Business Plan for Small Service Firms


A Note on Using This Publication
What’s in This for Me?
Why Am I in Business?
What Business Am I in?

Determining Sales Potential
Attracting Customers
Selling to Customers


Start-up Costs
Break Down Your Expenses
Matching Money and Expenses
Is Additional Money Needed?

Stock Control
Break-even Analysis




A. Income Projection Statement
B. Monthly Cash Flow Projection
C. Balance Sheet
D. How to Write a Business Plan
E. Information Resources


A business plan can provide the owner-manager or prospective
owner-manager of a small service firm with a pathway to profit.
This publication is designed to help an owner-manager develop a
business plan.

To profit in business, you need to consider the following
questions, among others: What business am I in? What services do
I provide? Where is my market? Who will buy the services? Who is
my competition? What is my sales strategy? What merchandising
methods will I use? How much money is needed to operate my firm?
How will I get the work done? What management controls are
needed? How can they be carried out? When should I revise my
plan? Where can I go for help?

No one can answer such questions for you. As the owner-manager
you must answer them as you draw up your business plan. This
publication is a combination of text and work spaces to record
the information you gather in developing your business plan.

A Note on Using This Publication

It takes time, energy and patience to draw up a satisfactory
business plan. Use this publication to get your ideas and the
supporting facts down on paper. Above all, make needed changes on
these pages as your plan unfolds.

Bear in mind that anything you leave out of the picture will
create an additional drain on your money when it crops up later.
If you leave out or ignore enough items, your business is headed
for disaster.

Keep in mind, too, that your final goal is to put your plan into
action. More will be said about this near the end of this

What’s in This for Me?

You may be thinking, Why should I spend my time drawing up a
business plan? What’s in it for me? If you’ve never drawn up a
plan before, you are right in wanting to hear about the possible
benefits before you do your work.

A business plan offers at least five benefits. You may find
others as you make and use the plan.

The first, and most important, benefit is that a plan gives you a
path to follow. A plan with goals and action steps allows you to
guide your business through turbulent economic seas and into
harbors of your choice. The alternative is drifting into “any old
port in a storm.”

Second, a plan makes it easy to let your banker in on the action.
Reading or hearing the details of your plan will furnish a lender
with real insight into your situation.

Third, a plan can be a communications tool when you need to
orient sales personnel, suppliers and others to your operations
and goals.

Fourth, a plan can help you develop as a manager. It can give you
practice in thinking about competitive conditions, promotional
opportunities and situations that seem advantageous to your
business. Such practice over a period of time can help increase
an owner-manager’s ability to make adjustments.

Fifth, a sound plan tells you what to do and how to do it to
achieve the goals you have set for your business.

Why Am I in Business?

Many enterprising Americans are drawn into starting their own
business by the possibilities of making money and being their own
boss. But the long hours, hard work and responsibilities of being
the boss quickly dispel any preconceived glamour.

Profit is the reward for satisfying consumer needs. But it must
be earned. Sometimes a new business might need two years before
it shows a profit.

What then are the other reasons for having your own business? For
some, satisfaction comes from serving their community. They take
pride in serving their neighbors and giving them quality work
that they can stand behind. For others, their business offers
them a chance to contribute to their employees’ financial

There are as many rewards and reasons for being in business as
there are business owners. Why are you in business?


What Business Am I In?

In making your business plan, the first question to consider is,
What business am I really in? At the first reading this question
may seem silly. “If there is one thing I know,” you say to
yourself, “it is what business I’m in.” Hold on and think. Some
owner-managers have gone broke and others have wasted their
savings because they did not define their businesses in detail.

Consider this example. Joe Riley had a small suburban radio and
television store. He thought of his business as a retail store,
although he also serviced and repaired anything he sold. As his
suburb grew, appliance stores emerged and cut heavily into his
sales. However, there was an increased call for quality repair

When Mr. Riley reconsidered his situation, he decided that he was
in the repair business. As a result, he profitably built up his
repair business and contracted with one of the appliance stores
to perform service and repairs.

Decide what business you are in and write your answer in the
following spaces. To help you decide, think of the answers to
questions such as, What parts and materials must you keep on
hand? What services do you offer? What services do people ask for
that you do not offer? What is it you are trying to do better,
more of or differently from your competitors?



When you have decided what business you’re in, you have made your
first marketing decision. Now you are ready for other important

Successful marketing starts with the owner-manager. You have to
know your service and the needs of your customers.

The narrative and work blocks that follow are designed to help
you work out a marketing plan for your firm. The blocks are
divided into three sections: (1) determining sales potential,
(2) attracting customers and (3) selling to customers.

Determining Sales Potential

In the service business, your sales potential will depend on the
area you serve. How many customers in this area will need your
services? Will your customers be industrial or commercial
clients, consumers or all of these?

When picking a site for your business, consider the nature of
your service. If you pick up and deliver, you will want a site
where the travel time will be low. If customers must come to your
place of business, the site must be conveniently located and easy
to find.

You must pick the site that offers the best possibilities of
being profitable. Consider the following questions:

What is the population and its growth potential?

What is the income, age and occupation of the population?

Are there a number of competitive services in and around your
proposed location?

Are there local ordinances and zoning regulations that would
apply to your business?

What type of trading takes place in the area (commercial,
industrial, residential or seasonal)?

For additional help in choosing an area, you might try the local
chamber of commerce and the manufacturer and distributor of any
equipment and supplies you will be using.

