Finance & Grow Your New Business. Angie Mohr

When you hire a manager or other employee critical to the success of your business, you will want to make sure that he or she knows the business plan and will manage the business accordingly.

      • Investors. Venture capitalists and other potential investors will want to ensure that their money will be well invested.

      • Customers. There may be times where securing a large contract means providing background material on your business and the business plan is an important document in that context.

      • Potential merger partners or acquisition targets. If you are proposing to merge with or buy another company, the owners of that company will want to make certain that your business is both financially and philosophically sound.

       Sample 5: Business Plan Outline

       I. EXECUTIVE SUMMARY

      1. Overall purpose of the business

      2. The competition and the business’s place in the industry

      3. The market

      4. Growth strategy

      5. Profitability and projections

      6. Human resources

      7. Financing structure and requirements

       II. EXTERNAL ENVIRONMENT AND INDUSTRY ANALYSIS

      1. Geographical operating environment and constraints

      2. The industry

      3. Product or service analysis

      4. Development and operating strategy

       III. THE MARKET

      1. Market size in the geographical operating environment

      2. Competitive analysis of market servicing

      3. Customer group profile

      4. Market share growth strategy

       IV. OPERATIONAL MANAGEMENT

      1. Cash flow projections: 12 months and 5 years

      2. Break-even and capacity analysis

      3. Cost structure of business

      4. Profitability potential and timing

      5. Operating location and warehousing

      6. Operating cycle

      7. Life cycle timing

       V. MARKETING AND PROMOTION

      1. Competitive strategy

      2. Sales strategies and outlets

      3. Pricing analysis

      4. Advertising strategy

      5. Product distribution or service provision

      6. Servicing

       VI. GROWTH STRATEGY

      1. Overall growth strategy

      2. Financing plan

      3. Growth limitations and constraints

      4. External and internal challenges and obstacles

      5. New product or service development and introduction

      6. Exit and harvest strategies

       VII. HUMAN RESOURCES

      1. Organizational structure

      2. Key employee profiles

      3. Ownership and investment structure

      4. Remuneration and performance evaluation

      5. Governance

      6. External advisory team

       VIII. FINANCING REQUIREMENTS

      1. Amount and use of required funds

      2. Current debt/equity structure

      3. Proposed return on funds

       IX. HISTORICAL FINANCIAL INFORMATION (when available)

      1. Balance sheet

      2. Income statement

      3. Statement of cash flows

      4. Ratio analysis

       * * *

      What Should Your Business Plan Include?

      Your business plan should be detailed enough so that readers can understand what the business does and how it will go about doing it, but not too long or detailed that they will get lost in the minutia.

      There are as many opinions on what should be included in a business plan as there are advisers, but Sample 5 is an example of critical information that should be included. Note also that you may alter your basic business plan depending on the reader. For example, a bank may be interested in very different information than a key employee. Be prepared to tailor your plan to different groups of readers.

      At first, the sheer volume of the information required for this document may overwhelm you, but take it one piece at a time. All of this information should be thought about and planned out before you open your doors. It may take several months for you to gather and plan the information. The more upfront planning you do, however, the more probability of success you will have.

      The Monthly Management Operating Plan

      Once you have mapped out the overall direction and strategy that your business will take in your business plan, it’s time to start looking at how you will manage the ongoing operations. How will you know if your revenues are on track? Will you have enough money next month to pay your suppliers? All these questions are answered in the monthly management operating plan (or the MMOP). The MMOP allows you to regularly monitor the operations of your business. It will tell you instantly if you are on track with your profit projections or if your liquidity is less than planned. Your MMOP should contain the following information:

      • A monthly budget showing actual-versus-planned figures

      • A monthly cash flow statement showing actual-versus-planned figures

      • Ratio analysis, including turnover and capital ratios

      • An analysis of all actual key performance indicators compared to the plan

      • A synopsis of the external and internal business environment and how it has affected the business

      • A thorough analysis of employee productivity

      • A summary of promotional efforts and their measurable impact on results

      Your monthly management operating plan should give you an analysis at a glance. In the beginning when you are the only employee in the business, you will be pulling this information yourself from your bookkeeping system, updating the plan, and then reviewing the results. As you grow, you will simply be reviewing the results and others will be doing the mechanical gathering. For a more detailed discussion of the mmop and how to calculate ratios and develop key performance indicators, please refer to the second book in the Numbers 101 for Small Business series, Financial Management 101.

      Your Exit Strategy

      It may seem strange to talk about getting out of your business before you’ve even gotten into it, but you should plan your leave-taking right from the beginning. The main reason for this is that you never know when you will be leaving.