Business Plan for startup company

The business plan consists of a narrative and several financial worksheets. The narrative template is the body of the business plan. It contains more than 150 questions divided into several sections. Work through the sections in any order that you want, except for the Executive Summary, which should be done last. Skip any questions that do not apply to your type of business. When you are finished writing your first draft, you’ll have a collection of small essays on the various topics of the business plan. Then you’ll want to edit them into a smooth-flowing narrative.

The real value of creating a business plan is not in having the finished product in hand; rather, the value lies in the process of researching and thinking about your business in a systematic way. The act of planning helps you to think things through thoroughly, study and research if you are not sure of the facts, and look at your ideas critically. It takes time now, but avoids costly, perhaps disastrous, mistakes later.

This business plan is a generic model suitable for all types of businesses. However, you should modify it to suit your particular circumstances. Before you begin, review the section titled Refining the Plan, found at the end. It suggests emphasizing certain areas depending upon your type of business (manufacturing, retail, service, etc.). It also has tips for fine-tuning your plan to make an effective presentation to investors or bankers. If this is why you’re creating your plan, pay particular attention to your writing style. You will be judged by the quality and appearance of your work as well as by your ideas.

It typically takes several weeks to complete a good plan. Most of that time is spent in research and re-thinking your ideas and assumptions. But then, that’s the value of the process. So make time to do the job properly. Those who do never regret the effort. And finally, be sure to keep detailed notes on your sources of information and on the assumptions underlying your financial data.

Write this section last.

We suggest that you make it two pages or fewer.

Include everything that you would cover in a five-minute interview.

Explain the fundamentals of the proposed business: What will your product be? Who will your customers be? Who are the owners? What do you think the future holds for your business and your industry?

Make it enthusiastic, professional, complete, and concise.

If applying for a loan, state clearly how much you want, precisely how you are going to use it, and how the money will make your business more profitable, thereby ensuring repayment.

Fashion is our main priority when it comes to make our customer happy and more fashionable than ever. We are dedicated to offer our customers innovative fashion, price friendly, made by an emerging designer with love to the arts.

KarMa is not regular brand with a basic name. This name was picked with a lot of thinking. Being a fashion student, not yet graduated I know the intensive long time graduates have when they finish with their bachelor to find a job in the industry. I have people that believe in me and are investing time and money, for when I finish college, I can be my own boss. In the spirit to pay it forward I want to create this brand that helps others while fashionistas buy my products. KarMa also, in a future wants to help emerging designers develop in the fashion world. We want to offer our installations for those who can’t afford it at the moment to use our machines and get their products to sell in our stores. KarMa name was the perfect one because karma means “the sum of a person's actions in this and previous states of existence, viewed as deciding their fate in future existences”. I’m a firm believer that if people do good to others they are going to have good things come to them. As millennial, I want to create conscience in the world and give good vibes and help others.

Our goal is to create a great ambience between the designer and customer relations. As a fashion brand we want to make you feel great in your skin and to be bold with the different styles. We strive for greatness and that can only be achieve putting our customer first and having a loyal designer with new ideas to attract customers so we can create a new ambience in the style of Ponce, Puerto Rico.

In KarMa, our main responsibility is our customer and their needs. We want to make them happy and make them come back. KarMa doesn’t believe in stereotypes and prefers if it has a bigger public to offer fashion for everyone. The brand itself can change like a chameleon. We can be edgy as the same time we can be perky. KarMa makes sure that every product made by us is up to our standards and believes as a brand so we can offer our customers the best work customers have ever seen.

Our designs are inspired by fashion innovators with different styles that combine to create a new personality in the customer that visit us. We offer ready to wear, evening dresses, couture, accessories and jewelry. Having products from different designers in the accessories and jewelry part, our customers can be sure to have everything they need to satisfy their passion for fashion. We aim to get every kind of customer to our store so we can get a successful brand.

KarMa aim to grow and expand in the coming years. We want to touch our customer’s hearts by doing designs that inspired them to do good. We want to share our history and teach people how to help others that needs a little boost to make it in life and professional life. Our goal is to expand in garment district all over United States and make aware of what we are about.

