business plan

WORKSHOP NOTES

Writing Your Business Plan

Presented by:

Russell Sawchuk Steppingstones® Seminars

Box 8220 Edmonton, Alberta Canada T6H 4P1

Phone: (780) 430-8245 or

1-800-267-9997 (Canada and USA)

Fax: (780) 434-0412 or 1-800-267-9993 (Canada and USA)

E-mail: [email protected] Web: www.steppingstones.ca

©2009 Steppingstones Partnership Inc. All rights reserved.

Steppingstones Seminars Notes – Writing Your Business Plan page i

Table of Contents page

A. Workshop outline ................................................................................................ 1 B. Workshop goals, objectives and strategies......................................................... 4 C. What is a business plan ...................................................................................... 5 D. Characteristics of a good business plan ............................................................ 6 E. How to turn investors on ................................................................................... 7 F. Getting organized and avoiding procrastination .............................................. 8 G. Suggested format and contents for a business plan ....................................... 10 H. Covering letter ................................................................................................. 11 I. Cover page ...................................................................................................... 12 J. Title page ...................................................................................................... 13 K. Executive summary ......................................................................................... 15 L. Table of contents .............................................................................................. 16 M. Business plan contents .................................................................................... 18 1. Company description ............................................................................. 18 2. Direction and environment ................................................................... 20 3. Market analysis ..................................................................................... 23 4. Products and services ............................................................................ 25 5. Marketing and promotion ..................................................................... 26 6. Advertising ............................................................................................ 30 7. Operations ............................................................................................. 33 8. Manufacturing ....................................................................................... 35 9. Research and development ................................................................... 36 10. Management and personnel .................................................................. 37 11. Implementation plan ............................................................................. 40 12. Financial information and projections ................................................. 41 13. Appendices.............................................................................................. 44 N. Packaging the final plan .................................................................................. 45 O. Using the plan to get funding........................................................................... 46

Steppingstones Seminars Notes – Writing Your Business Plan page 1

A. Workshop Outline

1. Welcome and overview of the day 2. Introductions and participant expectations 3. Workshop goals, objectives and instructional approaches 4. What is a business plan 5. Characteristics of a good business plan 6. How to turn investors on 7. How to get organized and avoid putting off writing your business plan 8. Suggested format and contents of your business plan 9. Title page 10. Executive Summary 11. Company description

a) Concept b) Background c) Current operations

12. Direction and environment

a) Vision and mission b) Goals and objectives c) Reasons for focus d) Strategic issues e) Distinctive competencies

13. Market analysis

a) Market description b) The competition c) Sources of information


Workshop Outline . . .

14. Products and services 15. Marketing and promotion

a) Marketing to date b) Market positioning c) Target markets d) Pricing strategies e) Distribution f) Marketing blueprint g) General marketing strategies

16. Advertising

a) Mini-media b) Maxi-media c) Non-media

17. Operations

a) Administrative systems b) Customer support systems c) Space and facilities

18. Manufacturing 19. Research 20. Management and personnel 21. Implementation plan

a) Short term b) Long term

22. Financial information and projections

a) General considerations b) Financial history c) Financial projections d) Assumptions e) Funds requested and their use


Workshop Outline . . .

23. Appendices to the plan 24. Packaging the final plan 25. Using the plan to get funding

a) Sources of funding b) Interviews with prospective investors

26. Workshop evaluation and wrap-up.


B. Workshop goals, objectives and strategies

B.1 Goal

he goal of the Writing Your Business Plan workshop is to help business owners and entrepreneurs to complete a significant part of their own

business plan.

B.2 Objectives

1. To provide participants with general direction and information to help

them write a business plan.

2. To provide an opportunity for participants to develop and write the

fundamental ideas and concepts behind their business plan.

3. To provide an opportunity for participants to exchange, share and test

their ideas.

B.3 Strategies

1. To present and discuss some general ideas regarding each section of the

business plan.

2. To allow some time for participants to write down core ideas relevant to

their business plan.

3. To allow participants an opportunity to test segments of their business

plan with others.

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C. What is a business plan

business plan is a document that describes all important current and future aspects of your business. A well-written business plan can achieve

several things:

1. Provides an analysis of the feasibility and potential profitability of a

proposed venture. Often after doing a business plan, many an

entrepreneur has decided that his or her idea was not so great, and

would not likely make any money.

2. Provides all the information needed by potential investors or lenders.

A business plan is a must when seeking financing whether it is equity,

loans or government grants.

