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Business Plan
Introduction
Creating an extensive business plan is
unnecessary for most businesses to get started. However, creating a short
business plan offers several benefits that more than outweigh the investment of
time:
· The
process of thinking and writing the plan provides clarity for the business.
· If
capital is needed from outside sources, investors want to see a plan that
demonstrates a solid understanding and vision for the business.
· The
plan will help prioritize tasks that are most important.
With growth, the plan offers a common
understanding of the vision to new leaders.
A simple business plan for a start-up service
company can be completed rather quickly. Keeping in mind who the intended
audience is, write simply. The plan needs to be understandable, readable, and
realistic.
This template is organized into seven sub-plans
or sections to be completed.
1.
Executive Summary
2.
Company Overview
3.
Business Description
4.
Market Analysis
5.
Operating Plan
6.
Marketing and Sales Plan
Financial Plan
It is recommended to complete the Executive Summary last,
after all of the other sections have been completed. As information is filled
in, from the Company Overview to the Financial Plan, the writing should tell
the story of the motivation and vision behind the business. Be sure to include
what will make the business successful, how success will be achieved, and how
success will be measured.
It is important to keep the business plan
updated in order to see progress, celebrate success, and adjust where issues
arise. This is best done on a quarterly, if not monthly, basis.
Executive Summary
The Executive Summary should be written last
after the remainder of the plan has been
finished. It is an overview (with a suggested length of no more than one page)
of the business, including the problem the business aims to solve, why this
business’ solution is different, the business’ ideal customer, and the expected
results. The Executive Summary should provide a high-level and optimistic
description of the company.
If the business requires outside investment or external
investors, include how much is needed, how it will be used, and how it will
make the business more profitable. Think of this section as the first thing a
potential investor reads, thus, it must capture their interest quickly.
Suggested headings to organize this business
plan include the following.
Opportunity:
What problem will the business solve?
Mission:
What problem will the business solve?
Solution:
How will the service uniquely solve the problem
identified?
Market focus:
What market and ideal customers will the
business target?
Competitive advantage:
How does the business intend to succeed against
its competitors?
Ownership:
Who are the major stakeholders in the company?
Expected returns:
What are the key milestones for revenue,
profits, growth, and customers?
Company Overview
The Company Overview is a brief summary of the intended
business, including what it uniquely delivers, the mission, how it got started,
market positioning, operational structure, and financial goals. After reviewing
this section, the reader should have a broad understanding of what the business
is setting out to do and how it is organized.
This section is not meant to be lengthy. Keep it
short and succinct. This is the snapshot of the business. The type of business
will determine what of the following sections will be required for the business
plan. Only include what is needed to properly represent the business and remove
anything else.
Company summary:
This is the introductory section to the company,
also known as the ‘elevator pitch’ of what the company stands for and is
setting out to do. Include the company’s goals and some of the near-term
objectives.
Mission statement:
This is a concise statement on the guiding
principles of the company and what the company aims to do for customers,
employees, owners, and other stakeholders.
Company history:
This provides the back story, especially the
personal story, of why the business was founded. Use this section to give the
overarching history of the company from its start and bring the reader
up-to-date on where the company is now in terms of sales, profits, key
services, and customers.
Markets and services:
This outlines the target market and related
needs that the company will address. Include brief descriptions of offered
services and targeted markets and customer types. This section can be a general
overview as more details will be suggested in a later section of this plan.
Operational structure:
This describes the operational details of the
business. List any potential employees needed on the payroll to make the
business run.
Financial goals:
This describes the start-up capital needed,
projected revenue and profits, forecast, and budget of the business.
Business Description
This section will first frame the business opportunity and
should answer the question: what problem(s) is the company trying to solve? Use
a case example to describe the customers’ pain point and how it is solved
today. If the business’ service addresses something the market has yet to
identify as a problem (for instance, a new mobile app or a new clothing line),
then also describe how the business’ solution reduces stress, saves money, or
brings joy to the customer.
After framing the opportunity, describe the service in
detail and how it is the solution the business offers, how it solves that
problem, and what benefits customers will receive.
This section also describes in more detail how the services
will be rendered and the pricing structure (e.g., fixed rate versus an hourly
fee). Describe how the company plans to differentiate from its competitors.
What is the target market and how can the customer capitalize on your unique
offering?