Our strengths are that we are here to help others in their way to get better when cancer patients are being treated. Knowing the story of our brand will get attention of the customers. In addition, we provide minimalist clothing with exceptional materials and one of a kind garments that not every person will get since KarMa will offer 3 pieces per size per garment for a total of 15 garments of the same style. Being a designer will help me achieve this store that would bring a lot of joy for fashionistas and emerging designers. A brand with a background history is always loved by people/ customers. We don’t do what we do just for make it through, at KarMa we do it because we love it. Giving back is our main priority.

KarMa offers woman RTW apparel collections. Our main type of clothing is sportswear for the woman on the go that wants to look good. New clothes will be available every three months, so every trimester there will be a total of 15 new designs making 60 new designs every year.

The name that represents a KarMa garment with their good quality fabrics have an advantage for the competition. It offers good quality materials with good prices that make consumers buy these products. Prices may vary on the type of garment, time spent making the garment and kind of fabrics and materials used. In other words, is going to be a RTW exclusive brand. Furthermore, KarMa is going to be presented to the bank for a credit line.

Market Research

Consumption patterns and expenditures in women’s clothing in Puerto Rico is linked to seasonality. Weather variations does not effect on the retail of women’s clothing in the Puerto Rico market. Knowing this, the year’s weather seasons are not related. Even though, special occasions like mother’s day and Christmas are when most women’s clothing is bought. The temperature, humidity, and heat index does no influence on the clothing sales. December period is one of the most important economic impact on retailers, which is called “make-it-or-break-it period”. Another research showed that apparel expenditures are more affected by consumer characteristics such as income, social class, location and family type, but no how seasons effect the consumer characteristics on household spending. Puerto Rico is a magnet for apparel manufacturing since it has a combination of affordable workforce and aggressive tax incentives.

Puerto Rico offers incentives for manufacturing. Furthermore, Puerto Rico is one of the world’s manufacturing powerhouses for more than fifty years. More than 40% of the island’s Gross Domestic Product derives from manufacturing operations but Puerto Rico had shown that it can be an attractive investment destination for more. Puerto Rico offers a combination of affordable workforce and highly specialized in regulated operations, unparalleled tax and benefits by being part of United States like intellectual property protection and applicability of federal laws. The government had created an aggressive economic and tax incentives programs to help companies in their operations and profit. Some of the benefits offered under Act No. 73 of 2008 are:

· 4% income tax on industrial development income

· 0% to 1% tax rate on income for pioneer or novel products manufactured in PR

· Up to 50% tax credit on purchases of products manufactured or recycled locally

· Up to $5,000 for each job created during 1st year of operation

· Up to 50% tax credit on Research and Development activities

· Special deductions on investments from structures, machinery and equipment

In addition, they offer incentive for creating new jobs opportunities and location. In the apparel products, for stores that had being operating for at least one year, this incentive is provided by the Act No. 8 of 1986. If the company qualify, it might receive a 3% of cash incentive of eligible sales, up to a maximum amount of $150,000 per business per year. This incentive can be used for raw materials, equipment, improvements to the company manufacturing facilities, subsidize the lease, training, promotion, among others.

Economics

The size of the market in women’s clothing store is in the 20% of the Clothing Store Industry Group. Women represent the 47% of the civilian workforce. Female consumers shop evaluating purchases based on products and company information. Also, when women shop they buy for a specific brand. More consumers prefer to be treated with respect when buying products and they are more likely to buy when a customer have a great customer service and the product have reasonable prices. Usually retail sales make a 2% to 5% in growth every year and holiday seasons accounts for 20% to 40% in sales.

Barriers and Solutions

· Marketing will be made with Facebook since they offer reasonable prices for marketing and promos. The changes in technology don’t affect the brand, the beneficiate the brand since the brand can be acknowledge and can sell better using social media.

· Customer acceptance will be a barrier because this is a new brand and even though KarMa sell good quality products the first year will be slow on sales.

· Changes in government regulations may affect the brand because of the contributive laws and labor laws.

· Changes in the industry will be changing as well as it changes with trends and new ways to make clothes.

· Changes in the economy can affect is there is a recession, tax increase and the high unemployment rates in Puerto Rico will have an impact in the target market.

