Executive Summary

Withintheoveralloutlineofthebusinessplan,theexecutivesummarywill
followthetitlepage.Thesummaryshouldtellthereaderwhatyouwant.This
isveryimportant.Alltoooften,whatthebusinessownerdesiresisburiedon
pageeight.Clearlystatewhatyou'reaskingforinthesummary.

Thestatementshouldbekeptshortandbusinesslike,probablynomorethan
halfapage.Itcouldbelonger,dependingonhowcomplicatedtheuseof
fundsmaybe,butthesummaryofabusinessplan,likethesummaryofaloan
application,isgenerallynolongerthanonepage.Withinthatspace,you'll
needtoprovideasynopsisofyourentirebusinessplan.Keyelementsthat
shouldbeincludedare:

1. Businessconcept.Describesthebusiness,itsproductandthemarketit
willserve.Itshouldpointoutjustexactlywhatwillbesold,towhomand
whythebusinesswillholdacompetitiveadvantage.
2. Financialfeatures.Highlightstheimportantfinancialpointsofthe
businessincludingsales,profits,cashflowsandreturnoninvestment.
3. Financialrequirements.Clearlystatesthecapitalneededtostartthe
businessandtoexpand.Itshoulddetailhowthecapitalwillbeused,and
theequity,ifany,thatwillbeprovidedforfunding.Iftheloanforinitial
capitalwillbebasedonsecurityinsteadofequity,youshouldalsospecify
thesourceofcollateral.
4. Currentbusinessposition.Furnishesrelevantinformationaboutthe
company,itslegalformofoperation,whenitwasformed,theprincipal
ownersandkeypersonnel.
5. Majorachievements.Detailsanydevelopmentswithinthecompany
thatareessentialtothesuccessofthebusiness.Majorachievements
includeitemslikepatents,prototypes,locationofafacility,anycrucial
contractsthatneedtobeinplaceforproductdevelopment,orresultsfrom
anytestmarketingthathasbeenconducted.
Whenwritingyourstatementofpurpose,don'twastewords.Ifthestatement
ofpurposeiseightpages,nobody'sgoingtoreaditbecauseit'llbeveryclear
thatthebusiness,nomatterwhatitsmerits,won'tbeagoodinvestment
becausetheprincipalsareindecisiveanddon'treallyknowwhattheywant.
Makeiteasyforthereadertorealizeatfirstglancebothyourneedsand
capabilities.

Business Description
Tell Them All About It
Thebusinessdescriptionusuallybeginswithashortdescriptionofthe
industry.Whendescribingtheindustry,discussthepresentoutlookaswellas
futurepossibilities.Youshouldalsoprovideinformationonallthevarious
marketswithintheindustry,includinganynewproductsordevelopmentsthat
willbenefitoradverselyaffectyourbusiness.Baseallofyourobservations
onreliabledataandbesuretofootnotesourcesofinformationasappropriate.
Thisisimportantifyou'reseekingfunding;theinvestorwillwanttoknow
justhowdependableyourinformationis,andwon'triskmoneyon
assumptionsorconjecture.

Whendescribingyourbusiness,thefirstthingyouneedtoconcentrateonis
itsstructure.Bystructurewemeanthetypeofoperation,i.e.wholesale,
retail,foodservice,manufacturingorserviceoriented.Alsostatewhetherthe
businessisneworalreadyestablished.

Inadditiontostructure,legalformshouldbereiteratedonceagain.Detail
whetherthebusinessisasoleproprietorship,partnershiporcorporation,who
itsprincipalsare,andwhattheywillbringtothebusiness.

Youshouldalsomentionwhoyouwillsellto,howtheproductwillbe
distributed,andthebusiness'ssupportsystems.Supportmaycomeinthe
formofadvertising,promotionsandcustomerservice.

Onceyou'vedescribedthebusiness,youneedtodescribetheproductsor
servicesyouintendtomarket.Theproductdescriptionstatementshouldbe
completeenoughtogivethereaderaclearideaofyourintentions.Youmay
wanttoemphasizeanyuniquefeaturesorvariationsfromconceptsthatcan
typicallybefoundintheindustry.

Bespecificinshowinghowyouwillgiveyourbusinessacompetitiveedge.
Forexample,yourbusinesswillbebetterbecauseyouwillsupplyafullline
ofproducts;competitorAdoesn'thaveafullline.You'regoingtoprovide
serviceafterthesale;competitorBdoesn'tsupportanythinghesells.Your
merchandisewillbeofhigherquality.You'llgiveamoneybackguarantee.
CompetitorChasthereputationforsellingthebestFrenchfriesintown;
you'regoingtosellthebestThousandIslanddressing.

How Will I Profit?

Nowyoumustbeaclassiccapitalistandaskyourself,"HowcanIturna
buck?AndwhydoIthinkIcanmakeaprofitthatway?"Answerthat
questionforyourself,andthenconveythatanswertoothersinthebusiness
conceptsection.Youdon'thavetowrite25pagesonwhyyourbusinesswill
beprofitable.Justexplainthefactorsyouthinkwillmakeitsuccessful,like
thefollowing:it'sawellorganizedbusiness,itwillhavestateoftheart
equipment,itslocationisexceptional,themarketisreadyforit,andit'sa
dynamiteproductatafairprice.

Ifyou'reusingyourbusinessplanasadocumentforfinancialpurposes,
explainwhytheaddedequityordebtmoneyisgoingtomakeyourbusiness
moreprofitable.

Showhowyouwillexpandyourbusinessorbeabletocreatesomethingby
usingthatmoney.

Showwhyyourbusinessisgoingtobeprofitable.Apotentiallenderisgoing
towanttoknowhowsuccessfulyou'regoingtobeinthisparticularbusiness.
Factorsthatsupportyourclaimsforsuccesscanbementionedbriefly;they
willbedetailedlater.Givethereaderanideaoftheexperienceoftheother
keypeopleinthebusiness.They'llwanttoknowwhatsuppliersorexperts
you'vespokentoaboutyourbusinessandtheirresponsetoyouridea.They
mayevenaskyoutoclarifyyourchoiceoflocationorreasonsforsellingthis
particularproduct.
Thebusinessdescriptioncanbeafewparagraphsinlengthtoafewpages,
dependingonthecomplexityofyourplan.Ifyourplanisn'ttoocomplicated,
keepyourbusinessdescriptionshort,describingtheindustryinone
paragraph,theproductinanother,andthebusinessanditssuccessfactorsin
threeorfourparagraphsthatwillendthestatement.

Whileyoumayneedtohavealengthybusinessdescriptioninsomecases,it's
ouropinionthatashortstatementconveystherequiredinformationinamuch
moreeffectivemanner.Itdoesn'tattempttoholdthereader'sattentionforan
extendedperiodoftime,andthisisimportantifyou'representingtoa
potentialinvestorwhowillhaveotherplansheorshewillneedtoreadas
well.Ifthebusinessdescriptionislonganddrawnout,you'lllosethereader's
attention,andpossiblyanychanceofreceivingthenecessaryfundingforthe
project.

