Business Planning 1

(BP-1) Introduction to the Business Plan

RENAISSANCE ENTREPRENEURSHIP CENTER The Business Planning Class

Business Planning One: Introduction to the Business Plan (BP-1) Learning Objectives This first Business Planning Class will cover the following: 1. Review of all questions from Introduction Class 2. Review and collection of all written assignments 3. Review of any assigned readings and business terms 4. Completion of the 12 Steps of Small Business Success 5. Teacher-led exercises from the first class re oral reviews 6. Small group exercises on key business questions 7. Review of all current students and their business issues 8. Introduction to the Business Plan 9. Understanding the what/who and why of business planning 10. The student commitment to writing the business plan 11. Assignments for the next class

Outcomes for this Class The intent of this class is for you to be clear on and/or have experienced the following: 1. Our role as facilitators and coordinators on all of the topics 2. Clarity from other students and what businesses they propose to start/expand 3. Your comfort with the classroom teaching environment and how we are going to teach and facilitate the class out loud and in public 4. How we ask for feedback, questions and facilitate discussion relevant to businesses and addressing personal issues as well 5. A clear idea on the integration of all 12 aspects for small business success 6. The clear purpose and intent of writing the business plan 7. The key questions for you in review all the business content and writing the business plan 8. The continued commitment to stay current on assignments and readings 9. How you can continue to develop the business skills on a week to week basis 10. The assignment due for the next class.

RENAISSANCE ENTREPRENEURSHIP CENTER The Business Planning Class

THE BUSINESS PLAN (BP-1)

Handouts 1. 2. 3. 4. 5. 6. 7. 8. Business Plan Overview Chart Introduction to Business Planning Overview of the Business Plan Business Plan Work Schedule Resource List for Business Planning Sample Business Plan for Kids Korner (a fictional retail clothing boutique) Business Plan Basics Your Business Plan

Assignments for Next Business Planning Class (BP-2) 1. Read all articles, simple business plan and business plan outlines and note any key factors, any lessons learned, and/or key observations 2. Prepare three key points from your reading to share during the next class discussion 3. Complete and turn in BP-1 Assignment Two: Introduction to Business Planning 4. Complete and turn in BP-1 Assigntment Three: Interviewing a Small Business Owner

Business Plan Overview

Passion/Motivation Concept, Idea or Business

Marketing Collecting Data/Information Research & Targeting Competition (SWOT) Marketing Mix (6 Ps)

Financial Start-up costs Proforma Statements Source/App of Funds Funding Sources

Management Time Tracking Project Management Legalities/Insurance Operations/Manufacturing Personnel Support Systems Professional Team Risk Analysis Identifying Risk Mitigation Strategies Growth Goals & Measurements Strategies & Implementation Action Plan Timeline and Contingencies Implementation

Revise

Executive Summary Test Assumptions

Implement

Launch/Expand 3

The Business Planning Class THE BUSINESS PLAN (BP-1)

INTRODUCTION TO BUSINESS PLANNING Common Questions: 1. 2. 3. 4. 5. Is a business plan necessary for everyone who is going into business? If you do not have a business plan can you still be a success? Why do so many people start a business without a business plan? Why do so many people who start businesses not succeed? What do the experts say?

Quotes from Readings and Experts on Business Plans: A business owner who fails to plan, plans to fail. Planning is not just what you do to go into business, its what you do to stay in business. Doing it is not a chore, it is an opportunity. As you do it, you learn but it needs to be executed. Comments: If you get on a plane without an itinerary, youll get somewhere. But will you know where and will you be prepared to handle what you find? Try out your business ideas and plan on paper without the full financial risk. This is going to be your road map. That will help you determine where should you be, when you are succeeding, how you can make adjustments and/or if you should get out. Find out what you need to know and the plan to continue learning. BP: Myth or Reality? True or False (only one is true) 1. 2. 3. 4. The primary reason for writing a business plan is to raise money Capital is more important than people Having too much start-up money is better than having too little A well thought-out plan may result in not starting at all

HINT: Conventional thinking says: money solves problems; business plans raise money; therefore you write a business plan to raise money. Business Experts Comments: The main cause of business failure is not lack of financing. The principle cause is lack of energy and drive. It is the creativity, the brain power that will keep a business plan afloat.

