T=
he
business plan consists of a narrative and several financial spreadsheets. T=
he
narrative template is the body of the business plan. It contains over 150
questions divided into several sections. Work through the sections in any o=
rder
you like, except for the Executive Summary which should be done last. Skip any
questions that do not apply to your type of business. When you are through
writing your first draft, you will have a collection of small essays on the
various topics of the business plan. Then you will want to edit them into a
smooth flowing narrative.
T=
he 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 thinking about your
business in a systematic way. The act of planning helps you to think things
through thoroughly, study and research when you are not sure of the facts, =
and
look at your ideas critically. It takes time now, but avoids costly, perhaps
disastrous, mistakes later.
T=
his
business plan is a generic model suitable for all types of businesses. Howe=
ver,
you should modify it to suit your particular circumstances. Before you begi=
n,
review the section entitled Refining the Plan, found at the end of the
narrative. It suggests emphasising certain areas depending upon your type of
business (manufacturing, retail, service, etc.). It also has tips for fine
tuning your plan to make an effective presentation to investors or bankers.=
If
this is why you are writing your plan, then pay particular attention to your
writing style. You will be judged by the quality and appearance of your wor=
k as
well as your ideas.
It
typically takes several weeks to complete a good plan. Most of that time is
spent in research and re-thinking your ideas and assumptions. But then, that is the value of the
process. So make time to do the job properly. Those who do, never regret the
effort. And finally, be sure to keep detailed notes on your sources of
information and the assumptions underlying your financial data.
<=
span
style=3D'mso-spacerun:yes'> =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; =
&nb=
sp;
Business
name: &n=
bsp; Your
Business Name =
&nb=
sp; =
Address: &=
nbsp; &nbs=
p; Address
Line 1
Address
Line 2
Town,
County Postal Code
Telephone:
&=
nbsp; 01234
567890
Fax: &=
nbsp; &nbs=
p; 01234
567890
Email: &=
nbsp; &nbs=
p; someone@example.com
W=
rite this
section last!
W=
e suggest
you make it 2 pages or less.
I=
nclude
everything that you would cover in a 5-minute interview.
E=
xplain the
fundamentals of the proposed business: what will your product be, who will =
be
your customers be, who are the owners, what do you think the future holds f=
or
your business and your industry?
M=
ake it
enthusiastic, professional, complete and concise.
I=
f applying
for a loan, state clearly how much you want, precisely how you are going to=
use
it, and how the money will make your business more profitable, thereby ensu=
ring
repayment.
W=
hat
business will you be in? What will you do?
C=
ompany
goals and objectives: Goals are destinations -- where you want your busines=
s to
be. Objectives are progress markers along the way to goal achievement. For
example, a goal might be to have a healthy, successful company that is a le=
ader
in customer service and has a loyal customer following. Objectives might be
annual sales targets and some specific measures of customer satisfaction.
B=
usiness
philosophy: What is important to you in business?
T=
o whom
will you market your products? Your target market? (State it briefly here -=
you
will do a more thorough explanation in the Marketing section).
D=
escribe
your industry. Is it a growth
industry? What changes do you foresee in your industry, short term and long
term? How will your company be poised to take advantage of them?
Y=
our most
important company strengths and core competencies:
W=
hat
factors will make the company succeed?&nbs=
p;
W=
hat do you
think your major competitive strengths will be?
W=
hat
background experience, skills, and strengths do you personally bring to this
new venture?
L=
egal form
of ownership: Sole Proprietor, Partnership, Corporation, Limited Liability
Corporation (LLC)?
W=
hy have
you selected this form?
D=
escribe in
depth your products and/or services (technical specifications, drawings,
photos, sales brochures, and other bulky items belong in the Appendix).
W=
hat
factors will give you competitive advantages or disadvantages? For example,
level of quality or unique or proprietary features.
W=
hat are
the pricing, fee or leasing structures of your products and/or services?
Market
research - Why?
