The executive summary will provide readers and potential investors a brief yet dynamic description of the key components of the business plan. To make sure it is clear and comprehensive, it is often the last section to be written. A first-time reader should be able to read the summary by itself and know what your business is all about. The summary should stand-alone and should not refer to other parts of your business plan.

The summary, between one to three pages in length, will motivate readers to continue reading the remainder of the business plan in more detail.

The summary should include the following subsections:

Business Description

Provide a brief description of your company. The opening paragraphs should introduce what you do and where. From this section, the investor must be convinced of the uniqueness of the business and gain a clear idea of the market in which the company will operate. The legal form of the business such as LLC, S-Corporation, C-Corporation, Partnership, or Proprietorship should be stated as well as the objectives of the business via a mission statement that clearly states the business’ purpose and values. Include a vision statement as well as where you see the business in five to ten years.

Be sure to answer the following questions that are usually asked by potential investors:

Products and Services

This should include a very brief overview and description of your products and services, with emphasis on distinguishing features.

Be sure to answer the following questions that are usually asked by potential investors:

The Market

Provide a brief description of the market you will be competing in. Here you will define your market, how large it is, and how much of the market share you expect to capture. It is important to reference credible sources and include the name of your source(s) of information along with a date. Indicate how you will market the products/services and which channels will be used to deliver your products/services to your target market(s) (i.e. website, direct sales force, Value Added Resellers, channel partners, etc.).

Be sure to answer the following questions that are usually asked by potential investors:

The Opportunity

Describe the problem or the pain that the customer feels in order to establish that your business is really offering value to the customer. Your business will have much scope if it provides a real solution to an existing or even latent problem.

State the problem clearly. Also outline how the customer is managing to solve the problem at present.

Establish how much pain there is. Higher the level of pain, and lack of solutions, more valuable and in demand your solution would become.

The Solution

The solution is your product or service! However, if you want to set apart from the competition, your solution must be different and unique.

To differentiate yourself, you need to have a very good idea of what your customers need or will need in the future. By providing an intelligent solution, you will help to solve a problem smartly.

Furthermore, your products or services need to have a robust set of features. Your ability to get and retain customers will be greatly enhanced if your product is feature-rich.

If your solution is an elegant one, you will enhance the user experience. Look beyond the core product or service and anticipate how to enrich your customers’ experience and the image in using your product. Remember that your customer gets an enhanced experienced not just while using product, but all the way from purchase decision to using and after service.

Competition

It is important to show the reader that you have investigated the competition. Identify the direct and indirect competitors, with analysis of their pricing and promotional strategies, as well as an assessment of their competitive advantage.

Based on this analysis, you can identify key obstacles for your business, the additional services you might offer, competitive challenges, as well as opportunities ahead. Briefly describe the competitive outlook and dynamics of the relevant market in which you will operate.

Be sure to answer the following questions that are usually asked by potential investors:

You may also wish to include the following table:

Main Competitors

Competitor NameSalesMarket ShareNature/Type

Operations

Operations is defined as the processes used to deliver your products and services to the marketplace and can include manufacturing, transportation, logistics, travel, printing, consulting, after-sales service, and so on. This section should briefly outline how you will implement all of the above and include a brief description of the organizational structure and the expense and capital requirements for operation.

Be sure to answer the following questions that are usually asked by potential investors:

Management Team

The quality of a company’s management team is one of the best predictors of success, thus investors will look very closely at the individuals who will be managing the company. The ideal scenario is that senior managers have previously started and successfully managed companies in the same business. If your management team cannot show this kind of background, you should emphasize the previous relevant experiences of the team. Mention past experiences, education, positions held and milestones achieved.

Be sure to answer the following questions that are usually asked by potential investors:

Risks & Opportunity

Risks are a part of any business, especially a new one. In this section, it is important to show potential investors and loan officers you have taken into consideration the risk involved with starting or expanding your venture. Illustrate the market, pricing, product, and management risks as well as how you plan to overcome these risks.

Convey to the investor that the company and product/service truly fills an unmet need in the marketplace. Describe and quantify the opportunity and where you fit. Explain why you are in business along with the reasons why you will be able to take advantage of this opportunity.

Be sure to answer the following questions that are usually asked by potential investors:

Financial Summary

The financial section of the business plan will help you and potential investors (or loan officers) estimate how much money will be required and how much profit and sales will be generated. This process will force you to think through the various scenarios that may arise through the course of business and the respective responses to each.

Be sure to answer the following questions that are usually asked by potential investors:

Income Statement SummaryYear 1Year 2Year 3Year 4Year 5RevenueCost of Goods SoldGross Profit Operating Costs Finance & Admin Sales & MarketingTotal ExpensesIncome Before TaxLess: Income TaxNet Income

Balance Sheet Summary Year 1Year 2Year 3Year 4Year 5AssetsLiabilitiesEquity

Capital Requirements

Clearly state the capital needed to start or expand your business. You should have a very clear idea of how much money you will need to operate your business for the first full year. If possible, summarize how much money has been invested in the business to date and how it is being used. Describe why you need the funds and why the opportunity is exciting. Keep in mind that one of the most common causes of new business failures is under-capitalization. Investors and loan officers want to know when they will get their money back, so be sure to explain how and when they will recoup their investment or when you will repay the loan. If the loan for initial capital will be based on security instead of equity, you should also specify the source of collateral. The following tables are useful to portray the sources and uses of funds:

Source of Funds:SourceAmountPercentageOwners’ contributionTerm loansNew equity financingTotal

Use of Funds:CategoryAmountPercentageSales & MarketingCapital ExpendituresG & A ExpensesOtherTotal

Executive Summary Checklist

1. Business Description

The business description is a brief (one or two page) description of the company you have founded or are about to found. This section will be broken down into subsections and should give your reader a good idea of where you are, how you have gotten there and where you foresee your business in the future.

