Executive Summary Of Your Business Plan Part 3

V. Instructions: Operational Plan This section explains the daily operation of your business, including its location, equipment, personnel and processes. 1. Production How will you will produce your product or deliver your service? Describe your production methods, the equipment you’ll use and how much it will cost to produce what you sell. 14. Quality control How will you maintain consistency? Describe the quality control procedures you’ll use. 15. Location Where is your business located? You briefly touched on this in the Company Overview. In this section, expand on that information with details such as: a. b. c. d. e. The size of your location The type of building (retail, industrial, commercial, etc.) Zoning restrictions Accessibility for customers, employees, suppliers and transportation if necessary Costs including rent, maintenance, utilities, insurance and any buildout or remodeling costs f. Utilities 16. Legal environment What type of legal environment will your business operate in? How are you prepared to handle legal requirements? Include details such as: g. Any licenses and/or permits that are needed and whether you’ve obtained them h. Any trademarks, copyrights or patents that you have or are in the process of applying for i. The insurance coverage your business requires and how much it costs j. Any environmental, health or workplace regulations affecting your business k. Any special regulations affecting your industry l. Bonding requirements, if applicable 17. Personnel What type of personnel will your business need? Explain details such as: m. What types of employees? Are there any licensing or educational requirements? n. How many employees will you need? o. Will you ever hire freelancers or independent contractors? p. Include job descriptions. q. What is the pay structure (hourly, salaried, base plus commission, etc.)? r. How do you plan to find qualified employees and contractors? s. What type of training is needed and how will you train employees? Download the Job Analysis Worksheet and use it to help you answer the questions above. 18. Inventory If your business requires inventory, explain: What kind of inventory will you keep on hand (raw materials, supplies, finished products)? What will be the average value of inventory (in other words, how much are you investing in inventory)? What rate of inventory turnover do you expect? How does this compare to industry averages? Will you need more inventory than normal during certain seasons? (For instance, a retailer might need additional inventory for the holiday shopping season.) What is your lead time for ordering inventory? 19. Suppliers List your key suppliers, including: Names, addresses, websites Type and amount of inventory furnished Their credit and delivery policies History and reliability Do you expect any supply shortages or short-term delivery problems? If so, how will you handle them? Do you have more than one supplier for critical items (as a backup)? Do you expect the cost of supplies to hold steady or fluctuate? If the latter, how will you deal with changing costs? What are your suppliers’ payment terms? 20. Credit policies If you plan to sell to customers on credit, explain: Whether this is typical in your industry (do customers expect it)? What your credit policies will be. How much credit will you extend? What are the criteria for extending credit? How will you check new customers’ creditworthiness? What credit terms will you offer? Detail how much it will cost you to offer credit, and show that you’ve built these costs into your pricing structure. How will you handle slow-paying customers? Explain your policies, such as when you will follow up on late payments, and when you will get an attorney or collections agency involved. After reading the Operational Plan section, the reader should understand how your business will operate on a day-to-day basis. VI. Instructions: Management & Organization This section should give readers an understanding of the people behind your business, their roles and responsibilities, and their prior experience. If you’re using your business plan to get financing, know that investors and lenders carefully assess whether you have a qualified management team. 1. Biographies Include brief biographies of the owner/s and key employees. Include resumes in the Appendix. Here, summarize your experience and those of your key employees in a few paragraphs per person. Focus on the prior experience and skills that have prepared your team to succeed in this business. If anyone has previous experience starting and growing a business, explain this in detail. 2. Gaps Explain how you plan to fill in any gaps in management and/or experience. For instance, if you lack financial know-how, will you hire a CFO or retain an accountant? If you don’t have sales skills, will you hire an in-house sales manager or use outside sales reps? 3. Advisors List the members of your professional/advisory support team, including: a. Attorney b. Accountant c. Board of directors d. Advisory board e. Insurance agent f. Consultants g. Banker h. Mentors and other advisors If they have experience or specializations that will increase your chances of success, explain. For instance, does your mentor have experience launching and growing a similar business? 4. Organization Chart Develop and include an organization chart. This should include both roles that you’ve already filled and roles you plan to fill in the future. After reading the Management & Organization section, the reader should feel confident that you have a qualified team leading your business. Use the Management Worksheet and Organization Chart on the next two pages to highlight your management team. Management Worksheet Bio/s Gaps in Management or Experience Advisors Organization Chart TITLE TITLE TITLE TITLE TITLE TITLE TITLE TITLE TITLE TITLE TITLE TITLE TITLE VII. Instructions: Startup Expenses & Capitalization In this section, detail the expenses involved in opening for business and how much capital you’ll need. (Do not include ongoing expenses after your business opens; those are listed in the Financial Plan.) Estimating startup expenses as accurately as possible helps you gather enough startup capital. 