N=
o matter
how good your product and your service, the venture cannot succeed without
effective marketing. And this begins with careful, systematic research. It =
is
very dangerous to simply assume that you already know about your intended
market. You need to do market research to make sure they are on track. Use =
the
business planning process as your opportunity to uncover data and question =
your
marketing efforts. Your time will be well spent.
Market
research - How?
T=
here are 2
kinds of market research: primary and secondary.
Secondary research means using published infor=
mation
such as industry profiles, trade journals, newspapers, magazines, census da=
ta,
and demographic profiles. This type of information is available in public
libraries, industry associations, chambers of commerce, vendors who sell to
your industry, and government agencies.&nb=
sp;
S=
tart with
your local library. Most librarians are pleased to guide you through their
business data collection. You will be amazed at what is there. There are mo=
re
online sources than you could possibly use. Your Chamber of Commerce has go=
od
information on the local area. Trade associations and trade publications of=
ten
have excellent industry specific data.&nbs=
p;
Primary market research means gathering your own da=
ta. For
example, you could do your own traffic count at a proposed location, use the
yellow pages to identify competitors, and do surveys or focus group intervi=
ews
to learn about consumer preferences.
Professional market research can be very costly, but there are many
books out that show small business owners how to do effective research by
themselves.
<=
span
style=3D'mso-spacerun:yes'> In your marketing plan, be as speci=
fic as
possible; give statistics & numbers and sources. The marketing plan wil=
l be
the basis, later on, of the all-important sales projection.
F=
acts about
your industry:
W=
hat is the
total size of your market?
W=
hat
percent share of the market will you have? (This is important only if you t=
hink
you will be a major factor in the market.)
C=
urrent
demand in target market
T=
rends in
target market - growth trends, trends in consumer preferences, and trends in
product development.
G=
rowth
potential and opportunity for a business of your size
W=
hat
barriers to entry do you face in entering this market with your new company?
Some typical ones are:
o&nb=
sp;
High
capital costs
o&nb=
sp;
High
production costs
o&nb=
sp;
High
marketing costs
o&nb=
sp;
Consumer
acceptance/brand recognition
o&nb=
sp;
Training/skills
o&nb=
sp;
Unique
technology/patents
o&nb=
sp;
Unions
o&nb=
sp;
Transport
costs
o&nb=
sp;
Tariff
barriers/quotas
o&nb=
sp;
And
of course, how will you overcome the barriers?
o&nb=
sp;
How
could the following affect your company?
o&nb=
sp;
Change
in technology
o&nb=
sp;
Government
regulations
o&nb=
sp;
Changing
economy
o&nb=
sp;
Change
in your industry
I=
n the
Products/Services section, you described your products and services as YOU =
see
them. Now describe them from your CUSTOMER'S point of view.
Features
and Benefits
L=
ist all
your major products or services.
F=
or each
product/service:
o&nb=
sp;
Describe
the most important features. That is, what will the product do for t=
he
customer? What is special about it?
o&nb=
sp;
Now,
for each produce/service, describe its benefits. That is, what will =
the
product do for the customer?
N=
ote the
difference between features and benefits, and think about them. For example=
, a
house that gives shelter and lasts a long time is made with certain materia=
ls
and to a certain design; those are its features. Its benefits include pride=
of
ownership, financial security, providing for the family, inclusion in a
neighbourhood. You build features into your product so you can sell the
benefits.
W=
hat
after-sale services will be given? Some examples are delivery, warranty,
service contracts, support, follow up, or refund policy.
I=
dentify
your targeted customers, their characteristics, and their geographic locati=
ons;
i.e., demographics.
T=
he
description will be completely different depending on whether you plan to s=
ell
to other businesses or directly to consumers. If you sell a consumer produc=
t,
but sell it through a channel of distributors, wholesalers and retailers, t=
hen
you must carefully analyse both the end consumer and the middlemen business=
es
to which you sell.