You will want to consider the next list of questions in picking
the specific site for your business.

Will customers come to your place of business?

How much space do you need?

Will you want to expand later on?

Do you require any special features in lighting, heating or

Is parking available?

Is public transportation available?

Is the location conducive to drop-in customers?

Will you pick up and deliver?

Will travel time be excessive?

Will you prorate travel time to service calls?

Would a location close to an expressway or main artery cut down
on travel time?

If you choose a remote location, will savings in rent offset the

If you choose a remote location, will customers be able to locate
your business readily?

Will the supply of labor be adequate and the necessary skills

What are the zoning regulations of the area?

Will there be adequate fire and police protection?

Will crime insurance be needed and available at a reasonable

I plan to locate in ________________________________ because


Also consider these questions:

Is the area in which you plan to locate supported by a strong
economic base? For example are nearby industries working full
time? Only part time? Did any industries go out of business in
the past several months? Are new industries scheduled to open in
the next several months?

Write your opinion of the area’s economic base and your reasons
for this opinion here:


Will you build? _______ What are the terms of the loan or mortgage?


Will you rent? ________ What are the terms of the lease?


What is the competition in the area you have picked?


How many nearby firms handle your same service?


Does the area appear to be saturated? ___________________________

How many of these firms look prosperous? __________________________

Do they have any apparent advantages over you? ____________________

How many look as though they’re barely getting by?

How many similar services went out of business in this area last


Can you find out why they failed? ________________________________

How many new services opened up in the last year? ________________

How much do your competitors charge for your same service?


Which firm or firms in the area will be your biggest


List the reasons for your opinions here.


Attracting Customers

When you have a location in mind you should work through another
aspect of marketing. How will you attract customers to your
business? How will you pull customers away from your competition?

Many small service firms find competitive advantages in how they
attract customers. The ideas they develop are as good as and
often better than those that large companies develop with hired
brains. The work blocks that follow are designed to help you
think about image pricing customer service policies and


Whether you like it or not your service business is going
to have an image. The way people think of your firm will be
influenced by the way you conduct your business. If people come
to your place of business for your service the cleanliness of the
floors the manner in which customers are treated and the quality
of your work will help form your image. If you take your service
to the customer the conduct of your employees will influence your
image. Pleasant prompt and courteous service before and after the
sale will make satisfied customers.

You can control your image. Whatever image you seek to develop it
should be focused enough to promote in your advertising. For
example, “service with a smile” is an often-used image.

Write what image you want customers to have of your business.



In setting prices for your service consider these four main
elements: (1) materials and supplies (2) labor and operating
expenses (3) planned profit and (4) competition.

Further in this publication you will have the opportunity to
figure out the specifics of materials supplies labor and
operating expenses. From there you may want the assistance of
your accountant in developing a price structure that will be fair
both to the customer and to you. This means that you must not
only cover all expenses but also allow enough margin to make a

One other thing to consider. Will you offer credit? Most
businesses use a credit card system. If you use a credit card
system what will it cost you? Can you add to your prices to
absorb this cost?

Some trade associations have a schedule for service charges.
Check with the trade association for your line of business. Their
figures will make a good measuring stick to ensure that your
prices are competitive.

And of course your prices must be competitive. You’ve already
found out your competitors’ prices. Keep these in mind when you
are working with your accountant. If you will not be able to make
an adequate return now is the time to find it out.

Customer Service Policies

Customers expect certain services or conveniences such as
parking. These services may be free to the customer but not to
you. If you do provide parking you either pay for your own lot or
share the cost of a lot with other businesses. Since these
conveniences will be an expense plan for them.

Will you provide a warranty or guarantee on your work? A typical
service warranty is 30 days on parts and 90 days on labor; this
means that you will correct any problems arising within a
specified time frame following performance of a service at no
charge. The time frame can vary depending on the kind of service
you provide. A warranty tells customers you want them to be
satisfied with the work of your company.

List the services that your competitors provide customers.



Now list the services that you will provide your customers.

Service Estimated cost

________________________________________ $ _________________
________________________________________ $ _________________
________________________________________ $ _________________
________________________________________ $ _________________
________________________________________ $ _________________
________________________________________ $ _________________


Consider advertising last after you have determined your image
price range and customer services. Only then are you ready to
tell prospective customers why they should use your services.

When advertising dollars are limited it is vital that your
advertising be on target. Before you can consider how much money
you can afford for advertising take time to determine your
advertising goals. The work blanks that follow should help.

The strong points about my service business are


My service business is different from my competition in the
following ways:


My advertising should tell prospective customers the following
facts about my business and services:


Determine the target audience for your advertising. The audience
will be those people who are most likely to use your services.
Describe your customers in terms of age sex occupation and what-
ever else is necessary depending on the nature of your business.
This is your customer profile. For example an automobile repair
business may have a customer profile of “automobile owners 18
years of age and older.” Anyone over 18 who owns a car is part
of the target audience.

The customer profile for my business is


Now you are ready to think about the form and costs of your
advertising. You are looking for the most effective means to tell
your story to those most likely to use your service. Ask the
local media (newspapers radio and television and direct mail
printers) for information about the services and results they

How you spend advertising money is your decision but don’t fall
into the trap that snares many service firms. One consultant
described as amazing the way many managers consider themselves
experts on advertising copy and media selection even though they
have no experience in these areas. Seek professional advice on
how to advertise.

