BUSINESS PLAN:

INTRODUCTION

 

	Details of Initial Research	Feedback. Next Steps. Why think of this?
1	Write a sentence that identifies the products or services that you provide. Alternatively write your company’s vision, mission and goals for the next three to five years.	You will use this statement all the time so it has to be clear and focused – your future depends on it. Test it with potential customers, friends, lenders, suppliers – if they are confused go back to the drawing board.
2	Check out your competition. What type of market are you entering – mature, growing, specialized/high-tech, declining? Define your niche in the marketplace. Are you positioned by price, quality, service, convenience, innovation?	This research will help you gauge just how long it is going to take to break into the marketplace, forecast revenues and estimate costs for marketing/ advertising start-up costs.
3	Research the costs of building your product or service: materials, supplies, equipment, manpower, building specifications. Does it add up to a smart idea? Are you competitive?	How long will it take to pay off your initial investment? Can you grow the business, expand your product line, adjust for market risks beyond your start-up costs? These numbers will be a key factor in your cash flow and break-even analysis.
4	Consider distribution costs and methods. Review the communications discussion and consider the methods used by your competitors. Obtain estimates for the likes of business cards, telephone hookups, yellow pages listings, website hosting and design.	Marketing and advertising are considered “soft” costs after the core costs of building your product/service, and yet, without some investment in this area you may not be able to build your business. Look for ways to trade services in the areas that you require or to slowly increase your spending as revenues increase.
5	Decide where you will conduct your business and choose a location that balances budget, traffic, visibility, safety parameters. Of course, this area will be zoned appropriately by your municipality.	Is this a business that you can start in your home before incurring building/rental space costs? How does that affect your professional business appearance? Can you share the space with another small business?
6	Now take a closer look at obtaining raw materials or supplies. Are there preferred customers in the marketplace? Will you be able to get materials in smaller quantities, in a timely manner, with/without credit terms? Are there a few, or many, suppliers in your marketplace?	New businesses may or may not be able to obtain credit terms from suppliers. Find out how much time/how many orders you will have to place in order to obtain credit terms. These figures will form an important part of your cash flow planning.
7	Find out how many employees and/or subcontractors you need. What is the market rate for their skills? Are these people in high demand? Are training programs locally available? Does your business culture make you a desired employer?	People are the new “green” for companies. Refer to the Best Workplaces in Canada 2007 survey – CanadianBusiness.com – for tips on creating credibility, fairness, respect, pride and camaraderie in your business.
8	Recruit your advisory team of professional advisors, partners and mentors that will work with you and support and analyze your decisions.	Some professional advisement will be included in your accountant’s fees or perhaps your industry association membership costs. Include those in your annual expenses and consider joining your local chamber of commerce as well.
9	Key risks in your own business, as well those prevalent in your industry need to be identified: key employees illness, injury to clients/staff on work premises, loss of a key supplier, and regulatory changes in the near future are just a few examples.	Probable risks require mitigation planning that should be documented in you risk management strategy. Insurance coverage can be purchased for certain risks. Consult with your local commercial insurance representative.
10	Forecast your finances in a rough draft form. If the initial projections look reasonable you can venture into the full forecasting tools provided on this website.	If you have an accountant or banker that you can talk to at this point, ask them for their initial opinion on your ability to qualify for financing. If you do not, your business plan may be designed for attracting partners or investors.

 

Executive summary

The executive summary is the most important part of your business plan, and is typically pulled together after you have completed writing your plan. Don’t assume people will read your plan cover-to-cover. Succinctly state what your business is about and why it was successful.

1. Describe your business concept. Be sure to include what industry sector you will be operating in, the market you serve and your competitive advantage.
2. How will you differentiate your product or service from competitors? Are you entering a new or mature market?
3. What is the legal structure of your company? Do you hold special/required licenses of operation and insurance for your particular business? Does the business, or its principals, belong to any associations?
4. Is your company already in operation or in start-up mode? If it is operational, give a brief overview of your progress and achievements to date: patents, prototypes, contracts, and market research indicating that the business is viable.
5. Who is your ownership/management? Briefly describe your management team’s experience and credentials.
6. How much money are you seeking (if any) and for what purpose?
7. How much money has the founder(s) invested to date? How was this money spent?
8. Summarize your projected financial performance. Include gross revenues and net profits in the year of business (three year actuals, if available, for existing businesses plus projections), and at least one year projected for start-up business.
9. Provide your contact information and where the reader can go to get supporting information about your business, industry, owners – i.e. website, downloadable reports, email or mobile phone numbers?