Answer the following questions in one or two paragraphs:

The Business description should include the following subsections:

1.1 Mission Statement

A mission statement is a brief explanation of your company’s reason for being. It can be as short as a marketing tagline (“FinFun is an app that helps consumers manage their personal finances in a fun, convenient way”) or more involved: (“WoufWouf is a dog daycare and grooming salon specializing in convenient services for urban pet lovers. Our mission is to provide service, safety and a family atmosphere, enabling busy dog owners to spend less time taking care of their dog’s basic needs and more time having fun with their pet.”) In general, it’s best to keep your mission statement to one or two sentences.

1.2 Values and Vision

What values does your business live by? Honesty, integrity, fun, innovation and community are values that might be important to your business philosophy.

Vision refers to the long-term outlook for your business. What do you ultimately want it to become? For instance, your vision for your doggie day-care center might be to become a national chain, franchise or to sell to a larger company.

1.3 Industry Overview

Often neglected in many business plans, an industry overview will provide potential investors or loan officers information on the industry that you are entering or already have a stake in. The industry overview should begin with the current situation of the industry and the future of the industry. Where possible, provide information on all the markets in the industry, including the positive or negative affect new products and developments will have on your particular business. When writing this section, it is very important to state or footnote the source of any information and data you have used. Investors and loan officers will want to know how reliable and accurate the information you have provided really is.

1.4 Company Description

Start with the legal name of your business and state the legal form such as LLC, S-Corporation, C-Corporation, Partnership, or Proprietorship. State whether the business is a new business, expanding business, or a takeover of an existing business. Next, explain the actual business you are in, this will include describing the manufacturing of any product, provision and delivery of any service, and so on.

State where your primary office will be located as well as any other facility that your business will operate in and then explain the reasons for that specific location. Give the actual size of each office and/or facility and along with a description of how each will be used and the duration in number of years these facilities will be adequate for operating the business (i.e. number of years used for amortization of their cost).

If your company uses any controlled substances in the manufacturing process or delivery of service be sure to list them along with the jurisdiction of the government agency associated with them. Be sure to indicate that you have obtained the necessary permits/licenses and what are the agencies that regulate them.

1.5 History and Current Status

Summarize the history and current status of your company. If your company is just forming, clearly explain how you came up with the idea to start your business and how you and your partners have met.

If your business is already in operation, state how long you have been in business. Do you have anything to say about previous owners, successes, failures, lessons learned, reputation in community or sales and profit history? Discuss significant past problems and how you survived them.

1.6 Goals and Objectives

In this section, explain in simple terms the objective of your business in a single paragraph.

Express your company’s objectives by answering the following questions:

1.7 Critical Success Factors

Separate from the Goals and Objectives section, the critical success factors identify what needs to be in place or managed to accomplish the objectives.

Questions to address are:

1.8 Company Ownership

This section will identify the owners of the business and should address the following:

Use the following table to clearly show how the ownership will be broken down:

Ownership of CompanyAs of [Date]NameTitle (if Applicable)Number of SharesPercentageTOTAL

2. Products / Services

This section is a detailed description of the products and/or services you will be selling or providing. Since the reader may not be familiar with your product/service, make sure to explain and describe it carefully. Begin to sell your idea by generating some excitement about it. Be honest about capabilities. When potential investors have finished learning about your product or service, they should be enthusiastic about reading the marketing and financial details of your venture.

Try to describe the benefits of your goods and services from a customers’ perspective.

Make sure to include technical specifications, drawings, photos, sales brochures, and other items that you deem appropriate in the appendix.

In a few paragraphs, answer the following questions:

The Products/Services section should include the following subsections:

2.1 Product / Service Description

Begin by stating your Company Name and the product or service you provide. List all products/services in order of highest to lowest sales or importance of product line. If possible, try to refer potential investors and loan officers to patents, diagrams, product displays, or other supporting material.

For each product/service, describe the main features and benefits. State at what stage of growth your product/service is in [introductory, growth, maturity] and when you initially developed your product/service. When possible, provide a historical summary of product developments, introductions, and improvements up to the time of the business plan in a table.

Existing Products

Description of the Products

Description of the Services

Stage of Development

2.2 Unique Features or Proprietary Aspects

In this section you will show how your product or service is unique. Explain the unique value-added characteristics of your product line or service and how these value-added characteristics will in turn give your business a competitive advantage.

Begin by stating why your business is unique (e.g. patent, secret ingredient, new production process, unmatched know-how). Explain how the competition may provide a similar product/service but provide the reasons why your business is able to differentiate itself in the market.

Be sure to give the details on any patents you have applied for, been granted, or been licensed. Provide a summary of the patent in the appendix. Point out your lead product/service and demonstrate how it addresses customer needs and benefits.

