Business Plan Basics

Business Plan Basics The Purpose A business plan should clearly define your business, identify your goals, and serve as your company's resume. Developing a business plan will force you to think through some important issues that you may not otherwise consider. Your plan will become a valuable tool as you set out to raise money for your business, and it will provide milestones to gauge your success.

The Plan Business Plan Basics The importance of a comprehensive business plan cannot be overemphasized. A solid and thorough plan can aid in your business’s ability to obtain outside funding, credit from suppliers, experienced management for your operation and finances, promotion and marketing of your business, and achievement of your goals and objectives. "The business plan is a necessity. If the person who wants to start a small business can't put a business plan together, he or she is in trouble," says Robert Krummer, Jr., chairman of First Business Bank in Los Angeles.

Business Plan Basics Getting Started: The preparation List your reasons for wanting to go into business. Some of the most common reasons: Self-management Financial independence Creative freedom Full use of personal skills and knowledge

Next determine what business is right for you: Business Plan Basics Getting Started: The preparation cont’d: Next determine what business is right for you: Do I have any hobbies or interests that are marketable? Consider where your business falls in its industry’s growth cycle; infancy, maturing, or declining. The answer to this question will give you a better sense of how to develop revenue projections. Fully understand the commitment of time, energy, and the resources required to start your new entity. Discuss your intentions with your family to gauge their support, physically and/or financially. Change slide to the following: Access any hobbies or interests you have that may be marketable. Give much consideration to whether the business line (industry) you’re want to enter is in its infancy, maturing, or dormant cycle. The answer to this question will give you greater sense for the type of impact the current cycle will have on projected sales and profits. Prepare yourself mentally for the commitment of time, energy, and resources starting a new business entity will require. Because your family will be impacted in some way, discuss your intentions with them to gauge their level of support (financially).

Identify your business niche. Business Plan Basics Getting Started: The preparation cont’d: Identify your business niche. What business are you interested in starting? What services or products will my business sell? Is the idea practical, and will it fill a need? (create a demand) Find out what and where your business competition is. Determine how and why your business will have an advantage over similar businesses. Plan out how your business will deliver a better quality product or service consistently.

Business Plan Basics Getting Started: The preparation cont’d: The final step is the pre-business checklist. Decide if you have sufficient funds to start the business. (funds from savings, family and friends or, if you will require bank financing). What skills and experience will you bring to the business? What’s the appropriate legal structure? (do some research and find out the most widely chosen legal structure in the industry you are entering, based on your projected sales size) Where will your business be located? What will you name your business? What equipment or supplies will I need? How will your company's business records be maintained? (should you hire an accountant or CPA?) What insurance coverage will be needed? Determine the level of compensation you want, and consider the impact it will have on projections.

The business plan can be divided into four distinct sections: Business Plan Basics What should be included in a business plan? The business plan can be divided into four distinct sections: Description of the business Finances Marketing Management

Statement of purpose (explains the aim of the plan) Business Plan Basics What should be included in a business plan? (cont’d) Statement of purpose (explains the aim of the plan) Table of contents (allows reader to find a specific section) Section One: The Business Description of business Marketing Competition Operating procedures Personnel (Copy of resumes of all principals)

Section Two: Financial Data Business Plan Basics What should be included in a business plan? (cont’d) Section Two: Financial Data Day One Balance sheet Breakeven analysis Pro-forma income projections (profit & loss statements) Three-year summary Detail by month, first year Detail by quarters, second and third years Assumptions upon which projections were based Pro-forma cash flow

Section Three: Supporting Documents Business Plan Basics What should be included in a business plan? (cont’d) Section Three: Supporting Documents Business tax returns if business (if applicable) Personal tax returns of principals for last two years and a personal financial statement (on bank form or accountant prepared) For franchised businesses, a copy of franchise contract and all supporting documents provided by the franchisor Copy of proposed lease (if renting space) Copy of purchase and sales agreement if purchasing an existing business Copy of licenses and other legal documents Copies of letters of intent from suppliers, etc.

Business Plan Basics How the Plan is Used A business plan is a tool with three basic purposes: communication, management, and planning. As a communication tool, it is used to attract investment capital, secure loans, convince workers to hire on, and assist in attracting strategic business partners. The development of a comprehensive business plan shows whether or not a business has the potential to make a profit. It requires a realistic look at almost every phase of business and allows you to show that you have worked out all the problems and decided on potential alternatives before actually launching your business.

How the Plan is Used (cont’d): Business Plan Basics How the Plan is Used (cont’d): As a management tool, the business plan helps you track, monitor and evaluate your progress. By using your business plan to establish timelines and milestones, you can gauge your progress and compare your projections to actual accomplishments. As a planning tool, the business plan guides you through the various phases of your business. A thoughtful plan will help identify roadblocks and obstacles so that you can avoid them and establish alternatives.

Business Plan Basics What's Next Once you have completed your business plan, review it with a friend or business associate. The business plan is a flexible document that should change as your business grows.

Business Plan Basics Questions? Call – TD Bank Steven Hinchee, Relationship Manager (603) 695-3461