 

COMPANY INFORMATION

Company Details
Registered Business Name
Business Operating Name
Business Address
Mailing Address
Telephone(s)
Fax
Cellular Phone
Email
Website
Date Established
Current Ownership Since
Form of Business:	__________ Corporation _________ Society __________ Partnership ______ Co-operative _______ Sole Proprietorship _____ Inc. Assoc. ____ Other: ___________________________
Industry Sector:
Current Financial Institutions:
Company Owner(s) – Supply Same Information for Each Owner
Legal Name
Business Name
% Ownership	Title:
Business Involvement:	__________ Part-time _________Full-time
Accountant
Name
Address
Telephone
Fax
Email
Fiscal Year End
Date of most recent formal accountant prepared financial statements or corporate income tax return
Latest interim statements (if applicable)
Lawyer
Name
Address
Telephone
Fax
Email

 

 

product/service information

This section of the plan describes the nature of your product of service, its key features, benefits and its competitive advantage.

1. What is your product or service? Describe its features in a “brochure” format that is designed for your intended audience (consumers, other businesses, government, others).
2. What are your product’s or service’s key features? Give a list of the features, for example: specialized materials, workmanship, geography, convenience, delivered, customized, educational, etc. What are the benefits to your customers?
3. Describe the price structure in your industry including: mark-ups, commissions, discounts and refund policies. Where does your product/service fit in the price matrix? Determine your prices and volume of sales. Document the assumptions that you have made to derive these figures. They will make up the “revenue” side of your cash flow forecasts. It is required by some financial lenders that you come up with a best and worst case scenario matrix.
4. Describe the distribution methods (wholesalers, agents, etc) that are typically used in your industry. Note the terms for volume discounts, incentives, factoring for cost increases/decreases and include in our cash flow forecasts.
5. Describe the customer service policy? e.g. guarantees, layaways, warranties, return policies, etc.
6. Does your product or service require you to rent/lease/own commercial space, property or licenses? What are the advantages/disadvantages of the space available to you? What is your plan for projected business growth and at what stage in your business plan do you need to take this into account?
7. What are the product/service risks in your business or industry? Can you obtain liabililty insurance to protect your business from these risks? Are they required by your industry associations? Can you join an industry association to become an accredited business to reduce these costs, join group insurance policies, learn best practices, etc?
8. Does your product or service competitive advantage include joint venture, partnering businesses, brand name suppliers, et al? What kind of support can you expect from them/provide for them?

 

Complete the sales forecast for your product or service below:

Sales Assumptions must be supported by research in order to be credible. Past history of the business is one way to arrive at the numbers, as are trends in the industry and consumer spending habits, and competitor figures.

Make a list of sales assumptions and research to support sales assumptions in the table below. Add more rows if you require them.

Sales Assumptions	Research to Support Sales Assumptions	Critical Risk/ Weakness of this Assumption
–	–	–
–	–	–
–	–	–

 

 

Calculating Sales and Cash Flow Projections from Sales (example):

Month	Units Sold	Price Per Unit	Monthly Sales Subtotal	% Cash Collected This Month*	% Cash Collected from Previous Month*	% Cash Collected from 60 days prior*	Total Cash Monthly from Sales
January	15	€ 200	€ 3000	€ 1500	€ 0	€ 0	€ 1500
February	12	€ 200	€ 2400	€ 1200	€ 750	€ 0	€ 1950
March	11	€ 200	€ 2200	€ 1100	€ 600	€ 750	€ 2450
April	9	€ 200	€ 1800	€ 900	€ 550	€ 600	€ 2050
May	7	€ 200	€ 1400	€ 700	€ 450	€ 550	€ 1650
June	3	€ 200	€ 600	€ 300	€ 350	€ 450	€ 1100
August	3	€ 200	€ 600	€ 300	€ 150	€ 350	€ 800
September	4	€ 200	€ 800	€ 400	€ 150	€ 150	€ 700
October	6	€ 200	€ 1200	€ 600	€ 200	€ 150	€ 950
November	8	€ 200	€ 1600	€ 800	€ 300	€ 200	€ 1300
December	10	€ 200	€ 2000	€ 1000	€ 400	€ 300	€ 1700
Totals	95	0	€ 17,600				€ 16,150

* In this exercise 50% collected in current month of sales and 25% collected in each of the following two months after the sales are generated. If you provide credit terms to your customers or take deposits/balance of payment on a different time scale you will need to adjust your sales and cash flow projections.