3. Serves as a communication and marketing tools. Developing and

having a well-written business plan will provide with the management

team and employees with a clearer understanding of strategic

direction.

4. Provides direction and guidance to a company to achieve the objectives

stated in the business plan. A well-written business plan also provides

milestones by which the company can measure its progress in

achieving these goals.

The number one reason for business failure is no business plan.

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D. Characteristics of a good business plan

he following rules are important, especially if the business plan is to be used to raise funding.

1. Make it neat. Appearance is critical. Use a laser or letter-quality printer

on white paper. Sloppiness of any kind will reflect negatively on the

way you do business.

2. Make it grammatically correct. Have someone read the draft and correct

any spelling, typing or grammatical errors.

3. Make it honest. Don’t exaggerate or lie. Tell it exactly as it is, not as

you would like it to be. Financial sources are looking for integrity and

honesty.

4. Write in plain English. Avoid technical jargon. Some 80% of all plans

and proposal have too much jargon, which only someone in the field can

understand.

5. Don’t overemphasize your product or service. Many business owners

know a great deal about their products and services and talk or write

for hours about them. But the product or service is just one part of a

business. Sell the company, not the product. Concentrate on the

benefits your customers get from using your product or service.

6. Write your business plan from the lender’s or investor’s point of view, not

the entrepreneurs.

7. Make it complete. A well-written business plan contains all the

information necessary for the financing source to make a decision

without talking to the entrepreneur.

A typical business plan is between 25 to 40 pages long depending on the complexity of the business and amount being sought. It will take two to three weeks of actual work to put together a well-written business plan.

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E. How to turn investors on Here are some important factors that get investors interested:

1. Evidence of customer acceptance. How can you demonstrate that

someone will buy your product or service? Do you have any actual

sales? Do you have purchase orders or letters of commitment? What

other evidence of customer feedback do you have?

2. Evidence of focus. Every business has many opportunities, but the

most successful businesses have focused on one or two things.

3. Proprietary position. Investors understand that patents, trademarks,

copyrights, and trade secrets don’t guarantee success, but they do

reduce the risk of competition somewhat. Investors look for what is

special about your product or service; what makes it unique?

4. Management. Investors want to know about management’s ability to

make the company a success. Management is everything. Good

management is more important than good ideas.

5. Return on investment. Investors want to know why this company will

make a lot of money. The plan must therefore contain believable

financial projections, with the key data explained and documented

under assumptions.

Conversely, here are some of the things that turn investors off:

1. Product orientation. Excessive infatuation with the company’s product

or service is a turnoff. The emphasis should be on the market, on the

needs of potential customers.

2. Projections that deviate excessively from industry norms. Each industry

has a range of accepted or standard financial norms. Don’t get too far

away from those norms. Significant deviations from industry norms

suggest the entrepreneur hasn’t done his homework and is being

unduly optimistic.


3. Unrealistic growth projections. This is probably the most common

characteristic of unsophisticated management.

F. Getting organized and avoiding procrastination

well-written business plan requires major time, effort and commitment from an entrepreneur or business owner/manger. Day to day operational

matters often interfere with getting a business plan written. Here are some suggestions on getting it done.

1. Block of some quiet time. You will be much more efficient and

accomplish much more if you are not interrupted continuously. Book

several days at some isolated location if necessary. You should allow

yourself to be interrupted only in emergencies.

2. Make use of scrap time. Have a small tape recorder, or notebook

available for use while commuting or waiting in lines. Jot down key

ideas that you may want to incorporate into your business plan.

3. Delegate. If you have staff, give them responsibility for some of your

duties for a short period of time. This will give them some valuable

experience, and provide you with time to complete the very important

task of writing your business plan.

4. Overcome procrastination. The first goal in overcoming procrastination

is not to complete the project, but to get started working on it. People

should reward themselves for this first success. The second victory is to

complete the task or project.