Market Strategies
Define Your Market
Marketstrategiesaretheresultofameticulousmarketanalysis.Amarket
analysisforcestheentrepreneurtobecomefamiliarwithallaspectsofthe
marketsothatthetargetmarketcanbedefinedandthecompanycanbe
positionedinordertogarneritsshareofsales.Amarketanalysisalsoenables
theentrepreneurtoestablishpricing,distributionandpromotionalstrategies
thatwillallowthecompanytobecomeprofitablewithinacompetitive
environment.Inaddition,itprovidesanindicationofthegrowthpotential
withintheindustry,andthiswillallowyoutodevelopyourownestimatesfor
thefutureofyourbusiness.

Beginyourmarketanalysisbydefiningthemarketintermsofsize,structure,
growthprospects,trendsandsalespotential.

Thetotalaggregatesalesofyourcompetitorswillprovideyouwithafairly
accurateestimateofthetotalpotentialmarket.Oncethesizeofthemarket
hasbeendetermined,thenextstepistodefinethetargetmarket.Thetarget
marketnarrowsdownthetotalmarketbyconcentratingonsegmentation
factorsthatwilldeterminethetotaladdressablemarketthetotalnumberof
userswithinthesphereofthebusiness'sinfluence.Thesegmentationfactors
canbegeographic,customerattributesorproductoriented.

Forinstance,ifthedistributionofyourproductisconfinedtoaspecific
geographicarea,thenyouwanttofurtherdefinethetargetmarkettoreflect
thenumberofusersorsalesofthatproductwithinthatgeographicsegment.

Oncethetargetmarkethasbeendetailed,itneedstobefurtherdefinedto
determinethetotalfeasiblemarket.Thiscanbedoneinseveralways,but
mostprofessionalplannerswilldelineatethefeasiblemarketbyconcentrating
onproductsegmentationfactorsthatmayproducegapswithinthemarket.In
thecaseofamicrobrewerythatplanstobrewapremiumlagerbeer,thetotal
feasiblemarketcouldbedefinedbydetermininghowmanydrinkersof
premiumpilsnerbeersthereareinthetargetmarket.

It'simportanttounderstandthatthetotalfeasiblemarketistheportionofthe
marketthatcanbecapturedprovidedeveryconditionwithintheenvironment
isperfectandthereisverylittlecompetition.Inmostindustriesthisissimply
notthecase.Thereareotherfactorsthatwillaffecttheshareofthefeasible
marketabusinesscanreasonablyobtain.Thesefactorsareusuallytiedtothe
structureoftheindustry,theimpactofcompetition,strategiesformarket
penetrationandcontinuedgrowth,andtheamountofcapitalthebusinessis
willingtospendinordertoincreaseitsmarketshare.

Projecting Market Share

Arrivingataprojectionofthemarketshareforabusinessplanisverymucha
subjectiveestimate.It'sbasedonnotonlyananalysisofthemarketbuton
highlytargetedandcompetitivedistribution,pricingandpromotional
strategies.Forinstance,eventhoughtheremaybeasizablenumberof
premiumpilsnerdrinkerstoformthetotalfeasiblemarket,youneedtobe
abletoreachthemthroughyourdistributionnetworkatapricepointthat's
competitive,andthenyouhavetoletthemknowit'savailableandwherethey
canbuyit.Howeffectivelyyoucanachieveyourdistribution,pricingand
promotionalgoalsdeterminestheextenttowhichyouwillbeabletogarner
marketshare.
Forabusinessplan,youmustbeabletoestimatemarketshareforthetime
periodtheplanwillcover.Inordertoprojectmarketshareoverthetime
frameofthebusinessplan,you'llneedtoconsidertwofactors:

1. Industrygrowthwhichwillincreasethetotalnumberofusers.Most
projectionsutilizeaminimumoftwogrowthmodelsbydefiningdifferent
industrysalesscenarios.Theindustrysalesscenariosshouldbebasedon
leadingindicatorsofindustrysales,whichwillmostlikelyinclude
industrysales,industrysegmentsales,demographicdataandhistorical
precedence.
2. Conversionofusersfromthetotalfeasiblemarket.Thisisbasedona
salescyclesimilartoaproductlifecyclewhereyouhavefivedistinct
stages:earlypioneerusers,earlyusers,earlymajorityusers,latemajority
usersandlateusers.Usingconversionrates,marketgrowthwillcontinue
toincreaseyourmarketshareduringtheperiodfromearlypioneersto
earlymajorityusers,leveloffthroughlatemajorityusers,anddeclinewith
lateusers.
Definingthemarketisbutonestepinyouranalysis.Withtheinformation
you'vegainedthroughmarketresearch,youneedtodevelopstrategiesthat
willallowyoutofulfillyourobjectives.

Positioning Your Business

Whendiscussingmarketstrategy,it'sinevitablethatpositioningwillbe
broughtup.Acompany'spositioningstrategyisaffectedbyanumberof
variablesthatarecloselytiedtothemotivationsandrequirementsoftarget
customerswithinaswellastheactionsofprimarycompetitors.

Beforeaproductcanbepositioned,youneedtoanswerseveralstrategic
questionssuchas:

1. Howareyourcompetitorspositioningthemselves?
2. Whatspecificattributesdoesyourproducthavethatyourcompetitors'
don't?
3. Whatcustomerneedsdoesyourproductfulfill?
Onceyou'veansweredyourstrategicquestionsbasedonresearchofthe
market,youcanthenbegintodevelopyourpositioningstrategyandillustrate
thatinyourbusinessplan.Apositioningstatementforabusinessplandoesn't
havetobelongorelaborate.Itshouldmerelypointoutexactlyhowyouwant
yourproductperceivedbybothcustomersandthecompetition.

Pricing
Howyoupriceyourproductisimportantbecauseitwillhaveadirecteffect
onthesuccessofyourbusiness.Thoughpricingstrategyandcomputations
canbecomplex,thebasicrulesofpricingarestraightforward:

1. Allpricesmustcovercosts.
2. Thebestandmosteffectivewayofloweringyoursalespricesisto
lowercosts.
3. Yourpricesmustreflectthedynamicsofcost,demand,changesinthe
marketandresponsetoyourcompetition.
4. Pricesmustbeestablishedtoassuresales.Don'tpriceagainsta
competitiveoperationalone.Rather,pricetosell.
5. Productutility,longevity,maintenanceandendusemustbejudged
continually,andtargetpricesadjustedaccordingly.
6. Pricesmustbesettopreserveorderinthemarketplace.
Therearemanymethodsofestablishingpricesavailabletoyou:

Costpluspricing.Usedmainlybymanufacturers,costpluspricing
assuresthatallcosts,bothfixedandvariable,arecoveredandthedesired
profitpercentageisattained.
Demandpricing.Usedbycompaniesthatselltheirproductthrougha
varietyofsourcesatdifferingpricesbasedondemand.
 Competitivepricing.Usedbycompaniesthatareenteringamarket
wherethereisalreadyanestablishedpriceanditisdifficulttodifferentiate
oneproductfromanother.
Markuppricing.Usedmainlybyretailers,markuppricingiscalculated
byaddingyourdesiredprofittothecostoftheproduct.Eachmethodlisted
abovehasitsstrengthsandweaknesses.