Cash flow is the life blood of a business. It is important to reflect on how customer terms, late payments on invoices and possible non-payment will impact your business management, commitments to financers and payroll. You can see from this example that your cash collection could potentially be almost 10% behind your sales figures on a monthly basis.

This sales/cash flow information will be used in creating the financial information for your new business.

 

market / Business environment research

This section helps you address the research required to assess the business environment using the most common business analysis tools. In fact, environmental analysis should be continuous and feed all aspects of planning and forecasting. Every firm exists in multiple environments. It is both affected by, and shapes, those environments.

• The societal environment can be examined using the PEST analysis of the following factors: political, economic, sociocultural and technological;
• The task environment can be examined using Porter’s Five Forces analysis;
• The internal factors affecting the organization; and, then
• A SWOT analysis brings together the most essential external and internal environment factors that are relevant to your business.

 

 

Business Tools

The summary of these tools is briefly described below and links to additional resources can be found on this page. While you may not report all the elements of this analysis in your business plan, you will need to summarize the high points of your strengths/ opportunities and weaknesses/ threats. Lenders, potential partners and investors will want to know the downside (worst case scenario) of your new venture.

 

PEST Analysis

1. Political Factors
   The political arena has an influence upon the regulation of business, and the spending power of consumers and other businesses. Consider the following issues in light of your business proposal:

• How stable is the political environment (home and host)?
• Will government policy influence laws that regulate or tax your business?
• What is the government’s position on marketing ethics or consumer protection?
• What is the government’s policy on the industry sector?
• Is the region involved in creating trade agreements: EU, NAFTA, BC/Alberta TILMA, others?

 

1. Economic Factors
   Businesses and their marketing departments need to consider the state of the trading economy in the short and long-terms. You will need to look at:

• Interest rates
• The level of inflation
• Employment level per capita
• Housing starts/real estate prices
• Financial institution restraints/constraints on various industry sectors

 

1. Sociocultural Factors
   For your target market and the region in which you will distribute your product consider the following questions:

• What is the dominant religion?
• What are attitudes toward foreign products and services?
• Does language impact the diffusion of products into the marketplace?
• How much time do consumers have for leisure?
• What are the roles of men and women within society?
• How are children treated in the society, i.e. impoverished, educated, part of the labour force, etc.
• How long does the population live? Are the older generations wealthy?
• Is the region multi-cultural?

 

1. Technological Factors
   Technology is vital for global competitive advantage, and is a major driver of globalization – falling price and increase efficiency of communication and technology. Consider the following research points:

• Technology drives creation of new industries and challenges the mature industry – how are you poised to take advantage of this fact?
• Technology is a key to withstanding competitive threats.
• How does the uptake/change in technology affect your relationships and communications with suppliers, customers, networks, communities, media, governments and stakeholders?

 

Porter’s Five (or Six) Forces Analysis

Porter’s Five Forces is a framework for industry analysis and business strategy development (Michael Porter, Harvard Business School, 1979). It works effectively for big or small businesses, and by design are generally used to analysis the micro-environment of your business. Each of the forces can be given a value of low, medium, strong or very strong rating and together provide a strategic ‘picture’ of our business.

1. The bargaining power of customers

• buyer volume
• buyer information availability
• price of total purchase
• buyer price sensitivity
• buyer switching costs relative to firm switching costs

 

2. The bargaining power of suppliers

• brand recognition
• supplier concentration to firm concentration ratio
• degree of differentiation of inputs
• cost of inputs relative to selling price of the product
• geographical coverage

 

3. The threat of new entrants

• brand equity
• switching costs
• access to distribution
• learning curve advantages
• government policies/regulations
• capital requirements
• geographical factors
• incumbents resistance

 

4. The threat of substitute products

• buyer propensity to substitute
• relative price performance of subsitutes
• buyer switching costs
• perceived level of product differentiation

 

5. Intensity of competitive rivalry

• number of competitors
• rate of industry growth
• exit barriers
• diversity of competitors
• informational complexity and asymmetry
• brand equity
• fixed cost allocation per value added
• level of advertising expense

 

6. The relative power of other stakeholders is a sixth force that can be particularly relevant to obtaining resources on Crown Land, for instance, and may be relevant to your business case.