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Here are some strategies for conquering procrastination:

a) Leading task. Take the first step. Get a binder and label it as

your business plan. Write up the cover sheet and the table of

contents. Once this first step is taken, continuing is much easier.

b) Break it up into smaller pieces. This often called the sliced salami

or swiss cheese technique. Tasks and projects can be broken up

by functions or time periods. Once the project is in smaller

pieces, the feeling of being overwhelmed goes away. The work

can then be done over a period of time and as each piece is

completed, there is a sense of accomplishment. Also, the work

does not have to be done in any set sequence. Easier parts can be

done first to develop momentum.

c) Five-minute plan. Work on an unpleasant task for five minutes

and quit. Often you will develop the momentum and find it easier

to continue until completion.

d) Worst first. Tackling an unpleasant task the first thing in the

morning gets it out of the way and makes you feel great and

motivated for the rest of the day.

e) Going public. Tell whoever will listen what you plan to do. This

perceived external pressure will encourage you to start and

complete a task or project because you told everyone you would

do so.

f) Balance sheet. Take a sheet of paper and on one side list all the

reasons for procrastinating, and on the other side for starting the

project. The reasons for starting are often greater than delaying.

Writing your business plan should be a labour of love. It is such a critical part of your success that it is important to make suitable time available to research and write your plan.


G. Suggested format and contents for a business

plan

lthough a well-written business plan can vary in format, it should contain the following information:

1. Cover letter 2. Cover 3. Title page 4. Executive Summary 5. Table of Contents 6. Company description 7. Direction and environment 8. Market analysis 9. Description of products and services 10. Marketing and promotion 11. Advertising 12. Operations 13. Manufacturing 14. Research and development 15. Management and personnel 16. Implementation plan 17. Financial information and projections 18. Appendices

This business plan workshop will follow the above format.

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H. Covering letter

A personal letter directed to a specific person by name and title. One page long. Say why you are sending the plan to him or her. Say why the financing opportunity is a good deal. Say how you plan to follow up the solicitation. Be personal and avoid the mass mailing look. Sign the letter in blue ink.


I. Cover page

This is the report or binder cover. It should identify document as a Business Plan Provide a descriptive title for the Business Plan State the company name. State the date. Include appropriate graphics, photographs and corporate logo Should look very professional but uncluttered.


J. Title page

The title page should include the following information: Descriptive title Contact name Company name, address and phone number Legal structure - show date company was incorporated or started business Date Disclaimer (see sample disclaimers on the next page)


Sample disclaimers:

The information contained in this plan is confidential and proprietary and is intended only for the persons to whom it is transmitted by the company. Any reproduction of this plan, in whole or in part, or the divulgence of any of its contents, without the prior written consent of the company, is prohibited. Receipt or possession of this document does not convey any rights to disclose its contents, in whole or in part, to any third party, or to develop, manufacture, use, or sell anything described herein. This plan does not constitute an offer to sell any securities. Any such solicitation will be undertaken only under appropriate documents and pursuant to all applicable securities laws. The information set forth herein is believed by the company to be reliable. It must be recognized, however, that projections and predictions about the company’s future performance are necessarily subject to a high degree of uncertainly, and no warranty of such projections is expressed or implied hereby.


K. Executive Summary

The most important part of the whole plan as only 10% of business plans get read beyond the summary. Think of it as a commercial to grab reader’s attention Write last - after rest of plan is complete Two to three pages long Be brief and only highlight key points The Summary should include the following points: A brief outline and description of the company Overall strategy and direction Objectives and how you propose to achieve them The market segment you are attempting to reach and how The unique features of the product or service Brief management team profile Overall financial glimpse of the company How much money is required and for what. Be specific. How and when investors will benefit from their investment


L. Table of Contents

page Executive Summary ............................................................................................... 1. Company description.............................................................................................. 1.1 Concept ....................................................................................................... 1.2 Background................................................................................................. 1.3 Current operations ..................................................................................... 2. Direction and environment .................................................................................... 2.1 Vision and mission ..................................................................................... 2.2 Goals and objectives ................................................................................... 2.3 Reasons for focus ........................................................................................ 2.4 Strategic issues........................................................................................... 2.5 Distinctive competencies............................................................................ 3. Market analysis...................................................................................................... 3.1 Market description ..................................................................................... 3.2 The competition.......................................................................................... 4. Products and services............................................................................................. 5. Marketing and promotion ...................................................................................... 5.1 Past and current marketing ...................................................................... 5.2 Market positioning ..................................................................................... 5.3 Target markets ........................................................................................... 5.4 Pricing strategies ....................................................................................... 5.5 Distribution ................................................................................................ 5.6 Marketing blueprint................................................................................... 5.7 General marketing strategies.................................................................... 6. Advertising ............................................................................................................. 6.1 Mini-media.................................................................................................. 6.2 Maxi-media ................................................................................................. 6.3 Non-media ..................................................................................................