Message: A business plan that succeeds in raising money doesnt guarantee that the business itself will succeed. In fact, raising money should not be the primary reason for writing the business plan. More Business Experts: (Consultant): Writing a business plan is a chance to flush out ideas and look for weak spots and vulnerabilities. (Business owner): It is not the lack of capital that causes a new business to fail. It is the failure to get the right people with the right skills and attitudes with a common commitment to getting the job done. (Author and Business Owner, Paul Hawken): Too much money can be a bigger problem than too little. Too much money in start-ups tends to replace creativity. Companies with money buy solutions by buying people and studies. Companies without money dream, imagine and get creative. Hunger speeds things right along. Message: The discipline of writing a business plan is more valuable than the money it raises. Owners are impatient. They want to get on with the business and dont have or make time to write a plan. Or they are intimidated and they avoid getting into it. Message: Some successful businesses do wing it but then it gets complicated and planning must be done in order to clarify goals and objectives and take a realistic look at the opportunities both (+ and -). Repeat: It is more important to focus on adequate market research and management than raising money. Paul Hawken: The problem affecting small business is lack of imagination, not capital.

Writing the Business Plan: KEY QUESTIONS A. WHAT IS A BUSINESS PLAN? A business plan is a written and objective review of the business before you proceed. 1. A business plan will provide the business owner with: A viable picture of our imagined vision A management and financial blueprint, guide, or roadmap An objective and honest reflection of reality 2. The well-written business plan will also: explain how a business will function in the marketplace detail how a business will be financed and the money used outline how and by whom a business will be managed

B. WHY CREATE A BUSINESS PLAN? 1. For the process of putting the BP together, including the thought before writing it. it forces you to take an objective, unemotional look at your entire business proposal it helps identify weaknesses and opportunities it helps you see problems before they get too large it gives you proof that you should continue gives you confidence that you can do it allows you to imagine the future is an assessment that you can do a SWOT analysis 2. For an operational tool that can help you manage your business 3. As a means for communicating your ideas to others and seek agreement and/confirmation 4. To show/prove that you can plan for the future and are ready to take action 5. As the basis for financing your business and to establish capital requirements

C. WHO SHOULD WRITE THIS DOCUMENT? You, because you are the one with the unique perspective. You need to be the one who will take ownership and stay involved. However, you still an advisor for any of the following: accounting and bookkeeping insurance and capital requirements operational forecasting and projection tax and legal issues

D. WHEN SHOULD A BUSINESS PLAN BE USED? To make the crucial start-up decisions To plan any timing of expansion To reassure lenders, backers or yourself To test any planning assumptions As a basis for adjusting forecasts To anticipate on-going capital and cash requirements As the benchmark for good operational management As a prospectus for potential investors and lenders To tell you when you should abandon an effort

E. WHAT THE BUSINESS PLAN DOES NOT DO 1. It does not guarantee success 2. It may raise money but that does not mean youve written a good business plan

The Business Plan

OVERVIEW OF THE BUSINESS PLAN

INTRODUCTION A business plan is used by both start-up and on-going business owners to verify in writing if their potential business ideas make sense. Then, it becomes a management tool. Finally, it will communicate to any potential partners or lenders that your proposal deserves support. The details in each business plan will vary depending on the type, size, and complexity of the business. You may have a retail store, a professional service, a small manufacturing business, or be a wholesale/distributor. Business plans will vary in content depending on the depth of research, the maturity of the business, and long-range projected growth. The length is not important. It is the accuracy, completeness, and practical application that makes your business plan a worthwhile document. The business plan serves at least four useful purposes for any business owner: 1. 2. 3. 4. It helps you focus your ideas and evaluate your business options. It creates a management path for owners and management to follow. It helps set benchmarks by which to measure progress. It becomes a vehicle for attracting capital, partners, and support.

Each business is different so each business plan is going to be unique. For example, a retail business will need to consider the cost of the merchandise and the location; a service business will have to set fees and find a client base; a manufacturer must have facilities, equipment raw materials and supplies in order to produce the product; a wholesaler, or mail-order business has unique "channels of distribution" that must be identified and maintained. However, a business planning approach to starting and/or expanding your business will help develop any business. The business plan process will create benchmarks and criteria that will be essential in evaluating the progress and success of your business. In the end, you will have a well-researched document that can be used to help you run your business, plan for the future and effectively communicate your ideas to potential investors, clients, customers and supporters.

THE ONE-PAGE OUTLINE To understand the business plan in total, note the basic one-page outline that follows. In each key area, there are significant sections that will be developed in the detailed business plan that follows. I. Introduction A. Executive Summary B. Introduction to Your Business Plan II. The Business A. History of the Current Business (if an existing business) B. Overview of the Proposed Business (if a new or pre-start phase business) C. Introduction to Products/Services III. The Marketing Plan A. B. C. D. The Marketplace The Competition Targeting Your Market Marketing Strategies

IV. The Management Plan A. B. C. D. a) A. B. C. E. F. Manufacturing & Operations Ownership/Personnel Legalities and Certifications Technology Plan The Financial Plan Introduction Overview & Purpose Financial Narrative Financial Statements Funding Needs & Options