Distribution
Distributionincludestheentireprocessofmovingtheproductfromthe
factorytotheenduser.Thetypeofdistributionnetworkyouchoosewill
dependupontheindustryandthesizeofthemarket.Agoodwaytomake
yourdecisionistoanalyzeyourcompetitorstodeterminethechannelsthey
areusing,thendecidewhethertousethesametypeofchanneloran
alternativethatmayprovideyouwithastrategicadvantage.

Someofthemorecommondistributionchannelsinclude:

Directsales.Themosteffectivedistributionchannelistoselldirectly
totheenduser.
OEM(originalequipmentmanufacturer)sales.Whenyourproductis
soldtotheOEM,itisincorporatedintotheirfinishedproductanditis
distributedtotheenduser.
Manufacturer'srepresentatives.Oneofthebestwaystodistributea
product,manufacturer'sreps,astheyareknown,aresalespeoplewho
operateoutofagenciesthathandleanassortmentofcomplementary
productsanddividetheirsellingtimeamongthem.
Wholesaledistributors.Usingthischannel,amanufacturersellstoa
wholesaler,whointurnsellsittoaretailerorotheragentforfurther
distributionthroughthechanneluntilitreachestheenduser.
Brokers.Thirdpartydistributorswhooftenbuydirectlyfromthe
distributororwholesalerandselltoretailersorendusers.
 Retaildistributors.Distributingaproductthroughthischannelis
importantiftheenduserofyourproductisthegeneralconsumingpublic.
DirectMail.Sellingtotheenduserusingadirectmailcampaign.
Aswe'vementionedalready,thedistributionstrategyyouchooseforyour
productwillbebasedonseveralfactorsthatincludethechannelsbeingused
byyourcompetition,yourpricingstrategyandyourowninternalresources.

Promotion Plan
Withadistributionstrategyformed,youmustdevelopapromotionplan.The
promotionstrategyinitsmostbasicformisthecontrolleddistributionof
communicationdesignedtosellyourproductorservice.Inorderto
accomplishthis,thepromotionstrategyencompasseseverymarketingtool
utilizedinthecommunicationeffort.Thisincludes:

Advertising.Includestheadvertisingbudget,creativemessage(s),and
atleastthefirstquarter'smediaschedule.
Packaging.Providesadescriptionofthepackagingstrategy.If
available,mockupsofanylabels,trademarksorservicemarksshouldbe
included.
Publicrelations.Acompleteaccountofthepublicitystrategyincluding
alistofmediathatwillbeapproachedaswellasascheduleofplanned
events.
Salespromotions.Establishesthestrategiesusedtosupportthesales
message.Thisincludesadescriptionofcollateralmarketingmaterialas
wellasascheduleofplannedpromotionalactivitiessuchasspecialsales,
coupons,contestsandpremiumawards.
Personalsales.Anoutlineofthesalesstrategyincludingpricing
procedures,returnsandadjustmentrules,salespresentationmethods,lead
generation,customerservicepolicies,salespersoncompensation,and
salespersonmarketresponsibilities.
Sales Potential
Oncethemarkethasbeenresearchedandanalyzed,conclusionsneedtobe
developedthatwillsupplyaquantitativeoutlookconcerningthepotentialof
thebusiness.Thefirstfinancialprojectionwithinthebusinessplanmustbe
formedutilizingtheinformationdrawnfromdefiningthemarket,positioning
theproduct,pricing,distribution,andstrategiesforsales.Thesalesor
revenuemodelchartsthepotentialfortheproduct,aswellasthebusiness,
overasetperiodoftime.Mostbusinessplanswillprojectrevenueforupto
threeyears,althoughfiveyearprojectionsarebecomingincreasinglypopular
amonglenders.

Whendevelopingtherevenuemodelforthebusinessplan,theequationused
toprojectsalesisfairlysimple.Itconsistsofthetotalnumberofcustomers
andtheaveragerevenuefromeachcustomer.Intheequation,"T"represents
thetotalnumberofpeople,"A"representstheaveragerevenuepercustomer,
and"S"representsthesalesprojection.Theequationforprojectingsalesis:
(T)(A)=S

Usingthisequation,theannualsalesforeachyearprojectedwithinthe
businessplancanbedeveloped.Ofcourse,thereareotherfactorsthatyou'll
needtoevaluatefromtherevenuemodel.Sincetherevenuemodelisatable
illustratingthesourceforallincome,everysegmentofthetargetmarketthat
istreateddifferentlymustbeaccountedfor.Inordertodetermineany
differences,thevariousstrategiesutilizedinordertoselltheproducthaveto
beconsidered.Aswe'vealreadymentioned,thosestrategiesinclude
distribution,pricingandpromotion.

Competitive Analysis
Identify and Analyze Your Competition
Thecompetitiveanalysisisastatementofthebusinessstrategyandhowit
relatestothecompetition.Thepurposeofthecompetitiveanalysisisto
determinethestrengthsandweaknessesofthecompetitorswithinyour
market,strategiesthatwillprovideyouwithadistinctadvantage,thebarriers
thatcanbedevelopedinordertopreventcompetitionfromenteringyour
market,andanyweaknessesthatcanbeexploitedwithintheproduct
developmentcycle.

Thefirststepinacompetitoranalysisistoidentifythecurrentandpotential
competition.Thereareessentiallytwowaysyoucanidentifycompetitors.
Thefirstistolookatthemarketfromthecustomer'sviewpointandgroupall
yourcompetitorsbythedegreetowhichtheycontendforthebuyer'sdollar.
Thesecondmethodistogroupcompetitorsaccordingtotheirvarious
competitivestrategiessoyouunderstandwhatmotivatesthem.

Onceyou'vegroupedyourcompetitors,youcanstarttoanalyzetheir
strategiesandidentifytheareaswherethey'remostvulnerable.Thiscanbe
donethroughanexaminationofyourcompetitors'weaknessesandstrengths.
Acompetitor'sstrengthsandweaknessesareusuallybasedonthepresence
andabsenceofkeyassetsandskillsneededtocompeteinthemarket.