 

Internal Environment Analysis

People, with their knowledge, know-how and managerial skills, are seen to be the new competitive advantage. Is your business structured in a manner that harnesses employee power, or drives it away?

1. How does your organization structure compare to your competitors – especially the ones that are known for their best practices in human resources management?
2. What is your organizational culture? Does it set you apart in the industry and lead to a competitive advantage?
3. What are your organizational resources in the following areas (do a size-up or examine the strengths/weaknesses):

• Marketing
• Finance
• Research & development
• Operations & Logistics
• Human resource management (recruitment/retention)
• Information systems

 

SWOT Analysis

• Strengths: attributes of the organization that positively impact its ability to achieve business/project objectives.
• Weaknesses: attributes of the organization that negatively impact its ability to achieve business/project objectives.
• Opportunities: external conditions that potentially assist the business in achieving the objective.
• Threats: external conditions that potentially threaten the success, in the present or future, of a business or project.

 

It is important to note that opportunities and threats are often beyond the control of a business, and therefore should prompt the business to adapt, evolve and innovate to either take advantage of the opportunity, or to mitigate the damage of the threat. Here is a chart that you can use to formulate your analysis:

 

	Positive (to business achieving its objective)	Negative (to business achieving its objective)
Internal (attributes of organization)	Strengths	Weaknesses
External (attributes of the environment)	Opportunities	Threats

 

Examples of SWOTs

Strengths or Weaknesses resources/technology prowess customer service/loyalty efficiency infrastructure quality staff productivity corporate culture management expertise or lack of expertise delivery time price point capacity relationships with customers/suppliers brand strength multi-lingual capabilities ethics patents, licenses, permits exclusive access to natural resources distribution networks

Opportunities or Threats changes in government policy tax increases/decreases currency fluctuations interest rates industry mergers or joint ventures change in customer demographics strategic alliances expectations of shareholders/public technology advances closing of geographic markets changing customer tastes

 

 

Marketing/Advertising Plan

One of the main difficulties faced by any entrepreneur is that advertising has changed and evolved over the last few years. It now includes audio, visual and electronic media. Website programming of all sorts allows you to interact with your customers. And that is just the tip of the iceberg!

The Internet has made unbelievable amounts of information accessible, but it has also contributed to information overload. An effective advertising/marketing campaign is not about being everything to everyone, but is about having a conversation with your ideal customer and measuring those results through sales and/or feedback.

Advertising: Advertising is an attempt to influence the buying behavior of your customers or clients by providing a persuasive selling message about your products and/or services. Technically, advertising in only one way of promoting your business, and you will want to be sure that whatever form of advertising you choose fits in with your marketing plan, strategy and budget.

Forms of advertising:

• Paid ads on tv and radio, and in newspapers and magazines;
• Billboards and signage
• Yellow page listings
• Sponsored links on websites
• Pay per click advertising on the Internet
• Direct mail
• Business cards
• Vehicle advertising
• Sending promos with invoices
• Bench/bus stop advertising

 

Marketing: Marketing is a process of interesting potential customers and clients in your products and/or services. The key word in this marketing definition is “process”; marketing involves researching, promoting, selling and distributing your products or services. Marketing involves everything you do to get your potential customers and your product or service together.

Forms of marketing:

• Attend industry tradeshows and networking events.
• Volunteer on a board related to your industry.
• Include positive customer feedback on your website or brochure.
• Create a customer feedback form and make improvements that are possible.
• Respond in a timely fashion to telephone messages, emails and written correspondence.
• Write a letter or article in your local newspaper or trade magazine offering tricks and tips from your industry.
• Create joint ventures.
• Reward your present customers for passing on the word to your future customers – rebates, discounts, thank you letters.
• Sponsor a youth sports team or fundraising event.
• Satisfy your customers needs or wants to the best of your ability and to the level of service that you advertise. Do as you say.
• If your staff or company has made mistake – apologize immediately and compensate your customer appropriately.

 

Here are some of the major areas and questions, by category, that you can ask in order to develop your marketing plan:

1. Know your audience.

• What do they want?
• Where do you shop?
• What do you read?
• How old are they?
• Where do they hang out?
• Do they need your product or service?
• Can they afford your product or service?