VI. Analysis & Business Development A. Business Risk Analysis B. Growth/Expansion C. Implementation & Action Plan VII. Appendix

A DETAILED BUSINESS PLAN OUTLINE The detailed outline is a more in-depth review to understand the topics in each major area. In this outline you will be able to review the entire business plan with more detail in each area to understand what will be necessary in your completed plan. This will educate you on the business planning review process and help you identify the areas of concern for your business. NOTE: Your business plan will NOT include ALL of the topics listed in this outline! V. Introduction A. Executive Summary The Executive Summary gets written after the business plan is completed. However, this will be the first section read by any outside person and therefore must give a synopsis of the most important factors of the new or expanding small business. The summary should provide a good introduction to all the key areas and issues of the business. This can be done in two pages. 1. Mission or Purpose 2. Business Description 3. Products and Services 4. Target Markets 5. Marketing & Sales Strategy 6. Competitors and Market Analysis 7. Competitive Advantages & Distinctions 8. Management & Expertise 9. Operations & Manufacturing 10. Start-up/Expansion Funds 11. Financials 12. Growth Plans 13. Implementation or Action Plan B. Introduction to Your Business Plan This can be a brief narrative section introducing your business plan. Here the focus is on you, your philosophies, visions, goals, and objectives for being in business. Here, you will want to clarify how you intend to use the business plan as part of a planning process for a management review, or as a request for investment. 1. 2. 3. 4. 5. 6. 7. 8. Philosophical Views Vision Statement Personal Mission for the Business Current and Long-Term Personal Goals Related Prior Experience Personal Strengths Potential Weaknesses Use of the Business Plan

VI. The Business A. History of the Current Business If this is an ongoing business, you will include overall information on your experience to date, such as management, ownership, and capitalization history; current legal form of business; financial health of the business; and a brief introduction to the industry and your current products or services. 10

1. 2. 3. 4. 5.

Current Description and Recent History of Your Business Legal Form of the Business Legal Protection and Licensing Issues Industry Status and Conditions Existing Products/Services

B. Overview of Proposed Business If it is a new business, this section will also detail more information about the industry you are in. This may include its current state, trends, and potential opportunities for your new business. You should also explain the importance of any technological changes, cultural biases, environmental restrictions, and economic conditions. Finally, you will include a business description. 1. 2. 3. 4. 5. Specific Industry and Opportunities Conditions of Your Industry and Impact on Your Business Macro Issues Economic, Cultural, Technological and Environmental Governmental Regulations or Requirements Brief Business Description

C. Introduction to Products/Services Here you will give detailed descriptions of your products and services. You may have a product that you manufacture, distribute, or display in a retail environment. This needs to be described clearly. If the end-user needs detail on how something works, is used, or is applied, this should be clearly described. You will also want to mention any additional products or services that you propose to add. 1. 2. 3. 4. Detailed Descriptions of Products and/or Services Competitive Characteristics of Products & Services Competitive Advantages of Your Business Growth Opportunities The Marketing Plan

VII.

A. The Marketplace Before you can tell if there is a market for your product or service, you must research opportunities and analyze the competition. You will want to convince yourself and any potential supporter that your products are of high quality; that there is a receptive and growing marketplace for them; and that you will be able to achieve projected forecasts for your business, even though there is competition. Generally, it is helpful if your venture has any of the following characteristics: a unique approach; a very specific niche; high or unfulfilled demand for the service; or a new marketplace that you are creating. 1. 2. 3. 4. Your "Total" Marketplace and Customer Base Analysis and Overview of the Marketplace The Competitive Environment and Macro Conditions Target Markets

B. The Competition Competition will always exist, both directly (another business sells the same product at another location) and indirectly (other businesses serve the same pool of customers with similar services or products.) For example, you may want to sell pastries as a dessert, but others may sell ice cream, and 11

that is also a dessert. Competition is also a source of information, comparison and inspiration. It is important to know about and to watch your competition as you start, grow, and expand into new markets. 1. 2. 3. 4. 5. Maturity, Strengths, and Weaknesses (SWOT Analysis) New and Indirect Competition Critical Competitive Factors What are Your Distinct Competitive Advantages? Using Competitors as a Resource

C. Targeting Your Market You have researched the industry, checked out much of the competition, talked to vendors and knowledgeable people in the field, analyzed industry statistics, and identified a potential target market. 1. 2. 3. 4. Target Markets Typical Customer/Client Customer/Client Profile and Their Buying Habits Where Customers are Found