Todeterminejustwhatconstitutesakeyassetorskillwithinanindustry,
DavidA.Aakerinhisbook,DevelopingBusinessStrategies,suggests
concentratingyoureffortsinfourareas:

1. Thereasonsbehindsuccessfulaswellasunsuccessfulfirms
2. Primecustomermotivators
3. Majorcomponentcosts
4. Industrymobilitybarriers
Accordingtotheory,theperformanceofacompanywithinamarketis
directlyrelatedtothepossessionofkeyassetsandskills.Therefore,an
analysisofstrongperformersshouldrevealthecausesbehindsucha
successfultrackrecord.Thisanalysis,inconjunctionwithanexaminationof
unsuccessfulcompaniesandthereasonsbehindtheirfailure,shouldprovidea
goodideaofjustwhatkeyassetsandskillsareneededtobesuccessfulwithin
agivenindustryandmarketsegment.

Throughyourcompetitoranalysis,youwillalsohavetocreateamarketing
strategythatwillgenerateanassetorskillcompetitorsdon'thave,whichwill
provideyouwithadistinctandenduringcompetitiveadvantage.Since
competitiveadvantagesaredevelopedfromkeyassetsandskills,youshould
sitdownandputtogetheracompetitivestrengthgrid.Thisisascalethatlists
allyourmajorcompetitorsorstrategicgroupsbasedupontheirapplicable
assetsandskillsandhowyourowncompanyfitsonthisscale.

Create a Competitive Strength Grid

Toputtogetheracompetitivestrengthgrid,listallthekeyassetsandskills
downtheleftmarginofapieceofpaper.Alongthetop,writedowntwo
columnheaders:"weakness"and"strength."Ineachassetorskillcategory,
placeallthecompetitorsthathaveweaknessesinthatparticularcategory
undertheweaknesscolumn,andallthosethathavestrengthsinthatspecific
categoryinthestrengthcolumn.Afteryou'vefinished,you'llbeableto
determinejustwhereyoustandinrelationtotheotherfirmscompetingin
yourindustry.

Onceyou'veestablishedthekeyassetsandskillsnecessarytosucceedinthis
businessandhavedefinedyourdistinctcompetitiveadvantage,youneedto
communicatetheminastrategicformthatwillattractmarketshareaswellas
defendit.Competitivestrategiesusuallyfallintothesefiveareas:

Product

Distribution
Pricing

Promotion
Advertising
Manyofthefactorsleadingtotheformationofastrategyshouldalreadyhave
beenhighlightedinprevioussections,specificallyinmarketingstrategies.
Strategiesprimarilyrevolvearoundestablishingthepointofentryinthe
productlifecycleandanendurablecompetitiveadvantage.Aswe'vealready
discussed,thisinvolvesdefiningtheelementsthatwillsetyourproductor
serviceapartfromyourcompetitorsorstrategicgroups.Youneedtoestablish
thiscompetitiveadvantageclearlysothereaderunderstandsnotonlyhow
youwillaccomplishyourgoals,butalsowhyyourstrategywillwork.

Design and Development Plan

What You'll Cover in This Section
Thepurposeofthedesignanddevelopmentplansectionistoprovide
investorswithadescriptionoftheproduct'sdesign,chartitsdevelopment
withinthecontextofproduction,marketingandthecompanyitself,and
createadevelopmentbudgetthatwillenablethecompanytoreachitsgoals.

Therearegenerallythreeareasyou'llcoverinthedevelopmentplansection:

Productdevelopment
Marketdevelopment

Organizationaldevelopment
Eachoftheseelementsneedstobeexaminedfromthefundingoftheplanto
thepointwherethebusinessbeginstoexperienceacontinuousincome.
Althoughtheseelementswilldifferinnatureconcerningtheircontent,each
willbebasedonstructureandgoals.

Thefirststepinthedevelopmentprocessissettinggoalsfortheoverall
developmentplan.Fromyouranalysisofthemarketandcompetition,mostof
theproduct,marketandorganizationaldevelopmentgoalswillbereadily
apparent.Eachgoalyoudefineshouldhavecertaincharacteristics.Your
goalsshouldbequantifiableinordertosetuptimelines,directedsothey
relatetothesuccessofthebusiness,consequentialsotheyhaveimpactupon
thecompany,andfeasiblesothattheyaren'tbeyondtheboundsofactual
completion.

Goals For Product Development

Goalsforproductdevelopmentshouldcenteronthetechnicalaswellas
themarketingaspectsoftheproductsothatyouhaveafocusedoutlinefrom
whichthedevelopmentteamcanwork.Forexample,agoalforproduct
developmentofamicrobrewedbeermightbe"Producerecipeforpremium
lagerbeer"or"Createpackagingforpremiumlagerbeer."Intermsofmarket
development,agoalmightbe,"Developcollateralmarketingmaterial."
Organizationalgoalswouldcenterontheacquisitionofexpertiseinorderto
attainyourproductandmarketdevelopmentgoals.Thisexpertiseusually
needstobepresentinareasofkeyassetsthatprovideacompetitive
advantage.Withoutthenecessaryexpertise,thechancesofbringingaproduct
successfullytomarketdiminish.

Procedures
Withyourgoalssetandexpertiseinplace,youneedtoformasetof
proceduraltasksorworkassignmentsforeachareaofthedevelopmentplan.
Procedureswillhavetobedevelopedforproductdevelopment,market
development,andorganizationdevelopment.Insomecases,productand
organizationcanbecombinedifthelistofproceduresisshortenough.

Proceduresshouldincludehowresourceswillbeallocated,whoisincharge
ofaccomplishingeachgoal,andhoweverythingwillinteract.Forexample,
toproducearecipeforapremiumlagerbeer,youwouldneedtodothe
following:

Gatheringredients.

Determineoptimummaltingprocess.
Gaugemashingtemperature.

Boilwortandevaluatewhichhopsprovidethebestflavor.
Determineyeastamountsandfermentationperiod.

Determineagingperiod.
Carbonatethebeer.

Decidewhetherornottopasteurizethebeer.
Thedevelopmentofproceduresprovidesalistofworkassignmentsthatneed
tobeaccomplished,butonethingitdoesn'tprovidearethestagesof
developmentthatcoordinatetheworkassignmentswithintheoverall
developmentplan.Todothis,youfirstneedtoamendtheworkassignments
createdintheproceduressectionsothatalltheindividualworkelementsare
accountedforinthedevelopmentplan.Thenextstageinvolvessetting
deliverabledatesforcomponentsaswellasthefinishedproductfortesting
purposes.Thereareprimarilythreestepsyouneedtogothroughbeforethe
productisreadyforfinaldelivery:

1. Preliminaryproductreview.Alltheproduct'sfeaturesand
specificationsarechecked.
2. Criticalproductreview.Allthekeyelementsoftheproductare
checkedandgaugedagainstthedevelopmentscheduletomakesure
everythingisgoingaccordingtoplan.
3. Finalproductreview.Allelementsoftheproductarecheckedagainst
goalstoassuretheintegrityoftheprototype.

