Business Plan Outline

THIS OUTLINE IS JUST THAT. AN OUTLINE. THIS WAS DESIGNED TO ASSIST YOU
ONLY. AT NO TIME SHOULD THIS MATERIAL BE CONSIDERED COMPLETE.
EACH LENDING SOURCE REQUIRES DIFFERENT INFORMATION AND QUITE OFTEN YOU
SHOULD PLAN FURTHER AHEAD THAN REQUESTED IN ORDER TO BE CERTAIN THAT YOU
HAVE A FIRM IDEA OF WHAT YOU EXPECT FROM YOUR BUSINESS AND WHERE YOU WANT
TO SEE YOUR BUSINESS GO.

THE MAJOR DIFFICULTY IN PREPARING BUSINESS PLANS IS IN PROPERLY PREPARING
THEM. DO NOT JUST RANDOMLY SELECT INFORMATION FOR YOUR PLAN. CAREFULLY
RESEARCH EACH SECTOR OF THE MARKET WHICH YOU ARE ABOUT TO BECOME INVOLVED
IN. IT WILL NOT ONLY MAKE A DIFFERENCE TO YOUR SUCCESS AT FINANCING, IT
SHOULD ALSO MAKE A DIFFERENCE IN YOUR SUCCESS IN BUSINESS.

GOOD LUCK!!

Wrapping your plan. Do not underestimate the power of presentation. We
recommend that you use a color photo of your product, your office or if
this is a real estate related project, the property in question. Use a
acetate cover to cover this photograph. You will then see your plans
ability to stand out in front when faced with a stack of plenty .
Remember to place your company name on the cover and use GVC Binding. It
is the easiest to handle.

When necessary include a disclaimer that is from the legal counsel of
your choice. This statement should be used especially if you have
obtained material from your plan from outside sources.

Non – Disclosure Agreement

You should always have a signed non-disclosure agreement with anyone
receiving your plan. Include a signed copy in your plan. Also, any
fees that you have agreed to pay to brokers or other referrals should
have agreements and be included in this part of your plan.

INDEX

THE INDEX PORTION OF YOUR PLAN SHOULD BE AS COMPLETE AND THOROUGH AS
POSSIBLE. BE CERTAIN THAT YOUR SUBTITLES ARE LISTED HERE. REMEMBER,
THAT MOST LENDERS/INVESTORS RECEIVE HUNDREDS OF PLANS A WEEK FOR REVIEW.
MOST ONLY LOOK AT A PORTION OF THE PLANS THEY RECEIVE. A WELL THOUGHT
OUT AND DIVIDED INDEX COULD MAKE THE DIFFERENCE BETWEEN YOUR PLAN BEING
READ OR NOT.

THE LOAN SUMMARY

This need only be one page. This should basically be considered a “Use
of Proceeds” statement. This page will include the amount
of your loan, the cost of equipment, cost of financing, first years
operating expenses, as well as any other costs you intend to pay from the
proceeds of your financing.

This page should also contain what you project your interest rate to be
(remember, the lenders do set these rates and you may not get the rate
you request). This will allow you to set your Debt Service Coverage
Ratios. (see explanation) Also, this page should contain Loan to Value
and Return on Investment figures.

EXPLANATION OF TERMS

Remember, you are more familiar with your subject matter than the reader
will be. Any terms that are not considered public knowledge should be
included in a “glossary” in this section of your plan. Explain any
theories or special terminology directly related to your specific
industry as clearly and concisely as possible. Explanations should be
done in as basic terms as possible.

It is preferable to set this up so that your definition is set apart by
tabs from the word. I strongly recommend underlining your word here and
if you feel it is appropriate, make note on the pages that these words
appear which will designate GLOSSARY. This is a helpful feature for
people who are not familiar with your industry.