D. Marketing Strategies Now, based on all of your research, you can make some decisions involving marketing strategy that will be unique and specific to your business, its products, and the customer base that you have identified. 1. Research and Analysis (to be described and completed ONLY as appropriate) 2. Quantitative Marketing Goals (these are what you intend to accomplish) 3. Specific Marketing Strategies (the Six Ps of Marketing) a. Product/Service Selection b. Pricing Options c. Place: Location and/or Distribution Choice d. Promotional Techniques e. Packaging the Product/Service f. Personal Selling and Sales Personnel E. Implementation The marketing plan requires an implementation strategy. (Consider what you are trying to achieve and what strategies will help you reach that goal. Set up action steps that can be achieved within a realistic timeline and affordable budget.) 1. 2. 3. 4. 5. Initial Marketing Goals Strategies/Metrics Action Steps Timeline Additional Resources

VIII. The Management Plan A. Manufacturing & Operations If a product needs to be packaged, re-packaged, baked, boxed, or actually manufactured, you will need to consider operational factors such as supply sources, lead times, credit ratings, payable accounts, and production lines. There are some basic questions that need to be answered. 12

1. 2. 3. 4. 5.

Operational Steps Facilities, Equipment, & Furniture Vendor Sources for Materials and Supplies Production and Manufacturing Considerations Location & Distribution Issues

B. Management/Personnel There are several factors that must be present in every successful business. This includes technical expertise and management experience. As a small business owner, the main management component is you. Additional resources must be developed -- personal support systems and professional resources, as well as full and part-time employee options. Who is your management team? What backgrounds, level of commitment, businesses, & management skills do they bring? If deficient, what management strategy will you use? Good management is the key to success! 1. 2. 3. 4. 5. 6. Legal Form of Business Management Expertise and Experience Personal Support System (Advisory Board and Peer Supporters) Professional Support Team (Attorney, Broker, Accountant, etc) Key Personnel and/or Contractors Organizational and Personnel Structure Job Descriptions with Compensation and Benefits Philosophy Regarding Authority Org Chart of Key Steps, People or Process 7. Quality Control Systems (Metrics and internal systems) 8. Time Management Systems C. Legalities and Certifications Every business needs to consider the legalities and risks related to normal business exposure. Define these issues for you and your industry. 1. 2. 3. 4. Local Licensing & Fictitious Business Name Industry Specific Certification Legal Advisor/Insurance Intellectual Property Needs

D. Technology Plan Today, ALL small businesses rely on computers, software and other technologies & electronic devices with varying levels of sophistication. It is imperative that these devices are reliably maintained. What are your technology support needs and how do you plan to maintain your systems? 1. 2. 3. 4. Equipment Contracts & Software Maintenance Technical Consultant Data backup and Storage Procedure Specialized Equipment/Unique Technology

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V. The Financial Plan A. Introduction The financial section of the business plan is where "the rubber meets the road." All the assumptions about the business, its products and services, and potential success in the marketplace are quantified here. B. Overview & Purpose The financial data should clearly state how much money will be made, how much will be needed and when. Financial projections must be realistic. The projections must also include any assumptions made within the business plan on marketing, management and money issues. C. Financial Narrative Your business plan assumes a business will grow at a certain rate, attract specific numbers of customers, sell a specific volume of product, bill extensive hours, and employ a variety of strategies (marketing, management, and operations) with associated costs, to achieve your goals. You must include a financial narrative that describes all of this. This narrative will sit in the body of the text, and summarize information from the detailed financials. Your financial narrative will summarize the past history (if you have an existing business) and current status of the business, your own personal investment and other potential investments that may be needed. Use your financial narrative summary to quantify the assumptions made regarding sales, overhead expenses, capital needs and any draw that you intend to take from your business. Your financial narrative summary should clearly state how much money you will need to start and continue to operate your business in contrast to the amount of money you expect your business to make on a regular basis. You will refer to spreadsheets that contain estimates of your start-up costs, your break-even point, income/expense projections, cash flow projections, and a balance sheet. In addition, your financial narrative should state how any money invested in the business is going to be used. D. Financial Statements In your business, the financial statements need to meet several conditions: 1. If historical, they should be accurate and based on careful bookkeeping and using a chart of accounts 2. They should be organized to reflect the relevant/critical numbers you need for your business 3. They should be formatted by month with year-to-date information and with percentage ratios to allow ease of comparison to other periods, industry standards, and the competition 4. They should be organized by actual months of the year. Do NOT have financials that run from the middle of one year to the middle of the next year. (For example, even if you dont start until May, include the first four months but leave them blank.)