Scheduling and Costs

Thisisoneofthemostimportantelementsinthedevelopmentplan.
Schedulingincludesallofthekeyworkelementsaswellasthestagesthe
productmustpassthroughbeforecustomerdelivery.Itshouldalsobetiedto
thedevelopmentbudgetsothatexpensescanbetracked.Butitsmainpurpose
istoestablishtimeframesforcompletionofallworkassignmentsand
juxtaposethemwithinthestagesthroughwhichtheproductmustpass.When
producingtheschedule,provideacolumnforeachproceduraltask,howlong
ittakes,startdateandstopdate.Ifyouwanttoprovideanumberforeach
task,includeacolumninthescheduleforthetasknumber.

Development Budget
Thatleadsusintoadiscussionofthedevelopmentbudget.Whenforming
yourdevelopmentbudget,youneedtotakeintoaccountalltheexpenses
requiredtodesigntheproductandtotakeitfromprototypetoproduction.
Coststhatshouldbeincludedinthedevelopmentbudgetinclude:

Material.Allrawmaterialsusedinthedevelopmentoftheproduct.
Directlabor.Alllaborcostsassociatedwiththedevelopmentofthe
product.
Overhead.Alloverheadexpensesrequiredtooperatethebusiness
duringthedevelopmentphasesuchastaxes,rent,phone,utilities,office
supplies,etc.
G&Acosts.Thesalariesofexecutiveandadministrativepersonnel
alongwithanyotherofficesupportfunctions.
Marketing&sales.Thesalariesofmarketingpersonnelrequiredto
developprepromotionalmaterialsandplanthemarketingcampaignthat
shouldbeginpriortodeliveryoftheproduct.
Professionalservices.Thosecostsassociatedwiththeconsultationof
outsideexpertssuchasaccountants,lawyers,andbusinessconsultants.
MiscellaneousCosts.Coststhatarerelatedtoproductdevelopment.
Capitalequipment.Todeterminethecapitalrequirementsforthe
developmentbudget,youfirsthavetoestablishwhattypeofequipment
youwillneed,whetheryouwillacquiretheequipmentoruseoutside
contractors,andfinally,ifyoudecidetoacquiretheequipment,whether
youwillleaseorpurchaseit.

Personnel
Aswementionedalready,thecompanyhastohavetheproperexpertisein
keyareastosucceed;however,noteverycompanywillstartabusinesswith
theexpertiserequiredineverykeyarea.Therefore,theproperpersonnelhave
toberecruited,integratedintothedevelopmentprocess,andmanagedsothat
everyoneformsateamfocusedontheachievementofthedevelopmentgoals.

Beforeyoubeginrecruiting,however,youshoulddeterminewhichareas
withinthedevelopmentprocesswillrequiretheadditionofpersonnel.This
canbedonebyreviewingthegoalsofyourdevelopmentplantoestablishkey
areasthatneedattention.Afteryouhaveanideaofthepositionsthatneedto
befilled,youshouldproduceajobdescriptionandjobspecification.

Onceyou'vehiredtheproperpersonnel,youneedtointegratethemintothe
developmentprocessbyassigningtasksfromtheworkassignmentsyou've
developed.Finally,thewholeteamneedstoknowwhattheirroleiswithin
thecompanyandhoweachinterrelateswitheverypositionwithinthe
developmentteam.Inordertodothis,youshoulddevelopanorganizational
chartforyourdevelopmentteam.

Assessing Risks
Finally,therisksinvolvedindevelopingtheproductshouldbeassessedanda
plandevelopedtoaddresseachone.Therisksduringthedevelopmentstage
willusuallycenterontechnicaldevelopmentoftheproduct,marketing,
personnelrequirements,andfinancialproblems.Byidentifyingand
addressingeachoftheperceivedrisksduringthedevelopmentperiod,you
willallaysomeofyourmajorfearsconcerningtheprojectandthoseof
investorsaswell.

Operations & Management

Theoperationsandmanagementplanisdesignedtodescribejusthowthe
businessfunctionsonacontinuingbasis.Theoperationsplanwillhighlight
thelogisticsoftheorganizationsuchasthevariousresponsibilitiesofthe
managementteam,thetasksassignedtoeachdivisionwithinthecompany,
andcapitalandexpenserequirementsrelatedtotheoperationsofthe
business.Infact,withintheoperationsplanyou'lldevelopthenextsetof
financialtablesthatwillsupplythefoundationforthe"Financial
Components"section.

Thefinancialtablesthatyou'lldevelopwithintheoperationsplaninclude:

Theoperatingexpensetable
Thecapitalrequirementstable
 Thecostofgoodstable
Therearetwoareasthatneedtobeaccountedforwhenplanningthe
operationsofyourcompany.Thefirstareaistheorganizationalstructureof
thecompany,andthesecondistheexpenseandcapitalrequirements
associatedwithitsoperation.

Organizational Structure
Theorganizationalstructureofthecompanyisanessentialelementwithina
businessplanbecauseitprovidesabasisfromwhichtoprojectoperating
expenses.Thisiscriticaltotheformationoffinancialstatements,whichare
heavilyscrutinizedbyinvestors;therefore,theorganizationalstructurehasto
bewelldefinedandbasedwithinarealisticframeworkgiventheparameters
ofthebusiness.

Althougheverycompanywilldifferinitsorganizationalstructure,mostcan
bedividedintoseveralbroadareasthatinclude:

Marketingandsales(includescustomerrelationsandservice)
Production(includingqualityassurance)

Researchanddevelopment
Administration
Theseareverybroadclassificationsandit'simportanttokeepinmindthat
noteverybusinesscanbedividedinthismanner.Infact,everybusinessis
different,andeachonemustbestructuredaccordingtoitsownrequirements
andgoals.

Thefourstagesfororganizingabusinessare:

1.Establishalistofthetasksusingthebroadestofclassificationspossible.
2.Organizethesetasksintodepartmentsthatproduceanefficientlineof
communicationsbetweenstaffandmanagement.
3.Determinethetypeofpersonnelrequiredtoperformeachtask.
4.Establishthefunctionofeachtaskandhowitwillrelatetothegeneration
ofrevenuewithinthecompany.

