Business Plan

A business plan is a working document that reflects the business strategy of a company, its operating
structure, and most importantly, its financial plan. It needs to show the company’s strategy going forward,
to ensure sustainability and growth of the business. The document should be maintained by all businesses
and updated continuously to reflect any changes which may potentially affect the business. A business
plan should also be drafted for a start-up business and then updated when necessary thereafter. When
submitting a business plan to a financier as part of the funding application process (either for an existing
or start-up business), the business plan should provide sufficient information to convince a financier or
potential investor of the prospective success of the business venture.

It is crucial that the foundations of the business plan be based predominantly on verifiable facts and
market research including changes in market forces affecting the business, key risks and mitigating
factors, as opposed to opinion and belief. The more facts in the business plan, the easier it is for a
potential financier to decide on whether to invest in a business. The business plan should demonstrate that
the business venture is commercially viable and that all those involved in the project, from management
to employees and consultants, have the skills, knowledge and/or qualifications, to deliver on the plan.

1. Cover Sheet: Business Name, Address, Phone Number, Principals

2. Executive Summary
The Executive Summary, one of the most frequently read components of a marketing plan, is a synopsis
of the marketing plan. Although it does not provide detailed information, it does present an overview of
the plan so readers can identify key issues pertaining to their roles in the planning and implementation
processes. Although this is the first section in a marketing plan.

A Business Plan helps you evaluate the feasibility of a new business idea in an objective, critical, and
unemotional way.

 Marketing – Is there a market? How much can you sell?

 Management – Does the management team have the skill?
 Financial – Can the business make a profit?

It provides an operating plan to assist you in running the business and improves your probability of
success.

 Identify opportunities and avoid mistakes

 Develop production, administrative, and marketing plans
 Create budgets and projections to show financial outcomes

It communicates your idea to others, serves as a “selling tool,” and provides the basis for your financing
proposal.

 Determine the amount and type of financing needed

 Forecast profitability and investor return on investment
 Forecast cash flow, show liquidity and ability to repay debt
A successful business needs a committed owner, a strong business concept and strategy, and financing to
help the business grow and thrive. Using your own money to start and finance a business is the easiest
approach, but may not be an option. Instead, you may need to obtain financing or capital from friends and
family, a bank, or other sources. Regardless of the source, financing can be categorized into two options:
debt and equity financing.

3. The Business

A. Description of the Business

Part A provides an overview of key information which is developed in greater detail in the following
pages. Aim for clarity and simplicity in this part. Too much detail here gets in the way of the main ideas.
The Elevator Test - Can you explain your basic business idea in the time it takes to get from the lobby to
the 5th floor?

Basic Questions:

1) What general type of business is this?

2) What is the status of the business? Start-up, expansion or take-over?

3) What is the business form? Sole Proprietorship, Partnership, Corporation or Limited

Liability Company?

4) What are your products?

5) Who are (will be) your customers?

Additional Questions for Start-Ups:

1) Why will you be successful in this business?

2) What is your experience with this type of business?

3) What will be special or unique about this business?

4) Why will your business be successful?

Additional Questions for Purchase of Existing Business:

1) When and by whom was the business founded?

2) Why is the owner selling?

3) How was the purchase price determined?

4) What are the current financial conditions and trends?

 5) How will your management make the business more profitable?

The Funding Request

Companies seeking financial backing are expected to include a funding request in the financial
section of the business plan. It should state how much money you need, why you need it and
what you will do with it.

5. Products/Services
Your business plan should completely, yet concisely, describe your products or services and explain how
they are produced or delivered. You need not describe every nut and bolt or service provision, but you
should explain what your product or service is and what need it fills. It should also give the reader some
idea of how your product or service differs from that of the competition. The potential investor MUST be
convinced that your product or service is more effective or efficient than that of the competition.

In this section, describe your product offering. This will include details of product features and an
overview of unique technology or processes. But don’t stop there and don’t focus too much on
technology. You must also describe the product benefits and why customers will want to buy.

For most businesses, the products/services are not totally unique. If yours are, take advantage of this
while you can and plan for the competitive battles that will come.

If your products/services are not unique, you must find a way to position your products/services in the
mind of your customer and to differentiate them from the competition. Positioning is the process of
establishing your image with prospects or customers. (Examples include: highest quality, lowest price,
wider selection, Best customer service, faster delivery, etc.)

Basic Questions:
1) What products/services are you (will you be) selling?

2) What are the features and benefits of what you sell?

3) What Position do you have (or want to have) in the market?

4) How do your products/services differ from the competition?

5) What makes your products unique and desirable?

6) Why do (will) customers buy from you?

6. Marketing Plan
The marketing plan clearly specifies and describes the target market(s) toward which the
organization will aim its marketing efforts.
In this section, you include the highlights or your detailed marketing plan. The basic components
of a Marketing Plan are:

 What are you selling? (What benefits do you provide and what position or
 image do you have?)
 Who wants the things you sell? (Identify Target Markets)
 How will you reach your Target Markets and motivate them to buy?