Y=
ou may
well have more than one customer group. Identify the most important
groups. Then, for each consum=
er
group, construct what is called a demographic profile:
o&nb=
sp;
Age
o&nb=
sp;
Gender
o&nb=
sp;
Location
o&nb=
sp;
Income
level
o&nb=
sp;
Social
class/occupation
o&nb=
sp;
Education
o&nb=
sp;
Other
(specific to your industry)
o&nb=
sp;
Other
(specific to your industry)
F=
or
business customers, the demographic factors might be:
o&nb=
sp;
Industry
(or portion of an industry)
o&nb=
sp;
Location
o&nb=
sp;
Size
of firm
o&nb=
sp;
Quality/technology/price
preferences
o&nb=
sp;
Other
(specific to your industry)
o&nb=
sp;
Other
(specific to your industry)
W=
hat
products and companies will compete with you?
L=
ist your
major competitors:
N=
ames &
addresses
W=
ill they
compete with you in across the board, or just for certain products, certain
customers, or in certain locations?
W=
ill you
have important indirect competitors? (For example, video rental stores comp=
ete
with theatres, though they are different types of business.)
H=
ow will
your products/services compare with the competition?
U=
se the
table called Competitive Analysis, below to compare your company with your
three most important competitors. In the first column are key competitive
factors. Since these vary from one industry to another, you may want to
customise the list of factors.
I=
n the cell
labelled "Me", state how you honestly think you will likely stack=
up
in customers' minds. Then check whether you think this factor will be a
strength or a weakness for you. Sometimes it is hard to analyse our own
weaknesses. Try to be very honest here. Better yet, get some disinterested
strangers to assess you. This can be a real eye-opener. And remember that y=
ou
cannot be all things to all people. In fact, trying to be causes many busin=
ess
failures because your efforts become scattered and diluted. You want an hon=
est
assessment of your firm's strong and weak points.
N=
ow analyse
each major competitor. In a few words, state how you think they compare.
I=
n the
final column, estimate the importance of each competitive factor to the
customer. 1 =3D critical; 5 =
=3D not
very important.
=
=
=
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 |
|
|
|
|
|
|
H=
aving done
the competitive matrix, write a short paragraph stating your competitive
advantages and disadvantages.
N=
ow that
you have systematically analysed your industry, your product, your customers
and the competition, you should have a clear picture or where your company =
fits
into the world.
I=
n one
short paragraph, define your niche, your unique corner of the market.
N=
ow outline
a marketing strategy that is consistent with your niche.
Promotion
H=
ow will
you get the word out to customers?
A=
dvertising:
what media, why, and how often? Why this mix and not some other?
H=
ave you
identified low cost methods to get the most out of your promotional budget?=
W=
ill you
use methods other than paid advertising, such as trade shows, catalogues,
dealer incentives, word of mouth (how will you stimulate it?), network of
friends or professionals?
W=
hat image
do you want to project? How do you want customers to see you?
I=
n addition
to advertising, what plans do you have for graphic image support? This incl=
udes
things like logo design, cards and letterhead, brochures, signage, and inte=
rior
design (if customers come to your place of business).
S=
hould you
have a system to identify repeat customers, and then systematically contact
them?
Promotional
Budget
H=
ow much
will you spend on the items listed above?
B=
efore
startup? (These numbers will go into your Startup budget.)
O=
ngoing?
(These numbers will go into your Operating Plan budget.)
Pricing
E=
xplain
your method(s) of setting process. For most small businesses, having the lo=
west
price is not a good policy. It robs you of needed profit margin; customers =
may
not care as much about price as you think; and large competitors can
under-price you anyway. Usually you will do better to have average prices a=
nd
compete on quality and service.
D=
oes your
pricing strategy fit with what was revealed in your competitive analysis?
C=
ompare
your prices with those of the competition. Are they higher, lower, the same?
Why?
H=
ow
important is price as a competitive factor? Do your intended customers real=
ly
make their purchase decisions mostly on price?
W=
hat will
be your customer service and credit policies?
Proposed
Location
P=
robably
you do not have a precise location picked out yet. This is the time to think
about what you want and need in a location. Many startups run successfully =
from
home for a while.
