Business Planning Guide
Business plans can be used for a number of purposes. They can be used as internal operating
guides to assist management with the goals, projections and activities of their business. They
can be used for start-up companies to initially identify goals and risk factors. They can be used
by start-up companies or existing companies to seek financing. They can be used to attract
partners and/or investors.
A business plan should identify numerous issues to the reader. These issues should include the
financial activities of the business (historical, current and projected). If the business plan is being
used to obtain financing, then the amount of funds being sought should be clearly identified.
Application of funds acquired should also be identified. Impacts as a result of the funds should
be identified, and most importantly the plan should specifically identify how the funds will be repaid
to the investor.
The plan should identify the operation of the business (who runs the company, who works for
the company, what their qualifications are). What the company does ( manufacture, assemble,
retail, wholesale, distribute, provide a service, etc.). It should identify who the customers are
(currently, and projected). It should identify how the company intends to "reach"
these customers (what the market plans are). It should identify the competition and whether or
not the competition will be able to seriously impact the success of the business.
The business plan should be written in a precise and direct manner. It should be a document
which is easy to read and comprehend. Tools that can be used to facilitate this are: a
comprehensive Table Of Contents; Appendixes (for supportive information). Two primary
components to a viable business plan are: A Title Page which identifies specific company
information; an Executive Summary which describes the entire business plan in an abbreviated format.
Many times, the Executive Summary is the primary document which someone reads to determine
their level of interest in the business. Also, it is far easier to distribute an Executive Summary to
many people than it is to distribute many copies of the business plan. If a major interest is identified,
then the entire business plan can be forwarded for review.
Therefore, a business plan can be used as an internal operational guide, a document to solicit
financing or investors, a marketing tool to encourage people to do business with you. Separate
portions of the business plan can be used individually for individual purposes.
Example: The marketing portion can be used to assist with market identification and development.
It might also be used to encourage vendors or customers to do business with you without having
to reveal all of the data presented in the complete business plan.
Example: The financial portion of the business plan might be used with potential investors, in-house
financial control staff, vendors, creditors.
If a business plan is designed properly, the uses can be endless. In the initial stages of designing a
business plan, it is important to identify what the plan will be used for, and who will be using it. This
will greatly enhance your ability to compose an effective plan, and one which will meet current and
It should be noted that as time progresses, so do the facts which might have been included in the
plan. This is especially important with regards to financial information. Current financial information
should reflect the activities of the business within the last 60 days, and there should be an ability to
provide the most recent financial activity of the business in draft form (internally generated) if it is requested.
As projected financial information changes from projected to actual, you should be able to update
and revise the projections to indicate the actual performance of the business. This is easily
accomplished if the financial information has been input into a computerized spread sheet database
which will allow for changes to be made on a frequent basis. Manually performing these tasks can
be cumbersome, but whichever method is used, it is important to be able to provide accurate and
current financial data.
Another important factor which needs to be addressed regarding the financial portion of the business
plan is how to determine which currency valuation to use. This identifies another feature which can
be used by having financial information in computerized systems, since you will be able to generate
multiple formats for financial reports.
If the business plan is to be used only in a local country environment, then the use of local currency
to depict financial performance is acceptable. If the business plan is to be used with American
(or foreign) companies, it is advisable to convert financial calculations to $USD or foreign currency
with a note specifying the conversion factor being utilized. Once again, the business plan should
provide the reader with ease of use and it is much more acceptable to present a business plan to
an American investor based upon $USD than it is to provide the same business plan based upon $Foreign.
A Business Plan should include the following information:
Table Of Contents
Description of Business
Description of Management and Staff
Description of Product or Service
Description of Manufacturing Facility (if applicable)
Historical Financial Information
Current Financial Information
Projected Financial Information
Appendixes (Supportive Information)
Letters of Intent
Letters of Credit Information
Foreign Corporation Documentation
Licenses, Registration Documentation
The Title Page should identify:
The name of the company
The address of the company
Telephone # / fax # / Email Address / URL / Telex #
The name of the owner(s), principals
The name of who the plan is being submitted to (optional)
TABLE OF CONTENTS
The Table of Contents should list by title heading and page number, all of the information included
in the business plan. It should be a guide for the reader so they will be able to locate any specific
information they are looking for. You can create your own title headings as they apply to your specific
plan. Be sure to use the same title headings which are listed in the Table of Contents as title headings
on the specific pages of text within the business plan.