2. Know your competition – be prepared to do a little detective work.

• What are your three main competitors doing to advertise?
• Where are they advertising? How often?
• What types of advertising methods are they using?
• What types of marketing methods are they using?
• How long have they been running?
• Are you reaching the same audience?
• Is your message different?
• What about your message differentiates you from the crowd?

3. Examine what the larger businesses in your industry are doing.

• Adapt their tactics for your audience, business niche and budget.

4. Know your message.

• What exactly are you trying to say?
• What do your customers want to hear?
• Why should they buy from you and not someone else?

 

Write your marketing plan in five subsections:

(1) Target Market/Competitive Analysis
You will need to understand the size of the target market for your product or service, and the number of competitors that already satisfy (or don’t) the market you are attempting to break into with your new business idea. The target market section should cover:

• Outline your target market – age, gender, where they live, income, buying habits, etc.
• Total size of target market in terms of gross sales and/or numbers of units sold.
• Trends affecting the target market (refer to your SWOT and PEST analyses).
• Summarize your competition – estimates of market share, your sense of their financial health, comparison of products/services to yours; include your direct and indirect competition in this analysis.

 

(2) Services/Products
Your marketing strategy should communicate what makes your product or service unique.

• What is the one thing that makes your product or service unique?
• What other features does your product have: packaging, utility, quality, price, service, availability, etc?
• What benefits will your customers enjoy by buying your product or service: save money, feel better, experience new sights, etc?

 

(3) Pricing Strategy
An important part of marketing is determining the price of your product or service. If your prices are too high for your customers, some will pass you by. If you do not charge enough, some may question the value of your service/product. Some markets and products will be price sensitive – consider what pricing says about your company and your products.

• Using the worksheet provided, calculate your fixed and variable costs. Summarize how you arrived at your base costs and/or justify it through market price, and then calculate how long it will take to break-even.
• Are you offering discounts to volume customers, wholesale prices to distributors or agents, discounts to cash vs. credit card payments?
• What does fair market value mean in the context of your business? Does fair market price allow you to run a profitable business from which the owners can make a decent living?

 

(4) Sales/Distribution Plan
Your sales/distribution plan should detail how the transaction between you and your customer will take place. You need to explain in detail what type of distribution channels are available to you – account representatives, sales people, internet referrals, delivery services, wholesalers and retailers. Analyze the various stops and routes in your distribution plan for possible efficiencies or duplications, cost-savings and excessive costs.

• How will you distribute your product or service? Will it be in one region, provincial, national, international? Outline all the steps and different companies in the chain. Consider what might happen if a business defaults or closes. Do you have alternate sources for the same service?
• How can your customers pay for their product? Will you provide credit terms? How will you handle deposits, refunds, returns, discounts?
• What kind of after-sales support will you offer? Will you charge for this service?

 

(5) Advertising and Promotions Plan
Your advertising and promotions plan must detail how you are going to communicate to your customers and prospects. If possible, provide an example of a mock-up of your brochure, website pages, advertisements, etc.

• What principles, operating procedures and company objectives will embed your marketing plan in day-to-day operations of your business?
• What training will you offer your staff in the areas of promotion, customer service and support, and industry “best” notoriety?
• What is your annual advertising plan? Is there some initial start-up advertising that will get sales flowing? Consider your annual buying habits of your customers, cyclical nature of your business and cash flow constraints of your company?
• What are your start-up costs for producing: brochures, business cards, hosting and creation of a website, signage for your vehicle and office location, association membership dues, telephone directory listings and grand opening celebrations (to name a few!).
• How will you measure the success of your advertising and marketing? How will you research new trends in communications, public relations and advertising?

 

 

Advertising / Marketing worksheet

 

Advertising/Marketing Techniques for Your Business

Activity	Appropriate	Maybe	Not Appropriate	Top Priority?
Advertising (print, broadcast, Internet)
Alliances
Annual reports & reviews
Associations
Book and publication writing
Brochures & collateral materials
Customer advisory boards
“Customer experience” enhancements
Customer surveys
Direct mail
Directories
Event sponsorships & trade shows
Internet-based marketing
Newsletters
Promotional giveaways
Press relations campaign
Pricing strategies
Referral sources campaign
Seminars & public speaking
Signage (vehicle, office, roadside)
Trade shows
Yellow Pages TM
Website – unique domain/development

 

 

 

 

“Marketing Mix” of Tools and Techniques

Top Priority Marketing Techniques (from above list)	Steps needed to implement	Estimated Costs	Timing / Deadlines	Person Responsible
1.		€
2.		€
3.		€
4.		€
5.		€

 

 

OPERATIONS PLAN

Your plan needs to address the day-to-day running of your business. The operations section should address the stage of development and production process.