Use the Advertising Workblock to determine what advertising is
needed to sell your strong points to prospective customers.

When you have a figure on what your advertising costs will be for
the next twelve months check it against what similar businesses
spend. Trade associations and other organizations often gather
data on advertising expenses as an operating ratio (expenses as a
percentage of sales). If your estimated cost for advertising is
substantially higher than the average for your line of service
take a second look. No single expense item should be allowed to
get way out of line if you want to make a profit. Your task in
determining how much to spend for advertising comes down to
answering the question How much can I afford to spend and still
do the job that needs to be done?

Advertising Workblock

Form of Size of Frequency Cost of Estimated
advertising audience of use single ad cost

————— ————- ——— X $——— = $———-

————— ————- ——— X $——— = $———-

————— ————- ——— X $——— = $———-

————— ————- ——— X $——— = $———-

————— ————- ——— X $——— = $———-

Total $———-

Selling to Customers

To complete your work on marketing think about what you want to
happen after you get a customer. Your goal is to provide your
service satisfy the customer and put money into the cash

One-time customers can’t do the job. You need repeat customers to
build a profitable annual sales volume. When someone returns for
your service it is probably because he or she was satisfied by a
previous experience. Satisfied customers are the best form of

If you previously decided to work only for cash take a hard look
at your decision. Americans like to buy on credit. Often a credit
card or other system of credit and collections is needed to
attract and hold customers.

Based on this description and the dollar amount of business you
intend to do each year fill in the following workblocks.

Fixtures and Equipment

Whether customers come to your place of business or you go to
them you will need certain equipment and furnitureto perform your
service. List that equipment and its cost in the following

Type of equipment Number needed X Unit cost = Cost

_____________________ ___________ $_________ $__________
_____________________ ___________ $_________ $__________
_____________________ ___________ $_________ $__________
_____________________ ___________ $_________ $__________
_____________________ ___________ $_________ $__________

Parts and Materials

You will probably need certain parts or materials to provide your
service. List their cost here and fill in the Supplier/Delivery
Workblock below.

for 12
Item months Unit cost Cost

_____________________ ___________ $_________ $__________
_____________________ ___________ $_________ $__________
_____________________ ___________ $_________ $__________
_____________________ ___________ $_________ $__________
_____________________ ___________ $_________ $__________

Supplier/Delivery Workblock
Name of Address
of sup- of Discount Delivery Freight Fill-in
item plier supplier offered time* costs** policy***
_____ _____ _________ _________ __________ ________ __________
_____ _____ _________ _________ __________ ________ __________
_____ _____ _________ _________ __________ ________ __________
_____ _____ _________ _________ __________ ________ __________
_____ _____ _________ _________ __________ ________ __________
_____ _____ _________ _________ __________ ________ __________
_____ _____ _________ _________ __________ ________ __________
_____ _____ _________ _________ __________ ________ __________
_____ _____ _________ _________ __________ ________ __________

* How many days or weeks does it take the supplier to deliver
the parts and materials to you?

** Who pays – you or the supplier? (This cost can be a big
expense item.)

*** What is the supplier’s policy on fill-in orders? Do you have
to buy a gross, a dozen or only two or three items? How long
does it take to deliver to you?

Before you make any supply arrangements examine the supplier’s
policy for outmoded equipment. This can be a vital factor in
service parts purchasing. You should also look at the supplier’s
warranty policy.


Will your employees be covered by a fidelity bond? This is
particularly important when they perform services off your
premises and should be considered in planning your property and
liability insurance needs. Advertising bonded workers conveys a
message that your firm is honest and reliable.


List the overhead items you will need. Examples include rent
utilities a stock control system office help insurance interest
telephone postage accountant services payroll taxes and licenses
or other local taxes. If you plan to hire others to help you
manage their salaries should be listed as overhead.

Overhead items Unit cost

________________________________________ ______________________
________________________________________ ______________________
________________________________________ ______________________
________________________________________ ______________________

________________________________________ ______________________
________________________________________ ______________________
________________________________________ ______________________
________________________________________ ______________________
________________________________________ ______________________
________________________________________ ______________________
________________________________________ ______________________


An important step in setting up your business is to find and hire
capable employees. You must train them to work together to get
the job done. Then as your organization grows you have to
delegate work responsibility and authority. Organization becomes
essential because you as the owner-manager cannot do all the

A helpful tool is an organizational chart. It shows at a glance
who is responsible for the major activities of a business.
Examples are given here to help you prepare an organizational
chart for your business.

An organizational chart for a small service business will reflect
the fact that the owner-manager does most of the managing. It
might look like this:

Company President
| | |
Shop Manager Sales Manager Office
(owner-manager) (owner-manager)

or like this:

Company President
| | |
Sales Manager Shop Manager Office
(owner-manager) (owner-manager)

As the service business grows, its organization chart might look
like this:

Company President
| | |
Shop Manager Sales Manager Office
| (owner-manager)
| |
Foreman Parts Manager

In the space below, draw up an organizational chart for
your business.

(Your Name)
| | | | |
+——-+——-+ | +——-+——-+ | +——-+——-+
| | | | | | | |
+—————+ | +—————+ | +—————+
| |
+——-+——-+ +——-+——-+
| | | |
+—————+ +—————+

To determine both what needs to be done and who will do it list
each activity that is involved in your business. Next to the
activity indicate who will do it. You may do this by name or some
other designation such as “worker #1.” Remember that a name may
appear more than once.

