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BUSINESS PLAN GUIDELINES
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BUSINESS PLAN
GUIDELINES
Every business can benefit from the
preparation of a carefully written business plan. The purpose of the business
plan is to:
1. Help you think
through the venture and ensure you have considered all your options and
anticipated any potential difficulties.
2. Convince lenders and
investors that you are in control of the project and that their money will be
safe with you.
3. Serve as an operating
guide as you turn your idea into a viable business.
4. Furnish a standard
against which to judge future business decisions and results.
Give your plan a businesslike
appearance by typing on high quality paper and putting it in a vinyl or
cardstock binder or a three-ring binder.
REFINING YOUR
BUSINESS PLAN
The generic business plan outline should be
modified to suit your specific type of business and the audience for which the
plan is written.
1. For Raising Capital
For
Bankers
Bankers
want assurance of orderly repayment. If you intend using this plan to present
to lenders, include:
§ Amount of loan
§ How the funds will be
used
§ What will this
accomplish (how will it make the business stronger?)
§ Requested 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.
§ Collateral offered,
and list of all existing liens against collateral
For
Investors
Investors
have a different perspective. They are looking for dramatic growth, and they
expect to share in the rewards.
§ Funds needed short
term
§ Funds needed in 2 to
5 years
§ How company will use
funds, and what this will accomplish for growth.
§ Estimated return on
investment
§ Exit strategy for
investors (buyback, sale, or IPO)
§ Percent of ownership
you will give up to investors
§ Milestones or
conditions you will accept
§ Financial reporting
to be provided
§ Involvement of
investors on the Board or in management
2. Refine for Type of Business
Manufacturing
§ Present production
levels
§ Present levels of
direct production costs and indirect (overhead) costs
§ Gross profit margin,
overall and for each product line
§ Possible production
efficiency increases
§ Production/ Capacity
limits of existing physical plant
§ Of expanded plant (if
expansion is planned)
§ Production/ Capacity
limits of existing equipment
§ Of new equipment (if
new equipment is planned)
§ Prices per product
line
§ Purchasing and
inventory management procedures
§ Anticipated
modifications or improvements to existing products
§ New products under
development or anticipated
Service
Businesses
Service
businesses sell intangible products. They are usually more flexible than other
types of business, but they also have higher labor costs and generally very
little in fixed assets.
§ Prices
§ Methods used to set
prices
§ System of production
management
§ Quality control
procedures
§ Standard or accepted
industry quality standards
§ How is labor
productivity measured?
§ What percent of total
available hours are actually billed to customers?
§ Breakeven billable
hours
§ Percent of work
subcontracted to other firms
§ Profit on
subcontracting?
§ Credit, payment, and
collections policies and procedures
§ Strategy for keeping
client base
§ Strategy for
attracting new clients
High
Technology Companies
§ Economic outlook for
the industry
§ Does company have info
systems in place to manage rapidly changing prices, costs, and markets?
§ Is company on cutting
edge with its products and services?
§ What is the status of
R&D? And what is required to:
§ Bring product/service
to market?
§ Keep the company
competitive?
§ How does the company:
o
Protect
intellectual property?
o
Avoid
technological obsolescence?
o
Supply
necessary capital?
o
Retain
key personnel?
§ If your company is not
yet profitable or perhaps does not yet even have sales, you must do longer-term
financial forecasts to show when profit take-off will occur. And your assumptions must be well document
and well argued.
Retail
Business
§ Company image
§ Pricing:
o Explain markup
policies.
o Prices should be
profitable, competitive and in accord with the company image.
§ Calculate your annual
inventory turnover rate. Compare this to industry average for your type store.
§ Customer service
policies: should be competitive and in accord with company image.
§ Location: Does it give the exposure you need? Is it convenient for customers? Is it consistent with company image?
§ Promotion: methods used, cost. Does it project a consistent company image?
§ Credit: Do you extend credit to customers? If yes, do you really need to, and do you
factor the cost into prices?