Y=
ou will
describe your physical needs later, in the Operational section of your busi=
ness
plan. Here in the marketing section, analyse your location criteria as they
will affect your customers.
I=
s your
location important to your customers? If yes, how?
If
customers come to your place of business:
I=
s it
convenient? Parking? Interior spaces? Not out of the way?
I=
s it
consistent with your image?
I=
s it what
customers want and expect?
W=
here is
the competition located? Is it better for you to be near them (like car dea=
lers
or fast food restaurants) or distant (like convenience food stores)?
Distribution
Channels
H=
ow do you
sell your products/services?
R=
etail
D=
irect
(mail order, web, catalogue)
W=
holesale
Y=
our own
sales force
A=
gents
I=
ndependent
reps
B=
id on
contracts
N=
ow that
you have described your products, services, customers, markets, and marketi=
ng
plans in detail, it is time to attach some numbers to your plan. Use a sales
forecast spreadsheet to prepare a month-by-month projection. The forecast
should be based upon your historical sales, the marketing strategies that y=
ou
have just described, upon your market research, and industry data, if
available.
Y=
ou may
wish to do two forecasts: 1) a "best guess", which is what you re=
ally
expect, and 2) a "worst case" low estimate that you are confident=
you
can reach no matter what happens.
R=
emember to
keep 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.
E=
xplain the
daily operation of the business, its location, equipment, people, processes,
and surrounding environment.
H=
ow and
where are your products/services produced?
E=
xplain
your methods of:
o&nb=
sp;
Production
techniques & costs
o&nb=
sp;
Quality
control
o&nb=
sp;
Customer
service
o&nb=
sp;
Inventory
control
o&nb=
sp;
Product
development
W=
hat
qualities do you need in a location? Describe the type of location you will
have.
P=
hysical
requirements:
o&nb=
sp;
Space;
how much?
o&nb=
sp;
Type
of building
o&nb=
sp;
Zoning
o&nb=
sp;
Power
and other utilities
A=
ccess:
I=
s it
important that your location be convenient to transportation or to
suppliers?
D=
o you need
easy walk-in access?
W=
hat are
your requirements for parking, and proximity to motorways, airports, rail,
shipping centres?
I=
nclude a
drawing or layout of your proposed facility if it is important, as it might=
be
for a manufacturer.
C=
onstruction?
Most new companies should not sink capital into construction, but if you are
planning to build, then costs and specifications will be a big part of your=
plan.
C=
ost:
Estimate your occupation expenses, including rent, but also including:
maintenance, utilities, insurance, and initial remodelling costs to make it
suit your needs. These numbers will become part of your financial plan.
W=
hat will
be your business hours?
D=
escribe
the following:
L=
icensing
and bonding requirements
P=
ermits
H=
ealth,
workplace or environmental regulations
S=
pecial
regulations covering your industry or profession
Z=
oning or
building code requirements
I=
nsurance
coverage
T=
rademarks,
copyrights, or patents (pending, existing, or purchased)
N=
umber of
employees
T=
ype of
labour (skilled, unskilled, professional)
W=
here and
how will you find the right employees?
Q=
uality of
existing staff
P=
ay
structure
T=
raining
methods and requirements
W=
ho does
which tasks?
D=
o you have
schedules and written procedures prepared?
H=
ave you
drafted job descriptions for employees? If not, take time to write some. Th=
ey
really help internal communications with employees.
F=
or certain
functions, will you use contract workers in addition to employees?
W=
hat kind
of inventory will be kept: raw materials, supplies, finished goods?
A=
verage
value in stock (i.e., what is your inventory investment)?
R=
ate of
turnover and how this compares to industry averages?
S=
easonal
buildups?
L=
ead-time
for ordering?
I=
dentify
key suppliers.
o&nb=
sp;
Names
& addresses
o&nb=
sp;
Type
& amount of inventory furnished
o&nb=
sp;
Credit
& delivery policies
o&nb=
sp;
History
& reliability
S=
hould you
have more than one supplier for critical items (as a backup)?