Product

KarMa products are one of a kind for a woman on the go with good taste and respect for fashion. With every purchase the brand offers tailoring services so the wearer can make it to their true size. KarMa employees are train to help every customer get the perfect fit and garment they need for any occasion.

Features and Benefits

Tailoring services with every piece purchase

Long lasting garments made by the best fabrics in the market

One of a kind piece

Employees that help customer acquire what they really need

One to one with the designer of KarMa

15 pieces per garment made (3 of every size)

Karma offers a refund policy of 30 days with receipt. If the customer wants to have a lab technician change something about the garment that is include in the price of the product. Moreover, is the customers is not satisfied with their purchase KarMa offers credit from the store. KarMa also offer follow-up to all loyal customers, whenever there’s something new to the store (a new line, fashion show, new merchandise) all customers will be invited to visit the store or to attend meetings. KarMa will send emails, Facebook invitations (reminders in Facebook page) calls and texts to the customers if there’s a sale, a store activity or just a sale for loyal customers.

Customers

KarMa customer profile consist in a single woman between 20 to 35 years’ old that is a fashionista. She’s the average city girl with a job in the downtown area that comes to an income from 60,000 to 102,000 a year. Spending money on clothes, accessories and jewelry is more of a hobby but traveling is a must. She likes to travel, have memories with fashion pieces and that’s why she cherishes what she buys and never give it away. Their education is college degree. They work as PR, CEO, Marketing and fashion related jobs. This woman buys clothe every week for every occasion and they like to be classy but minimalist. They are eco-friendly and know that if they buy a piece from KarMa they would use it more than 30 times and change their style with just a collar or purse. They are fashionistas that know how to mix and match one piece to several others. They are never bored with their clothes. Even though this customer likes to spend money in good garments made by hand, they like to pay it forward. They tend to help others when is needed.

Competition

KarMa competition is designers that make tailored made clothes and also sells others brands in their stores. Some of them already offer one type of brand and KarMa wants to bring new brands to the consumers in Puerto Rico. The brand (KarMa) weaknesses is that for now is not going to offer prom dresses, but in a future this would be a possibility in KarMa Stores.

Major competitors:

· Kriado Boutique- #2932 Ave. Emilian Fagot, Ponce, PR 00716

· Atelier Lissa Porrata- Ave. Ednita Nazario calle Bonita #957, Ponce, PR 00716

· Rebeca Tiago- Calle Cesar Gonzalez #375, Hato Rey, PR 00917

KarMa competitors offer tailor made clothes but not the one to one with the designer. This brand offers the one-to-one with the designer and good quality clothing with satisfaction guaranteed. If the customer doesn’t like the product they can have a credit in the store, others don’t offer this credit or the customer service that KarMa employees give.

Indirect competitors are doctor’s office, a sport store, museum and art supply store. Those are useful because they are situated in a central area that have houses, schools and college nearby.

KarMa offer clothing lines every 3 months and exclusivity with every garment made. if the garment need a trim or a something added, that service will be made because is already included in the price of the product. The designer for KarMa will mostly be there to help customers on achieving the look for what they need and the employees will be train so they can help assemble the perfect outfit for the shape and likes of the customer that visit the store.

Now analyze each major competitor. In a few words, state how you think they compare.

In the final column, estimate the importance of each competitive factor to the customer. 1 = critical; 5 = not very important.

Table 1: Competitive Analysis

Now, write a short paragraph stating your competitive advantages and disadvantages.

Niche

Now that you have systematically analyzed your industry, your product, your customers, and the competition, you should have a clear picture of where your company fits into the world.

Strategy

· KarMa store will be on an avenue where it has a lot of traffic and can be seen when people drive by

· Friends and customers will receive exceptional service so they can forward information if the brand to other people

· Local press mentions and Facebook

· Personal shoppers

Promotion

Social media is our main target for promotion. Since we want to practice being an eco-friendly brand, not using paper or poster could be a start. Before opening the store there will be a lot of promotion on Facebook, Instagram and Etsy.

Facebook will be the main social media because it has tools to get good promotional prices. Daily posts will be 2, one will be that Karma is open to come and visit and the sales of the day Other post will be a combination of clothing and photo of a customer satisfied with their purchase.