Activity Name
————————————– ————————-
————————————– ————————-
————————————– ————————-
————————————– ————————-


This section is designed to help you think about what your
business plan means in terms of dollars. The first question
concerns the source of dollars. After your initial capital
investment the major source of money is the sale of your
services. What dollar volume of business do you expect to do
in the next 12 months? $______________

Start-up Costs

If you are starting a new business list the following estimated
start-up costs:

Fixtures and equipment* $__________
Starting inventory $__________
Office supplies $__________
Decorating and remodeling $__________
Installation of equipment $__________
Deposits for utilities $__________
Legal and professional fees $__________
License and permits $__________
Advertising for the opening $__________
Operating cash $__________
Owner’s withdrawal during
prep-start-up time $__________
Total $__________

*If you listed the cost of these items in the fixtures and
equipment section earlier in this publication transfer your


In connection with your annual dollar volume of business you need
to think about expenses. For example what will it cost you to do
$100000 worth of business? And even more important what will be
your profit at the end of year? Never lose sight of the fact that
profit is your pay. Even if you pay yourself a salary for living
expenses your business must make a profit if it is to continue
year after year and pay back the money you invested in it.

The following work block is designed to help you quickly estimate
your expenses. To use this formula you need to get only one
figure — the cost of sales figure for your line of business. If
you don’t have this operating ratio check with your trade

Whether you have the funds (savings) or borrow them your new
business will have to pay back these start-up costs. Keep this in
mind as you estimate expenses and other financial aspects of your

Operating Ratios
Example Yours
—————– ——————
% $ % $
Sales 100 $100,000 100 $———
Cost of sales 61.70 61.70 — $———
Gross profit
margin 38.30 38.30 — $———

Break Down Your Expenses
Your quick estimate of expenses provides a starting point. The
next step is to break down your expenses so they can be handled
over the twelve months. Use the Income Projection Statement. (See
Appendix A.)

Matching Money and Expenses

A budget helps you to see the dollar amount of your expenses each
month. Then from month to month the question is Will sales bring
in enough money to pay the firm’s bills on time? The answer will
be “maybe not” or “I hope so” unless the owner-manager prepares for
the “peaks and valleys” that are part of many service operations.

Consider using the “valleys” for staff training. To stay
competitive your employees must keep current on the latest
technology of the service they provide. Keep a library of
relevant manuals available for their reference.

A monthly cash flow projection is a management tool that can
eliminate much of the anxiety of lean months. Developing an
accurate cash flow projection helps you to determine the amount
and timing of your cash requirements over a 12-month period. The
SBA has created an excellent form for this purpose which you will
find in Appendix B along with a line-by-line description and
explanation of the form to help you prepare it.

Is Additional Money Needed?

Suppose at this point you have determined that your business plan
needs more money than can be generated by sales. What do you do?

What you do depends on the situation. For example you may need
bank credit to tide your business over during the lean months.
This loan can be repaid during the fat sales months when expenses
are far less than sales. Adequate working capital is necessary
for success and survival.

Whether an owner-manager seeks to borrow money for only one month
or on a long-term basis the lender needs to know the firm’s
financial position. Your lender will ask to see a current balance
sheet. (See Appendix C.)

The balance sheet can be seen as an equation:


Assets are all resources that are owned by the business and used
to further its activities. Liabilities are the obligations of the
business entity. Owner’s equity is the owner’s claim against or
interest in the assets. The owner’s equity is the excess of
assets over liabilities.

Even if you don’t need to borrow money complete a current balance
sheet or have your accountant draw a “picture” of your firm’s
financial condition. Show your plan to the bank that handles your
firm’s checking account. It is never too early to build good
relations with your banker to show that you are a manager who
knows where you want to go rather than one who merely hopes to
make a success.


To make your plan work you will need feedback. For example a
year-end profit and loss statement shows whether your business
made a profit or loss for the past twelve months.

But you can’t wait twelve months for the score. To keep your plan
on target you need readings at frequent intervals. A profit and
loss statement at the end of each month or at the end of each
quarter is one type of frequent feedback. Beware of relying too
heavily on the profit and loss statement. Since it only shows
actual income and expenses for a given period you may find that
at certain times you have more losses than profits. To keep a
balanced perspective on your business you must continuously
review and update your cash flow projection. This will help you
to anticipate changing levels of income and expenses.

The record-keeping system should be set up before your business
opens. Don’t leave it until after you’re in business; then it is
too late and you may be too busy to give a record-keeping system
the proper attention. The control system that you set up should
give you information about stock sales and disbursements. The
simpler the system the better. Its purpose is to give you current
information and help you identify trouble spots. Outside advisers
such as accountants can help.

Stock Control

The purpose of controlling parts and materials inventory is to
provide maximum service to your customers and to see that parts
and materials are not lost through theft shrinkage errors or
waste. Your aim should be to achieve a high turnover on your
inventory. The fewer dollars you tie up in inventory the better.

In a small business inventory control helps the owner-manager to
offer customers efficient service. The control system should
enable you to determine what needs to be ordered on the basis of
what is on hand what is on order and what has been used.

