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Business Plan

.. Services 1. List the customer services we provide: a. b. c.

2. These are our sales/credit terms: a. b. c. 3.

The competition offers the following services: a. b. c. E. Advertising/Promotion 1. These are the things we wish to say about the business: 2. We will use the following advertising/promotion sources: 1.

Television 2. Radio 3. Direct mail 4. Personal contacts 5. Trade associations 6.

Newspaper 7. Magazines 8. Yellow Pages 9. Billboard 10. Other 3. The following are the reasons why we consider the media we have chosen to be the most effective: MARKETING TIPS, TRICKS & TRAPS 1.

Marketing Steps * Classifying Your Customers’ Needs * Targeting Your Customer(s) * Examining Your Niche * Identifying Your Competitors * Assessing and Managing Your Available Resources – Financial – Human – Material – Production NOTES AND STRATEGIES FOR YOUR BUSINESS MARKETING TIPS, TRICKS & TRAPS 2. Marketing Positioning * Follower versus Leader * Quality versus Price * Innovator versus Adaptor * Customer versus Product * International versus Domestic * Private Sector versus Government NOTES AND STRATEGIES FOR YOUR BUSINESS MARKETING TIPS, TRICKS & TRAPS 3. Sales Strategy * Use Customer-Oriented Selling Approach – By Constructing Agreement * Phase One: Establish Rapport with Customer – by agreeing to discuss what the customer wants to achieve. * Phase Two: Determine Customer Objective and Situational Factors – by agreeing on what the customer wants to achieve and those factors in the environment that will influence these results. * Phase Three: Recommend a Customer Action Plan – by agreeing that using your product/ service will indeed achieve what customer wants. * Phase Four: Obtaining Customer Commitment – By agreeing that the customer will acquire your product/service.

* Emphasize Customer Advantage Must be Read: When a competitive advantage can not be demonstrated, it will not translate into a benefit. Must be Important to the Customer: When the perception of competitive advantage varies between supplier and customer, the customer wins. Must be Specific: When a competitive advantage lacks specificity, it translates into mere puffery and is ignored. Must be Promotable: When a competitive advantage is proven, it is essential that your customer know it, lest it not exist at all. NOTES AND STRATEGIES FOR YOUR BUSINESS MARKETING TIPS, TRICKS & TRAPS 4.

Benefits vs. Features * The six O’s of organizing Customer Buying Behavior ORIGINS of purchase: Who buys it? OBJECTIVES of purchase: What do they need/buy? OCCASIONS of purchase: When do they buy it? OUTLETS of purchase: Where do they buy it? OBJECTIVES of purchase: Why do they buy it? OPERATIONS of purchase: How do they buy it? * Convert features to benefits using the ..Which Means.. Transition * Sales Maxim: Unless the proposition appeals to their INTEREST, unless it satisfies their DESIRES, and unless it shows them a GAIN–then they will not buy! * Quality Customer Leads: Level of need Ability to pay Authority to pay Accessibility Sympathetic attitude Business history One-source buyer Reputation (price or quality buyer) NOTES AND STRATEGIES FOR YOUR BUSINESS CONVERT FEATURES INTO BENEFITS– THE ..WHICH MEANS.. TRANSITION FEATURES WHICH MEANS BENEFITS Performance Time Saved Reputation Reduced Cost Components Prestige Colors Bigger Savings Sizes Greater Profits Exclusive Greater Convenience Uses Uniform Production Applications Uniform Accuracy Ruggedness Continuous Output Delivery Leadership Service Increased Sales Price Economy of Use Design Ease of Use Availability Reduced Inventory Installation Low Operating Cost Promotion Simplicity Lab Tests Reduced Upkeep Terms Reduced Waste Workmanship Long Life BUYING MOTIVES RATIONAL EMOTIONAL Economy of Purchase Pride of Appearance Economy of Use Pride of Ownership Efficient Profits Desire of Prestige Increased Profits Desire for Recognition Durability Desire to Imitate Accurate Performance Desire for Variety Labor-Saving Safety Time-Saving Fear Simple Construction Desire to Create Simple Operation Desire for Security Ease of Repair Convenience Ease of Installation Desire to Be Unique Space-Saving Curiosity Increased Production Availability Complete Servicing Good Workmanship Low Maintenance Thorough Research Desire to be Unique Curiosity PRICE / QUALITY MATRIX SALES APPEALS PRICE/QUALITY HIGH MEDIUM LOW HIGH Rolls Royce We Try Harder Best Buy Strategy Strategy Strategy MEDIUM Out Performs Piece of the Rock Smart Shopper Strategy Strategy Strategy LOW Feature Packed Keeps on Ticking Bargain Strategy Strategy Hunter Strategy THE BUSINESS PLAN – APPENDIX 2 FINANCIAL MANAGEMENT 1. Income Projection Statement – Instructions for Income Projection Statement 2.