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Details on Financial Statements 1. Start-Up Costs Report 2. Proforma Financial Statements o Break Even Analysis o Projected Profit and Loss Statement o Cash Flow Statement o Balance Sheet o Source and Uses of Funds 3. Detailed Footnotes on Assumptions E. Funding Needs and Options 1. Investment Conditions 2. Alternative Sources and Strategies

VI. Analysis & Business Development A. Business Risk Analysis The business owner takes the initiative to identify and discuss inherent risks of the business to increase the potential investors' confidence. Look at the realistic potential risks for your business and make plans to minimize their impact on your business. 1. Business Risks & Weaknesses 2. Mitigation of Risk with Alternative Options B. Growth/Expansion It is important to understand growth, to choose an appropriate manner to grow, and to plan the timing, implementation, and impact that growth will have on your business. 1. 2. 3. 4. 5. Definition of Growth Reasons for Growth Preparation and Research Methods of Coping with Growth Measuring Growth - Benchmarks

C. Implementation and Action Plan Once the business plan is complete, how will it get implemented? What are the timelines, objectives, and goals that need to be met so that the business will really get started? Every business will have a specific and unique plan of action. 1. 2. 3. 4. 5. Timeline & Milestone Charts in Projecting Business Actions Implementing Your Plan Critical Dates Alternative Plans/Coping with Delays Monitoring Your Progress

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VII. Appendix This section will include details on products or services, cost analyses, marketing surveys, financial reports, and any secondary marketing data. Sample items include: 1. Financial Statements Information Startup/Expansion Estimate Source of Funds Statement Break-Even Analysis Profit & Loss Statement Cash Flow Statement Balance Sheet 2. Footnotes with all financial assumptions 3. Job Descriptions 4. Task Lists 5. Plans, Models and Drawings 6. Marketing Samples, Price Lists and Marketing Materials/Client Lists 7. Advisors/Support Group 8. Timeline or Action Plan 9. Detailed or Historical Financials

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RENAISSANCE ENTREPRENEURSHIP CENTER The Business Planning Class

BUSINESS PLAN WORK SCHEDULE The focus of the business planning class is writing the business plan. Each student will develop and write their own specific business plan. The topics covered and working dates are suggested for drafts on each major section even you want to stay on target

1.

Detailed business definition (by week two) Business ideas and personal history have been reviewed within the business plan introduction. Some basic marketing strategies have been introduced. Analysis of the marketplace (by week four) The marketplace for business has been identified including total market, industry and basic marketing research. Business interviews and competition analysis have been initiated. Target market analysis and specific marketing strategy (by week six) The target market, niches, and initial marketing strategies using price, product, promotion, and place for the business have been covered. Financial statements, rough projections and footnotes (by week eight) Start-up or expansion estimates have been started/completed. Pro-forma financials have been estimated. Some work on major income categories, fixed and variable expenses, break-even, and cash flow has been introduced. Practical plan for personnel management and use of professionals (by week nine) Management skills and weaknesses have been identified. Professional service providers have introduced legal and insurance issues. Sales, advertising and promotion (by week ten) Strategies for face-to-face selling, advertising, and the use of promotion have been covered. Operations and analysis of business risks (by week eleven) The business significant risks and problems have been reviewed. Some ideas for risk reductions have been prepared and listed. Implementation, timelines and action plans (by week twelve) Specific business objectives, timelines, and plans of action have been listed. Timeline for completing additional business plan sections has been scheduled. (Last class is completed) Developing outline of Business Plan drafts (by week fourteen) Meetings with graduates at business plan lab to start specific sections. Complete drafts of Graduate Business Plan (by week eighteen) Complete finished draft of business plan is submitted for review. Business Plan to Renaissance for Competition (by week twenty-two) Business plans submitted to Renaissance reviewed for awards and recognition. Business Plan Read/Reviewed (by week twenty six) Business plans are read, critiqued, and returned to students with comments for improvement.

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RENAISSANCE ENTREPRENEURSHIP CENTER The Business Planning Class Resource List for Business Planning

BOOKS ON BUSINESS PLANNING How to Write a Business Plan, Mike McKeever, Nolo Press, Berkeley, CA. Business Planning Guide, Bangs & Osgood, Upstart Publishing Company, Portsmouth, NH Business Plans for Dummies, Paul Tiffany and Steven D. Peterson, IDG Books. The Perfect Business Plan Made Simple, William Lasher, Doubleday.