Etsy is a start-up online store; customers can buy clothes trough Etsy if they can’t visit the store. Etsy offers a good deal per product sell in their page and its easy creating an online store with them too. Instagram, in a daily basis KarMa profile will upload pictures of our products, models with our products and inspirational quotes.

KarMa wants to project the esthetic of Zara. Minimalist clothing but one of a kind. The brand wants the customers to know that it offers uniqueness and aim to have fewer pieces so customers be sure that they have a piece that a limited number people is going to have.

In KarMa when a sale is made, the system will have a customer info tab that can put the customer in the computer and that way the employees can get in touch with them for future store sales, fashion shows new merchandise arrives, among other things. Email, Facebook, phone or text will be the main way to get customers in with the brand.

Promotional Budget

How much will you spend on the items listed above?

Before startup? (These numbers will go into your startup budget.)

Ongoing? (These numbers will go into your operating plan budget.)

Pricing

Every KarMa garment/product is a one of a kind. With the purchase of the piece every customer gets additional benefits like tailoring and satisfaction guaranteed that the product is made with carefully hand-picked durable fabrics and what better fit the women’s body. The prices for KarMa may vary on fabrics used and how many yardage is use in every piece. Blouses, pants, skirts, blazers, dresses, jumpsuits range from $60 to $400. Prices of KarMa garments are in the same category as Lissa Porrata and Kriado Boutique. The 3 brands have garments made by designers and range in the same price. Customers always buy products by brand, quality and price. Knowing that is a designer brand, price is not a problem.

Proposed Location

Starting location is going to be at #2345 Ave. Las Americas Ponce, Puerto Rico and our goal is to open 2 more stores in the 5-year plan. Instagram and Facebook as a way to attract customers and buy. Shipping internationally is a must when starting with the brand. That way KarMa will be known and it can bring more customers to brand.

Being near a college for med and law students, among other concentrations is our main goal to stay in the range of age we are looking for in our target customer. These customers are the new kind of consumers we need to attract to. Not having near competitors in clothing stores is better for the brand since a lot of the students that attend Pontificia Universidad Catolica de Puerto Rico leave near and don’t want to drive all the way to the mall when they can get quality garments and uniqueness in the brand they are buying.

This location is central to everything in Ponce. Is near the downtown area, have schools and colleges near, among them there’s doctors’ offices and restaurants. It has a big parking lot so customers don’t have trouble looking for a space to park and the spots are on the front and back of the building. The building is not yet equipped with the esthetic of the brand and color but the interior and space is the best for the first store/workshop. The store need some adjustments that can be made by a contractor or an architect.

Distribution Channels

· Etsy and Facebook will be the major key of selling online to those who can’t visit the store. The prices will still the same but if the order is under $100 an additional fee will be added for mailing.

· Brick and mortar is the brand specialty. KarMa wants to let the customer know that they care and want to help them in every decision made with any of the products offer.

Sales Forecast

Now that you have described your products, services, customers, markets, and marketing plans in detail, it’s time to attach some numbers to your plan. Use a sales forecast spreadsheet to prepare a month-by-month projection. The forecast should be based on your historical sales, the marketing strategies that you have just described, your market research, and industry data, if available.

You may want to do two forecasts: 1) a "best guess", which is what you really expect, and 2) a "worst case" low estimate that you are confident you can reach no matter what happens.

Remember to keep notes on your research and your assumptions as you build this sales forecast and all subsequent spreadsheets in the plan. This is critical if you are going to present it to funding sources.

Production

Production is currently at home and customers make their purchases via Facebook and Etsy. The garments sold on social media are by request but, they still have the exclusivity of just making 15 garments of the same style, 3 repetitions of the same style per size.

The store will have a room for production for KarMa. As for the production of KarMa there will be 15 new designs for production every three months.

Production techniques and costs

Quality control

Our customer is always first. Their needs will always be meet with time goals and satisfaction.

Inventory control

Product development

Location

KarMa store have to had a big space so customers can see every piece without felling cluttered.

Physical requirements:

Amount of space

Commercial building

Zoning

Power and other utilities

Access:

KarMa location has to be easy for when customers and suppliers come to the store. Parking space is necessary because if there’s no parking for us is going to be difficult to get customers in if they know we don’t have parking and they have to find one far from the store. It is important that we can offer a walk-in access. Customers don’t want to have trouble getting in or out. KarMa want to make this easy for the consumers to come in with=out any hassle.