Balance Sheet – Instructions for Balance Sheet 3. Monthly Cash Flow Projection – Instructions for Monthly Cash Flow Projection 4. Information Resources INCOME PROJECTION STATEMENT Industry J F M A M J J A S O N D Annual Annual % total % Total net sales (revenues) Costs of sales Gross profit Gross profit margin Controllable expenses Salaries/wages Payroll expenses Legal/accounting Advertising Automobile Office supplies Dues/Subscriptions Utilities Miscellaneous Total controllable expenses Fixed expenses Rent Depreciation Utilities Insurance License/permits Loan payments Miscellaneous Total fixed expenses Total expenses Net profit (loss) before taxes Taxes Net profit (loss) after taxes INSTRUCTIONS FOR INCOME PROJECTIONS STATEMENT The income projections (profit and loss) statement is valuable as both a planning tool and a key management tool to help control business operations. It enables the owner/manager to develop a preview of the amount of income generated each month and for the business year, based on reasonable predictions of monthly levels of sales, costs and expenses. As monthly projections are developed and entered into the income projections statement, they can serve as definite goals for controlling the business operation.

As actual operating results become known each month, they should be recorded for comparison with the monthly projections. A completed income statement allows the owner/manager to compare actual figures with monthly projections and to take steps to correct any problems. Industry Percentage In the industry percentage column, enter the percentages of total sales (revenues) that are standard for your industry, which are derived by dividing Costs/expenses items x 100% total net sales These percentages can be obtained from various sources, such as trade associations, accountants or banks. The reference librarian in your nearest public library can refer you to documents that contain the percentage figures, for example, Robert Morris Associates’ Annual Statement Studies (One Liberty Place, Philadelphia, PA 19103). Industry figures serve as a useful bench mark against which to compare cost and expense estimates that you develop for your firm. Compare the figures in the industry percentage column to those in the annual percentage column.

Total Net Sales (Revenues) Determine the total number of units of products or services you realistically expect to sell each month in each department at the prices you expect to get. Use this step to create the projections to review your pricing practices. – What returns, allowances and markdowns can be expected? – Exclude any revenue that is not strictly related to the business. Cost of Sales The key to calculating your cost of sales is that you do not overlook any costs that you have incurred. Calculate cost of sales of all products and services used to determine total net sales.

Where inventory is involved, do not overlook transportation costs. Also include any direct labor. Gross Profit Subtract the total cost of sales from the total net sales to obtain gross profit. Gross Profit Margin The gross profit is expressed as a percentage of total sales (revenues). It is calculated by dividing gross profits total net sales Controllable (also known as Variable) Expenses – Salary expenses — Base pay plus overtime.

– Payroll expenses — Include paid vacations, sick leave, health insurance, unemployment insurance and social security taxes. – Outside services — Include costs of subcontracts, overflow work and special or one-time services. – Supplies — Services and items purchased for use in the business. – Repair and maintenance — Regular maintenance and repair, including periodic large expenditures such as painting. – Advertising — Include desired sales volume and classified directory advertising expenses. – Car delivery and travel — Include charges if personal car is used in business, including parking, tools, buying trips, etc.

– Accounting and legal — Outside professional services. Fixed Expenses – Rent — List only real estate used in business. – Depreciation — Amortization of capital assets. – Utilities — Water, heat, light, etc. – Insurance — Fire or liability on property or products.

Include workers’ compensation. – Loan repayments — Interest on outstanding loans. – Unspecified; small expenditures without separate accounts. Net Profit (loss) (before taxes) – Subtract total expenses from gross profit. Taxes – Include inventory and sales tax, excise tax, real estate tax, etc.

Net Profit (loss) (after taxes) – Subtract taxes from net profit (before taxes) Annual Total – For each of the sales and expense items in your income projection statement, add all the monthly figures across the table and put the result in the annual total column. Annual Percentage – Calculate the annual percentage by dividing Annual total x 100% total net sales – Compare this figure to the industry percentage in the first column. BALANCE SHEET COMPANY NAME As of , 19 Assets Current assets Cash $ Petty cash $ Accounts receivable $ Inventory $ Short-term investment $ Prepaid expenses $ Long-term investment $ Fixed assets Land $ Buildings $ Improvements $ Equipment $ Furniture $ Automobile/vehicles $ Other assets 1. $ 2. $ 3. $ 4.