The development section should cover the following:

• How will your product or service be made? Describe the workflow in the creation of your product or service.
• What is your quality control in the development of your product or service? Have you created a process and checklist to ensure these problems are discovered?
• Does your work site meet regional/national Standards, municipal/building inspector ready and do you have procedures in place to mitigate risk and train staff?
• Outline which industry associations you will be or already are a member of. Most businesses are legally obliged to do so. Employers who should register but do not may be subject to fines.
• Who are your primary and secondary suppliers? Do you have any back-ups or options of other suppliers if they don’t’ work out? What are their terms of payment?

The production process section should cover the following:

• What are the essential requirements of your business – building space, land, office style (home or commercial space), zoning – and if you own, lease or rent include the value/costs in your start-up costs. Are any of these absolutely vital to the business, and if so, what makes it so?
• When can you start producing and deliver to customers? How long does it take to make one unit? How much lead time do you need from order to delivery? Will you produce on spec or on demand? What are the risks of each (time to customer, competitor modes of production, etc)?
• What materials do you require? How much do they cost? How are they delivered to your location and how long does it take? Do you have on-demand access to these supplies if you have rush orders?
• What will you do if your demand for your goods or services fluctuates?
• Have you done a test run of your facilities? processes? with the required people? Do your competitors have any stories of struggling at the beginning of operations?
• How will you track materials and production inventory? If you are not computerized how will you manage your data?

If you are a manufacturer, then your proposal should also briefly cover the:

• mechanics of your business’ work flow,
• inventory controls,
• personnel requirements, and
• production schedules.

 

 

FINANCIAL INFORMATION

The financial information section of your business plan is like the skeleton upon which all the other parts hang. It will act as your progress report and benchmark for success. There are several worksheets that are included in this section that can be downloaded and printed off, or enter the lists into a spreadsheet for first-time and on-going planning.

Each link below takes you to a new webpage and a link to download the PDF file version of each financial planning tool.

Enter the Financial Planning Tools Section HERE!

There are three essential steps in creating your basic financial plan:

• Start-Up Expenses Worksheet
• Cash Flow Statement
• Income Statement

If you are creating a business plan for an ongoing business include financial statements from previous years:

• Balance Sheet
• Income Statement
• Aged List of Payables
• Aged List of Receivables
• Summary of Inventory / Capital Equipment or Assets Value

Other tools that are useful for different types of businesses are:

• Advertising/Marketing Worksheet (SEE PREVIOUS SECTION)
• Break-even Analysis

 

 

START-UP EXPENSES WORKSHEET

A new business will have two types of expenses: one-time expenses and operating expenses. Estimate these costs and add them to the cash flow statement. Lenders will require actual quotes from approved/certified vendors (for building contractors, franchises, etc).

Your one-time expenses section may include, but are not limited to:

• Contingency expenses
• Down payment on property or deposit on rent
• Down payment or deposit on fixtures or equipment (computer, printer, telephones)
• Franchise fees
• Incorporation costs (where applicable)
• Licenses or permits
• Product development costs
• Promotions for opening
• Renovations or leasehold improvements
• Starting inventory
• Utility set-up fees
• Vehicles

Your operating expenses section of your business plan may include, but are not limited to:

• Advertising/marketing
• Bad debts/sales discounts
• Distribution
• Insurance
• Loan payments plus interest
• Maintenance
• Payroll expenses
• Professional fees (lawyer, accountant)
• Raw materials
• Rent/mortgage payments
• Salaries
• Travel
• Utilities
• Management fees
• Vehicle expenses

 

cash flow Statement

By completing this monthly cash flow projection for one year (or more) you will have an idea of cash inflows and outflows. Your calculations may help you plan material purchases in smaller/larger amounts, take time to negotiate terms with suppliers, watch your cash during slowdowns, ramp up for busy periods, and more. Once you have your cash flow projections you can speak to your accountant or lender about your cash needs.

You will need your start-up estimates/costs/quotes from the previous worksheet. Input them in the first column.