The Executive summary is usually a document which is best written after the entire business plan has been
completed. It should not be more than three pages long unless absolutely necessary.
The Executive Summary should be written as a summary of the entire business plan. It should describe
the business and its activities in abbreviated form. It should describe the product or service, the market
base, and the basic directions of the business.
If financial funds are being sought, a description of the application of funds should be provided. Additionally,
the positive impact of the application of funds should be provided (market penetration, increased purchasing
power, increased manufacturing capabilities, etc.). Most importantly, a method of repayment should be included
to assure the potential investor that the rate of return on their investment will be worth their involvement.
Specific financial and marketing information should be provided to prove the validity of the concepts
identified in the business plan.
The Executive Summary is an important document because many times it is used with the Title Page
(without the complete copy of the business plan) to seek out potential investors, or other interested parties
who might be willing to participate in the activities of the business. If potential investors are interested in
further reviewing the specific information regarding the business, they can request a complete copy of the
business plan for a more detailed analysis.
It is much easier (and cost effective) to send out numerous copies of an Executive Summary, than it is
to send out numerous copies of a business plan. Many times, potential investors do not have the time
available to read a multitude of business plans, but they are willing to read an Executive Summary to
determine if they wish to review the business further.
DESCRIPTION OF BUSINESS
The Description Of Business section should provide numerous items of information.
The name of the business.
The type of business (corporation, joint venture, etc.).
How long the business has existed (when was it founded).
The name of the owners.
Contact information ( telephone, fax, email, etc.).
Type of facility which business is located in:
Description of building and space occupied.
If the facility is owned or leased.
What payments are needed to secure ownership or lease of facility.
You should provide a description of the types of activities the business has been involved in, and what
the plans are for the future. If you manufacture or sell a product, you should describe these types of
products. If you sell a service, you should describe the service.
You should describe who you sell your products or services to. Why do your customers purchase from
you, who else can your customers purchase from. What makes your business distinctly different from others.
What is the area in which you do business? Is it local, country-wide, international? Whatever the areas
are in which you do business, you should provide supportive information to indicate that your business
has the proper licenses and permits to do business, and that all of your business activities comply with
all applicable laws, rules and regulations.
Basically, the Description Of Business should describe the current operations of your business: who you
are, where you are, what you do, how you do it, who you do it for. Supplemental and supportive information
can be included in the Appendix, but should be referenced in the text.
DESCRIPTION OF MANAGEMENT AND STAFF
You should describe who participates in the daily activities of the business, what their roles are,
and what their qualifications are. Supplemental and supportive information (resumes and technical
backgrounds) if available, should be included in the Appendix, but should be referenced in the text.
The skills and technical backgrounds of specific individuals are important because they provide
the reader with assurances that you have management and personnel which is experienced in
their respective fields. Skills which are of significant importance are: business management,
financial management, manufacturing and production, sales, marketing, and others which clearly
depict that the individual has a current knowledge of the portion of the business in which they are
participating in. Listing names of individuals with their respective titles in the business is appropriate.
Describing the specific functions of these individuals, and how their efforts support the goals and
objectives of the business is important. You need to prove with factual data that you have a
well-trained staff to perform the current activities of the business, and that they are capable of
meeting the operational demands of whatever goals you have projected within the business plan.
Sometimes, specific individuals which are needed to meet future plans are not yet working for
the company. You will need to identify that their services are available to the business, and that
if there does exist a need for their services in the future, that they will be willing to provide these
services to the business.
If you utilize the services of an Advisory Board, or a Board Of Directors, although they may not be
employed by the business, their advice and counsel is available to the business. If this is the case,
you should identify the existence of such an outside source of assistance.
DESCRIPTION OF PRODUCT OR SERVICE
Whatever it is that the business does: purchase and sell a product, manufacture a product, provide a
service, operate a retail, wholesale or distribution business, etc.; you need to provide a description of
what it is that you do.