(Develop Product, Price, and Promotional Strategies)

Product Strategies

1) How will products be packaged?

2) How broad will your product line be?

3) What new products will you introduce?

4) What Position or Image will you try to develop or reinforce?

Pricing Strategies

1) What will be your pricing strategies? (For example: Premium, Every Day Low Price,
Frequent Sale Prices, Meet Competitor Price, etc.)

2) How will you compare with competition and how will they respond?

3) Why will customers pay your price?

4) What will be your credit policies?

5) Is there anything about your business which insulates you from price competition?

6) Can you add value and compete on issues other than price?

Promotional Strategies

1) Who are your Target Markets?

2) How will you reach your Target Markets? (What Media will you use?)

3) How will you motivate them to buy? (What Message will you stress?)

4) What is the cost and timetable for implementation of the marketing plan?
Financial Plan
Purpose: To show the financial requirements to start the business, and to keep the business
profitable and liquid.

The financial plan is critical to the success of your business plan – especially if it is for the
purpose of getting a bank loan. The Cash Flow Forecast is arguably the most important part of
the plan, but each of the other documents is important from a planning perspective. There are
three sections in a financial plan:

 Starting Balance Sheet

 Pro-Forma (Forecast) Income Statement

 Cash Flow Forecast

 Notes to the Financial Plan

 Statement of Personal Net Worth (for lending purposes)

7. Critical Risk

Business risk, on the other hand, is about internal and external forces that converge to create
threats to a company and its management team. These threats could emerge from:

1. The external business environment, including macroeconomic forces well outside the
control of management (like inflation, foreign exchange rates, or prevailing interest
rates).

2. Industry-specific risks, like the level of concentration in the industry, regulatory risk,
barriers to entry, the threat of disruption, and other factors.

3. Company or firm-level concerns, like ineffective management, reputational risk, a toxic

corporate culture, and customer or supplier concentration risk.

Your plan can address several kinds of risk. You don't need to address every kind of risk in the
book, but pick the risk categories that are most relevant to your company and include a
paragraph or two about each:

 Product risk is the risk that the product can't be created. Biotech firms often have a high
degree of product risk. They never know for sure they can produce the drug they are
hoping to produce.
  Market risk is the risk that the market will develop differently than expected. Sometimes
markets take too long to develop, and cash runs out while a company is waiting for
customers.

 People risk is big in companies that depend on having certain employees or certain kinds
of employees. I was with a company that had hired one of the world experts in a certain
type of 3-D modeling. It was possible that without this man on board and happy, the
company wouldn't be able to create their product.

 Financial risk is the risk that a company will run out of money or mismanage their money
in some way. Finance companies may have huge financial risk, since bad lending policies
combined with poor investment policies can sink them.
 Competitive risk is the risk that a competing product or service will be able to win. Many
Web-based businesses have high competitive risk since they can be started with little
money and have no way of locking in customers.
What investors want is to know that you are prepared to respond to risks. To the extent possible,
outline what your response is to the risk you anticipate. After all, assuming you get funding,
those risks may really come to pass. And you will really have to do something about it. By
showing investors some of the alternatives you've thought through, you raise their confidence
that you'll be able to deal if things don't go according to plan.

8. Exit Strategy
Investors will want to know what kind of a return they can expect for their investment. Different investors
have different goals. Returns that are acceptable to lending institutions will not excite venture capitalists
to invest in some business. Remember that different investors also have different time frames. For
example, a venture capitalist will generally want to liquidate their investment in a reasonably short period
of time, while a lending institution may want a longer-term relationship. You should think carefully about
your long-term plans and be explicit about your intended exit strategy.

9. Appendices
Purpose: The purpose of the appendices is to provide supporting documents for claims made in
the business plan. They may not necessarily be read, but are there for reference purposes

 Resumé(s) of principals

 Letters of agreement / intent (potential orders, customer commitments, letters of support). This
adds a great deal of credibility to the outside reader, including the bank or financial institution.

 Sample ads and brochures

 Collation of market surveys

 Other
 Price lists

 Personal net worth statement (including personal property values, investments, cash, bank
loans, charge accounts, mortgages, other liabilities. This will substantiate the value of your
personal guarantee if required for security.

 List of inventory (including type, age, value)

 List of leasehold improvements (including description, when made)

 List of fixed assets (including description, age, current market value of any equipment; legal
description of any lands; description of any encumbrances on assets to be pledged for business
purposes)

 Description of insurance coverage (e.g. insurance policies, amount of coverage)

 Aged accounts receivable summary

 Aged accounts payable summary

 Copies of legal agreements (e.g. contracts, lease, franchise agreement, mortgage, debentures)

 Appraisals (include recent appraisals of assets such as buildings, property, and equipment or
provide a market evaluation of the business and an asset list outlining the asset, the year
purchased and amount paid)

 Financial statements for associated companies (where appropriate)

 Name of present lending institution (including branch, type of accounts)

 Lawyer’s name (include address and phone/fax number)

 Accountant’s name (include address and phone/fax number)