Cash Flow Statement for a Small Business
12 Month and Start-Up Cash Flow	Start-Up Costs	Month 1	Month 2	Month 3	Month 4
Cash Receipts (Cash In)
Cash sales
Collections from accounts receivable
Owners’ capital
Loan proceeds
Capital/Asset Disposal
Other cash received (specify)
Total Cash In
Cash Disbursements (Cash Out)
Advertising & promotion expense
Bank charges & interest
Business licenses & permits
Capital / Assets Purchases
Equipment Payments
Government Remittances (taxes, VAT, etc)
Interest expense
Insurance
Loan/line of credit payments
Management salaries (owners draw)
Office supplies & expenses
Payroll remittances (pensions, payroll taxes, other taxes, etc)
Professional fees (accounting, legal)
Rent or mortgage payment
Repairs & Maintenance
Storage
Telephones/communications
Travel
Utilities
Vehicle expenses
Wages & salaries (staff)
Total Cash Out
Cash Flow Summary
Opening Balance
Add: Cash In
Subtract: Cash Out
Closing cash balance – surplus or (deficit)

 

INCOME STATEMENT

An income statement shows your profit or loss for a particular period of time, detailing all revenues and expenses. It should be prepared on a monthly or quarterly basis to allow for proactive management to make any necessary changes. The income statement is primarily an accounting tool to measure a business’ performance.

Another useful tool that will help you to measure your business performance at the outset is the break-even analysis. You can measure your breakeven point in level of sales in either dollars or units where revenue equals total cost.

Use this worksheet to prepare your Income Statement if you are already in business, and as a format for pro forma (projected) income statements.

Income Statement for a Small Business
Time Period – Projected or Actual	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Full Year
Sales	€
> >Opening inventory	€
> > + Purchases (direct materials)	€
> > + Production wages*	€
. > . – Closing inventory	€
(Less) Cost of goods sold (COGS)	€
Gross profit (or income)	€
–
Expenses
Amortization expense
Advertising & marketing
Bad Debts
Insurance
Interest expense
Maintenance
Management fees
Office expenses
Rent or mortgage interest
Salary – owner
Storage
Travel (other)
Utilities
Vehicle expenses
Wages (staff)
Total expenses	€	€	€	€	€
Earning (or loss) before taxes
. . Less Income Taxes
Net Earnings (or loss)

* Wages are only included in manufacturing businesses; in retail businesses wages are operation’s expense.

• Gross profit (or income) is obtained by deducting the costs of goods sold from sales.
• Net earnings (or profit) or loss is obtained by deducting all expenses from the gross profit.
• Net earnings is the amount to be transferred to the retained earnings section of the balance sheet.

 

BALANCE SHEET FOR A SMALL BUSINESS

Use this worksheet to prepare a balance sheet you will include in your business plan for an ongoing business. If you are starting a new business proforma (projected) balance sheets can be prepared, particularly if your business requires significant capital (asset) investment or financing.

Assets		Liabilities
Current Assets		Current Liabilities
Cash in bank	_____________________	Accounts payable	__________________
Accounts receivable	_____________________	Short-term loans	__________________
Inventory	_____________________	Other payments due in 12 months	__________________
Cash in (item 1)	_____________________	VAT(BTW)owing
Cash in (item 2)	_____________________	VAT(BTW) collected on sales	__________________
Total current assets	_____________________	Less ITC (deductables)	(_________________)
		Net amount payable or (refundable)	__________________
		Total current liabilities	__________________
Fixed Assets		Long-term Liabilities
Land	_____________________	Long-term loans (due after 1 yr)	__________________
Buildings	_____________________	Mortgage	__________________
Less amortization	(____________________)	Total long-term liabilities	__________________
Net land & buildings	_____________________
		Total Liabilities (L)	__________________
Equipment	_____________________
Less amortization	(____________________)	Owners’ Equity
Net equipment	_____________________	Investment	__________________
		Retained Earnings	__________________
Vehicles	_____________________
Less amortization	(____________________)	Total owners’ equity (E)	__________________
Net vehicles	_____________________
Total Assets (A)	_____________________	Total liabilities and equity (L+E)	__________________

ITC – Input tax credits

 

BREAK-EVEN ANALYSIS

Another useful tool that will help you to measure your business performance at the outset is the break-even analysis. You can measure your break-even point in level of sales in either dollars or units where revenue equals total cost.