Depending on the type of business, the following
sections may or may not be necessary. Only include relevant sections and remove
everything else.
Opportunity:
Describe the current market for the business’
offered service. At a high level, what is the market and who are its
participants; is it business customers or consumers; what is the specific
geography, etc.? More details on the market will be provided in the next
section of the plan. Next, describe the current state of available services and
how the business will offer better. Also discuss any additional services the
company plans to offer in the future.
Product overview:
Key participants:
Identify
any strategic partners in the business, such as critical suppliers,
distributors, referral partners, or any others. In some businesses, products
are custom-made and any break in their supply will impact the business. There
may be key contributors to the services offered, so it is important to identify
them.
Pricing:
Note the difference between working hours and
billable hours. All working hours are not billable. If the business has
employees with differing skill levels (for example, in a law practice, there
are associates, paralegals, lawyers, partners, etc.), indicate the various
billing rates.
Communicate rates clearly to clients and
customers. If there are potential additional fees which will be passed on to
clients or customers, define and establish them up front.
Market Analysis
The Market Analysis provides the reader with an
understanding of how well the business knows and understands its market and if
it is big enough to support the business objectives. This section provides an
overview of the industry that the business will participate in. As this section
is narrowed down to the ideal customer based on the business strategy, the plan
will define the target market. A detailed description and sizing of the target
market will help the reader understand the market value the business is
pursuing (the number of potential customers multiplied by the average revenue
for the product or service).
In defining the target market, the plan will
identify key elements such as geographic location, demographics, buyer
characteristics, the target market's needs, and how market needs are currently
being met. If there are any direct competitors, explain how the company’s
service compares to the competitors in terms of solving the consumers’
problems.
This section may also include a Strengths,
Weaknesses, Opportunities, and Threats (SWOT) Analysis as necessary, to better
assess the business’ position against the competition.
Depending on the type of business, the following
sections may or may not be necessary. Only include what is need and remove
everything else.
Industry type:
Begin with the broader descriptions of the
market opportunity. For instance, if the intended business is a home-based
travel agency, the industry type would be service industry. In this particular
market, the global revenues are projected to exceed $183 billion, but the local
agency will have a much smaller market. Identify the potential clientele in the
company’s local geography that might fit into the target demographic group.
This section will also identify any industry regulations and evaluate trends in
market growth and stability.
Market segmentation:
This section defines the main market segments
and those the business is targeting now. A market segment is a group of people
(or other businesses) within the industry, identify smaller segments, such as
luxury travel or exotic cruisers. The market can also be segmented by criteria
such as quality, price, range of products, geography, demographics, and others.
A few other elements to consider answer questions such as: Is the segment
growing, shrinking, or will it be flat for the next few years? What percentage
of the market will be reachable? What share of the market is anticipated within
the next 2-3 years? Graphics are best used in a section like this to either
show growth (line graph) or percentages of markets or groups (pie chart).
Competition:
All businesses compete in one way or another. It
may be with specific, direct competitors or it may be with the way customers
have been doing things for a long time. When identifying the competition,
identify who else is providing services to solve the same problem the business
seeks to address. What are the business’ advantages over these competitors? How
will the company’s voice be heard over the noise of competitors? Sometimes a
business plan includes a matrix of features and compares how each business
offers or does not offer those features. This section reflects how the
company’s solution is different and better suited for the identified target
market compared to the competition.
SWOT analysis:
A SWOT analysis may be included by completing
the boxes below to assess the business’ current environment’s strengths and
weaknesses (internal) and opportunities and threats (external). This is a good
exercise to go through on an annual basis. After completing the analysis,
provide thoughts on: how the business’ strengths can help maximize opportunities
and minimize threats; how its weaknesses can slow the company’s ability to
capitalize on the opportunities; and how the business’ weaknesses could expose
it to threats.
STRENGTHS
· Advantage
· Capabilities
· Assets,
people
· Experience
· Financial
reserves
· Value
proposition
Price, value, quality
WEAKNESSES
· Disadvantages
· Gap
in capabilities
· Cash
Flow
· Suppliers
· Experience
· Areas
to improve
Causes of lose sales
OPPORTUNITIES
· Areas
to improve
· New
segments
· Industry
trends
· New
products
· New
innovations
Key partnership
THREATS
· Economy
movement
· Obstacles
faced
· Competitor
actions
· Political
impacts
· Environmental
effects
· Loss
of key staff
Market demand
Operating Plan
Additionally, it is necessary to outline how
the company currently and will continue to develop and maintain a loyal
customer base. This section includes management responsibilities with dates and
budgets and making sure results can be tracked. What are the envisioned phases
for future growth and the capabilities that need to be in place to realize
growth?