In setting up inventory controls keep in mind that in addition to
the cost of inventory there are also the costs of purchasing
receiving and storing inventory and the cost of keeping control


In a small business sales slips and cash register tapes give the
owner-manager feedback at the end of each day. To keep on top of
sales answer questions such as How many sales were made? What was
the dollar amount? What credit terms were given to customers?


Your management controls should also give you information about
the dollars your company pays out. In checking on your bills you
do not want to be penny-wise and pound-foolish. You need to know
that major items such as paying bills on time to get a supplier’s
discount are being handled according to your policies. Your
review system should also give you the opportunity to make
judgments on the use of funds. In this manner you can be on top
of emergencies as well as routine situations. Your system should
also let you know that tax monies such as payroll income tax
deductions are being set aside and deposited at the proper time.

Break-even Analysis

Break-even analysis is a management control device that shows how
much you must sell under given conditions in order to just cover
your costs with no profit and no loss.

Profit depends on sales volume selling price and costs.
Break-even analysis helps you to estimate what a change in one or
more of these factors will do to your profits. To figure a
break-even point fixed costs such as rent must be separated from
variable costs such as the cost of sales and the other items
listed under controllable expenses on the Expenses Worksheet.

The break-even formula is as follows:

Break-even point = total fixed costs
(in sales dollars) —————–
total variable costs
1- ——————–
corresponding sales volume

For example, Bill Jackson plans to open a laundromat. He estimates
his fixed expenses at about $9000 the first year. He estimates
his variable expenses at about $700 for every $1000 of sales.

$9,000 $9,000 $9,000
Break-even point = —— = —— = —— = $30,000
700 1-.7 .3
1- —-


Stop when you have worked out your break-even point. Whether the
break-even point looks realistic or way off base it is time to
make sure your plan is workable.

Reexamine your plan before you back it with money. If the plan is
not workable it is better to learn it now than to realize six
months down the road you are pouring money into a losing venture.

In reviewing your plan look at the cost figures from your
breakdown of yearly expenses in your Expenses Worksheet. If any
of your cost items are too high or too low change them. You can
write your changes above or below your original entries. When you
finish making your adjustments you will have a revised projected
statement of sales and expenses for twelve months.

With your revised figures work out a revised break-even point.
Whether the new break-even points look good or bad take one more
precaution. Show your plan to someone who has not been involved
in working out the details. Your banker contact person at the
U.S. Small Business Administration (SBA) or other advisor outside
of your business may see weaknesses that you did not see. This
expert may also identify strong points that your plan should


When your plan is as near target as possible you are ready to put
it into action. Keep in mind that action is the difference
between a plan and a dream. If a plan is not acted upon it is of
no more value than a pleasant dream that evaporates over the
breakfast coffee.

Look back over your plan for things that must be done to put your
plan into action. What needs to be done will depend on your
situation. For example if your business plan calls for an
increase in sales one action will be to provide funds for this
expansion. Have you more money to put into this business? Will
you borrow from friends and relatives? From your bank? From your
suppliers by arranging liberal commercial credit terms? If you
are starting a new business one step may be to get a loan for
fixtures employee salaries and other expenses. Another action
step will be to find and hire capable employees.

In the spaces that follow list things that must be done to put
your plan into action and give each item a completion date.

Action Completion Date
———————— —————
———————— —————
———————— —————
———————— —————


Once you put your plan into action look for changes. They can
cripple the best made business plan if the owner-manager lets
them. Stay on top of changing conditions and adjust your business
plan accordingly. Sometimes the change is within your company for
example several of your employees quit. Sometimes the change is
with customers whose desires and tastes shift. Sometimes the
change is technological as when new raw materials on the market
create the need for new processes and procedures.

In order to adjust your plan to account for such changes you

* Be alert to the changes that come in your company line of
business market and customers.
* Check your plan against these changes periodically.
* Determine what revisions if any are needed in your plan and
implement them.

Be sure to read the trade papers and magazines for your line of


(This appendix is not available in electronic format. For a copy
of the complete document, please contact the nearest SBA Office.)


Name of business: Address:
Owner: Type of business:
Prepared by: Date:

Pre- Total
Year/Month Start-up 1-6
Est. Act. 1 2 3 4 5 6 Est. Act.
1. Cash on hand
(beginning of month)
2. Cash receipts

(a) Cash sales
(b) Collections from
credit accounts
(c) Loan or other cash
injections (specify)
3. Total cash receipts
(2a + 2b +2c = c)
4. Total cash available
(before cash out) (1+3)
5. Cash paid out

(a) Purchases
(b) Gross wages
(excludes withdrawals)
(c) Supplies
(office and operating)
(d) Outside services
(e) Supplies
(office and operating)
(f) Repairs and maintenance
(g) Advertising
(h) Car, delivery & travel
(i) Accounting & legal
(j) Rent
(k) Telephone
(l) Utilities
(m) Insurance
(n) Taxes
(o) Interest
(p) Other expenses
(specify each)


(q) Miscellaneous
(r) Subtotal
(s) Loan principal payment
(t) Capital purchases
(u) Other start-up costs
(v) Reserve and/or escrow
(w) Owner’s withdrawal
6. Total cash paid out
(5a through 5w)
7. Cash position
(end of month)
(4 minus 6)
Essential operating
data (non-cash
flow information)

A. Sales volume (dollars)
B. Accounts receivable
(end of month)
C. Bad debt
(end of month)
D. Inventory on hand
(end of month)
E. Accounts payable
(end of month)