2.3 Research and Development

If your business is big enough to have either a Research and Development department or employee, specify the people in charge and their major objectives. List what your Research and Development has accomplished in the past such as innovative products/services. Account for what has been spent in the past year in percentage of revenue or actual dollar amount. If there are any plans for the future, give the percentage of revenue or dollar amount that will be allocated and the duration of the plan.

Selecting a product/service from idea to market can be a difficult task. It is a good idea to have criteria in place for deciding which product/service to move forward with.

These criteria may include but are not limited to:

2.4 Production

This section will give more details on how your product/service is manufactured or delivered. To better assist you in writing this particular section, a product-oriented approach and a service-oriented approach are provided.

Product

There are several things to address when your business is product oriented. First, state if your product(s) is manufactured in-house or assembled in-house from various vendors, then list the raw materials, sub-assemblies, or components used for your product. Identify where you purchase your materials or any manufacturers you may use for sub assembly.

List the critical factors in the production of your product.

Specify and explain capital equipment, material, and labor requirements. Are the above items readily available? Do you have multiple supply sources? List inventory requirements, quality, and technical specifications, and hazardous materials.

Service

Service-oriented businesses will address issues in a different manner. Anyone operating a service-oriented business will state if his or her service is provided by internal staff or subcontracted to field consultants. If there are procedures for delivering the service it will be described in this section.

List the critical factors for the delivery of service.

Specify if there will be a service level that has to be maintained and how you will maintain these levels.

2.5 New and Follow-on Products & Services

As your business expands, there will come a time to launch new products and services. If you already have new products in mind, point them out in this section. Specify whether they will be an extension of an existing product or completely new products. Your plan should include when and how you will launch the product/service (e.g. at major trade shows, industry events, through free samples, contests, etc.).

Provide a target introduction date for the product/service.

Future Products

Market Comparison

In one or two paragraphs, position your new product or service in its marketplace:

3. The Market

The success of many new ventures is often determined by how well they have prepared this section of the business plan. The section itself should be broken down into subsections for industry analysis, market analysis, and competitor analysis. To properly write this section of the business plan, conducting or gathering market research is very important. It is for this reason that we have supplied a short segment on Market Research before the subsections.

Why do market research?

Every business can benefit from doing market research to ensure it is where it wants to be. Use the business planning process as your opportunity to uncover data and question your marketing efforts. Rest assured it will benefit your business in the future and is time well spent.

There are two types of market research: primary and secondary.

Primary market research involves collecting your own data. Some examples of primary research include using the Internet and yellow pages to identify your local, national, and global competition. Conducting surveys, group interviews, and focus groups to learn more about potential consumers and niches for your particular business. Paying for professional research could be hard for anyone starting a new business. However, there are several books on the market, which can show small business owners how to conduct effective research by themselves.

Secondary market research involves using published information such as industry profiles, trade journals, newspapers, demographic profiles, magazines, census data, and books. This type of information is available from public libraries, industry associations, chambers of commerce, vendors who sell to your industry, business information centers, government departments, and agencies.

The Market section should include the following subsections:

3.1 Industry Analysis

The industry analysis subsection should objectively describe the industry in which you will compete. The government and suppliers of equipment for your industry are great sources of information. Use the Internet to research stats and reports. When completed with this section, potential investors and loan officers should understand the dynamics, problems, and opportunities driving your industry.

Try to find answers to the following questions:

General Information

Size, Growth Rate, Trends, Drivers of the Industry

Sensitivity to Economic Cycles & Seasonality

Legal, Political and Economic Factors

Sociocultural Factors

Technological Factors

Finance Norms & Patterns

3.2 Market Analysis

In your market analysis subsection, you must describe the specific market in which you will be competing. Your market will probably be smaller than the entire industry defined above. Much of the research you do for this subsection will be to talk with experts in the marketplace, potential customers, competitors, sales representatives, wholesalers, distributors, and retailers. A thorough research of the market is the most important part in the development of a business plan. As well, it will help to isolate a target market and the behaviors and habits of the people within this market to better understand customer needs and expectations.

If it is a locally based business, you need to evaluate the demand for your product/service within a specific radius, based on what you determine is a reasonable distance from your business. If it is a web-based business or a business that relies on both the Internet and local traffic for revenues, you will need to evaluate demand on a local, national, international, basis. Be sure to identify any voids in the market which are currently not served, and which you presumably will fill. A research report from sites such as Forrester Research can cost hundreds to thousands of dollars. However, you may be able to get some basic information simply by using the Internet and its many search engines and directories.

Market Segmentation and Target Market

Identify and segment the customers in your marketplace. The research you conduct for this subsection will be with customers and potential customers. It is imperative that you do sufficient customer research to convince potential investors (and yourself) that there is an unmet need in the marketplace. The description will be completely different depending on whether you sell to other businesses or directly to consumers. If you sell a consumer product, but sell it through a channel of distributors, wholesalers and retailers, then you must carefully analyze both the end user and the middlemen businesses to which you sell.