1. Start-Up Expenses Download and complete the Start-Up Expenses template. In working on this Business Plan, you should already have gathered most, if not all, of the information you need. In the body of this section, be sure to explain all of the assumptions behind the figures. How did you come up with these expenses? If you’ve secured or expect to secure loans, explain the source/s, amount/s and terms. If you’ve secured or expect to secure investors, explain how much each investor will contribute and what percentage of ownership each receives in return. Be sure to include extra capital for unexpected expenses. Opening a new business almost always ends up costing more than expected, and you need to be prepared. List this figure in the Start-Up Expenses template under “Reserve for Contingencies.” How much should you set aside for contingencies? You can talk to other business owners in your industry to get a ballpark figure. If you can’t come up with a figure this way, a good rule of thumb is to set aside 20% to 25% of your total startup costs for contingencies. 2. Opening Day Balance Sheet Download and complete the Opening Day Balance Sheet. Use it to detail the expected state of your business finances on opening day. As with the Start-Up Expenses sheet, be sure to explain the assumptions behind the figures. 3. Personal Financial Statement If you are using the business plan to seek financing, include personal financial statements for each owner and each major stockholder. The personal financial statements should detail each person’s assets and liabilities outside of the business and their personal net worth. Investors and/or lenders typically expect business owners to use personal assets to finance a startup, and they’ll want to see how much capital you have available from your personal finances. After reading the Startup Expenses & Capitalization section, the reader should know how much money is needed to start the business and how well capitalized you are. VIII. Instructions: Financial Plan Your financial plan is perhaps the most important element of your business plan. Lenders and investors will review it in detail. Developing your financial plan helps you set financial goals for your startup and assess its financing needs. Include the following: 1. 12-month profit & loss projection Also known as an income statement or P&L, the 12-month profit and loss projection is the centerpiece of your business plan. Download the 12-Month Profit and Loss Projection and fill in your projected sales, cost of goods sold and gross profit. (Refer to the Sales Forecast you created in Section IV). Then list your expenses, net profit before taxes, estimated taxes and net operating income. Be sure to explain the assumptions behind the numbers in your P&L. Keep detailed notes about how you came up with these figures; you may need this information to answer questions from potential financing sources. 2. Optional: 3-year profit & loss projection A three-year profit and loss projection is not essential to a business plan. However, you may want to create one if you expect your business’s financials to change substantially after the first year, or if investors or lenders require it. Download the 3Year Profit and Loss Projection template, and use it to create your projection. 3. Cash flow projection The cash flow statement tracks how much cash your business has on hand at any given time. Once your business is up and running, you’ll want to keep close tabs on your cash flow statement. For now, however, you’re creating a cash flow projection. Think of the cash flow projection as a forecast for your business checking account. It details when you need to spend money on things such as inventory, rent and payroll, and when you expect to receive payments from customers and clients. For example, you may make a sale, have to buy inventory to fulfill the sale, and not collect payment from the customer for 30, 60 or 90 days. The cash flow projection takes these factors into account, helping you budget for upcoming expenses so your business doesn’t run out of money. Download the 12-MonthCash Flow Statementand use it to create your projections. 4. Optional: 3-year cash flow statement Depending on your needs and the purpose of your business plan, you may also want to include a 3-year cash flow statement. If so, download the 3-Year Cash Flow Statementand use it to create your projections. This is a much simpler document than the 12-month cash flow statement, but can still be useful in making plans. 5. Projected balance sheet A balance sheet subtracts the company’s liabilities from its assets to arrive at the owner’s equity. You already created an opening day balance sheet in Section 1. Now, download the Balance Sheet (Projected), and create a projected balance sheet showing the estimated financial condition of your business at the end of its first year. The major difference between the two is that the projected balance sheet includes any owner’s equity resulting from the business’s first year in operation. Lenders and investors may want to see this projection. 6. Break-even calculation The break-even analysis projects the sales volume you need in order to cover your costs. In other words, when will the business break even? Download the Break-Even Analysis template and, using your profit and loss projections, enter your expected fixed and variable costs. Adjust the categories to reflect your own business. You can even create a couple of different break-even analyses for different scenarios. For example, your payroll costs will vary depending on whether you hire full-time employees or use independent contractors. Creating different break-even analyses can help you determine the best option. 7. Use of capital If you’re using the business plan to seek financing from lenders or investors, provide a breakdown of how you will the capital and what results you expect. For example, perhaps you will use the money to buy new equipment and expect that to double your production capacity. After reading the Financial Plan section, the reader should understand the assumptions behind your financial projections and be able to judge whether these projections are realistic. A SCORE mentor can help you complete your Financial Plan tailored for your business. Find a SCORE mentor. IX. Instructions: Appendices Don’t slow your readers down by cluttering your business plan with supporting documents, such as contracts or licenses. Instead, put these documents in the Appendices, and refer to them in the body of the plan so readers can find them if needed. Below are some elements many business owners include in their Appendices. 