1. Cash on hand (beginning of month) – Cash on hand same as (7). Cash
position, previous month
2. Cash receipts
(a) Cash sales – All cash sales. Omit credit sales unless cash is
actually received.
(b) Collections from credit accounts – Amount to be expected from
all credit accounts.
(c) Loan or other cash injection – Indicate here all cash injections
not shown in 2(a) or 2(b) above.
3. Total cash receipts
4. Total cash available
(before cash out) (1+3)
5. Cash paid out
(a) Purchases (merchandise) – Merchandise for resale or for use in
product (paid for in current month)
(b) Gross wages (excludes withdrawals) – Base pay plus overtime
(if any)
(c) Payroll expenses (taxes, etc.) – Include paid vacations, paid sick
leave, health insurance, unemployment insurance, etc. (this might
be 10 to 45% of 5(b))
(d) Outside services – This could include outside labor and/or material
for specialized or overflow work, including subcontracting
(e) Supplies (office and operating) – Items purchased for use in the
business (not for resale)
(f) Repairs and maintenance – Include periodic large expenditures such
as painting or decorating
(g) Advertising – This amount should be adequate to maintain sales
(h) Car, delivery and travel – If personal car is used, charge in this
column, include parking
(i) Accounting and lega – Outside services, including, for example,
(j) Rent – real estate only (See 5(p) for other rentals)
(k) Telephone
(l) Utilities – Water, heat, light and/or power
(m) Insurance – Coverages on business property and products (fire,
liability); also worker’s compensation, fidelity, etc. Exclude
executive life (include in 5(w))
(n) Taxes (real estate, etc.) – Plus inventory tax, sales tax, excise
tax, if applicable
(o) Interest – Remember to add interest on loan as it is injected (See
2(c) above)
(p) Other expenses (specify each) – Unexpected expenditures may be
included here as a safety factor
______________ – Equipment expensed during the month should be
included here (non-capital equipment)
______________ – When equipment is rented or leased, record
payments here
(q) Miscellaneous (unspecified) – Small expenditures for which separate
accounts would not be practical
(r) Subtotal – This subtotal indicates cash out for operating costs
(s) Loan principal payment – Include payment on all loans, including
vehicle and equipment purchases on time payment
(t) Capital purchases (specify) – Nonexpensed (depreciable) expendi-
tures such as equipment, building, vehicle purchases and
leasehold improvements
(u) Other start-up costs – Expenses incurred prior to first month
projection and paid for after start-up
(v) Reserve and/or escrow (specify) – Example: insurance, tax or
equipment escrow to reduce impact of large periodic payments
(w) Owners withdrawal – Should include payment for such things as
owner’s income tax, social security, health insurance, executive
life insurance premiums, etc.
6. Total cash paid out
(5a through 5w)
7. Cash position
(end of month) (4 minus 6) – Enter this amount in (1) Cash on hand
following month.

Essential operating data
(non-cash flow information) – This is basic information necessary for
proper planning and for proper cash flow projection. In conjunction
with this data, the cash flow can be evolved and shown in the above

A. Sales volume (dollars) – This is a very important figure and
should be estimated carefully, taking into account size of facility
and employee output as well as realistic anticipated sales (actual
sales, not orders received).

B. Accounts receivable (end of month) – Previous unpaid credit sales
plus current month’s credit sales, less amounts received current
month (deduct “C” below)

C. Bad debt (end of month) – Bad debts should be subtracted from (B)
in the month anticipated

D. Inventory on hand (end of month) – Last month’s inventory plus
merchandise received and/or manufactured current month minus
amount sold current month

E. Accounts payable (end of month) – Previous month’s payable plus
current month’s payable minus amount paid during month

F. Depreciation – Established by your accountant, or value of all
your equipment divided by useful life (in months) as allowed by
Internal Revenue Service


(This appendix is not available in electronic format. For a copy
of the complete document, please contact the nearest SBA Office.)


The following pages provide a suggested outline of the material
that should be included in your business plan. Your final plan
may vary according to your needs or because of the individual
requirements of your lender.

What Are the Benefits?

Every business can benefit from the preparation of a carefully
written plan. There are two main purposes for writing that plan:

1. To serve as a guide during the lifetime of the business. It is
the blueprint of your business and will provide you with the
tools for analysis and change.

2. A business plan is a requirement if you are planning to seek a
loan. It will provide potential lenders with detailed information
on all aspects of your company’s past and current operations and
provide future projections.

Business Plan Outline

I. Cover sheet
Serves as the title page of your business plan.
It should contain the following:

* Name of the company
* Company address
* Company phone number (include area code)
* Logo (if you have one)
* Names, titles, addresses, phone numbers (include area code) of
* Month and year your plan was issued
* Name of preparer

II. Statement of purpose
(Same as executive summary.) This is the thesis statement and
includes business plan objectives. Use the key words (who,
what, where, when, why, how, and how much) to briefly tell
about the following:

* What your company is (also who, what, where and when).
* What your objectives are.
* If you need a loan,, why you need it.
* How much you need.
* Why you will be successful.
* How and when you plan to repay your loan.

III. Table of contents
A page listing the major topics and references.

IV. The business

Covers the details of your business. Include information
about your industry in general, and your business in
particular. Address the following:

* Legal structure – Tell what legal structure you have chosen and
state reasons for your choice.