You may well have more than one customer group. Identify the most important groups. Then, for each consumer group, construct a Market Segment profile with the following:

Demographics

Geographic

Lifestyle

Psychographics

Buying Factors and Sensitivity

Market Size and Trends

Begin by stating the market you are competing in; how big it is in terms of a dollar amount and your source/date of information. Next, state any future trends you believe will occur in the market and your reasoning behind your beliefs. This can be achieved by listing the primary or secondary research you have performed. Once again, be sure to reference any source of information you have used to show potential investors and loan officers you have done your homework. Some common questions this section should address:

Market Needs

Define any current needs in the market and how your product or service will fulfill those.

Market Growth

Gathering information on historical development and growth will aid in assessing potential market opportunities for the future. Business success is determined by not only recognizing what “today’s” customers want, but also what “tomorrow’s” customers will need. Try to identify the future makeup of the market you are entering and state whether the market will be growing or maturing in the short and long run.

3.3 Competitor Analysis

Competition occurs daily no matter what line of business you are in. Advances in technology can send the profit margins of a successful business into a tailspin causing them to plummet overnight or within a few hours. When considering these and other factors, we can conclude that business is a highly competitive, volatile arena. Because of this volatility and competitiveness, in some cases, it is important to know your competitors, what they have accomplished, and the challenge you have before you. Your competitors have preceded you into the market. They have established position, distribution, market exposure, and a customer base. The success of your business depends on your company’s ability to take market share away from these competitors or to address a segment of the market that is not currently being addressed. If you are anticipating taking market share, you need to explain how you are going to do it. There are a number of issues that you should consider in completing your competitive analysis. Potential investors and loan officers should have the sense that you have insights into your competition that they cannot get from reading the competitors’ website or prospectus.

Competitive Landscape

List your major competitors

Compare your products/services with competition

Use the following table entitled Competitive Analysis to compare your company with your three most important competitors.

In the first column are key competitive factors. Since these vary with each market, you may want to customize the list of factors.

In the cell, labeled “Company” state how you honestly think you stack up in customers’ minds. Then check whether you think this factor is a strength or a weakness for you. Sometimes it is hard to analyze our own weaknesses. Try to be honest. Better yet, get some disinterested strangers to assess you. This can be a real eye-opener.

Now analyze each major competitor. In a few words, state how you think they stack up.

In the final column, estimate how important each competitive factor is to the customer.

1 = critical; 5 = not very important.

Competitive Analysis TableFACTORCompanyStrengthWeaknessComp. AComp. BComp. CImportance to CustomerProductsPriceQualitySelectionServiceReliabilityStabilityExpertiseCompany ReputationLocationAppearanceSales MethodCredit PoliciesAdvertisingImage

Competitive Advantage and Comparative Evaluation

Having done the competitive analysis matrix above, write a short paragraph stating your competitive advantages and disadvantages for both you and your competitors:

Goals

personnel motivation, commitment, productivity ” src=”file:///C:/Users/stephen/AppData/Local/Temp/msohtmlclip1/01/clip_image041.gif” hspace=”12″ v:shapes=”Text_x0020_Box_x0020_101″>Internal Strengths

Market Share and Distribution

Strategic Opportunities

Barriers to Market Entry and Exit

Defined as a cost that must be incurred by a new entrant, entry barriers can benefit some new businesses while stopping others in their tracks. No matter which side of the barrier you are on, it is important to identify any barriers your business will have to overcome or have set in place for new entrants. Some of the more common barriers to entry include:

Barriers to exit limit the ability of a firm to leave a market and can exacerbate rivalry. Examples of entry and exit barriers can be found below: Easy to Enter if there are:

· Common technology

· Little brand loyalty

· Access to distribution channels

· Low scale threshold

Difficult to Enter if there are:

· Patented or proprietary know-how

· Difficulty in brand switching

· Restricted distribution channels

· High scale threshold

Easy to Exit if there are:

· Salable assets

· Low exit costs

· Independent businesses Difficult to Exit if there are:

· Specialized assets

· High exit costs

· Interrelated businesses

4. Marketing & Sales

The Marketing and Sales section of your plan will make or break the prospects for your venture. A great idea is meaningless if you cannot find customers. Carefully drafted and logical financial projections are irrelevant if nobody buys your product/service.

In this Marketing Strategy section, you must convince potential investors and loan officers that there is indeed an eager market for your product. The Marketing Strategy section is where you show how you are going to fit into the market structure you just finished describing. What are unmet needs in the marketplace and how are you going to fill them? How will you differentiate your product/service from your competitors? What unique features, benefits, or capabilities will you bring to the marketplace? Who are your customers?

Research you do for this subsection will be with customers, potential customers, plus any necessary secondary data. It is imperative that you do sufficient customer research to convince potential investors (and yourself) that customers will indeed come flocking to buy your product or service.

Customer research can include simply talking with potential customers to get reactions to your product idea, conducting focus groups, undertaking walk-up or mailed surveys, putting up a mock demonstration of your concept and soliciting customer feedback, and so on.

Be creative in finding ways to get honest customer input about your product or service. Finally, do not inadvertently cook the books here. Since you are enthusiastic about your concept, customers will notice your enthusiasm and often reflect it back to you, leading to erroneous conclusions about customer acceptance. It is therefore preferable to be neutral and factual as you collect data.

The Market Strategies and Sales section should include the following subsections:

4.1 Introduction

Begin with the fundamentals of your marketing plan. State target market segments you wish to penetrate, how you plan to achieve this (e.g. through retail, mail order, multi-level marketing, the Internet) and the period for capturing a specific percentage of the market.