Calculate Your Personnel Numbers

Onceyou'vestructuredyourbusiness,however,youneedtoconsideryour
overallgoalsandthenumberofpersonnelrequiredtoreachthosegoals.In
ordertodeterminethenumberofemployeesyou'llneedtomeetthegoals
you'vesetforyourbusiness,you'llneedtoapplythefollowingequationto
eachdepartmentlistedinyourorganizationalstructure:C/S=P

Inthisequation,Crepresentsthetotalnumberofcustomers,Srepresentsthe
totalnumberofcustomersthatcanbeservedbyeachemployee,andP
representsthepersonnelrequirements.Forinstance,ifthenumberof
customersforfirstyearsalesisprojectedat10,110andonemarketing
employeeisrequiredforevery200customers,youwouldneed51employees
withinthemarketingdepartment:10,110/200=51

Onceyoucalculatethenumberofemployeesthatyou'llneedforyour
organization,you'llneedtodeterminethelaborexpense.Thefactorsthat
needtobeconsideredwhencalculatinglaborexpense(LE)arethepersonnel
requirements(P)foreachdepartmentmultipliedbytheemployeesalarylevel
(SL).Therefore,theequationwouldbe:P*SL=LE

Usingthemarketingexamplefromabove,thelaborexpenseforthat
departmentwouldbe:51*$40,000=$2,040,000

Calculate Overhead Expenses

Oncetheorganization'soperationshavebeenplanned,theexpenses
associatedwiththeoperationofthebusinesscanbedeveloped.Theseare
usuallyreferredtoasoverheadexpenses.Overheadexpensesrefertoallnon
laborexpensesrequiredtooperatethebusiness.Expensescanbedivided
intofixed(thosethatmustbepaid,usuallyatthesamerate,regardlessofthe
volumeofbusiness)andvariableorsemivariable(thosewhichchange
accordingtotheamountofbusiness).
Overheadexpensesusuallyincludethefollowing:

Travel
Maintenanceandrepair

Equipmentleases
Rent

Advertising&promotion
Supplies

Utilities
Packaging&shipping

Payrolltaxesandbenefits
Uncollectiblereceivables

Professionalservices
Insurance

Loanpayments
Depreciation
Inordertodeveloptheoverheadexpensesfortheexpensetableusedinthis
portionofthebusinessplan,youneedtomultiplythenumberofemployees
bytheexpensesassociatedwitheachemployee.Therefore,ifNErepresents
thenumberofemployeesandEEistheexpenseperemployee,thefollowing
equationcanbeusedtocalculatethesumofeachoverhead(OH)
expense:OH=NE*EE

Develop a Capital Requirements Table

Inadditiontotheexpensetable,you'llalsoneedtodevelopacapital
requirementstablethatdepictstheamountofmoneynecessarytopurchase
theequipmentyou'llusetoestablishandcontinueoperations.Italso
illustratestheamountofdepreciationyourcompanywillincurbasedonall
equipmentelementspurchasedwithalifetimeofmorethanoneyear.

Inordertogeneratethecapitalrequirementstable,youfirsthavetoestablish
thevariouselementswithinthebusinessthatwillrequirecapitalinvestment.
Forservicebusinesses,capitalisusuallytiedtothevariouspiecesof
equipmentusedtoservicecustomers.

Capitalformanufacturingcompanies,ontheotherhand,isbasedonthe
equipmentrequiredinordertoproducetheproduct.Manufacturing
equipmentusuallyfallsintothreecategories:testingequipment,assembly
equipmentandpackagingequipment.

Withthesecapitalelementsinmind,youneedtodeterminethenumberof
unitsorcustomers,intermsofsales,thateachequipmentitemcanadequately
handle.Thisisimportantbecausecapitalrequirementsareaproductof
income,whichisproducedthroughunitsales.Inordertomeetsales
projections,abusinessusuallyhastoinvestmoneytoincreaseproductionor
supplybetterservice.Inthebusinessplan,capitalrequirementsaretiedto
projectedsalesasillustratedintherevenuemodelshownearlierinthis
chapter.

Forinstance,ifthecapitalequipmentrequirediscapableofhandlingthe
needsof10,000customersatanaveragesaleof$10each,thatwouldbe
$100,000insales,atwhichpointadditionalcapitalwillberequiredinorder
topurchasemoreequipmentshouldthecompanygrowbeyondthispoint.
Thisleadsustoanotherfactorwithinthecapitalrequirementsequation,and
thatisequipmentcost.

Ifyoumultiplythecostofequipmentbythenumberofcustomersitcan
supportintermsofsales,itwouldresultinthecapitalrequirementsforthat
particularequipmentelement.Therefore,youcanuseanequationinwhich
capitalrequirements(CR)equalssales(S)dividedbynumberofcustomers
(NC)supportedbyeachequipmentelement,multipliedbytheaveragesale
(AS),whichisthenmultipliedbythecapitalcost(CC)oftheequipment
element.Giventheseparameters,yourequationwouldlooklikethe
following:CR=[(S/NC)*AS]*CC

Thecapitalrequirementstableisformedbyaddingallyourequipment
elementstogeneratethetotalnewcapitalforthatyear.Duringthefirstyear,
totalnewcapitalisalsothetotalcapitalrequired.Foreachsuccessiveyear
thereafter,totalcapital(TC)requiredisthesumoftotalnewcapital(NC)
plustotalcapital(PC)fromthepreviousyear,lessdepreciation(D),once
again,fromthepreviousyear.Therefore,yourequationtoarriveattotal
capitalforeachyearportrayedinthecapitalrequirementsmodelwould
be:TC=NC+PCD

Keepinmindthatdepreciationisanexpensethatshowsthedecreaseinvalue
oftheequipmentthroughoutitseffectivelifetime.Formanybusinesses,
depreciationisbaseduponschedulesthataretiedtothelifetimeofthe
equipment.Becarefulwhenchoosingtheschedulethatbestfitsyour
business.Depreciationisalsothebasisforataxdeductionaswellastheflow
ofmoneyfornewcapital.Youmayneedtoseekconsultationfromanexpert
inthisarea.

Create a Cost of Goods Table

Thelasttablethatneedstobegeneratedintheoperationsandmanagement
sectionofyourbusinessplanisthecostofgoodstable.Thistableisused
onlyforbusinesseswheretheproductisplacedintoinventory.Foraretailor
wholesalebusiness,costofgoodssoldorcostofsalesreferstothe
purchaseofproductsforresale,i.e.theinventory.Theproductsthataresold
areloggedintocostofgoodsasanexpenseofthesale,whilethosethataren't
soldremainininventory.

Foramanufacturingfirm,costofgoodsisthecostincurredbythecompany
tomanufactureitsproduct.Thisusuallyconsistsofthreeelements:

1.Material
2.Labor
3.Overhead
Asinretail,themerchandisethatissoldisexpensedasacostofgoods,while
merchandisethatisn'tsoldisplacedininventory.Costofgoodshastobe
accountedforintheoperationsofabusiness.Itisanimportantyardstickfor
measuringthefirm'sprofitabilityforthecashflowstatementandincome
statement.