What are your requirements for parking and proximity to freeway, airports, railroads, and shipping centers?

Include a drawing or layout of your proposed facility if it is important, as it might be for a manufacturer.

Construction? Most new companies should not sink capital into construction, but if you are planning to build, costs and specifications will be a big part of your plan.

Cost: Estimate your occupation expenses, including rent, but also including maintenance, utilities, insurance, and initial remodeling costs to make the space suit your needs. These numbers will become part of your financial plan.

KarMa will have a 9am to 7pm operational hours. 10 hours will be sufficient for customers to come in and shop for their needs. If this is not enough, KarMa will have online help from 7am to 11pm in Facebook chat.

Legal Environment

Describe the following:

Licensing and bonding requirements

Permits

Health, workplace, or environmental regulations

Special regulations covering your industry or profession

Zoning or building code requirements

Insurance coverage

Trademarks, copyrights, or patents (pending, existing, or purchased)

Personnel

KarMa in the other hand will have 2 daily employees for day-to-day basis work. These 2 employees will be the manager and the sales associate or the lab technician.

Employees of KarMa have to be fashion forward and be profesionals about it.

Facebook is going to be one of our tools to find a good candidate for the KarMa store and monster.com. In there we can find what the brand really look for KarMa and our customers. After possible candidates are contacted an interview will be schedule for every candidate and later on a decision will be made to see who better fit with our standards and needs.

Every employee will start with $8.00 an hour. Depending on qualifications and experiences the salary will increase.

Every Fashion Lab Technician should have a certification and prove that they know how to sew and how to make patterns. Some other techniques, if they don’t know, will be shown to them. Key Holder should have previous experience of 2 years being manager. Sales associate don’t need to have previous experience since they will be trained to be the best at selling clothes and make the customer have the best experience ever.

Personnel Tasks

· Key Holder/Sales Associate

· 1 key holder/sales associate for the mornings or nights if the owner is not going to be able to work. This position is for someone that is going to be an immediate manager when the owner/manager is not there. Also, this position the key holder will be a sales associate too. They will help the customer find their attire. Will maintain the store clean. Help with the inventory.

· Fashion Lab Technician

· 1 technician to help the designer get the clothes done before every week. They will help the designer pick what is better for production and develop new styles. Lab Tech will help in the process of making a new line and will make arrangement in the clothes that is sell to our customers. They can make minor adjustment so the clothes can fit to our customers right.

Job Descriptions

· Key Holder/Sales Associate

· Purpose to assist and support the manager in the running of the store in line with the brand objectives and standards. Supervise the shop floor and coordinate employee’s activity. Drive sales to improve store performance. Organizing sales and changes of prices or any commercial action needed to improve the performance of the store. Sales associates are responsible for all sales activities from lead generation trough to close. It is important that a sales associate is a driven individual. KarMa want someone that is going to be able to elevate company standards, achieve goals and meet clients’ expectations.

· Fashion Lab Technician

· A fashion lab technician is responsible for selecting all of the equipment needed for the sewing process and help the designers achieve the garment final products and how is going to be created. KarMa wants someone that knows how to operate and tend a sewing machine, in order to perform a garment sewing operations.

Inventory

What kind of inventory will you keep: raw materials, supplies, finished goods?

Average value in stock (i.e., what is your inventory investment)?

Rate of turnover and how this compares to the industry averages?

Seasonal buildups?

Lead-time for ordering?

Suppliers

Identify key suppliers:

Names and addresses

Type and amount of inventory furnished

Credit and delivery policies

History and reliability

Should you have more than one supplier for critical items (as a backup)?

Do you expect shortages or short-term delivery problems?

Are supply costs steady or fluctuating? If fluctuating, how would you deal with changing costs?

You should also age your accounts payable, what you owe to your suppliers. This helps you plan whom to pay and when. Paying too early depletes your cash, but paying late can cost you valuable discounts and can damage your credit. (Hint: If you know you will be late making a payment, call the creditor before the due date.)