4.2 Market Segmentation Strategy

Explain your strategy for each segment you have described in section 3.2 (Market Segmentation and Target Market). Describe the unmet need of your target consumers that your product/service fulfils or the problem it solves. The main types of segmentation strategies are as follows (you may also choose a combination of strategies):

4.3 Targeting Strategy

Identify the targeting strategy to implement. This will determine which market segments you will focus on. The three main targeting strategies are:

4.4 Positioning Strategy

Here you will include the strategy you will use to position your product vis-à-vis competitors. Some of the common product positioning strategies includes:

Corporate Message and Image

4.5 Product/Service Strategy

Describe how your product/service has been designed and tailored to meet the needs of your target customer and how it will compete in your target market:

4.6 Pricing Strategy

Your pricing strategy is a marketing technique that is part of your overall marketing/positioning strategy. Upon examining the pricing strategy your competition is currently using, explain your pricing strategy and why it will be effective with your target customers.

Begin by stating your pricing strategy. Explain how you arrived at your pricing strategy (e.g. based on cost, gross margin objectives, market prices, perceived value). Point out how your pricing strategy compares to the competition. Be sure to include when you will review your pricing strategy, i.e. monthly, quarterly, annually.

Some common pricing strategies include:

In structuring your pricing plan, make sure you have considered all the following:

4.7 Distribution Channels

A distribution channel consists of the set of people and processes involved in the transfer of a product from producer to ultimate consumer. Describe your distribution strategy and explain why it is the best for your marketplace.

Begin by providing the distribution channels your business will use [WHOLESALERS, CATALOGUERS, MASS MERCHANT RETAILERS, CONSOLIDATORS, DISTRIBUTORS] and how they are good fits for your end users because of [CUSTOMER PROFILE, GEOGRAPHY, SEASONAL SWINGS, OTHER FACTOR]. Then point out the distribution channels used by your competition and the reasons why your choice of distribution channels is advantageous for you.

4.8 Promotion and Advertising Strategy

How you advertise and promote your goods and services is crucial to gaining acceptance in the market and successfully generating a profitable sales volume. Having a good product or service and poor advertising is like not having a business at all. Many business owners operate under the mistaken concept that the business will promote itself, and channel money that should be used for advertising and promotions to other areas of the business. Advertising and promotions, however, are the lifeline of a business and should be treated as such. Your purpose is to introduce, promote, and support your products in the marketplace. Although considered a cost, a properly designed and executed campaign is an investment.

Explain your advertising and promotion strategy. It is critical that you educate your target market about your product or service, inform it about its availability, and regularly communicate your benefits to that market.

Marketing Channels

You must decide how you will generate awareness of your product or service among potential customers. Employing the following promotional activities can generate awareness:

Promotional Budget

There are four common promotional budget methods:

State and give details of the method you will apply to your marketing strategies. Be sure to consider the following questions when completing your promotional budget:

4.9 Sales Strategy

Depending on your business, a strong sales team may be a critical component of your success. Remember: “nothing happens until the sale is made.” An effective sales strategy is critically important for most manufacturers, publishers, software firms, and many service providers. Do not overlook the importance of formulating an effective sales strategy.

4.10 Sales Forecasts

Now that you have described your products, services, customers, markets, and marketing plans in detail, it is time to attach some numbers to your plan. Prepare a month-by-month sales forecast for a projected twelve-month period. The forecast should be based upon your historical sales, the marketing strategies that you have just described, market research, and industry data if available.

It is preferable to do three forecasts: 1) “best case”, 2)” expected case”, and 3) “worst case” (a low estimate that you are confident you can reach no matter what happens).

For this section, please refer to the Sales Forecast in the appendix.

Remember to keep notes on your research and assumptions as you build this sales forecast and all subsequent spreadsheets in the plan. Relate the forecast to your sales history, explaining the major differences between past and projected sales. This is critical if you are going to present it to funding sources.

5. Development

In this section, you will outline how you intend to improve your business. This section is often sadly under-developed in many business plans. Assuming you have a dynamic marketing plan and customers do indeed come flocking for your product/service, you must be able to deliver it to them.

The Development section is a road map of how you are going to get from where you are now to where you want to be in the future. If you are starting a business, what are all of the steps that you need to accomplish to get the business up and running? If you are expanding a business, what do you need to do to make it grow? These steps can be as routine as securing retail space, or as critical as applying for and getting a patent on key technology. Do not go into too much detail here. For example, the need to get business cards printed probably does not belong in a development plan (although you might include it in a detailed checklist in the appendices). Use your judgment.

The Development section should include the following subsections:

5.1 Development Strategy

What work remains to launch your company and your products? What factors need to come together to make your concept work? What are the risks threatening the successful implementation of your development plan? Are they technological risks, cost risks, competitive risks? How will you mitigate these risks?

5.2 Development Timeline

What is your timetable for launching your company and your products? Go out as far in the future as you have can. Consider adding a chart or table here.

5.3 Development Expenses

Include here a description of the development costs and assumptions that appear in your financial statements.