The break-even analysis is especially useful when you’re developing a pricing strategy, either as part of a marketing plan or a business plan.

Break-even analysis depends on the following variables:

• Selling price per unit: The amount of money charged to the customer for each unit of product or service.
• Total fixed costs: The sum of all costs required to produce the first unit of a product. This amount does not vary as production increases or decreases, until new capital expenditures are needed.
• Variable unit cost: Costs that vary directly with the production of one additional unit.
• Total variable cost: The product of expected unit sales and variable unit cost, i.e. expected unit sales times the variable cost.

Each of these variables is interdependent on the break-even point analysis. If any of the variables changes, the results may change.

Total Cost: The sum of the fixed cost and total variable cost for any given level of production, i.e., fixed cost plus total variable cost.

Total Revenue: The product of forecasted unit sales and unit price, i.e., forecasted unit sales times unit price.

Break-Even Point: Number of units that must be sold in order to produce a profit of zero (but will recover all associated costs). In other words, the break-even point is the point at which your product stops costing you money to produce and sell, and starts to generate a profit for your company.

As a business owner you can play with the variables to make managerial decisions like:

• setting price level and its sensitivity;
• targeting the “best” values for the variable and fixed cost combinations; and,
• determining the financial attractiveness of different strategic options for your company

Q = FC / (UP – VC)

where:

Q = Break-even Point, i.e., Units of production (Q),

FC = Fixed Costs

VC = Variable Costs per Unit

UP = Unit Price

Therefore,

Break-Even Point Q = Fixed Cost / (Unit Price – Variable Unit Cost)

 

RISK ANALYSIS

Every business has some degree of risk. Acknowledging the worst case scenarios and how you will minimize or mitigate the risks inherent in your business, is the first step in avoiding the problems.

Often risk awareness and mitigation will warrant an operational or administration expense category, i.e. a particular type of insurance, an employee with certain credentials/salary scale, training program for staff, etc.

Consider the following:

• What if you run out of cash? What would you do to pay the bills?
• What if your key employees quit?
• What if you get seriously hurt on (or off) the job? Do you have a plan for someone to take over key management roles?
• What are the standard risks of your industry? Have you adopted industry standards to protect the health and safety of your workers?
• What if the demand for your product or service decreases?
• What if the number of competitors increases?
• What if you are considering buying a business with liabilities (outstanding debts) to workers compensation or commissions?
• What if your major suppliers run into financial difficulties?
• What other unique risks does your business/industry face in light of pandemics, border security, globalization, rare resources, unique geography, multi-culturalism, etc?
• What is the age of your equipment? Could new regulations force you to upgrade?
• What are the technological advances in your business and are you able to keep up?
• Could zoning bylaw changes require you to move in the near future?

Risk Conclusions: Clearly restate your goals and objectives for your business. Address the risks and liabilities in light of a positive way forward and the resources available to you, for example: equipment, superior technology, a talented workforce, deep and wide networks.

 

IMPLEMENTATION PLAN & TIMELINE

If your business plan is complicated, requiring many steps or construction of a facility, a project plan with a timeline will be required at this step of the business plan.

Lenders may time payment advances with the various steps in the projects. At each step of the project, actual costs will be compared with estimated costs of the business plan. There will be decision points with regards to cost overruns or cost savings and the reallocation of monies from other parts of your business plan.

It provides a way of planning your time and resources so that all the necessary tasks are carried out within a given timescale. It will provide whoever sees your business plan with a ‘snapshot’ of how you intend to go about setting up your business. It should be broken down into the following sections:

• Objectives or targets
• Tasks/Actions
• Timescale
• Monitoring Progress

The plan does not need to be complex. It is a simple, disciplined means of getting your project completed in a reasonable time and with minimum confusion as to each person’s responsibilities.

Timescale For Workshop Project – SAMPLE
Task #/Name	Person Responsible	Month of Action for Task Assigned
		Sept	Oct	Nov	Dec
Finalize planning permission	Joe	X
Apply for loan	Jane	X
Finalize suppliers	Susan	X
Liase with local building inspector	Henry		X
Seek Builders	Joe		X
Tender Information	Joe		X
Supervise Builders	Joe			X
Plan shop and interior design	Jane /Susan			X
Marketing materials created and distributed	Henry				X

Legend: “x” becomes “V” when completed