If there are products that you manufacture, purchase, or sell; identify these products, their sources,
the costs, the resale prices, etc. Manufacturing requires a much more detailed description since you
should describe in detail the manufacturing process and the related expenses. Some of the
manufacturing information can be included in the Description Of Manufacturing Facility included in
a separate portion of the business plan.
If you purchase and sell products, the sources of these products and their related expenses need to be identified.
In all instances, time is also an important factor. You need to identify the time it takes to purchase or
manufacture a product, as well as the time it takes to sell the product. The same requirements exist for services.
If there are minimum purchase requirements (volume discount purchasing), inventory and stocking
requirements, these issues should be addressed.
While also describing the product or service, you should make initial reference to the types of customers
who will be purchasing these products or services. A more detailed analysis of your customer base should
be included in the Marketing Plan section of the business plan.
DESCRIPTION OF MANUFACTURING FACILITY
If you are a manufacturer, you should provide a comprehensive description of the facility which
you use. You should also provide a definitive list of the types of equipment which you use, and
the technical specifications and capabilities of these types of equipment. Some of this information
can be included in the Appendix, but specific references should be made in the text. (Supplemental
information can include diagrams of the facility, equipment lists, power and utility requirements,
production line diagrams, etc.).
Sometimes, potential investors and/or customers will be able to determine the capabilities and
viability of your business based upon the types of equipment and set-up of manufacturing facility
which you describe.
A description of the manufacturing facility should also include a description of the manufacturing
process, with specific references made to the: source, availability and cost of raw materials; the
labor force/skills which are used in the manufacturing process; time schedules related to all aspects
of the manufacturing process from initial purchasing of raw materials to a finished product.
The selling of the product, with references to all relative expenses and time schedules can be
more clearly identified in the Description Of Product or Marketing Plan sections of the business plan.
The Marketing Plan should identify what it is you are going to market, to whom, how, and for
how much. This will require that you reference existing staff and products/services as previously described.
You will also have to reference volume/quantity of products or services being sold, and there
will need to be some sort of pricing calculation made to identify what the unit costs are. These
financial figures will be referenced in your financial projections, and the reader will want to be
able to support your financial projections with data and information provided in your Marketing Plan.
In the Marketing Plan, you should identify which members of your staff are going to perform
which types of services to fulfill the goals of the plan. There needs to be an established time
schedule for selling the products/services to customers.
There needs to be an established and supportable cost analysis related to the products/services,
and there needs to be an established selling price for products/services.
The manner in which you intend to "reach" your customers; retail store, warehouse,
mail order, telemarketing, direct mail, distributors, etc., needs to be clearly identified. The costs
related to these marketing efforts, as well as the time and labor involved should also be specifically identified.
A clear identification of who your existing and potential customers are is required. You can refer
to these customers in general, and provide a more clearly defined listing of them in the Appendix.
But, you do need to identify who the market is, and who your "target market" is.
If you plan to advertise your products/services, you should identify what methods of advertising
will be used, how frequently you will use them, who will be affected by these forms of advertising,
and how much it will cost.
Finally, you should also identify who your competition is, what types of products/services they sell,
who their customers are, and what their prices are. Hopefully, there will be something unique about
your business which makes you better or different from the competition. The uniqueness could be:
better service, better price, better delivery time, better quality, better product, better location, better
sales staff, better technical staff. You need to identify what makes your business unique and more
desirable to the potential customer.
Much of the information identified in the Marketing Plan is either referenced or supported elsewhere
in the plan. If you indicate that you intend to sell more products than you can afford to purchase
or manufacture, this will create a flaw which will render the plan invalid. If you indicate that you
intend to sell more products/services than the target market you identified is capable of purchasing,
this will also create a flaw.
If the selling price for the products/services is far in excess of what your target market can afford,
this will also create a flaw. It is important to prove that your claims are valid. This can be accomplished
by conducting market surveys, polling potential customers to determine what they would be willing to
purchase, when, and for how much.