6. Management

Venture capitalists often assert that there are three attributes important for a successful start-up business: management, management, and management. Many venture capitalists claim they will invest in a strong management team with a mediocre idea but will decline to fund a weak management team with a great idea. The purpose of the Management section, therefore, is to convince potential investors and loan officers that you have a great management team to complement a great business concept. This is not the place for modesty or self-depreciation. Be honest but highlight your accomplishments and your capabilities while mitigating any obvious shortcomings or weaknesses. For example, if you are young and inexperienced, accentuate your energy, capacity for hard work, and willingness to learn, while downplaying your lack of experience. When readers are finished with this section, you want them to be confident that your venture is in good hands and will be competently managed.

The Management section should include the following subsections:

6.1 Company Organization

Describe how your company will be organized.

6.2 Management Team

Biographies of the Management Team

The management section should include the names and backgrounds of lead members of the management team and their respective responsibilities. Describe the founders and principal managers who will run your business.Officers and Key EmployeesAge% of OwnershipPresidentVice President of Sales & MarketingVice President of FinanceVice President of OperationsVice President of R & DControllerCorporate Attorney

6.3 Management Structure and Style

Organizational Chart

If you have more than ten employees, do an organizational chart showing the management hierarchy and who is responsible for key functions. A very simple organizational chart will help explain how the company is organized, the reporting structure, and the positions that you plan to fill. The chart should reflect both current and open positions, or you can have two charts – pre- and post-funding. Two charts would be more applicable if you foresee significant changes in the organizational structure after funding.

Management Style

6.4 Ownership

In this subsection, you will list the majority owners of the business. State if you have authorized shares of common stock and then break down the number of the shares held and percentage of ownership for each stockholder.Name# Shares Held% Ownership[Founder][Inventor][Management Team][Seed Ventures][Stock Option Pool]

6.5 Professional and Advisory Support

Here you will list service providers your business may consult or from whom you will obtain additional services, who are not a part of your internal staff. These may include:

6.6 Board of [Advisors OR Directors]

If your business will have a Board of Advisors or Directors be sure to list each member, detailing where and why they add strategic importance, what experience they have and what contacts they can contribute. How will the Board be compensated?

7. Operations

The Operations section outlines how you will run your business and deliver value to your customers. Operations is defined as the processes used to produce your products/services and deliver them to the marketplace and can include manufacturing, transportation, logistics, travel, printing, consulting, after-sales service, and so on. Likely, about 80% of your expenses will be for operations, 80% of your employees will be working in operations, and 80% of your time will be spent worrying about operating problems and opportunities. Be sure that you carefully link the design of your operations to your marketing plan. For example, if high quality will be one of your comparative advantages in the marketplace, then design your operations to deliver high quality, not low costs. Remember that you will probably have to make trade-offs with your operations. It is impossible to have the lowest costs, highest quality, and best on-time performance in your industry all at the same time. Often, high quality means higher costs, low costs means less variety and less flexibility. Be careful how you make these trade-offs so that you can deliver products to the market in accordance with your marketing plan.

Operations checklist:

The Operations section should include the following subsections:

7.1 Operations Strategy

In this subsection, describe how you will fulfill your marketing strategy using operations:

7.2 Scope of Operations

Describe the scope of your operations. Include details in an appendix, as necessary.

7.3 Ongoing Operations

How will your company operate on an ongoing basis? Include details in an appendix.

7.4 Location

The location of your business can play a decisive role in its success or failure. Your location should be built around your customers, it should be accessible, and it should provide a sense of security. State where your primary office will be located as well as any other facility where your business will operate and then explain the reasons for those locations. Give the actual size of each office and/or facility and along with a description of how each will be used and the duration in number of years these facilities will be adequate for operations. Some issues you may address include:

addresses, floor plans, etc. • Lease > terms, length, important details • Improvements > plans, funding, budget • Key factors > expansion potential, proximity to market, unique aspects • Physical condition ” src=”file:///C:/Users/stephen/AppData/Local/Temp/msohtmlclip1/01/clip_image068.gif” hspace=”12″ v:shapes=”Text_x0020_Box_x0020_164″>Facilities and Equipment

7.5 Personnel

The right mix of personnel will be the most valuable asset any business has. Employees and staff will play an important role in the overall operation of your business. It is very important to know what skills you possess and the ones you lack since you will have to hire personnel to supply the skills you lack. Furthermore, it is essential that you know how to manage and treat your employees. Make them feel as part of the team. Keep them informed of changes and be sure to get their feedback. Employees can often be a great source of excellent ideas, of innovations to existing products/services, and inspiration for new product lines and markets to enter, so be sure to take the time to listen to your employees as they may provide you with the new competitive edge you have been looking for.

This section should be broken down to include the following:

7.6 Production

Explain your methods of production or how you deliver your service.

7.7 Operations Expenses

Include here a description of the operating costs and assumptions that appear in your financial statements. Most expenses are often referred to as overhead expenses. Overhead expenses are all the non-labor expenses required to operate the business. Expenses can be separated in two ways: fixed (expenses that must be paid no matter the volume of business) and variable or semi-variable (expenses which change according to the amount of business).