Intheincomestatement,thelaststageofthemanufacturingprocessisthe
itemexpensedascostofgoods,butitisimportanttodocumenttheinventory
stillinvariousstagesofthemanufacturingprocessbecauseitrepresents
assetstothecompany.Thisisimportanttodeterminingcashflowandto
generatingthebalancesheet.

Thatiswhatthecostofgoodstabledoes.It'soneofthemostcomplicated
tablesyou'llhavetodevelopforyourbusinessplan,butit'sanintegralpartof
portrayingtheflowofinventorythroughyouroperations,theplacementof
assetswithinthecompany,andtherateatwhichyourinventoryturns.

Inordertogeneratethecostofgoodstable,youneedalittlemore
informationinadditiontowhatyourlaborandmaterialcostisperunit.You
alsoneedtoknowthetotalnumberofunitssoldfortheyear,thepercentage
ofunitswhichwillbefullyassembled,thepercentagewhichwillbepartially
assembled,andthepercentagewhichwillbeinunassembledinventory.
Muchofthesefigureswilldependonthecapacityofyourequipmentaswell
asontheinventorycontrolsystemyoudevelop.Alongwiththesefactors,
youalsoneedtoknowatwhatstagethemajorityofthelaborisperformed.

Financial Components
Financial Statements to Include
Financialdataisalwaysatthebackofthebusinessplan,butthatdoesn't
meanit'sanylessimportantthanupfrontmaterialsuchasthebusiness
conceptandthemanagementteam.Astuteinvestorslookcarefullyatthe
charts,tables,formulasandspreadsheetsinthefinancialsection,because
theyknowthatthisinformationislikethepulse,respirationrateandblood
pressureinahumanitshowswhetherthepatientisaliveandwhattheodds
areforcontinuedsurvival.
Financialstatements,likebadnews,comeinthrees.Thenewsinfinancial
statementsisn'talwaysbad,ofcourse,buttakentogetheritprovidesan
accuratepictureofacompany'scurrentvalue,plusitsabilitytopayitsbills
todayandearnaprofitgoingforward.

Thethreecommonstatementsareacashflowstatement,anincomestatement
andabalancesheet.Mostentrepreneursshouldprovidethemandleaveitat
that.Butnotalldo.Butthisisacaseofthemore,thelessmerry.Asarule,
stickwiththebigthree:income,balancesheetandcashflowstatements.

Thesethreestatementsareinterlinked,withchangesinonenecessarily
alteringtheothers,buttheymeasurequitedifferentaspectsofacompany's
financialhealth.It'shardtosaythatoneoftheseismoreimportantthan
another.Butofthethree,theincomestatementmaybethebestplacetostart.

Income Statement
Theincomestatementisasimpleandstraightforwardreportontheproposed
business'scashgeneratingability.It'sascorecardonthefinancial
performanceofyourbusinessthatreflectswhensalesaremadeandwhen
expensesareincurred.Itdrawsinformationfromthevariousfinancialmodels
developedearliersuchasrevenue,expenses,capital(intheformof
depreciation),andcostofgoods.Bycombiningtheseelements,theincome
statementillustratesjusthowmuchyourcompanymakesorlosesduringthe
yearbysubtractingcostofgoodsandexpensesfromrevenuetoarriveatanet
resultwhichiseitheraprofitoraloss.

Forabusinessplan,theincomestatementshouldbegeneratedonamonthly
basisduringthefirstyear,quarterlyforthesecond,andannuallyforeach
yearthereafter.It'sformedbylistingyourfinancialprojectionsinthe
followingmanner:

1. Income.Includesalltheincomegeneratedbythebusinessandits
sources.
2. Costofgoods.Includesallthecostsrelatedtothesaleofproductsin
inventory.
3. Grossprofitmargin.Thedifferencebetweenrevenueandcostof
goods.Grossprofitmargincanbeexpressedindollars,asapercentage,or
both.Asapercentage,theGPmarginisalwaysstatedasapercentageof
revenue.
4. Operatingexpenses.Includesalloverheadandlaborexpenses
associatedwiththeoperationsofthebusiness.
5. Totalexpenses.Thesumofalloverheadandlaborexpensesrequiredto
operatethebusiness.
6. Netprofit.Thedifferencebetweengrossprofitmarginandtotal
expenses,thenetincomedepictsthebusiness'sdebtandcapital
capabilities.
7. Depreciation.Reflectsthedecreaseinvalueofcapitalassetsusedto
generateincome.Alsousedasthebasisforataxdeductionandan
indicatoroftheflowofmoneyintonewcapital.
8. Netprofitbeforeinterest.Thedifferencebetweennetprofitand
depreciation.
9. Interest.Includesallinterestderivedfromdebts,bothshorttermand
longterm.Interestisdeterminedbytheamountofinvestmentwithinthe
company.
10. Netprofitbeforetaxes.Thedifferencebetweennetprofitbefore
interestandinterest.
11. Taxes.Includesalltaxesonthebusiness.
12. Profitaftertaxes.Thedifferencebetweennetprofitbeforetaxesand
thetaxesaccrued.Profitaftertaxesisthebottomlineforanycompany.
Followingtheincomestatementisashortnoteanalyzingthestatement.The
analysisstatementshouldbeveryshort,emphasizingkeypointswithinthe
incomestatement.

Cash Flow Statement

Thecashflowstatementisoneofthemostcriticalinformationtoolsforyour
business,showinghowmuchcashwillbeneededtomeetobligations,when
itisgoingtoberequired,andfromwhereitwillcome.Itshowsascheduleof
themoneycomingintothebusinessandexpensesthatneedtobepaid.The
resultistheprofitorlossattheendofthemonthoryear.Inacashflow
statement,bothprofitsandlossesarecarriedovertothenextcolumntoshow
thecumulativeamount.Keepinmindthatifyourunalossonyourcashflow
statement,itisastrongindicatorthatyouwillneedadditionalcashinorderto
meetexpenses.

Liketheincomestatement,thecashflowstatementtakesadvantageof
previousfinancialtablesdevelopedduringthecourseofthebusinessplan.
Thecashflowstatementbeginswithcashonhandandtherevenuesources.
Thenextitemitlistsisexpenses,includingthoseaccumulatedduringthe
manufactureofaproduct.Thecapitalrequirementsarethenloggedasa
negativeafterexpenses.Thecashflowstatementendswiththenetcashflow.