OTHER RESOURCES S.C.O.R.E. and SBDC are located at the SBA Offices. 455 Market Street, 5th Floor, San Francisco, CA 94105. (415) 744-6820. (www.sba.gov) Any Loan Officer. At your local bank, savings and loan office and/or credit union. SBA Small Business Answer Desk: 1-800-827-5722. (www.sba.gov)

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RENAISSANCE ENTREPRENEURSHIP CENTER The Business Planning Class A Simple Business Plan for Kids Korner Boutique (a fictional business) History of the Partnership
BACKGROUND Mary, Martha, and Jane wanted to go into a business together, each of a part-time basis. They decided that they would form a partnership and open a small retail business, selling new, natural-fiber, children's clothing and handmade toys. (They were encouraged by a recent baby boom and the dot com explosion that seems to be continuing.) They recognized that many mothers of young children were returning to work, and were willing and able to afford high-quality children's merchandise. Mary was a freelance bookkeeper and wanted a career change into retail work. Martha had extensive sales experience for large retail clothing chains. Jane was a mother with two small pre-school age children. She had worked part-time in a small boutique and was very active in her local nursery school. The three friends felt that their combined skills were well-suited for this kind of enterprise. The three women made a commitment to meet regularly and share the pre-start-up work load. Also, they agreed that before actually locating and opening a store, they would develop and write a simple business plan. THE FIRST STEP Their first step in writing a business plan was to do research. They wanted to define their business and address some basic questions concerning the following issues: product lines, vendors, potential customers, merchandising policies, location, hours of operation, personnel requirements, marketing techniques, and special services. They also wanted to project some financial information assumptions about start-up and potential growth in the near term at least! Then, with this information, the three partners could define their business. They researched their potential marketplace, determined an appropriate customer base, and worked out an affordable marketing strategy to reach their target market. They decided the target market was working women with young children who either work or live reasonably close to the retail location. ESTIMATING THE COST Their next important step was to estimate what it will cost them to start-up their business. They researched neighborhoods in their town, talked to a lot of similar businesses and reviewed government statistics. Based on combined business experience, they developed a budget for starting the business. Based on the start-up cost estimates, the three partners realized they would need to raise at least $60,000 to open the doors of their business. They would also need to use about $20,000 to pay for opening day inventory. They would attempt to reduce costs by doing a lot of the work themselves, buying old fixtures, doing more free publicity and less advertising, and foregoing professional services. However, even with cost-saving techniques they still determined they have to raise almost $60,000. In order to be fair, they agreed to put in equal amounts of capital to equalize their partnership on a monetary and work energy level. Mary and Martha had enough in savings for their initial investment of $20,000 each. Jane had $10,000 and would borrow the difference to stay an equal partner. THE PARTNERSHIP Before opening the store, Mary, Martha, and Jane agreed to sit down and write a partnership agreement that included all relevant terms of their investment, shared work, business policies, and buy-out agreements. They recognized how important an agreement is even though they are very good friends. They also projected realistic income and expenses for the first year of operation. They researched retail outlets of similar size, analyzed business ratios available through Dunn & Bradstreet, looked at potential sales versus store size, estimated appropriate rent and lease conditions for a 1,000 square foot space, and estimated expenses for every other relevant category for their proposed store.

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KID'S KORNER Natural Clothing & Handmade Toys A Very, Simple Business Plan Kid's Korner will be retail store offering natural-fiber clothing and handmade toys for children from birth to age 6 years. Our prime customer will be young, working mothers between 25 and 40 years of age who either live nearby or work in the immediate vicinity. Other potential customers will include grandparents and other adult gift buyers. The ideal location will be a small shop in a local commercial area or local, urban based shopping center and near to a higher income neighborhood. Ideally, no other shops offering a similar mix of products would be located within a one-mile radius. The store will be small but will offer personalized service, good exchange policies and high quality merchandise at affordable prices. It will specialize in name brand American clothing, imported accessories, and handmade toys. The shop will also be a resource center for birthing, childcare, and child raising information. Publicity ideas will include contacting and speaking to local playgroups, nursery schools, and childcare facilities. The advertising strategy includes listings on line, yellow page ads, display ads in local community newspapers, and occasional newsletter mailings. Kid's Korner will be open six days a week and operated by two women at all times - one partner and one employee. The partners will manage by consensus and hold weekly meetings to decide policy. Each partner will work two days a week and assume managerial responsibilities on her workday. One partner will be responsible for setting-up and instigating an appropriate accounting system. Communication procedures will be developed for the regular transfer of information. PRE-BUSINESS START-UP COSTS Insurance Down payment Fixtures & Equipment Prepaid Rent Telephone & Utilities Pre-Start-Up Marketing Supplies Professional Services Start-Up Costs: Opening Inventory Total Investment: FOOTNOTES: Insurance includes liability for store and contents. Fixtures & Equipment includes cash register, counters, shelves, etc. Prices based on research. Rent is estimated at $1,500 per month for 1,000 square feet. Telephone & Utilities includes installation and purchase of three phone sets and related equipment Marketing includes business cards, letterhead, simple web site, store signs and opening day flyers. Professional Services includes meetings with lawyer and CPA re agreements and contracts Opening Inventory estimate is based on industry turnover rates compared to cost of sales. Average annual inventory turnover rate for the industry is estimated at 5.0. Using the mid-estimate for sales of $195,000 and COGS of about $100,000, opening day inventory has been estimated at $20,000. ($100,000/5.0 the turnover rate.) Actual opening day inventory can be affected by trade credit and product mix. (See income projections that follow.) 20 500.00 30,000.00 3,000.00 500.00 3,500.00 500.00 2,000.00 40,000.00 20,000.00 $60,000.00