Overhead expenses normally include any or all the following:

To develop the overhead expenses for this portion of the business plan, you need to multiply the number of employees by the expenses associated with each employee. The following equation can be used to calculate the sum of each overhead expense:

Overhead = Number of Employees x Expense per Employee

forms, systems (computer), practices • Food and beverage > check systems, management practices, training, periodic inventory • General > management, inventory ” src=”file:///C:/Users/stephen/AppData/Local/Temp/msohtmlclip1/01/clip_image077.gif” hspace=”12″ v:shapes=”Text_x0020_Box_x0020_182″>Cost Controls

Administrative and Financial Controls

7.8 Legal Environment

Describe each of the following elements as they apply to your business:

7.9 Inventory

Explain how you will manage your inventory. Give the details on each of the following elements of inventory:

7.10 Suppliers

Identify the supplies you will use for your products and services. Be sure to document the following in this section:

7.11 Credit Policies

If your business will extend credit, be sure to include detailed descriptions of the policies you will implement. When creating your policies, you should have answers to the following questions:

You need to carefully manage both the credit you extend and the credit you receive.

Managing your Accounts Receivable

You should do an aging 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 aging looks like this: TotalCurrent30 Days60 Days90 DaysOver 90 DaysAccounts Receivable

Aging

Collecting from delinquent customers is no fun. You need a set policy and to follow it.

Managing your Accounts Payable

You should age your Accounts Payable, what you owe to your suppliers. Use this format: TotalCurrent30 Days60 Days90 DaysOver 90 DaysAccounts Receivable

Aging

This helps you plan who to pay and when. Paying too early depletes your cash but paying late can cost you valuable discounts and damage your credit. Are payment discounts offered by your proposed vendors? Do you always take them?

8. Financials

The Financials section should be frosting on a cake. You have outlined a great business concept, demonstrated a real need in the marketplace, shown how you will execute your ideas, proven that your team is just right to manage the venture, and now you will show how much money everyone is going to make. Note, however, that if your business concept is weak, there is no market for your product/service, your execution is poor, or if your management team is incompetent, then your financial plans are doomed to failure. If you have not convinced your potential investors and loan officers by now of the strength of your concept, then they will not be convinced by your financials.

It is important to have strong, well-constructed financials. If you cannot show that your great concept is going to make (lots of) money, your potential investors and loan officers will quickly lose interest. To construct your financials, it is highly recommended that you start with your development and operations plan to create a schedule or timetable of development and operational activities. From these development activities, you can then create cash-flow projections, income statements, and pro forma balance sheets for at least three years into the future, and sometimes five. As a rule of thumb, your financial projections should extend far enough into the future to the point where your business has achieved stable operations. The first year of your financial statement projections should be month-by-month since cash flows are critical in the early stages of any startup. Second and third year financial statements should be quarterly, and fourth and fifth years should be annual. If possible, it is useful to include best case, expected case, and worse case scenarios for your financials. This allows you and potential investors to explore the upside potential and downside risks of your venture.

Be sure that your financial projections are in congruence with the other sections of your plan. For example, if you say you will open three stores in Year 2 and your financials show you opening five stores, potential investors will quickly lose confidence in your plan.

The Financials section should be a discussion and description of your financial projections — put the actual financial spreadsheets in the appendices. Describe the timing and amount of investment that you will require to achieve your plans. Then demonstrate that this investment is a good one by showing that profits, assets, and ROI are all favorable as the business progresses. When potential investors and loan officers are finished with this section, they should be anxious to invest.

Guidelines

8.1 Start-up Funds

The section should identify all the costs associated with starting the business, expanding a current business, or taking over a business as well as the sources of investment capital and/or borrowed money. Include a start-up budget or estimate to account for the initial cost of the business.

Elements to consider when preparing a start-up budget include:

8.2 Income Statement

The income statement is a financial statement that reveals whether a business has earned a profit or has suffered a loss after a specified period. (Please refer to the appendix for Income Statement template.)

An income statement may also be referred to as a “profit and loss statement” (PNL) or an “operating statement.”

A “Pro Forma Income Statement” is used to show how things will be under given conditions rather than how they are at present.

Be sure to state any assumptions when creating your Income Statement.

8.3 Balance Sheet

The balance sheet is a “snapshot” of what you own and what you owe on a specific date. A “Pro Forma Balance Sheet” shows how things will be in the future, under given conditions, rather than how they are now.

A balance sheet follows a standard format (please refer to the appendix for Balance Sheet template), however, it may contain additional items depending on circumstances relating to the business for which it is prepared. State the assumptions you used for all major changes between your last historical balance sheet and the projection.

8.4 Cash Flow

A cash flow statement identifies monthly inflows and outflows of cash. It reveals whether a company will have enough money to meet its needs on a monthly basis. Use the Income Statement as a starting point. For each item, determine when you expect to receive cash (for sales) or when you will actually have to write a check (for expense items).

Your cash flow will show you whether your working capital is adequate. Clearly if your cash on hand goes negative, you will need more. It will also show when and how much you need to borrow.

Explain your major assumptions, especially those which make the cash flow differ from the Profit and Loss Statement, such as:

8.5 Break-Even Analysis

This section should provide a calculation for the break-even point in dollars and units for the business. Include all assumptions upon which your break-even calculation is based. (Please refer to Appendices for Break-Even Analysis spreadsheet.)

A break-even analysis determines sales volume in dollars, at a given price, required to recover total costs. Expressed as a formula, breakeven is:

Break-Even Sales $ = Fixed Costs / (1 – Variable Costs)

Fixed costs are expressed in dollars, but variable costs are expressed as a percent of the total sales dollar amount. To obtain the break-even point in terms of number of sales, simply divide the break-even sales (dollar amount) by the price of your product.