D=
o you
expect shortages or short term delivery problems?
A=
re supply
costs steady or fluctuating? If fluctuating, how would you deal with changi=
ng
costs?
Do you plan to sell on credit?
Do you really need to sell on credit? Is it customary in your indust=
ry
and expected by your clientele?
If yes, what policies will you have about who gets credit and how mu=
ch?
How will you check the creditworthiness of new applicants?
What terms will you offer your customers; i.e., how much credit and =
when
is payment due?
Will you offer prompt payment discounts (hint: do this only if it is
usual and customary in your industry).
Do you know what it will cost you to extend credit? Have you built t=
he
costs into your prices?
=
Managing your Accounts Receivable
If you do extend credit, you should do an ageing at least monthly, to
track how much of your money is tied up in credit given to customers, and to
alert you to slow payment problems. A receivables ageing looks like this:
|
|
Total |
Current |
30 Days |
60 Days |
90 Days |
Over 90 Days |
|
Accounts Receivable Ageing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
You will need a policy for dealing with slow paying customers.
When do you make a phone call?
When send a letter?
When get your attorney to threaten?
=
Managing your Accounts Payable
You should also age your Accounts Payable, what you owe to your
suppliers. This helps you plan who to pay and when. Paying too early deplet=
es
your cash, but paying late can cost you valuable discounts and damage your
credit. (Hint: if you know you will be late making a payment, call the cred=
itor
before the due date. It tends=
to
relax them.)
Are prompt payment discounts offered by your proposed vendors?
A payables ageing looks like this:
|
|
Total |
Current |
30 Days |
60 Days |
90 Days |
Over 90 Days |
|
Accounts Payable Ageing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W=
ho will
manage the business on a day to day basis? What experience does that person
bring to the business? What special or distinctive competencies? Is there a
plan for continuation of the business if this person lost or incapacitated?=
I=
f you will
have more than about ten employees, create an organisational chart showing =
the
management hierarchy and who is responsible for key functions.
I=
nclude
position descriptions for key employees. If you are seeking loans or invest=
ors,
then also include resumes of owners and key employees.
L=
ist board
of directors and management advisory board.
A=
ttorney
A=
ccountant
I=
nsurance
agent
B=
anker
C=
onsultant(s)
M=
entors and
key advisors in addition to the above
I=
nclude
personal financial statements for each owner and major stockholder, showing
assets and liabilities held outside the business and personal net worth. Ow=
ners
will often have to draw on personal assets to finance the business, and the=
se
statements will show what is available. Bankers and investors usually want =
this
information as well.
Even with the best of research, however,
opening a new business has a way of costing more than you anticipate. There=
are
two ways to make allowances for surprise expenses. The first is to add a li=
ttle
“padding” to each item in the budget. The problem with that
approach, however, is that it destroys the accuracy of your carefully wroug=
ht
plan. The second approach is to add a separate line item, which we call
contingencies, to account for the unforeseeable. This is the approach we
recommend.
Talk to others who have started similar
businesses to get a good idea of how much to allow for contingencies. If you
cannot get good information, we recommend a rule of thumb that contingencies
should equal at least 20% of the total of all other startup expenses.
Explain your research and how you arrived=
at
your forecasts of expenses. Give sources, amounts, and terms of proposed lo=
ans.
Also explain in detail how much will be contributed by each investor and wh=
at
percent ownership each will have.
The financial plan consists of a 12-month profit and loss projection=
, a
four-year profit and loss projection (optional), a cash flow projection, a
projected balance sheet, and a breakeven calculation. Together they constit=
ute
a reasonable estimate of your company's financial future. More importantly,
however, the process
of thinking through the financial plan will improve your insi=
ght
into the inner financial workings of your company.
Many business owners think of this as the centrepiece of their plan.
This is where you put it all together in numbers and get an idea of what it
will take to make a profit and be successful.
Your sales projections will come from a twelve-month sales forecast =
in
which you forecast sales, cost of goods sold, expenses, and profit month by
month for one year.