EXECUTIVE SUMMARY

The executive summary should be a short (approximately 3 -5 page) summary
describing pertinent information about your company. The summary should
explain why you feel it is time to expand (if this is purpose of loan) or
why you feel this is a good time to enter this particular business (if
new). Other pertinent information should be included, such as when
and why you started your company, your goals and a thorough explanation
of your business.

It is important that during this summary you do your best to be as
thorough as possible. Remember, that this may be the only chance you
have to attract attention. Quite often these summaries are pulled from
your package and sent to the lender/investor via file, fax, modem or
other means and this will be the factor that determines if more material
will be requested.

RESUMES

Resumes are perhaps one of the most important features of a good business
plan. Let the lender/investor know your background in relationship to
the business you plan to pursue.

The resumes of all key personnel should be included in this section.
Also, include a list of the “proposed” or “existing” board of directors.

A “COMPANY” resume is also a good idea to include in this section. For
start up companies explain the concept and what brought you to the stage
where you are now pursuing financing.

INDUSTRY STANDARDS

A 1 – 3 page section that should include statistics about your chosen
industry. This information can be from any source you deem reliable.
Always include as many statistics about your industry as possible.

———————————————
FOR EXAMPLE:

INDUSTRY: Loan Brokerage
NUMBER OF PEOPLE: 156,000
FEES IN 1991: $445,900,000

This information was received from Dun &
Bradstreet on April 16, 1992.
———————————————

When available documentation should be included in your plan under
“SUBSTANTIATION DOCUMENTS”.

DEMOGRAPHICS

This section of your business plan should include as much information
about the area which you intend to locate your business in as you are
able to compile. Statistics are usually available at the town hall or
the state house. These statistics should include average age and
household income for your area, as well as the Business description of
the area (i.e. professional, factories etc).

Also, include in this section why you feel that the demographics of the
are will support a business in the field you have chosen.

Remember, any substantiation documentation that can be supplied should be
included in your plan under “SUBSTANTIATION DOCUMENTS”.

COMPETITION

This 1 – 3 page section of your business plan should include all
pertinent information about your competition, including the length of
time they have been in business, where they are located in comparison to
your chosen location and what their average annual sales are.

In addition, you should explain your company strengths and weaknesses are
in comparison to the strengths and weaknesses of your competition.

Explain how you intend to overcome your competition and your expectations
of the impact your company will have on their business.

Any available information about your competitors should be included as
“SUBSTANTIATION DOCUMENTATION”.

MARKETING

This 5 – 8 page section of your plan should include all information you
have obtained in seeking out a viable marketing plan for your company.
In addition it would be useful to compare your marketing ideas with the
methods that are used by your competitors in this industry.

Comprehensive data about pricing strategies, specials to be offered to
clients etc. should be included in this section.

If you have designed a logo, your stationary and / or advertising
materials they should be included in your plan under “SUBSTANTIATION
DOCUMENTATION”.

EQUIPMENT

This section of your plan should describe all equipment that you have (or
intend to use) for your business. As minor as you may feel it is even
your office typewriters and word processors should be included here. An
explanation of specialized equipment should also be included.

Obtain a current market price for all equipment as well as a “fire sale”
price for your equipment.

Include cost projections in your “SUBSTANTIATION DOCUMENTATION” section.

GOALS

This will be the most critical part of your business plan. Explain where
you see your company in one year, in two years and so on up until
approximately the fifth year. Further explain the methods you feel will
assist you in obtaining these goals.

Included in this section should be data that will explain what will
happen in different economic environments. That is if we have a strong
environment, what will your goals be and if we have a weak environment
how will this affect your goals.

CONTRACTS WITH CLIENTS

If you have contracts that you have developed with clients they should be
included in this section of your plan.

Complete contracts with names, addresses and telephone numbers as well as
expiration dates should be included.

Any caveats in your contract which forbids potential lenders from
contacting should also be noted in this section as an addendum.

EMPLOYMENT CONTRACTS

If you have signed any employment contracts with projected employees they
should be included in this section of your plan.

This material will remain confidential.

EMPLOYEE CONSIDERATIONS

This section of your plan should include information about the projected
staff for your company. Include the projected salaries, benefits as well
as the minimum requirements for employment (i.e. experience).

Please include all positions you forsee necessary and what each positions
responsibilities are to be.

INSURANCE CONSIDERATIONS

This section should include all health, life and disability insurance
information you intend to offer employees. It should further include any
special insurance you are required to carry in your geographic location
and/or in your industry. Quotes should be included as “SUBSTANTIATION
DOCUMENTATION”.

FINANCIAL INFORMATION – PERSONAL

This section of your plan should include the last three years income tax
returns, both federal and state for all of the principals in your
corporation.

It should also include a financial statement dated within 60 days for
each of these principals. If available also include a current credit
report for each principal.

We strongly recommend you include your social security number as well as
banking references.

FINANCIAL INFORMATION – CORPORATE

The same information as requested above should be included. In addition
you should include a copy of all outstanding debts within the business.

PRO FORMA PROJECTIONS

The proforma section of your business plan will be read and reread.
Although the normally acceptable way to prepare pro forma projections is
to prepare them annually and on a “sideways” printout, we suggest
printing them in the same format as the rest of your plan. It does take
more room to do this however it makes your plan much easier to read. We
use regular spreadsheets to do our pro forma projections and print only
the months that can be fit across an 8 1/2 X 11 page. This does make
easier reading without having to tip your volume to the side.

EXAMPLE:

INCOME FOR 1992
——————————————–
| DESCRIPTION | January | February | March |
——————————————–
| SALES | 75,000 | 82,000 | 66,000|
SOURCE
SOFTWARE 27,000 32,000 12,000
EQUIPMENT 48,000 50,000 54,000

| INTEREST | 1,200 | 895 | 1,400|
SOURCE
FSNB 700 600 800
NEB 500 295 600
——————————————–
| TOTAL INCOME| 76,200 | 82,895 | 67,400|
============================================

etc. This format makes your projections easy to follow and calculations
simple to do.

These projections should be done as follows:

YEAR ONE: by Month
YEAR TWO: by Month
YEAR THREE: by Quarter
YEAR FOUR: by Quarter
YEAR FIVE: Annual

This formula should be used by all new businesses.

For existing business you should use the following:

Include your cash flow (actuals) for the previous 2 fiscal years by
month. Include the current year monthly actual as well as the remainder
of the year in monthly projections. The first year projected should be
done by months and thereafter use quarterly projections up through year
5.

SUBSTANTIATION DOCUMENTATION

At several points through the plan you have been advised to obtain
information for this section of your plan.

In addition to the materials suggested you should also include an
amortization schedule as well as a depreciation schedule.

Any documentation that you feel would be appropriate for a lender or
investor to review would be suitable for this section of your plan.

TERMS:

Earlier I used the following terms. The calculations are included here
for your use and benefit:

DEBT SERVICE COVERAGE RATIO:

Annual Net Income / Annual Debt

RETURN ON INVESTMENT:

Total Investment / number of years = ___ [per
year]

Annual Net Income / Investment per year

LOAN TO VALUE:

Loan Amount / Value of Business (or property)

I hope that this document assists you in more successfully creating your
business plan. There are many, many more hints and tips that could be
supplied to you, however I feel that the ones contained in this document
shall give you a ground to stand on and a basis for preparing your plan.

Remember, there is no “right” way to prepare a business plan. Also
remember that only you know your business. It is nearly impossible
to ask someone to prepare a plan for you. While we have prepared many
plans over many years we first advise the client to prepare as much as he
is capable of doing and simply restructure their plans for them. Lenders
and investors use your plan as a way of judging who you are. They know
who we are. Good luck in preparing your plan. Should you need
additional information feel free to leave me a message.

Doreen Martel

About author

SMB Reviews
SMB Reviews 473 posts

SMBReviews is committed to providing small and mid-sized business owners with the information and resources they need to select the best service or product for their company.

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