8.6 Financial History and Analysis

A solid analysis of the past must precede any serious attempt to forecast the future. The Financial History and Ratios spreadsheet allows you to put a great deal of financial information from other statements on a single page for ease of comprehension and analysis. Your financial information is presented in dollars and percentages. Key financial ratios are calculated automatically. You may also enter industry average ratios for comparison.

In an appendix, put year-end balance sheets, operating statements, and business income tax returns for the past 3 years, plus your most current balance sheet and operating statement.

9. Offering / Funding Request

The Offering (or Funding Request) is where you make your pitch for money. If you have decided to seek equity capital, then you need to offer the [POTENTIAL INVESTOR, VENTURE CAPITAL FIRM, ANGEL, ALLIANCE PARTNER, FRIENDS AND FAMILY] a specified share of your company in return for a specific amount of money. If you are seeking a loan, you need to request a potential lender [BANK, CUSTOMER, FRIENDS AND FAMILY] for a specific amount of money in return for the principal plus interest. In either case, it is important that you be specific with your funding needs, sell the advantages of your proposal to the investor, and make it clear how investors can get their money back, i.e. what is their gain (ROI). In addition, it is important that you persuade investors that the deal you are offering is fair to them and is supported by facts. Finally, remember that everything is open to negotiation, so do not give away the farm on the first round.

9.1 Offer

Clearly, state the offer your business will use to approach potential investors. It is important here to consider:

9.2 Capital Requirements

Clearly, state the capital needed to start or expand your business. You should have a very clear idea of how much money you will need to operate your business for the first full year. If possible, summarize how much money has been invested in the business to date and how it is being used. Describe why you need the funds and how both parties will benefit from the opportunity. Keep in mind that one of the most common causes of new business failures is under-capitalization. Investors and loan officers want to know when they will get their money back, so be sure to explain how and when you will repay the investment or loan. If the loan for initial capital will be based on security instead of equity, you should also specify the source of collateral.

9.3 Risk/Opportunity

Risks are a part of any business, especially a new one. Here, it is important to show potential investors and loan officers that you have taken into consideration the risk involved in starting or expanding your venture. Illustrate the market, pricing, product, and management risks as well as how you plan to cope with them.

Convey to the investor that the company and product/service truly fills an unmet need in the marketplace. Describe and quantify the opportunity. Explain why you are in business along with the reasons why you will be able to take advantage of this opportunity.

Be sure to answer the following questions that usually investors ask:

9.4 Valuation of Business

What is the value of your company? How do you calculate this value?

9.5 Exit Strategy

All good business plans include a section that lays out the strategy you will follow should investors decide or need to cash out (end their involvement and recoup their investment). This can involve, for example, selling the business, merging, a buyout by a partner/shareholder, getting acquired or issuing an initial public offering (IPO). The strategy to be laid out here can be based on a target dollar figure you want to reach, revenue growth, the market’s reception to your idea, or a consensus among top officers.

Possible exit strategies can include:

10. Implementation

Implementation is the process of executing a plan or policy so that a concept becomes a reality. To implement a plan properly, managers should communicate clear goals and expectations, and supply employees with the resources needed to help the company achieve its goals

In this section, you must detail what must be accomplished, to achieve your greater objectives. You must clarify objectives, assign tasks with deadlines, and chart your progress toward reaching goals and milestones.

Remember, your objectives should be crystal clear. Setting the right goals and objectives for implementation of your business plan will push you to show up and perform every day.

10.1 Year 1

Summarize the key tasks to be completed during the first year of your business plan. Be short and concise.

10.2 Subsequent years

Explain the implementation of the business plan for the subsequent years. Focus on strategic tasks.

10.3 Contingency plan

Explain the contingency measures in case of the plans going astray for internal or external reasons.

11. Refining the Plan

The generic business plan presented above should be modified to suit your specific type of business and the audience for which the plan is written.

11.1 For Raising Capital

For Bankers

Bankers want assurance of orderly repayment. If you intend on using this plan to present to lenders, iclude:

For Investors

Investors have a different perspective. They are looking for dramatic growth, and they expect to share in the rewards.

11.2 Refine According to Type of Business

Manufacturing

Service Businesses

Service providers sell intangible products. They are usually more flexible than other types of businesses, but they also have higher labor costs and generally very little in fixed assets.

High Technology Companies

If your company is not yet profitable or perhaps does not yet generate sales, you must do longer-term financial forecasts to show when profit take-off will occur. All your assumptions must be well document and well argued.

Retail Business

12. Appendix

The appendix is where you should provide all of the documentation that supports the body of your business plan. Include those documents that are required (e.g. financial projections), those that are helpful (e.g. results of marketing studies), and those that assist in selling your idea (e.g. letters of interest from potential customers). Do not include lots of tangential information such as newspaper clippings or tables of data unless they really serve to bolster your plan. One way to deal with information that is voluminous and/or lengthy (such as a large market research study) is to summarize it and note in the plan that the complete document is available upon request.

Templates for all financial documents below are provided separately in this product.

Appendices checklist:

Include documents which you believe could be of interest to potential investors and loan officers. This may include: