmay not
have enoughbudgetedforstartupinventory.
 Customerservice policies: These shouldbe competitive andinaccordwithcompanyimage.
 Location:Does it give the exposure thatyouneed? Isitconvenientforcustomers? Isitconsistentwith
companyimage?
 Promotion:Methodsused,cost. Doesitprojecta consistentcompanyimage?
 Credit:Do youextendcredittocustomers? If yes,doyoureally needto,anddo youfactor the cost into
prices?

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