Table of Contents . . . 7. Operations .............................................................................................................. 7.1 Administrative systems ............................................................................ 7.2 Customer support systems ........................................................................ 7.3 Space and facilities .................................................................................... 8. Manufacturing ....................................................................................................... 9. Research and development ................................................................................... 10. Management and personnel .................................................................................. 10.1 Management team ..................................................................................... 10.2 Organization structure .............................................................................. 10.3 Key personnel ............................................................................................ 10.4 Company philosophy and values .............................................................. 11. Implementation plan ............................................................................................. 11.1 Short term .................................................................................................. 11.2 Longer term ............................................................................................... 12. Financial information and projections ................................................................. 12.1 Financial history ....................................................................................... 12.2 Financial projections ................................................................................. 12.3 Funds requested and their use ................................................................. 13. Appendices .............................................................................................................


M. Business plan contents

1. Company description

1.1 Concept Describe in one or two paragraphs your concept or proposal. Give the who, what, when and why.

1.2 Background Provide a history of the company When established Legal structure Ownership Locations and geographical areas of operation Any significant events, changes or successes


1.3 Current operations Describe company current activities Major focus Good place to identify key strengths and successes


2. Direction and environment

2.1 Vision and mission In this section, give the reader the big picture or vision of where you and/or the owners see this company going. If your company has one, this is also the place to put in your mission statement. If you do not have one, you might consider developing one.

2.2 Goals and objectives List the specific goals and objectives as associated with this business plan. List general company goals List marketing goals and objectives List general financial goals and objectives List any goals of the owners (e.g., selling the company, going public, etc)


2.3 Reasons for focus Investors like to see a company focus on doing one or two things well. Your focus should have been described earlier in this plan. In this section, give as many reasons as possible why you are choosing to focus on the areas identified in this plan.

2.4 Strategic issues Successful companies are aware of broader trends and developments around them that may impact their operations e.g., concern for environment, pending legislation, changing demographics, etc. In this section, identify any broader issues that may impact the success of your proposed plan - mention both positive and negative impacts. In this section, identify all the risks to your venture. Discuss how you plan to manage these risks.


2.5 Distinctive competencies List as many factors as possible that make your company and its products unique or special. Be as specific as possible - remember investors are looking for companies that have an edge on the competition. These could be patents, trademarks or copyright materials These could be people with unique skills and talents


3. Market analysis

3.1 Market description Describe with as much detail the market you are going after. What is the size of the market? At what rate is it growing? What evidence do you have that it will continue growing? What are the characteristics of the market? Some possible sources of information about the market are: Trade publications Business section of library Statistics Canada

publications Chambers of Commerce Economic Development

Depts of government Federal government

publications The Internet and World Wide

Web sites


3.2 The competition Who is your competition? Identify not only direct competitors but also others that may be after your customers’ business. How does the competition’s products or services compare with yours? How do you plan to sell more than they do? How will you make it difficult for others to compete with you? Don’t downplay or ignore the competition. Investors know every business has competition and want to know how you will deal with it.


4. Products and services Be brief and refer readers to your product literature or catalogues Avoid jargon or technical language Investors want to know what makes your product more desirable than what’s already on the market. Explain any special aspects of your product that will help to sell it.


5. Marketing and promotion

5.1 Past and current marketing Describe briefly any past or current marketing activities that your company has undertaken. What lessons have you learned from this marketing? How will you apply these lessons to improve your marketing? What opportunities have you identified in marketing your products or services?

5.2 Market positioning Where are you going to position your products or services - low, medium or high end? It is important to pick one niche and stick with it. Identify what strategies you are going to use to reinforce your positioning, e.g., pricing, quality, advertising, locations, etc.


5.3 Target markets Identify as clearly as possible what your target market is - Geographical area - community, province, part of country, country, international? Type of business or customer - what are the demographics or profile - age, sex, income levels, occupations, etc. Provide any information you may have on your existing customers. Note: with existing tele-communications technologies and courier connections, more small businesses can sell nationally and internationally

5.4 Pricing strategies Discuss how you will set the prices for your products and services. How does your pricing fit into an overall marketing strategy?


5.5 Distribution How will you get your products or services to the client? Direct sales, e.g., telephone, Internet, etc. Catalogue distribution Local agents Retail outlets Wholesalers, etc.

5.6 Marketing blueprint Suggest you prepare a brief marketing blueprint based on Levison’s Guerrilla Marketing approach: A statement that tells the

purpose of the marketing. How will you accomplish

purpose through marketing, focusing on key benefits?

What is your target

audience? What marketing weapons will

you employ? What is your positioning in

the market? What is your identity? How much will you spend on

marketing as a per cent of gross sales?


5.7 General marketing strategies Each of the following can be an important marketing weapon. Discuss which ones you will use. Name Colour Identity Logo Theme Packaging Decor Attire Business card Stationery Order forms/ invoices/

cheques Hours/days of operation Phone manners Neatness Location Window displays Customer follow-up Customer recourse Guarantees/warranties Community involvement Tie-in with others Reprints of ads or articles Special events Testimonials Smiles/greetings Sales training Audio-visual aids Refreshments Credit cards Financing Team sponsorships Column in publications Books and articles Music theme Roadside stands Research studies Posters Gift certificates Reputation Customer mailing lists Enthusiasm Employee training (For more information on each, see Levinson’s book Guerrilla Marketing Attack)


6. Advertising

6.1 Mini-media These are the targeted media that you can use in your advertising. Identify which ones you will use and how: Canvassing Personal letters Telephone marketing Circulars and brochures Classified advertising Signs Yellow Pages Fax back systems 800 - phone service Post card decks Listing in directories Ads in directories Listing in databases News releases Catalogues Internet World Wide Web (For more information on how to use each effectively, see Levinson’s book - Guerrilla Marketing)


6.2 Maxi-media These are the mass media. Identify which ones you may use. Major newspapers Specialty newspapers Magazines Radio Television Outdoor advertising Direct mail (For tips on how to use each effectively, see Levinson’s book - Guerrilla Marketing)


6.3 Non-media Some of the other ways you can keep your company’s name in front of potential customers include: Advertising specialities or

give-aways Free seminars or

demonstrations Free samples Contests Coupons T-shirts, caps, jackets Newsletters Free videos Free computer diskettes Voice mail systems Public relations Networking and

memberships Word-of-mouth For more ideas, see Levinson’s books on guerrilla marketing.


7. Operations

7.1 Administrative systems You must make it as easy as possible for customers to do business with you. Nothing turns customers off more than administrative screw-ups. In this section, briefly describe the systems you have in place to ensure your company will operate effectively and efficiently. Describe any suppliers and subcontractors that will be used

7.2 Customer support systems In this section, describe the systems you have, or will put into place to support customers. Discuss such things are refund policy, resolution of complaints, provision of technical support, etc.


7.3 Space and facilities Describe the space and facilities you have or will need. Requirements will differ depending on whether the business is in service, retail or manufacturing Describe lease arrangements, location, size and any other relevant factors Identify any office or specialized equipment that may be required to achieve goals as specified in this plan Actual list of assets that need to be acquired can be included in the appendix How much engineering, testing and quality control will be required?


8. Manufacturing If you business plan is based on a manufacturing activity, describe the manufacturing processes to be used and other relevant information in this section. Be brief and avoid technical jargon. How much will be subcontracted? Why? Discuss distance to customers, vendors, worker training, access to skilled labour, inventory management, quality and production controls. Cover any zoning or local, provincial or federal laws affecting your facility . Discuss whether an environmental impact assessment will be required.


9. Research and development If your products depend on R&D, discuss how you will ensure that this activity will keep your company at the leading edge. Identify any key R&D projects that will need to be undertaken as a result of this business plan. This section can also be used to describe other research activities including market research, customer satisfaction research, product testing, etc.


10. Management and personnel

10.1 Management team This is the most carefully read part of the business plan. Investors invest in management not products or ideas. Need a team of people to succeed. List the skills and experience of each team member and how it will contribute to the success of the company. Relate the credentials of the team to meet the company’s needs. The five skill areas that are important to investors are: Marketing (most important) Industry knowledge Management skills Purchasing/production Financial/accounting Show how your company will have each of the above skills. If your management team is weak of deficient in one or more of the above areas, describe the kind of person you will hire as soon as you get the money. In this section, list the owners, legal structure, and the Board of Directors and their qualifications.


10.2 Organizational structure Describe and show organizational structure Provide a description of the labour force and employees Number of people and qualifications, pay scales, etc. How will you attract and keep good people? Talk about anticipated human resource requirements.

10.3 Key personnel Identify any key staff that you may have or need to get Describe how you plan to make your key personnel stay with you and do not go to the competition


10.4 Company philosophy and values In this section, talk about the core values and beliefs of the company How will these values and beliefs be transferred to the management and staff?


11. Implementation plan

11.1 Short term Provide a schedule of events or activities you propose to undertake when you get the money. Monthly for the first year is ideal.

11.2 Longer term List a schedule of major activities or actions you plan to take in the next two or three years to achieve the goals and objectives described in this business plan.


12. Financial information and projections

12.1 Financial history Include financial statements and tax returns of the company for the last three years. Include any interim statements showing operations since the last annual statement. This section should also provide a brief financial summary of the business, especially sales, profits and return on investment. Always include a brief explanation of the figures.

12.2 Financial projections Investors and lenders are mainly numbers people. The numbers must be correct, add up and make sense. Lenders will be interested in historical figures as proof of your ability to repay a loan Investors will be more interested in your projections of the returns they can expect Don’t get “Excel-itis” when doing projections. Multiple projections confuse the reader. Put one set of projections in your business plan and be prepared to defend the numbers. Assumptions are one of the most important parts of the financial projections. They should be spelled out in detail. Be realistic in your assumptions and pay attention to detail


Five year revenues

Base all your revenues on units sold. Do with each product or product line. Be sure to detail all assumptions.

Five year expenses

Be as detailed as you can possibly be. Be realistic and believable. Historical costs provide a good basis for future projections.

Five year income statement

This is a summary projected profit and loss statement based on the first two tables.

Balance sheets

Provide a projected balance sheet for each of five years. One year monthly cash flows The key assumptions that need to be described here are:

1. the terms of sale of your products or services 2. the historical payment schedules for receivables and payables

Industry comparisons

Check your profit and loss statement ratios with industry averages. Don’t deviate too far from the norm.

Examples of possible financial projections at included at the end of this workbook.


12.3 Funds requested and use Specify whether you are looking for debt or equity funding. Specify how the funds will be used - be specific in terms of application and amount. Avoid general categories Personal or company funds should be used for operating and not acquisition of assets or land - it is easier to get a loan or funding for assets and equipment. Many government programs apply. Investors want to invest so that your company will grow. They do not like to invest to pay off debt or pay for past mistakes of management. Therefore requesting funds for marketing, product development and plant expansion are of more interest to investors. Only specify the amount, not the terms, amount of ownership you are willing to give up or exit strategy. These should all be negotiated at a later time.


13. Appendices

Include the following: Pictures of products or facilities Company literature and sales material Newspaper and magazine clippings Market survey Production flow chart Patent description Significant contracts Price list Sample advertisement or press release Historical financial statements Table of start-up costs Fixed asset acquisition table Break-even analysis Management and key staff resumes Management tax returns Letters of intent References


N. Packaging the final plan

fter your business plan has been written, here are some steps that should be taken before it is given to any potential investor or banker.

1. Get someone to proofread it. It should be clear, easy to understand and

without any grammatical or spelling errors. More importantly, get

someone who is involved with the investment community to read it and

give you feedback. Try and get answers to the following questions. Did

it grab their attention? Did it prove the company has tremendous

potential? Was it easy to understand? How can it be improved?

2. Avoid putting in the following. The entrepreneur should not put any

exit strategy into a business plan. Instead just tell the investor that

the exit strategy is negotiable. Do not describe why type of investment

vehicle you prefer or what portion of your company is being offered for

sale. This information is too premature to be put into a business plan.

3. Check your facts. Do not include any fraudulent or misleading

information.You want to fully disclose any material items that a lender

or investor would to know before leading or investing in your business.

It always pays to tell the truth.

4. Get professional help if necessary. You will find that writing a complete

business plan is difficult and time-consuming, but it should be a labour

of love. It’s your baby; it’s your business. If you do get help, remember

that it still must be your plan, and that you must know it inside out,

and be able to explain/defend every statement in it.

5. Package in a professional manner. Remember that the first impression

is critical. The business plan should:

Be printed on good quality white paper. Be printed with a laser printer. Have one-inch margins on all sides. Use graphics and pictures if appropriate.

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Be bound so that pages can turn easily and lie flat when left open.

O. Using the plan to get funding

Important: Never contact a potential investor or lender until you have

completed your business plan. You may not be able to answer any questions that are asked and thus reduce your chances of completing a successful deal.

Once your business plan is complete, here the steps you can take to obtain financing for your business.

1. Identify potential investors or lenders. Once the investing or lending

agencies have been identified you should:

a) Learn as much as possible about the investor or lender. Get

brochures or annual reports.

b) Identify the person to contact. Call and talk to the receptionist.