The operating plan describes how the business
works. Depending on the type of the business, important elements of this plan
should include how the company will bring services to market and how it will support
customers. It is the logistics, technology, and basic blocking and tackling of
the business.
Depending on the type of business, the following
sections may or may not be necessary. Only include what is needed and remove
everything else. Remember: try to keep the business plan as short as possible.
Excessive detail in this section could easily make the plan too long.
Order fulfillment:
Describe the company’s procedures for delivering
services to its customers. As a service company, determine how to keep track of
the customer base, form of communications, and how best to manage sales and
data.
Payment:
Describe the standard payment terms and the
payment methods accepted. Describe the pricing plans (one-time service fees,
hourly-based fees, markups, and any other fees) and any impact on cash flow.
Technology:
If technology is critical to the business,
whether it is part of the service offering or is fundamental to delivering a
service, describe the key technologies used that are proprietary. If the
business data (company or customer) is at risk, describe the data security plan
in place, as well as any backup or recovery in the case of a disaster or
outage.
Key customers:
Identify any customers that are important to the
success of the business due to a partnership, volume, or pathway to a new
market. Also identify any customers who bring in more than 10% of the company’s
revenues.
Key employees and organization:
Describe unique skills or experiences that are
required of the current team. If necessary, describe any proprietary recruiting
or training processes in place. List key employees that are necessary for
success. Include an organization chart to support this section.
Facilities:
As a home-based business, be educated on
legalities and tax filings for such business types.
Marketing and Sales Plan
Promoting the business, whether through
generating leads or traffic to a website or store, is one of the most important
functions of any business. In this section of the plan, provide details of
intended marketing of the business. Describe the key messages and channels used
for generating leads and promoting the business. This section should also
describe any sales strategy. Depending on the type of business, the following
sections may or may not be necessary. Only include what is needed and remove
everything else.
Key messages:
Describe the key messages that will elevate
services in the target customers’ eyes. If there is sample collateral or
graphical images of some messages, include them.
Marketing activities:
Which of the following promotion options provide
the company the best chance of product recognition, qualified leads, store
traffic, or appointments?
o Media
advertising (newspaper, magazine, television, radio)
o Direct
mail
o Telephone
solicitation
o Seminars
or business conferences
o Joint
advertising with other companies
o Word
of mouth or fixed signage
Digital marketing such as social media, email
marketing, or SEO
Sales strategy:
If needed, what will be the sales approach? Will
there be full-time commissioned sales people, contract sales, or another
approach?
Financial Plan
Creating a financial plan is where all of the
business planning comes together. Up to this point, the target market, target
customers, and pricing have all been identified. These items, along with
assumptions, will help estimate the company’s sales forecast. The other side of
the business will be what expenses are expected. This is important on an
ongoing basis to see when the business is profitable. It is also important to
know what expenses will need to be funded before customer sales, or the cash
they generate, is received.
At a minimum, this section should include
estimated start-up costs and projected profit and loss, along with a summary of
the assumptions being made with these projections. Assumptions should include
initial and ongoing sales, along with the timing of these inflows.
Projected start-up costs:
The table below shows a sample of ongoing and
one-time cost items that the business might need in order to open. Many
businesses are paid on credit over time and do not have cash coming in
immediately. It is necessary to make assumptions about how many months of
recurring items, in addition to one-time expenses, to estimate when cash will
begin to flow into the company. To begin with, the company will have to fund
out of savings or an initial investment. There is a blank table in the Appendix
to complete potential start-up cost projections.
START-UP COSTS
Your Home-Based Agency
January 1, 2018
COST ITEMS
MONTHS
COST/ MONTH
ONE-TIME COST
TOTAL COST
Advertising/Marketing
3
$300
$2,000
$2,900
Employee Salaries*
4
$500
$2
$2,002
Employee Payroll Taxes and Benefits
4
$100
$1,500
$1,600
Rent/Lease Payments/Utilities
4
$750
$2,500
$5,500
Postage/Shipping
1
$25
$25
$50
Communication/Telephone
4
$70
$280
$560
Computer Equipment
$0
$1,500
$1,500
Computer Software
$0
$300
$300
Insurance
$0
$60
$60
Interest Expense
$0
$0
$0
Bank Service Charges
$0
$0
$0
Supplies
$0
$0
$0
Travel & Entertainment
$0
$0
$0
Equipment
$0
$2,500
$2,500
Furniture & Fixtures
$0
$0
$0
Leasehold Improvements
$0
$0
$0
Security Deposit(s)
$0
$0
$0
Business Licenses/Permits/Fees
$0
$5,000
$5,000
Professional Services - Legal, Accounting
$0
$1,500
$1,500
Consultant(s)
$0
$0
$0
Inventory
$0
$0
$0
Cash-On-Hand (Working Capital)
$0
$1,000
$1,000
Miscellaneous
$0
$2,000
$2,000
ESTIMATED START-UP BUDGET
$26,472
*Based on part-time employees. This may change
once you hit your growth benchmark.
Projected profit and loss model:
The model below shows a sample of the
projections a small business is forecasting for their first 12 months of
operations. The top portion of the table shows projected sales and gross
profit. This is a good place to begin creating the company’s sales forecast.
The next section itemizes the recurring expenses the business is projecting for
the same months. These should be consistent with the estimated start-up costs
completed in the prior section. At the bottom of this model, it will possible
to see when the company is becoming profitable and what expense items are the
most impactful to its profitability. There is a blank table in the Appendix to
complete the business’ own start-up cost projections.
START-UP COSTS
Your Home-Based Agency
January 1, 2018
REVENUE
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
YTD
Estimated Sales
$5,000
$13,000
$16,000
$7,000
$14,500
$16,400
$22,500
$23,125
$24,549
$22,000
$25,000
$27,349
$216,423
Less Sales Returns & Discounts
$0
($350)
$0
($206)
($234)
$0
$0
($280)
($1,200)
($1,600)
$0
($2,400)
($6,270)
Service Revenue
$0
$0
$0
$0
$0
$250
$350
$100
$0
$0
$1,245
$1,360
$3,305
Other Revenue
$0
$0
$0
$0
$0
$0
$0
$1,500
$0
$0
$0
$0
$1,500
Net Sales
$5,000
$12,650
$16,000
$6,794
$14,266
$16,650
$22,850
$24,445
$23,349
$20,400
$26,245
$26,309
$214,958
Cost of Goods Sold*
$2,000
$5,200
$6,400
$2,800
$5,800
$6,560
$9,000
$9,250
$9,820
$8,800
$10,000
$10,940
$86,569
Gross Profit
$3,000
$7,450
$9,600
$3,994
$8,466
$10,090
$13,850
$15,195
$13,529
$11,600
$16,245
$15,369
$128,389
Expenses
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
YTD
Salaries & Wages
$2,500
$2,500
$3,500
$5,000
$5,000
$5,000
$8,000
$9,000
$9,000
$9,000
$9,000
$9,000
$76,500
Marketing/Advertising
$400
$450
$450
$450
$900
$900
$900
$900
$900
$900
$1,200
$1,200
$9,550
Sales Commissions
$250
$650
$800
$350
$725
$820
$1,125
$1,156
$1,227
$1,100
$1,250
$1,367
$10,821
Rent
$1,250
$1,250
$1,250
$1,250
$1,250
$1,250
$1,125
$1,125
$1,125
$1,125
$1,125
$1,125
$15,000
Utilities
$250
$150
$200
$200
$200
$250
$250
$250
$200
$200
$250
$250
$2,650
Website Expenses
$175
$175
$175
$175
$175
$175
$175
$175
$175
$175
$225
$225
$2,200
Internet/Phone
$110
$110
$110
$110
$110
$110
$110
$110
$110
$110
$110
$110
$1,320
Insurance
$165
$165
$165
$165
$165
$165
$165
$165
$165
$165
$165
$165
$1,980
Travel
$100
$0
$0
$250
$0
$0
$0
$0
$675
$800
$0
$0
$1,825
Legal/Accounting
$1,200
$0
$0
$450
$0
$500
$0
$0
$0
$0
$0
$250
$2,400
Office Supplies
$125
$125
$125
$125
$125
$125
$125
$125
$125
$125
$125
$125
$1,500
Interest Expense
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Total Expenses
$6,525
$5,575
$6,775
$8,525
$8,650
$9,295
$12,100
$13,131
$13,827
$13,825
$13,575
$13,942
$125,746
Income Before Taxes
($3,525)
$1,875
$2,825
($4,531)
($184)
$795
$1,750
$2,064
($298)
($2,225)
$2,670
$1,427
$2,643
Income Tax Expense
($529)
$281
$424
($680)
($28)
$119
$263
$310
($45)
($334)
$401
$214
$396
NET INCOME
($2,996)
$1,594
$2,401
($3,851)
($156)
$676
$1,488
$1,754
($253)
($1,891)
$2,270
$1,213
$2,246
*In the service industry, Cost of Goods Sold is
the monetized value of the time spent on the client.