The financial information which you include in your business plan should identify the historical financial
activity of the business, current financial activity, and projected financial activity. If you are looking to
attract financial investors, your projected financial plans should identify how you intend to "pay
them back", and you should also identify how you intend to use the investment funds. To avoid
confusion, if your plan is being presented to an American investor/company, it is recommended that
you perform all the necessary currency conversions, and present a financial plan in $USD.
The historical financial information should be in the form of Income Statements which should identify:
Costs of Goods Sold
Cost Of Manufacture
Cost Of Selling
Other expenses directly related to the activity of making/selling a product/service.
Gross Profit Margin (monies left over after all direct expenses).
Expenses not directly related to sales activity.
General and administrative expenses.
Net Profit Margin (monies left over after all expenses, but before taxes).
Net Profit After Taxes
The format used for the Income Statement can be used for historical financial information, current
financial information and projected financial information. The historical financial Income Statement
can be in an annual format. If available, it is recommended that three years of prior financial history
be included in the plan.
The current financial Income Statement should reflect the current month of business activity, and
year-to-date (YTD) financial activity so the reader will be able to determine how profitable your
business is at the present time.
The projected financial Income Statement (for the first projected year) should be in a monthly format.
The projected financial Income Statement for the subsequent two projected years should be in a
quarterly format with annual data compiled for each year.
Financial statements which should be included in the plan are: A Balance Sheet (to identify specific
financial data at a fixed point in time, including: Inventory, Accounts Payable, Accounts Receivable,
Cash Balances, and other short/long term assets and liabilities), Historical Income Statements,
Projected Income Statements, Projected Cash Flow Statements.
Every source of revenue and every form of expense should be clearly identified somewhere in the
financial statements. The relationship between revenues and expenses should always be clearly
identified. The difference between fixed expenses and variable expenses is easily explained as follows:
If you lease a store-front to open up a retail store, regardless of how many products you purchase
and sell, you will always have to pay the fixed lease price. If you purchase no products, and thereby
sell no products, you will still have to pay the lease. Therefore, the lease is a fixed expense.
If you hire a sales person and agree to pay them a salary (although the salary may be considered a
selling expense) and the sales person sells no products, you will still have to pay the sales person's
salary. In this instance, the salary is considered fixed. If you agree to pay the sale person only a
commission based upon what the sales person sells, if the sales person doesn't sell anything, you
won't have to pay them anything. If the sales person does sell something, you will only have to
pay the sales person a percentage of what was sold (the commission). In this instance, the pay
for the sales person is considered variable.
Variable expenses are considered to be adjustable in direct relationship to the revenues generated.
If there are no revenues, the variable expenses should be minimal. This does not hold true with
certain expenses which require an initial investment to initiate business in the first place like base
inventories, or, minimum purchase requirements.
Appendixes should include supportive information which is referenced elsewhere in the business
plan, but should not be included in the primary text of the business plan because it would tend to
make the flow of information far too bulky and cumbersome. Items that are usually included in
Resumes and Technical Qualifications of Management and Staff
Contracts with existing customers
Letters of Intent to do business from potential customers
Product/Service Lists (with prices)
Facility Designs, production diagrams
Leases, or property ownership information
Licenses, Permits, Corporate Documents
Letter of Credit Information
Partnership, Joint Venture Documentation
Marketing/Demographic Information (Market Research)
Other Documents which are relevant to the plan
There are many excellent guides available to assist with the development of a Business Plan.
One guide which we highly recommend is "Anatomy of a Business Plan"
which is a hard copy text outlining everything which needs to be included in a Business Plan.
This text is supplemented by a stand-alone software "Automate Your Business Plan"
(which includes word processing and spreadsheet software) and can be used in a DOS, WINDOWS 3.x,
WINDOWS 95/98 environment. The software has sample business plans available to be used as
guides, and also provides numerous templates which can be easily edited to assist with the development
of your business plan.
Either of these products can be obtained by contacting:
Out Of Your Mind ... And Into The Market Place.
Linda Pinson, President
13381 White Sand Drive
Tustin, California 92680
T: 714-544-0248 F: 714-730-1414
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