Profit projections should be accompanied by a narrative explaining t=
he
major assumptions used to estimate company income & expenses.
Research Notes: Keep careful notes on your research and assumptions,=
so
you can explain them later if necessary, and also so you can go back to your
sources when it is time to revise your plan later on.
The 12-month projection is the heart of your financial plan. However=
, we
provide this section for those who want to carry their forecasts beyond the
first year.
Of course, keep notes of your key assumptions, especially about thin=
gs
you expect to change dramatically after the first year.
If the profit projection is the heart of your business plan, then ca=
sh
flow is the blood. Businesses fail because at some point they cannot pay th=
eir
bills. Every part of your business plan is important, but none of it means a
thing if you run out of cash.
The point of this worksheet is to plan how much you need before star=
tup,
for preliminary expenses, operating expenses, and reserves. You should keep
updating it and using it afterwards as well. It will enable you to foresee
shortages in time to do something about them; perhaps to cut expenses, or p=
erhaps
to negotiate a loan. But foremost you shouldn’t be taken by surprise.=
There is no great trick to preparing it: the cash flow projection is
just a forward look at your checking account.
For each item, determine when you actually expect to receive cash (f= or sales) or when you will actually have to write a check (for expense items)<= o:p>
You should track essential operating data, which is not necessarily =
part
of cash flow but allows you to track items which have a heavy impact upon c=
ash
flow, such as sales and inventory purchases.
You should also track cash outlays prior to opening in a pre-startup
column. You should have already researched those for your startup expenses
plan.
Your cash flow will show you whether your working capital is adequat=
e.
Clearly, if your projected cash balance ever goes negative, you will need m=
ore
startup capital. This plan will also predict just when and how much you will
need to borrow.
Explain your major assumptions; especially, those which make the cash
flow differ from the Profit and Loss Projection. For example: If you make a
sale in month one, when do you actually collect the cash? When you buy
inventory or materials do you pay in advance, upon delivery, or much later?=
How will this affect cash flow?
Are some expenses payable in advance? When?
Are there irregular expenses such as quarterly tax payments, mainten=
ance
and repairs, or seasonal inventory buildup which should be budgeted?
Loan payments, equipment purchases, and owner's draws usually do not
show on profit and loss statements, but definitely do take cash out. Be sur=
e to
include them.
And of course, depreciation does not appear in the cash flow at all
because you never write a check for it.
A balance sheet is one of the fundamental financial reports which any
business needs for reporting and financial management. A balance sheet shows what items of
value are held by the company (Assets), and what its debts are (Liabilities=
).
When liabilities are subtracted from assets, the remainder is Owners’
Equity.
Use a startup expenses and capitalisation spreadsheet as a guide to
preparing a balance sheet as of opening day. Then detail how you calculated=
the
account balances on your opening day balance sheet.
OPTIONAL: Some people want to add a projected balance sheet showing =
the
estimated financial position of the company at the end of the first year. T=
his
is especially useful when selling your proposal to investors.
A breakeven predicts the sales volume, at a given price, required to
recover total costs. In other words, it’s the sales level that is the
dividing line between operating at a loss and operating at a profit.
Expressed as a formula, breakeven is:
|
|
|
|
Breakeven Sales &nbs=
p;
=3D |
Fixed Costs |
|
1- Variable Costs |
|
|
|
|
(Where fixed costs are expressed in dollars, but variable costs are
expressed as a percent of total sales.)
Include all assumptions upon which your breakeven calculation is bas=
ed.
I=
nclude
details & studies used in your Business Plan; for example:
B=
rochures
& advertising materials
I=
ndustry
studies
B=
lueprints
& plans
M=
aps &
photos of location
M=
agazine or
other articles
D=
etailed
lists of equipment owned or to be purchased
C=
opies of
leases & contracts
L=
etters of
support from future customers
A=
ny other
materials needed to support the assumptions in this plan
M=
arket
research studies
L=
ist of
assets available as collateral for a loan
T=
he generic
business plan presented above should be modified to suit your specific type=
of
business and the audience for which the plan is written.
For
Bankers
B=
ankers
want assurance of orderly repayment. If you intend using this plan to prese=
nt
to lenders, include:
A=
mount of
loan
H=
ow the
funds will be used
W=
hat will
this accomplish (how will it make the business stronger?)
R=
equested
repayment terms (number of years to repay). You will probably not have much
negotiating room on interest rate, but may be able to negotiate a longer
repayment term, which will help cash flow.
C=
ollateral
offered, and list of all existing liens against collateral
For
Investors
I=
nvestors
have a different perspective. They are looking for dramatic growth, and they
expect to share in the rewards.
F=
unds
needed short term
F=
unds
needed in 2 to 5 years
H=
ow company
will use funds, and what this will accomplish for growth.
E=
stimated
return on investment
E=
xit
strategy for investors (buyback, sale, or IPO)
P=
ercent of
ownership you will give up to investors
M=
ilestones
or conditions you will accept
F=
inancial
reporting to be provided
I=
nvolvement
of investors on the Board or in management
Manufacturing
P=
lanned
production levels
A=
nticipated
levels of direct production costs and indirect (overhead) costs -- how do t=
hese
compare to industry averages (if available)
P=
rices per
product line
G=
ross
profit margin, overall and for each product line
P=
roduction/
Capacity limits of planned physical plant
P=
roduction/
Capacity limits of equipment
P=
urchasing
and inventory management procedures
N=
ew
products under development or anticipated to come on line after startup
Service
Businesses
S=
ervice
businesses sell intangible products. They are usually more flexible than ot=
her
types of business, but they also have higher labour costs and generally very
little in fixed assets.
W=
hat are
the key competitive factors in this industry?
Y=
our prices
M=
ethods
used to set prices
S=
ystem of
production management
Q=
uality
control procedures. Standard or accepted industry quality standards
H=
ow will
you measure labour productivity?
P=
ercent of
work subcontracted to other firms. Will you make a profit on subcontracting=
?
C=
redit,
payment, and collections policies and procedures
S=
trategy
for keeping client base
High
Technology Companies
E=
conomic
outlook for the industry.
W=
ill the
company have info systems in place to manage rapidly changing prices, costs,
and markets?
W=
ill you be
on the cutting edge with your products and services?
W=
hat is the
status of R&D? And what is required to:
B=
ring
product/service to market?
K=
eep the
company competitive?
H=
ow does
the company:
P=
rotect
intellectual property?
A=
void
technological obsolescence?
S=
upply
necessary capital?
R=
etain key
personnel?
H=
igh tech
companies sometimes have to operate for a long time without profits, and
sometimes even without sales. If this fits you, then banker probably will n=
ot
want to lend to you. Venture capitalists may invest, but your story must be
very good. You must do longer term financial forecasts to show when profit
take-off is expected occur. And your assumptions must be well documented an=
d well
argued.
Retail
Business
C=
ompany
image.
Pricing:
<=
span
style=3D'mso-tab-count:1'> &=
nbsp; Explain
markup policies.
<=
span
style=3D'mso-tab-count:1'> &=
nbsp; Prices
should be profitable, competitive and in accord with company &=
nbsp; &nbs=
p; image.
Inventory:
o&nb=
sp;
Selection
and price should be consistent with company image.
o&nb=
sp;
Inventory
Level: Find industry average numbers for annual inventory turnover rate
(available in RMA book). Multiply your initial inventory investment times t=
he
average turnover rate. The result should be at least equal to your projected
first year's Cost of Goods Sold. If it is not, then you may not have enough
budgeted for startup inventory.
Customer service policies:<=
span
lang=3DEN-GB style=3D'mso-ansi-language:EN-GB'> should be competitive and i=
n accord
with company image.
Location: Does it give the exposure you need? Is it
convenient for customers? Is it consistent with company image?
P=
romotion:
methods used, cost. Does it project a consistent company image?
C=
redit: Do
you extend credit to customers? If yes, do you really need to, and do you
factor the cost into prices?
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