Ask who handles your type of business. Try and find out as

much as possible about the contact person - what is his or her

position? How long has this person been with the company?

2. Make the first contact by phone. Sometimes the potential source for funding will want to see your plan first. Go with the wishes of the potential investor or lender. If offered a choice, arrange the meeting first. In making this first contact, here are a number of important factors to keep in mind:

a) The objective of your first call is to get an appointment. Don’t try

to sell the listener to lend or invest over the phone.

b) When you get the right person, be cordial, polite, businesslike,

brief, and to the point. Tell him or her why you are calling,

briefly what the business is all about, how much money is

needed, and what you plan to do with it.


c) Be prepared to answer the following questions over the phone:

1. What kind of business are you in? 2. How did you get my name? 3. How much money do you need? 4. What do you need it for? 5. How do you intend to pay it back? 6. What collateral do you offer? 7. When did you buy the real estate? 8. What is unique about your product or service? 9. Do you have any patents on your product?

d) Don’t do the following on the phone:

1. Don’t get involved in long discussions that are not

relevant to the subject.

2. Don’t tell the potential source what terms you want for

the money.

3. Don’t allow yourself to be unprepared to answer relevant

questions.

4. Don’t try and sell the financing; just go for the

appointment.

5. Don’t use technical words that the listener might not

understand.

6. Don’t assume the listener knows a lot about you, your

business, or your industry.

7. Don’t leave out explanations of what has happened or

expect the listener to read your mind.

8. Don’t give too long answers. Sources want short answers

that stick to the point.


9. Don’t volunteer information. You never know what

reaction it will have on the listener. End by asking,

“When can I see you to explain my project in more detail?”

3. Go to the personal interview. Once an appointment has been made, keep the following in mind:

a) Dress neatly and conservatively. You don’t want anything to

detract from your business plan.

b) Bring your plan and any samples of your product. They might be

useful in explaining your project.

c) Know your plan well. This is especially important if you had

someone else help you prepare it. Especially familiarize yourself

with the assumptions that go behind any projections.

d) Make a good impression. Here are some tips on how to do so:

1. First impressions are crucial. Enter the meeting with

confidence, a glowing smile, and an extend hand. Make

eye contact. The financial source will attempt to read your

personality. Your voice, tone, and confidence are

extremely important.

2. Be businesslike and prepared. Do your homework, such as

getting information about he people you are going to meet

and reviewing your plan. Expect questions.

3. Be honest. Always tell your story truthfully. There may be

certain pieces of your story that are not ideal from a

financing standpoint, but that is true of every business in

need of money. Hiding crucial facts will destroy your

credibility.


4. Talk in specifics, but don’t use technical jargon unless it is

helpful and will be understood by all the people in the

room. Ask questions to ensure that your listeners

understand what you are talking about.

5. Your talk should be energizing but not detailed or long-

winded.

6. Be aware of the impact of body language and actual words

when you are selling your proposal. Sit forward and

straight if possible. Look and act like a leader. Also watch

your listener’s body language and adjust as necessary.

7. Don’t forget to listen. When you listen you pick up

valuable clues.

8. Put yourself in the lender’s or investor’s position.

Consider his or her point of view as if you were lending or

investing in your own company for the first time.

9. Be prepared to walk; don’t take the first offer. Don’t let

yourself become emotionally committed to any one source

until you have talked to as many as you can.

10. Always end your discussions on a friendly note. Just

because they say no this time, doesn’t mean no in the

future. Always leave the door open to come back.

e) Here are some things not to say during the interview:

1. Do not discuss grandiose plans, additional products and

services, other opportunities or mergers that may occur in

the future. Stick to your immediate plans.

2. Avoid explaining why you are in business or want to go

into business for a reason other than money. The lender


or investor is interested in making money, not solving

personal, country or world objectives.

3. Don’t tell the source you will make money by doing

anything that would be considered dishonest or illegal.

4. Don’t avoid hard questions with vague answers. Give a

direct answer to a direct question. If you can’t answer or

don’t know, just say so.

5. Don’t hide past problems such as poor credit, bankruptcy

or lawsuits. Reveal the good, bad and ugly. The source

will eventually find them out anyway.

6. Don’t downgrade the risks. If you are asked what can go

wrong, or how your plan can fail, tell them.

7. Never bring a lawyer to the initial meeting unless

requested by the source.

8. Don’t press for an immediate decision.

9. Don’t say your management team makes all the decisions

jointly or in a committee. You can’t run a business by

committee; someone has to be in charge.