Do your proposed vendors offer prompt payment discounts?

A payables aging looks like the following table.

KarMa will be managed by the designer on a day-to-day basis. The manager has a bachelor in fine arts for fashion design and a minor in fashion marketing that will help the brand get better every day in branding, marketing and selling wise. In addition of the owner/manager, others 3 key employees that would rotate in the week will work hard in the daily basis to get recognition with the consumers and target customers.

Professional and Advisory Support

List the following:

Board of directors

Management advisory board

Attorney

Accountant

Insurance agent

Banker

Consultant or consultants

Include personal financial statements for each owner and major stockholder, showing assets and liabilities held outside the business and personal net worth. Owners will often have to draw on personal assets to finance the business, and these statements will show what is available. Bankers and investors usually want this information as well.

Even with the best of research, however, opening a new business has a way of costing more than you anticipate. There are two ways to make allowances for surprise expenses. The first is to add a little “padding” to each item in the budget. The problem with that approach, however, is that it destroys the accuracy of your carefully wrought plan. The second approach is to add a separate line item, called contingencies, to account for the unforeseeable. This is the approach we recommend.

Talk to others who have started similar businesses to get a good idea of how much to allow for contingencies. If you cannot get good information, we recommend a rule of thumb that contingencies should equal at least 20 percent of the total of all other start-up expenses.

Explain your research and how you arrived at your forecasts of expenses. Give sources, amounts, and terms of proposed loans. Also explain in detail how much will be contributed by each investor and what percent ownership each will have.

The financial plan consists of a 12-month profit and loss projection, a four-year profit and loss projection (optional), a cash-flow projection, a projected balance sheet, and a break-even calculation. Together they constitute a reasonable estimate of your company's financial future. More important, the process of thinking through the financial plan will improve your insight into the inner financial workings of your company.

12-Month Profit and Loss Projection

Many business owners think of the 12-month profit and loss projection as the centerpiece of their plan. This is where you put it all together in numbers and get an idea of what it will take to make a profit and be successful.

Your sales projections will come from a sales forecast in which you forecast sales, cost of goods sold, expenses, and profit month-by-month for one year.

Profit projections should be accompanied by a narrative explaining the major assumptions used to estimate company income and expenses.

Research Notes: Keep careful notes on your research and assumptions, so that you can explain them later if necessary, and also so that you can go back to your sources when it’s time to revise your plan.

Four-Year Profit Projection (Optional)

The 12-month projection is the heart of your financial plan. This section is for those who want to carry their forecasts beyond the first year.

Of course, keep notes of your key assumptions, especially about things that you expect will change dramatically after the first year.

Projected Cash Flow

If the profit projection is the heart of your business plan, cash flow is the blood. Businesses fail because they cannot pay their bills. Every part of your business plan is important, but none of it means a thing if you run out of cash.

The point of this worksheet is to plan how much you need before startup, for preliminary expenses, operating expenses, and reserves. You should keep updating it and using it afterward. It will enable you to foresee shortages in time to do something about them—perhaps cut expenses, or perhaps negotiate a loan. But foremost, you shouldn’t be taken by surprise.

There is no great trick to preparing it: The cash-flow projection is just a forward look at your checking account.

For each item, determine when you actually expect to receive cash (for sales) or when you will actually have to write a check (for expense items).

You should track essential operating data, which is not necessarily part of cash flow but allows you to track items that have a heavy impact on cash flow, such as sales and inventory purchases.

You should also track cash outlays prior to opening in a pre-startup column. You should have already researched those for your startup expenses plan.

Your cash flow will show you whether your working capital is adequate. Clearly, if your projected cash balance ever goes negative, you will need more start-up capital. This plan will also predict just when and how much you will need to borrow.

Explain your major assumptions, especially those that make the cash flow differ from the Profit and Loss Projection. For example, if you make a sale in month one, when do you actually collect the cash? When you buy inventory or materials, do you pay in advance, upon delivery, or much later? How will this affect cash flow?

Are some expenses payable in advance? When?

Are there irregular expenses, such as quarterly tax payments, maintenance and repairs, or seasonal inventory buildup, that should be budgeted?

Loan payments, equipment purchases, and owner's draws usually do not show on profit and loss statements but definitely do take cash out. Be sure to include them.