1. 2. 3. 4. 5. 6. 7. 8. 9. Agreements (Leases, contracts, purchase orders, letters of intent, etc.) Intellectual property (trademarks, licenses, patents, etc.) Resumes of owners/key employees Advertising/marketing materials Public relations/publicity Blueprints/plans List of equipment Market research studies List of assets that can be used as collateral You can also include any other materials that will give readers a fuller picture of your business or support the projections and assumptions you make in your plan. For instance, you might want to include photos of your proposed location, illustrations or photos of a product you are patenting, or charts showing the projected growth of your market. After reviewing the Appendices, the reader should feel satisfied that the assumptions throughout the plan are backed up by documentation and evidence. X. Instructions: Refining the Plan Modify your business plan for your specific needs, audience and industry. Here are some guidelines to help: For Raising Capital from Bankers Bankers want to know that you’ll be able to repay the loan. If the business plan is for bankers or other lenders, include: How much money you’re seeking How you’ll use the money How that will make your business stronger Requested repayment terms (number of years to repay) Any collateral you have and a list of all existing liens against your collateral For Raising Capital from Investors Investors are looking for dramatic growth, and they expect to share in the rewards. If the business plan is for investors, include: Investment amount you need short-term Investment amount you’ll need in two to five years How you’ll use the money and how that will help your business grow Estimated return on investment Exit strategy for investors (buyback, sale or IPO) Percentage of ownership you will give investors Milestones or conditions you will accept Financial reporting you will provide to investors How involved investors will be on the board or in management For a Manufacturing Business Explain the operations involved in manufacturing your product/s. What equipment is needed? What are the production/capacity limits of the equipment? What are the production/capacity limits of the proposed physical plant? Is specialized labor needed? What raw materials do you need for manufacturing? Are there any special requirements for storing these? What quality control procedures will you use? How will you manage inventory levels? What is your supply chain? Explain any new products you’re developing, or products you plan to begin developing after startup. For a Service Business Explain your prices and the methods used to set them. What systems and processes will you use for ensuring consistent delivery of services? What quality control procedures will you use? How will you measure employee productivity? Will you subcontract any work to other businesses? If so, what percentage of work will be subcontracted? Will you make a profit on subcontracting? Explain your credit, payment and collections policies and procedures. How will you maintain your client base and get long-term contracts? Explain any new services you’re developing or services you plan to add after startup. For a Retail Business List specific brands you plan to carry that will give you a competitive advantage. How will you manage inventory? What inventory management software will you use? What forms of payment will you accept? What payment processing service will you use? What point-of-sale software and hardware will you use? Explain your markup policies. Your prices should be profitable, competitive and in line with your brand. Initial inventory level: Find the industry average annual inventory turnover rate (available in the RMA book). Multiply your initial inventory investment by the average turnover rate. The result should be at least equal to your projected first year's cost of goods sold. If not, you may need to budget more for startup inventory. What are your customer service policies? How will you handle returns and exchanges? Will your retail store also have an ecommerce site, or is one planned for the future? For an Ecommerce Business Will you sell a physical product, a service, a digital product (such as eBooks) or some combination of these? If you’re selling physical products, how will you brand and package them? Will you sell on your own website, online marketplaces (such as Amazon) or both? What technology providers and platforms will you use to run your ecommerce site? o Web hosting service o Web design service o Shopping cart provider o Payment processing service o Fulfillment & shipping services o Email marketing services Can the solutions you’ve chosen quickly scale up or down as needed? Where will you get your products? Will you manufacture them in-house, buy them from manufacturers or use drop shippers? How will you handle returns and exchanges? What are your customer service policies? How will you provide customer service? Will you use any proprietary technology of your own and if so, what advantages does that give you? For a Software or SaaS business What is your pricing structure? Will you use a free trial, “freemium” or paid business model? If you offer free services or a free trial option, how will you upsell customers to a payment model? What percentage of customers are expected to become paying customers? Have you tested your software? Are any “early adopters” already using the product? How will you encourage long-term contracts in order to create recurring revenues? How will you manage rapidly changing markets, technologies and costs? How will you keep your company competitive? Will you use in-house developers or outsource this function? How will you provide customer support? How will you retain key personnel? Are you using any proprietary or exclusive software that will give you a competitive edge? How will you protect your intellectual property? What additional products or updates to current products are you planning after launch?