10. Try not use the word problem in phrases such as we have

cash flow problems, labour problems, our main problem

and the like. Investors are looking for companies with

solutions, not problems.

4. Follow-up on the interviews.

a) Be patient. Wait a few days before calling. If more information is

requested, get it to the source as soon as possible.

b) If additional meetings are requested, reinforce the positive

relationship you have established.


c) If the source says “no”, call and find out what happened. Use the

feedback to learn from your mistakes and make appropriate

changes. Use the experience positively.

d) If the investor or lender is interested, then it is important to

negotiate the best terms for yourself. Get good legal assistance

to conclude the final terms.


Examples of financial projections

Table 1: Projected Five Year Revenues

Item 2010 2011 2012 2013 2014

Product 1 Number of units sold Average price per unit

Total revenues for Product 1

Less variable costs Unit production costs Unit packaging costs Unit distribution costs

Total variable costs

Total net revenues for Product 1

Product 2 Number of units sold Average price per unit

Total revenues for Product 2

Less variable costs Unit production costs Unit packaging costs Unit distribution costs


Total net revenues for Product 2

Total gross revenues


Total net revenues


Table 2: Projected Five Year Marketing Expenses

Item 2010 2011 2012 2013 2014

Media buys Number of ads Average cost/ad (including production)

Total costs

Direct mail Pieces mailed out Productions costs/unit Postage/unit

Total costs

Trade shows Number of shows Booth costs (@ $500/show ) Staff expenses (2@ $500 per) Materials (@ $200 per)

Total costs

Other marketing expenses

Total marketing costs


Table 3: Projected Five Year Personnel Expenses

Item 2010 2011 2012 2013 2014Board fees & expensesC.E.O./PresidentChief Operating OfficerMarketing managerResearch & planning managerAdmin. ManagerU.S. sales manager

Sub-total

Support & TechnicalClerical and office supportTechnologist/WebmasterSales staff

Sub-total

Total staffing costs

Benefit costs (@20%)

Total salaries and benefits


Table 4: Projected Five Year Income Statement

Item 2010 2011 2012 2013 2014REVENUES

Product 1Product 2Product 3Product 4Product 5Product 6Grants/sponsorshipsMiscellaneous (e.g., interest)

Total gross revenues

Less: variable costs Production & distribution (Table 1) Marketing expenses (Table 2)

Total net revenues

ADMIN. & OVERHEADAdvertising and promotionAutomotive/equipmentBank charges and interestCustom work & machinesDepreciationInsurance (general)Land rentLicenses, fees & subscriptionsMaintenance & repairsOffice suppliesProfessional/consulting feesProperty taxesRentals/leasesResearch & developmentTelephone and utilitiesTelecom & InternetTravel

Total administration

Wages and benefits (Table 3)

Total fixed expenses

Net income before taxesProvision for taxes (20%)

Net income (loss)

Cumulative (To retained earnings)


Table 5: Projected Five Year Balance Sheet

Item 2010 2011 2012 2013 2014ASSETS

Current Assets Cash & short-term investments Accounts receivable

Inventory (at market values) Product 1 Product 2 Product 3 Total inventory

Total current assets

Fixed Assets Land Buildings Improvements Equipment Vehicles and trailers

Less accumulated depr. Total fixed assets

Total assets

LIABILITIES AND EQUITYCurrent Accounts payable Corporate taxes payable

Total current liabilities

Long term Shareholder's loan Bank loan

Total long term liabilities

Total liabilities

Shareholder Equity Share capital Retained earnings

Total liabilities and equity


Table 6: Projected Five Year Assets Purchases

Item 2010 2011 2012 2013 2014LandLand (10 acres)Other land Total land

BuildingsMachine shopOther buildings Office building Total buildings

ImprovementsOffice renovations Total improvements

EquipmentTractor and with loader Total equipment

Vehicles & trailersTrailers (2)Trucks (2) Total vehicles & trailers

Total new assets


Table 7: Projected Five Year Cash Flow Summary

Item 2010 2011 20012 2013 2014Cash In

Cash from salesStarting cashEquity investment (after fees)Bank loan

Total cash income (cash in)

Cash OutTotal variable costsTotal fixed costs Less: depreciationTaxes - corporateLand & equipment purchasesInventory purchases

Total cash outflows (cash out)

Net cash flow

Cash on hand (accumulated)


business plan

Documents

unit total

avoid technical

written business

good business

business plan

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sample disclaimers

final plan