And of course, depreciation does not appear in the cash flow at all because you never write a check for it.

Opening Day Balance Sheet

A balance sheet is one of the fundamental financial reports that any business needs for reporting and financial management. A balance sheet shows what items of value are held by the company (assets), and what its debts are (liabilities). When liabilities are subtracted from assets, the remainder is owners’ equity.

Use a startup expenses and capitalization spreadsheet as a guide to preparing a balance sheet as of opening day. Then detail how you calculated the account balances on your opening day balance sheet.

Optional: Some people want to add a projected balance sheet showing the estimated financial position of the company at the end of the first year. This is especially useful when selling your proposal to investors.

Include details and studies used in your business plan; for example:

Brochures and advertising materials

Industry studies

Blueprints and plans

Maps and photos of location

Magazine or other articles

Detailed lists of equipment owned or to be purchased

Copies of leases and contracts

Letters of support from future customers

Any other materials needed to support the assumptions in this plan

Market research studies

List of assets available as collateral for a loan

The generic business plan presented above should be modified to suit your specific type of business and the audience for which the plan is written.

For Raising Capital

For Bankers

Bankers want assurance of orderly repayment. If you intend using this plan to present to lenders, include:

Amount of loan

How the funds will be use

What this will accomplish—how will it make the business stronger?

Requested repayment terms (number of years to repay). You will probably not have much negotiating room on interest rate but may be able to negotiate a longer repayment term, which will help cash flow.

Collateral offered, and a list of all existing liens against collateral

For Investors

Investors have a different perspective. They are looking for dramatic growth, and they expect to share in the rewards:

Funds needed short-term

Funds needed in two to five years

How the company will use the funds, and what this will accomplish for growth.

Estimated return on investment

Exit strategy for investors (buyback, sale, or IPO)

Percent of ownership that you will give up to investors

Milestones or conditions that you will accept

Financial reporting to be provided

Involvement of investors on the board or in management

For Type of Business

Manufacturing

Planned production levels

Anticipated levels of direct production costs and indirect (overhead) costs—how do these compare to industry averages (if available)?

Prices per product line

Gross profit margin, overall and for each product line

Production/capacity limits of planned physical plant

Production/capacity limits of equipment

Purchasing and inventory management procedures

New products under development or anticipated to come online after startup

Service Businesses

Service businesses sell intangible products. They are usually more flexible than other types of businesses, but they also have higher labor costs and generally very little in fixed assets.

What are the key competitive factors in this industry?

Your prices

Methods used to set prices

System of production management

Quality control procedures. Standard or accepted industry quality standards.

How will you measure labor productivity?

Percent of work subcontracted to other firms. Will you make a profit on subcontracting?

Credit, payment, and collections policies and procedures

Strategy for keeping client base

High Technology Companies

Economic outlook for the industry

Will the company have information systems in place to manage rapidly changing prices, costs, and markets?

Will you be on the cutting edge with your products and services?

What is the status of research and development? And what is required to:

Bring product/service to market?

Keep the company competitive?

How does the company:

Protect intellectual property?

Avoid technological obsolescence?

Supply necessary capital?

Retain key personnel?

High-tech companies sometimes have to operate for a long time without profits and sometimes even without sales. If this fits your situation, a banker probably will not want to lend to you. Venture capitalists may invest, but your story must be very good. You must do longer-term financial forecasts to show when profit take-off is expected to occur. And your assumptions must be well documented and well argued.

Retail Business

Company image

Pricing:

Explain markup policies.

Prices should be profitable, competitive, and in accordance with company image.

Inventory:

Selection and price should be consistent with company image.

Inventory level: Find industry average numbers for annual inventory turnover rate (available in RMA book). Multiply your initial inventory investment by the average turnover rate. The result should be at least equal to your projected first year's cost of goods sold. If it is not, you may not have enough budgeted for startup inventory.

Customer service policies: These should be competitive and in accord with company image.

Location: Does it give the exposure that you need? Is it convenient for customers? Is it consistent with company image?

Promotion: Methods used, cost. Does it project a consistent company image?

Credit: Do you extend credit to customers? If yes, do you really need to, and do you factor the cost into prices?