KIDS KORNER BOUTIQUE Pro-Forma Statement (Year One) Description REVENUE ESTIMATES Kids Clothes Handmade Toys TOTAL SALES COST OF GOODS SOLD Clothes (@ 50%) Toys (@35%) TOTAL COST OF GOODS SOLD GROSS PROFIT EXPENSES Fixed Expenses Insurance Rent Utilities Personnel/Payroll Total Fixed Expenses Variable Expenses Advertising/Marketing General Supplies Legal and Accounting Office Expenses Telephone Total Variable Expenses TOTAL EXPENSES OPERATING PROFIT Partners Draw (Combined) NET PROFIT AFTER DRAW 50,000 26,250 76,250 98,750 55,000 29,750 84,750 110,250 62,500 35,000 97,500 127,500 100,000 75,000 175,000 110,000 85,000 195,000 125,000 100,000 225,000 Low Estimate Mid Estimate High Estimate

1,500 18,000 1,800 24,000 45,300

1,500 18,000 1,800 27,000 48,300

1,500 18,000 1,800 30,000 51,300

2,400 1,200 1,500 2,400 2,400 9,900 55,200 43,550 40,000 3,550

2,500 1,200 1,500 2,500 2,500 10,200 58,500 51,750 50,000 1,750

2,600 1,200 1,500 2,600 2,600 10,500 61,800 65,700 60,000 5,700

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FOOTNOTES (Partial Only) Income: Estimate based on industry averages on sales per square foot, feedback from suppliers and research on similar competitors. Based on 6 day work week. Average sale per day (at mid range) is $700. Most expense estimates based on market research with competitors, industry averages and best guesses by the new partners. One employee per day for 6 day week at $10-11 per hour. One working partner per day at between $15-16 per hour depending on sales volume level and to be reflected in partners draw if available in the first year.

Average: Expenses:

Personnel:

COMMENTARY Actual projections for estimated income and expenses really need to be done on a monthly basis for at least the first year. This month-by-month breakdown will reveal the reality of a new business. The first few months are often slow and income is initially lower than after a business is established. This will affect short-term profitability and cash flow. The partners may need to be prepared to increase their investment in the short term. The state of the economy affects the health of every small business. Retail businesses in general and a children's clothing store in particular will be affected by traditional retail seasons - slow summers and high volume year ends. Kid's Korner will factor in all the above considerations as they grow.

IN CONCLUSION The brief business plan outlined above is ONLY a good starting point for this new business. The partners need more financial information on breakeven points and actual schedules for cash flow. Also, a balance sheet will be useful to show asset values and track individual partner's capital accounts. There are some definite risks that need further study. Store management, personnel issues, inventory control and seasonal purchases are crucial areas. However, even this simple, written business plan provides the all-important first look that can be revised at regular intervals. Finally, any business plan for small business must include an action plan. These are the steps to make the business plan and the business a reality. These steps will include finite considerations for management, marketing and finances to get the business started and operating successfully. An action plan will encourage the new business to get started, implement pre-determined strategies and learn from actually doing business.

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BUSINESS PLAN BASICS

What is a Business Plan? A business plan is a blueprint of your company, presented in standard business format that is logical and well documented. A good business plan is also: A strategic vision of your company Your most important communication tool A document to obtain working capital and/or investments A tool for planning, measuring and improving performance A basis for sound decision-making A way to motivate employees Why is a Business Plan important? The success of your business depends largely upon the decisions you make. A business plan allocates resources and measures the results of your actions, helping you set realistic goals and make decisions. You may have asked yourself, Why should I spend my time and energy drawing up a business plan? Remember, first and foremost that lack of planning leaves you poorly equipped to anticipate future decisions and actions you must make or take to run your business successfully. On the other hand, a sound plan can act as: A reality check. The process of putting a business plan together, including the thought you put in before you begin to write, forces you to take an objective, critical and unemotional look at your business in its entirety. A performance tool. Your written business plan is an operating tool which, when properly used, will help you manage your business and work effectively toward its success. Your business plan will allow you to set realistic goals and objectives for your companys performance, and, if maintained, will also provide a basis for evaluating and controlling the companys performance in the future. A message sender. The completed business plan communicates your companys ideas and message to employees, outside directors, lenders and potential investors outside your company. A business plan help you do that in an organized, credible manner. Also, the process of planning helps you determine if you vision is realistic, and tells you what you need to do in order to achieve it. A motivation tool. The development of your business plan is one of the best ways for you to communicate you well you understand your business and describe your vision of your business. Without proper planning, it becomes impossible for you to get all of your employees reading off the same page of the book and generating energy through high levels of team work. It is impossible to motivate people when they do not know where they are going or what they are trying to achieve. A management development tool. Putting together your business plan will help you develop as a manager because it can give you practice in figuring out problems about competitive conditions, promotional opportunities and situations that may be beneficial or harmful to your business. A road map. Your business plan, once it is completed, will give you and your employees goals and direction: a path to follow in guiding your business through good and bad times. Three things a Business Plan must provide. More than anything else, a business plan must clearly communicate your ideas and plans. To accomplish this, a plan should include: Evidence of focus. What one thing (or several things) do you do exceptionally well? Understanding of who your target customers are. Define or list your target customers. An appreciation of investor needs. What are some of the needs of the lender? Of an investor?