* Description of the business – Detail your business. Tell about
your history, present status and future projections. Outline
your product or service in terms of marketability. Project a
sense of what you expect to accomplish in the next few years.

* Products or services – Give a detailed description of your
products from raw materials to finished items. Tell about your
manufacturing process. If you provide a service, tell what it
is, how it is provided and why it is unique. List future
products or services you plan to provide.

* Location – Describe site and why it was chosen. (If location is
important to your marketing plan,, focus on this in the marketing
section below.)

* Management – Describe who is behind the business. For each owner,
tell about responsibilities and abilities. Support with resumes.

* Personnel – Who will be doing the work why are they qualified what
is their wage what are their responsibilities?

* Methods of record keeping – What accounting system will you use? Who
will do your record keeping? Do you have a plan to help you use
your records in analyzing your business?

* Insurance – What kinds of insurance will you need? What will these
cost and who will you use for a carrier?

* Security – Address security in terms of inventory control and theft
of information.

V. Marketing

Covers the details of your marketing plan. Include information
about the total market with emphasis on your target market.
Identify your customers and tell about the means to make your
product or service available to them.

* Target market – Identify characteristics of your customers.
Tell how you arrived at your results. Back up information with
demographics questionnaires and surveys. Project size of your

* Competition – Evaluate indirect and direct competition. Show how
you can compete. Evaluate competition in terms of location market
and business history.
* Methods of distribution – Tell about the manner in which products
and services will be made available to the customer. Back up
decisions with statistical reports rate sheets etc.

* Advertising – How will your advertising be tailored to your target
market? Include rate sheets promotional material and time lines
for your advertising campaign.

* Pricing – will be determined as a result of market research and
costing your product or service. Tell how you arrived at your
pricing structure and back it up with materials from your

* Product design – Answer key questions regarding product design and
packaging. Include graphics and proprietary rights information.

* Timing of market entry – Tell when you plan to enter the market and
how you arrived at your decision.

* Location – If your choice of location is related to target market
cover it in this section of your business plan. (See location in
the business section of this outline.)

* Industry trends – Give current trends project how the market may
change and what you plan to do to keep up.

VI. Financial documents
These are the records used to show past, current and projected
finances. The following are the major documents you will want
to include in your business plan. The work is easier if these
are done in the order presented.

* Summary of financial needs – This is an outline indicating why you
are applying for a loan and how much you need.

* Sources and uses of funds statement – It will be necessary for you
to tell how you intend to disperse the loan funds. Back up your
statement with supporting data.

* Cash flow statement (budget) – This document projects what your
business plan means in terms of dollars. It shows cash inflow and
outflow over a period of time and is used for internal planning.
Cash flow statements show both how much and when cash must flow
in and out of your business.

* Three-year income projection – A pro formal income statement
showing your projections for your company for the next three
years. Use the pro formal cash flow statement for the first
year’s figures and project the next according to economic and
industry trends.

* Break-even analysis – The break-even point is when a company’s
expenses exactly match the sales or service volume. It can be
expressed in total dollars or revenue exactly offset by total
expenses or total units of production (cost of which exactly
equals the income derived by their sales). This analysis can be
done either mathematically or graphically.

NOTE: The following are actual performance statements reflecting
the activity of your business in the past. If you are a new
business owner your financial section will end here and you will
add a personal financial history. If you are an established business
you will include the actual performance statements that follow.

* Balance sheet – Shows the condition of the business as of a fixed
date. It is a picture of your firm’s financial condition at a
particular moment and will show you whether your financial
position is strong or weak. It is usually done at the close of an
accounting period and contains assets liabilities and net worth.

* Income (profit and loss) statement – Shows your business financial
activity over a period of time (monthly annually). It is a moving
picture showing what has happened in your business and is an
excellent tool for assessing your business. Your ledger is closed
and balanced and the revenue and expense totals transferred to
this statement.

* Business financial history – This is a summary of financial
information about your company from its start to the present. The
business financial history and loan application are usually the
same. If you have completed the rest of the financial section you
should be able to transfer all the needed information to this

VII. Supporting documents

These are the records that back up the statements and decisions
made in the three main parts of your business plan. Those most
commonly included are as follows:

* Personal resumes – Should be limited to one page and include work
history educational background professional affiliations and
honors and special skills.

* Personal financial statement – A statement of personal assets and
liabilities. For a new business owner this will be part of your
financial section.

* Credit reports – Business and personal from suppliers or wholesalers
credit bureaus and banks.

* Copies of leases – All agreements currently in force between your
company and a leasing agency.

* Letters of reference – Letters recommending you as being a
reputable and reliable businessperson worthy of being considered
a good risk. (Include both business and personal references.)

* Contracts – Include all business contracts both completed and
currently in force.

* Legal documents – All legal papers pertaining to your legal
structure proprietary rights insurance titles etc.

* Miscellaneous documents – All other documents that have been
referred to but are not included in the main body of the plan
(e.g. location plans demographics advertising plan etc.).