Appendix
START-UP COSTS
Home-Based Agency
Date
COST ITEMS
MONTHS
COST/ MONTH
ONE-TIME COST
TOTAL COST
Advertising/Marketing
Employee Salaries
Employee Payroll Taxes and Benefits
Rent/Lease Payments/Utilities
Postage/Shipping
Communication/Telephone
Computer Equipment
Computer Software
Insurance
Interest Expense
Bank Service Charges
Supplies
Travel & Entertainment
Equipment
Furniture & Fixtures
Leasehold Improvements
Security Deposit(s)
Business Licenses/Permits/Fees
Professional Services - Legal, Accounting
Consultant(s)
Inventory
Cash-On-Hand (Working Capital)
Miscellaneous
ESTIMATED START-UP BUDGET
Instructions for Getting Started with Estimated
Start-Up Costs
Determining a business' startup costs is
critical to ensure enough cash is available to begin business operations within
the budgeted time frame as well as within the cost budget. Startup costs
typically fall within two categories: monthly costs and one-time costs. Monthly
costs cover costs that occur each month during the startup period, and one-time
costs are costs that will be incurred once during the startup period.
Steps for preparation:
Step 1:
Enter the company name and the date this
estimate is being prepared.
Step 2:
Enter the number of months and the monthly cost
for each cost item that is recurring. For one-time costs only, skip the monthly
costs. If there are cost items that have both recurring and one-time amounts,
enter those as well. The total cost will calculate automatically in the
far-right column.
Step 3:
Once all of the costs are entered, review the
individual items and total amount to see where the budget can be fine-tuned or
move something out into the future when more revenue is coming in.
START-UP COSTS
Home-Based Agency
Date
REVENUE
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
YTD
Estimated Product Sales
Less Sales Returns & Discounts
Service Revenue
Other Revenue
Net Sales
Cost of Goods Sold
Gross Profit
EXPENSES
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
YTD
Salaries & Wages
Marketing/Advertising
Sales Commissions
Rent
Utilities
Website Expenses
Internet/Phone
Insurance
Travel
Legal/Accounting
Office Supplies
Interest Expense
Other 1
Total Expenses
Income Before Taxes
Income Tax Expense
NET INCOME
Instructions for Getting Started on Profit &
Loss Projections
Completing projections for Profit and Loss of a
new company is a good exercise to understand and communicate when the company
will begin to break even and see how sales and profits will grow. The top
portion of the model to the left, Revenue, is a good way to forecast sales,
month by month for the first year. The lower portion then applies estimated
expenses for the same period of time to derive the business' profitability.
Steps for preparation:
Step 1:
Enter the company name and the date this
projection is being prepared.
Step 2:
For each month, beginning in January or whenever
the start is estimated, enter the expected sales to be. This could be for a
single service or multiple services. Add lines to this model for additional offerings.
From this, subtract any product returns or discounts that are to be tracked
(these should be shown as negative numbers, for example, -10). Below Net Sales,
enter the Cost of Goods Sold. This refers to the monetized value of the time
spent on a particular client.
Step 3:
For each month, enter the estimated salaries,
marketing, utilities, and other items that are projected.
Step 4:
Once all of the costs have been entered, review
the individual items and total amount to see where projections can be
fine-tuned or move something out into the future when more revenue is coming
in. The objective is to get to profitability and positive cash flow as quickly
as possible.