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YOUR BUSINESS PLAN Planning Your Business Success By Paul Terry Paul Terry & Associates

INTRODUCTION There are many people starting small businesses and almost as many failing. However, there is a way to reduce your risks and increase your chances of success for your own small business. The secret is planning. This will include research, developing, writing and then using a business plan for your small business start-up and business development. KEY FACTORS Risk always exists in a small business! However, risk can be reduced and opportunities can be measured if time is set aside to define the business, do careful market research, develop key management skills and project realistic financial expectations with written footnotes and assumptions. Again, a key factor for long-term business success is in the implementation of a written, realistic business plan. READING THE PULSE Completing, maintaining and implementing a business plan and then learning from your mistakes, is hard work. Thomas Edison has stated: "Genius is 1% inspiration and 99% perspiration". The ability to learn from mistakes and be open to new ideas, is critical. Suzuki Roshi, a Zen Buddhist teacher, stated the importance of being open to new ideas, this way: "In the beginner's mind there are many possibilities, in the expert's mind, there are few." In business, planning is learning to read the pulse of the business over and over again! However, small business owners are impatient. They want to get on with running the business and do not have or make time to write the business plan. Often they are intimidated or just simply procrastinate. (I am too busy running my business to do any planning) It is true some successful small businesses can start without any thought to planning and manage by reaction. However, once the business starts and gets complicated, alternatives become confusing and a business plan can really help sort out the options, opportunities and problems. To really move forward we need to look at internal strengths and weaknesses as well as external opportunities and market challenges. WHAT IS A BUSINESS PLAN? Simply, a business plan is a written, objective analysis of the business before you proceed. It is a roadmap or blueprint of your business itinerary. It is your best attempt at predicting your future reality. The plan will prepare the owner to take advantage of opportunities as they occur and to deal with problems by anticipating them in advance.

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WHY CREATE A BUSINESS PLAN? There are several reasons for doing this. The prime purpose is the actual process itself. The process forces you to be objective and critical. It helps you identify weaknesses and opportunities, suggests benchmarks to mark any progress and gives you confidence that you should continue this business. There are other important reasons. The plan becomes an operational management tool that can be used to manage your on-going business. As well, it is means of communication to others about your business - partners, supporters, customers and friends. Finally, if appropriate, it can be used to raise capital for the business. WHO WRITES THIS BUSINESS PLAN? The business owner, owners or key management should write this plan. Only you have the unique perspective. Of course you may need help or assistance from a professional, but ownership of the plan must remain with the business owner. If not, it becomes only a written exercise, not a useful document appropriate for planning. WHEN/HOW SHOULD IT BE USED? A business plan should be a dynamic document. It needs to be current, accessible and appropriate for the business. The planning process is both rational and intuitive. The written plan is a foundation from which each owner's business judgment, personal feelings and intuition are measured. Write it in such a way that you and others can see it, read it and use it - daily, monthly, quarterly and review at least annually! WHAT THE BUSINESS PLAN DOES NOT DO! A business plan does not guarantee success. It can help prevent serious mistakes, but it does not remove risk or predict the unknown. The business plan may be written well enough to raise money for your business. However, this same plan may not be written in enough depth to be used by you to help you run your business successfully. CONCLUSION To maintain attention to business growth, attention to many business details, industry trends, competitors and requests from customers planning will always be necessary. Being strategic and using the business plan will really help. Using a comprehensive, realistic business plan will help business owners meet goals and objectives. With careful planning and use, the business plan should help the business owner maintain profitability, acknowledge and minimize potential risks and develop a confidence for future opportunities. Make your approach to planning a full time commitment. Make your business plan a plan of action for your business. Planning before you leave on your business journey greatly increases your chances of arriving at your destination. Make time to plan and use the planning process to learn about risks, opportunities, alternatives and growth. It will be worth your effort.

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