Sample Business Plan Framework 1: A program seeking to continue Better

operations in the post-grant period as a not-for-profit (NGO) entity Buildings

NEIGHBORHOOD PROGRAM
U.S. DEPARTMENT OF ENERGY

Mission: Create a sustainable, local home energy efficiency market in the greater city “X” region
Vision: Recognized as key to building and connecting demand and market capacity, enabling the market to grow to its full long-term potential
Goal: Operate in post-grant period by generating sufficient revenues to cover costs

Governance Financial Assets & Service Customer Partners

Structure
Define internal Identify sources/uses
responsibilities: of funds:
• A not-for-profit with a • Grant funding is used
technical advisory initially
board • Post-grant period,
Define external additional revenues are
restrictions (e.g., generated by selling
services created during
regulations, laws,
the grant period to
etc.):
contractors
• Original grant funding
• Each service sold
requires the reporting
incurs both revenues
and tracking of
and costs to the
program progress.
program
• Revenues generated
Track financial
using grant funds must
be used for same performance:
purpose as original • Profit is tracked
grant rules mandated through the use of an
income statement
Infrastructure Offering
Identify assets (e.g., List services offered: Identify target Identify future
software, brand, etc.): For Homeowners: customers: partnering
Software: • Energy efficiency • Homes >1,500 sq.ft. opportunities:
• Customer relations education • Household income of • HVAC contractors
management For Contractors: >$80,000 • Remodelers
• Home performance • Lead generation Describe outreach Describe how
reporting • Quality assurance (QA) strategy: program aligns with
Brand: • Software services • Host neighborhood
potential partner
• Invested in the Articulate value of events
interests:
development of a service offering: • Train local “champions”
• Program provides
strong brand image • Makes finding qualified to spread message
marketing, software,
that can be recognized contractors easier for • Profile neighbors
QA and other ancillary
by consumers to assist homeowners and • Use social media
services that are
in education and ensures work quality
generally considered
outreach • Contractors reduce
areas of difficulty for
their marketing and
contractors; In return,
QA costs
the program receives
Describe distribution contractor
channel(s): compensation of 4% of
• Program does QA and total job cost
marketing directly
• Contractors conduct
energy assessment
and installation

Costs Revenue
List and describe costs: List and describe revenue:
• Cost of goods and services sold (e.g., marketing/lead generation, labor and • Federal grants (initial funding)
materials for QA) • Revenues from sales (long-term funding based on demand for services)
• Software licensing fees
• Overhead (e.g., rent, utilities, administrative costs, etc.)

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Sample 1 Schematic: A program seeking to continue operations in Better
Buildings
the post-grant period as a not-for-profit (NGO) entity NEIGHBORHOOD PROGRAM
U.S. DEPARTMENT OF ENERGY

Defining a program’s mission, vision, and goals is critical to determining what an

organization’s basic characteristics are, and by extension, its model and schematic

Mission: Create a sustainable, local home energy efficiency market in the greater city “X” region
Vision: Recognized as key to building and connecting demand and market capacity, enabling the
market to grow to its full long-term potential
Goal: Operate in post-grant period by generating sufficient revenues to cover costs

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 Once a high-level plan is in place, the organization can identify its Better
Buildings
data needs for each business model element, starting with finance NEIGHBORHOOD PROGRAM
U.S. DEPARTMENT OF ENERGY

Financial Structure: 1 Design High Level Financial Structure

Detailed Steps

How to build out a financial Sources/Uses of Funds:

plan: • Grant funding is used initially
1. Design high level • Funding is used to create services that can be sold to contractors in the future
financial structure • Each service sold generates both revenues and costs to the program
2. Identify data needs
3. Track financial Tracking Financial Performance:
performance (conduct • Profit is tracked through the use of an income statement
profit analysis)

2 Identify Data Needs 3 Track Financial Performance: Profit Analysis

Sources of Funds: Uses of Funds: Costs • Revenue and cost data for each individual
Revenues service offering can be rolled up on a year to
• Cost of goods and year basis; These data can be captured in the
• Federal grants services sold (e.g., form of an income statement
(initial funding) labor and materials for
QA, marketing • Use of an income statement allows a business
• Revenues from materials) to monitor its profits or losses over time
sales (long term
funding based on • Software licensing • It is critical to monitor the profitability of
demand for fees individual services to determine where a
services) program is really adding value
• Overhead (e.g., rent,
utilities, administrative See sample income statement on following
costs, etc.) page

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 Once program financial data are gathered, they can be used to Better
Buildings
evaluate program performance over time NEIGHBORHOOD PROGRAM
U.S. DEPARTMENT OF ENERGY

Key Inputs
Sample Income Statement
Total Average Jobs per Year(2010)* 500
Average Job Size $ 5,000 Revenues 2010 2011 2012 (Forecast) Total
Average Cost to Program per Job $ 1,250 Software Usage Fees $ 115,000 $ 117,300 $ 119,646 $ 351,946
Gross Profit Margin 15% Quality Assurance Fees $ 265,938 $ 271,256 $ 276,681 $ 813,875
Total Program Cost per Year $ 625,000 Lead Sales $ 265,938 $ 271,256 $ 276,681 $ 813,875
*Grows at 2% per year Total Revenues $ 646,875 $ 659,813 $ 673,009 $ 1,979,696

Cost of Goods Sold (COGS)

In this scenario, a pre-overhead margin
Quality Assurance Labor $ (231,250) $ (235,875) $ (240,593) $ (707,718)
of 15% yields an overall profit for the
Software Licensing Fees $ (100,000) $ (102,000) $ (104,040) $ (306,040)
program annually
Education and Outreach Materials $ (231,250) $ (235,875) $ (240,593) $ (707,718)
A simple variation of this rate illustrates Total COGS $ (562,500) $ (573,750) $ (585,225) $ (1,721,475)
that the break-even point for this
program is 11.1% gross margin Gross Margin (Tot Revenue - COGS) $ 84,375 $ 86,063 $ 87,784 $ 258,221

Overhead Costs
This scenario assumes that all service
Program Admin $ (43,750) $ (44,625) $ (45,518) $ (133,893)
lines are profitable (before accounting
Rent and Utilities $ (18,750) $ (19,125) $ (19,508) $ (57,383)
for overhead), though that may not
Total Overhead Cost $ (62,500) $ (63,750) $ (65,025) $ (191,275)
always be the case

This net profit for the program can be Net Margin (Tot. Revenue - Tot. Cost) $ 21,875 $ 22,313 $ 22,759 $ 66,946
reinvested into the business to expand
its service offerings or be distributed to
customers as direct incentives

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