Refining the Plan
This generic business plan can be modified to fit your specific type of business and the audience you are presenting it to.
Raising Capital-
For Bankers
Banks want assurance of orderly repayment. If you plan on presenting this to potential lenders, be sure to include:
Amount of loan
How the funds will be used
How will the loan benefit (strengthen) your business?
Requested repayment terms (number of years to repay). Negotiating on the interest rate may be difficult, but you may be able to negotiate on a longer repayment term, which helps cash flow.
Collateral offered, and a list of all current liens against collateral
For Investors
Investors have a different perspective. They are looking for dramatic growth, and they expect to share in the rewards. Include:
Funds needed short-term
Funds needed in two to five years
How the company will use the funds, and what this will accomplish for growth
Estimated return on investment
Exit strategy for investors (buyback, sale, or IPO)
Percent of ownership offered to investors
Acceptable milestones or conditions
Financial reporting to be provided
Involvement of investors on the board or in management
For Type of Business
Manufacturing
Planned production levels
Anticipated levels of direct production costs and indirect (overhead) costs—how do these compare to industry averages (if available)?
Prices per product line
Gross profit margin, overall and for each product line
Production/capacity limits of planned physical plant
Production/capacity limits of equipment
Purchasing and inventory management procedures
New products under development or anticipated to come online after startup
Service Business
Service businesses sell intangible products and are usually more flexible than other business types. Although, they do have higher labor costs and very little fixed assets.
What are the key competitive factors in this industry?
Methods used to set prices
System of production management
Quality control procedures, including the standard or accepted industry quality standards.
How will you measure labor productivity?
Percent of work subcontracted to other firms. Will you make a profit on subcontracting?
Credit, payment, and collections policies and procedures
Strategy for keeping client base
High Technology Companies
Economic outlook for the industry
Will the company have information systems in place to manage rapidly changing prices, costs, and markets?
Will your company be on the cutting edge of products and services?
What is the status of research and development? And what is required to:
Bring product/service to market?
Keep the company competitive?
How does the company:
Protect intellectual property?
Avoid technological obsolescence?
Supply necessary capital?
Retain key personnel?
Often times, high tech companies are forced to go a long time without profits or sales. If this is your situation, a banker is not likely to lend to you. Venture capitalists might, but you need a really promising story to convince them. Make sure you have longer-term financial forecasts to show when you expect profit take-off for your company. Of course, your estimations must be well documented and defended.
Retail Business
Company image
Pricing:
Explain markup policies.
Prices should be profitable, competitive, and reflect company image.
Inventory:
Selection and price should promote the desired company image.
Inventory level: Find industry average numbers for annual inventory turnover rate (available in RMA book). Multiply the initial inventory investment by the average turnover rate. The result should be at least equal to the estimated cost of goods sold for the first year. If it isn’t, there may not be enough budgeted for the startup inventory.
Customer service policies: These should be competitive and reflect the company image.
Location: Is it convenient for customers to get to? Does it give the company sufficient exposure? Does it echo the image your company is going for?
Promotion: Methods use and cost. Does it present a consistent company image?
Credit: Will you need to extend credit to customers? If yes, is it necessary, and will you factor the cost into prices?
Don't forget to write the executive summary last. Good luck getting a loan!
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