Thecashflowstatementshouldbepreparedonamonthlybasisduringthe
firstyear,onaquarterlybasisduringthesecondyear,andonanannualbasis
thereafter.Itemsthatyou'llneedtoincludeinthecashflowstatementandthe
orderinwhichtheyshouldappearareasfollows:

1. Cashsales.Incomederivedfromsalespaidforbycash.
2. Receivables.Incomederivedfromthecollectionofreceivables.
3. Otherincome.Incomederivedfrominvestments,interestonloansthat
havebeenextended,andtheliquidationofanyassets.
4. Totalincome.Thesumoftotalcash,cashsales,receivables,andother
income.
5. Material/merchandise.Therawmaterialusedinthemanufactureofa
product(formanufacturingoperationsonly),thecashoutlayfor
merchandiseinventory(formerchandiserssuchaswholesalersand
retailers),orthesuppliesusedintheperformanceofaservice.
6. Productionlabor.Thelaborrequiredtomanufactureaproduct(for
manufacturingoperationsonly)ortoperformaservice.
7. Overhead.Allfixedandvariableexpensesrequiredfortheproduction
oftheproductandtheoperationsofthebusiness.
8. Marketing/sales.Allsalaries,commissions,andotherdirectcosts
associatedwiththemarketingandsalesdepartments.
9. R&D.Allthelaborexpensesrequiredtosupporttheresearchand
developmentoperationsofthebusiness.
10. G&A.Allthelaborexpensesrequiredtosupporttheadministrative
functionsofthebusiness.
11. Taxes.Alltaxes,exceptpayroll,paidtotheappropriategovernment
institutions.
12. Capital.Thecapitalrequiredtoobtainanyequipmentelementsthatare
neededforthegenerationofincome.
13. Loanpayment.Thetotalofallpaymentsmadetoreduceanylongterm
debts.
14. Totalexpenses.Thesumofmaterial,directlabor,overheadexpenses,
marketing,sales,G&A,taxes,capitalandloanpayments.
15. Cashflow.Thedifferencebetweentotalincomeandtotalexpenses.
Thisamountiscarriedovertothenextperiodasbeginningcash.
16. Cumulativecashflow.Thedifferencebetweencurrentcashflowand
cashflowfromthepreviousperiod.
Aswiththeincomestatement,youwillneedtoanalyzethecashflow
statementinashortsummaryinthebusinessplan.Onceagain,theanalysis
statementdoesn'thavetobelongandshouldcoveronlykeypointsderived
fromthecashflowstatement.

The Balance Sheet

Thelastfinancialstatementyou'llneedtodevelopisthebalancesheet.Like
theincomeandcashflowstatements,thebalancesheetusesinformation
fromallofthefinancialmodelsdevelopedinearliersectionsofthebusiness
plan;however,unlikethepreviousstatements,thebalancesheetisgenerated
solelyonanannualbasisforthebusinessplanandis,moreorless,a
summaryofalltheprecedingfinancialinformationbrokendownintothree
areas:

1.Assets
2.Liabilities
3.Equity
Toobtainfinancingforanewbusiness,youmayneedtoprovideaprojection
ofthebalancesheetovertheperiodoftimethebusinessplancovers.More
importantly,you'llneedtoincludeapersonalfinancialstatementorbalance
sheetinsteadofonethatdescribesthebusiness.Apersonalbalancesheetis
generatedinthesamemannerasoneforabusiness.

Asmentioned,thebalancesheetisdividedintothreesections.Thetop
portionofthebalancesheetlistsyourcompany'sassets.Assetsareclassified
ascurrentassetsandlongtermorfixedassets.Currentassetsareassetsthat
willbeconvertedtocashorwillbeusedbythebusinessinayearorless.
Currentassetsinclude:

Cash.Thecashonhandatthetimebooksareclosedattheendofthe
fiscalyear.
Accountsreceivable.Theincomederivedfromcreditaccounts.Forthe
balancesheet,it'sthetotalamountofincometobereceivedthatislogged
intothebooksatthecloseofthefiscalyear.
Inventory.Thisisderivedfromthecostofgoodstable.It'sthe
inventoryofmaterialusedtomanufactureaproductnotyetsold.
Totalcurrentassets.Thesumofcash,accountsreceivable,inventory,
andsupplies.
Otherassetsthatappearinthebalancesheetarecalledlongtermorfixed
assets.Theyarecalledlongtermbecausetheyaredurableandwilllastmore
thanoneyear.Examplesofthistypeofassetinclude:

Capitalandplant.Thebookvalueofallcapitalequipmentand
property(ifyouownthelandandbuilding),lessdepreciation.
Investment.Allinvestmentsbythecompanythatcannotbeconverted
tocashinlessthanoneyear.Forthemostpart,companiesjuststartingout
havenotaccumulatedlongterminvestments.
Miscellaneousassets.Allotherlongtermassetsthatarenot"capital
andplant"or"investments."
Totallongtermassets.Thesumofcapitalandplant,investments,and
miscellaneousassets.
Totalassets.Thesumoftotalcurrentassetsandtotallongtermassets.
Aftertheassetsarelisted,youneedtoaccountfortheliabilitiesofyour
business.Likeassets,liabilitiesareclassifiedascurrentorlongterm.Ifthe
debtsaredueinoneyearorless,theyareclassifiedasacurrentliabilities.If
theyaredueinmorethanoneyear,theyarelongtermliabilities.Examples
ofcurrentliabilitiesareasfollows:

Accountspayable.Allexpensesderivedfrompurchasingitemsfrom
regularcreditorsonanopenaccount,whicharedueandpayable.
Accruedliabilities.Allexpensesincurredbythebusinesswhichare
requiredforoperationbuthavenotbeenpaidatthetimethebooksare
closed.Theseexpensesareusuallythecompany'soverheadandsalaries.
Taxes.Thesearetaxesthatarestilldueandpayableatthetimethe
booksareclosed.
Totalcurrentliabilities.Thesumofaccountspayable,accrued
liabilities,andtaxes.
Longtermliabilitiesinclude:
 Bondspayable.Thetotalofallbondsattheendoftheyearthataredue
andpayableoveraperiodexceedingoneyear.
Mortgagepayable.Loanstakenoutforthepurchaseofrealproperty
thatarerepaidoveralongtermperiod.Themortgagepayableisthat
amountstilldueatthecloseofbooksfortheyear.
Notespayable.Theamountstillowedonanylongtermdebtsthatwill
notberepaidduringthecurrentfiscalyear.
Totallongtermliabilities.Thesumofbondspayable,mortgage
payable,andnotespayable.
Totalliabilities.Thesumoftotalcurrentandlongtermliabilities.
Oncetheliabilitieshavebeenlisted,thefinalportionofthebalancesheet
owner'sequityneedstobecalculated.Theamountattributedtoowner's
equityisthedifferencebetweentotalassetsandtotalliabilities.Theamount
ofequitytheownerhasinthebusinessisanimportantyardstickusedby
investorswhenevaluatingthecompany.Manytimesitdeterminesthe
amountofcapitaltheyfeeltheycansafelyinvestinthebusiness.

Inthebusinessplan,you'llneedtocreateananalysisstatementforthe
balancesheetjustasyouneedtodofortheincomeandcashflowstatements.
Theanalysisofthebalancesheetshouldbekeptshortandcoverkeypoints
aboutthecompany.