Putting Your Plan Together

When you are finished: Your business plan should look
professional, but the lender needs to know that it was done by
you. A business plan will be the best indicator he or she has to
judge your potential for success. It should be no more than 30 to
40 pages long. Include only the supporting documents that will be
of immediate interest to your potential lender. Keep the others
in your own copy where they will be available on short notice.
Have copies of your plan bound at your local print shop, or with
a blue, black or brown cover purchased from the stationery store.
Make copies for yourself and each lender you wish to approach. Do
not give out too many copies at once, and keep track of each
copy. If your loan is refused, be sure to retrieve your business
plan. For a more detailed explanation of each section of the
business plan outline, see SBA’s publication, How to Write a
Business Plan, which includes step-by-step directions and sample
sections of actual business plans. Also available from the SBA is
a VHS videotape and workbook, “The Business Plan: Your Roadmap for

U.S. Small Business Administration (SBA)

The SBA offers an extensive selection of information on most
business management topics, from how to start a business to
exporting your products.

This information is listed in “The Small Business Directory”. For
a free copy contact your nearest SBA office.

SBA has offices throughout the country. Consult the U.S.
Government section in your telephone directory for the office
nearest you. SBA offers a number of programs and services,
including training and educational programs, counseling services,
financial programs and contract assistance. Ask about

– Service Corps of Retired Executives (SCORE), a national
organization sponsored by SBA of over 13,000 volunteer business
executives who provide free counseling, workshops and seminars
to prospective and existing small business people.

– Small Business Development Centers (SBDCs), sponsored by the SBA
in partnership with state and local governments, the educational
community and the private sector. They provide assistance,
counseling and training to prospective and existing business

– Small Business Institutes (SBIs), organized through SBA on more
than 500 college campuses nationwide. The institutes provide
counseling by students and faculty to small business clients.

For more information about SBA business development programs and
services call the SBA Small Business Answer Desk at 1-800-8-ASK-SBA

Other U.S. Government Resources
Many publications on business management and other related topics
are available from the Government Printing Office (GPO). GPO
bookstores are located in 24 major cities and are listed in the
Yellow Pages under the “bookstore” heading. You can request a
“Subject Bibliography” by writing to Government Printing Office,
Superintendent of Documents, Washington, DC 20402-9328.

Many federal agencies offer publications of interest to small
businesses. There is a nominal fee for some, but most are free.
Below is a selected list of government agencies that provide
publications and other services targeted to small businesses. To
get their publications, contact the regional offices listed in
the telephone directory or write to the addresses below:

– Consumer Information Center (CIC), P.O. Box 100 Pueblo, CO 81002
The CIC offers a consumer information catalog of federal

– Consumer Product Safety Commission (CPSC)
Publications Request
Washington, DC 20207
The CPSC offers guidelines for product safety requirements.

– U.S. Department of Agriculture (USDA)
12th Street and Independence Avenue, SW
Washington, DC 20250
The USDA offers publications on selling to the USDA.
Publications and programs on entrepreneurship are also available
through county extension offices nationwide.

– U.S. Department of Commerce (DOC)
Office of Business Liaison
14th Street and Constitution Avenue, NW
Room 5898C
Washington, DC 20230
DOC’s Business Assistance Center provides listings of
business opportunities available in the federal government. This
service also will refer businesses to different programs and
services in the DOC and other federal agencies.

– U.S. Department of Health and Human Services (HHS)
Public Health Service
Alcohol, Drug Abuse and Mental Health Administration
5600 Fishers Lane
Rockville, MD 20857
Drug Free Workplace Helpline: 1-800-843-4971. Provides
information on Employee Assistance Programs.
National Institute for Drug Abuse Hotline:
1-800-662-4357. Provides information on preventing substance
abuse in the workplace.
The National Clearinghouse for Alcohol and Drug Information:
1-800-729-6686 toll-free. Provides pamphlets and resource
materials on substance abuse.

– U.S. Department of Labor (DOL)
Employment Standards Administration
200 Constitution Avenue, NW
Washington, DC 20210
The DOL offers publications on compliance with labor laws.

– U.S. Department of Treasury
Internal Revenue Service (IRS)
P.O. Box 25866
Richmond, VA 23260
The IRS offers information on tax requirements for small

– U.S. Environmental Protection Agency (EPA)
Small Business Ombudsman
401 M Street, SW (A-149C)
Washington, DC 20460
1-800-368-5888 except DC and VA
703-557-1938 in DC and VA
The EPA offers more than 100 publications designed to help small
businesses understand how they can comply with EPA regulations.

– U.S. Food and Drug Administration (FDA)
FDA Center for Food Safety and Applied Nutrition
200 Charles Street, SW
Washington, DC 20402
The FDA offers information on packaging and labeling
requirements for food and food-related products.

For More Information
A librarian can help you locate the specific information you need
in reference books. Most libraries have a variety of directories,
indexes and encyclopedias that cover many business topics. They
also have other resources, such as

– Trade association information
Ask the librarian to show you a directory of trade associations.

Associations provide a valuable network of resources to their
members through publications and services such as newsletters,
conferences and seminars.

– Books
Many guidebooks, textbooks and manuals on small business are
published annually. To find the names of books not in your local
library check “Books In Print”, a directory of books currently
available from publishers.

– Magazine and newspaper articles
Business and professional magazines provide information that is
more current than that found in books and textbooks. There are
a number of indexes to help you find specific articles in

In addition to books and magazines, many libraries offer free
workshops, lend skill-building tapes and have catalogues and
brochures describing continuing education opportunities.

The material in this publication may not be reproduced or
transmitted in any form or by any means – electronic,
mechanical, photocopying, recording or other – without the prior
written permission of the U.S. Small Business Administration.
“How to Write a Business Plan.” Copyright 1990, Linda Pinson
and Jerry Jinnett. All rights reserved.

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