$ Total assets $ Liabilities Current Liabilities Accounts payable $ Notes payable $ Interest payable $ Taxes payable Federal income tax $ State income tax $ Self-employment tax $ Sales tax (SBE) $ Property tax $ Payroll accrual $ Long-term liabilities Notes payable $ Total liabilities $ Net worth (owner equity) $ Proprietorship or Partnership (name’s) equity $ (name’s) equity $ or Corporation Capital stock $ Surplus paid in $ Retained earnings $ Total net worth $ Total liabilities and total net worth $ (Total assets will always equal total liabilities and total net worth) INSTRUCTIONS FOR BALANCE SHEET Figures used to compile the balance sheet are taken from the previous and current balance sheet as well as the current income statement. The income statement is usually attached to the balance sheet. The following text covers the essential elements of the balance sheet. At the top of the page fill in the legal name of the business, the type of statement and the day, month and year. Assets List anything of value that is owned or legally due the business.

Total assets include all net values. These are the amounts derived when you subtract depreciation and amortization from the original costs of acquiring the assets. Current Assets – Cash — List cash and resources that can be converted into cash within 12 months of the date of the balance sheet (or during one established cycle of operation). Include money on hand and demand deposits in the bank, e.g., checking accounts and regular savings accounts. – Petty cash — If your business has a fund for small miscellaneous expenditures, include the total here. – Accounts receivable — The amounts due from customers in payment for merchandise or services.

– Inventory — Includes raw materials on hand, work in progress and all finished goods, either manufactured or purchased for resale. – Short-term investments — Also called temporary investments or marketable securities, these include interest- or dividend-yielding holdings expected to be converted into cash within a year. List stocks and bonds, certificates of deposit and time-deposit savings accounts at either their cost or market value, whichever is less. – Prepaid expenses — Goods, benefits or services a business buys or rents in advance. Examples are office supplies, insurance protection and floor space.

Long-term Investments Also called long-term assets, these are holdings the business intends to keep for at least a year and that typically yield interest or dividends. Included are stocks, bonds and savings accounts earmarked for special purposes. Fixed Assets Also called plant and equipment. Includes all resources a business owns or acquires for use in operations and not intended for resale. Fixed assets may be leased.

Depending on the leasing arrangements, both the value and the liability of the leased property may need to be listed on the balance sheet. – Land — List original purchase price without allowances for market value. – Buildings – Improvements – Equipment – Furniture – Automobile/vehicles Liabilities Current Liabilities List all debts, monetary obligations and claims payable within 12 months or within one cycle of operation. Typically they include the following: – Accounts payable — Amounts owed to suppliers for goods and services purchased in connection with business operations. – Notes payable — The balance of principal due to pay off short-term debt for borrowed funds.

Also includes the current amount due of total balance on notes whose terms exceed 12 months. – Interest payable — Any accrued fees due for use of both short- and long-term borrowed capital and credit extended to the business. – Taxes payable — Amounts estimated by an accountant to have been incurred during the accounting period. – Payroll accrual — Salaries and wages currently owed. Long-term Liabilities Notes payable — List notes, contract payments or mortgage payments due over a period exceeding 12 months or one cycle of operation.

They are listed by outstanding balance less the current position due. Net worth Also called owner’s equity, net worth is the claim of the owner(s) on the assets of the business. In a proprietorship or partnership, equity is each owner’s original investment plus any earnings after withdrawals. Total Liabilities and Net Worth The sum of these two amounts must always match that for total assets. MONTHLY CASH FLOW PROJECTION Name of Business Owner Type of Business Prepared by Date Pre-start- 1 2 3 4 5 6 Total up position Columns 1-6 Year Month Est.* Act.* Est.Act. Est.Act. Est.Act.

Est.Act. Est.Act. Est.Act.Est.Act. 1. Cash on hand (beginning month) 2. Cash receipts (a) Cash sales (b) Collections from credit accounts (c) Loan or other cash injections (specify) 3.

Total cash receipts (2a+2b+2c=3) 4. Total cash available (before cash out) (1+3) 5. Cash paid out (a) purchases (merchandise) (b) Gross wages (excludes withdrawals) (c) Payroll expenses (taxes, etc.) (d) Outside services (e) Supplies (office and operating) (f) Repairs and maintenance (g) Advertising (h) Car, delivery and travel (i) Accounting and legal (j) Rent (k) Telephone (l) Utilities (m) Insurance (n) Taxes (real estate, etc.) (o) Interest (p) Other expenses (specify each) (q) Miscellaneous (unspecified) (r) Subtotal (s) Loan principal payment (t) Capital purchases (specify) (u) Other start-up costs (v) Reserve and/or escrow (specify) (w) Owner’s withdrawal 6. Total cash paid out (5a through 5w) 7. Cash position (end of month) (4 minus 6) Essential operating data (non-cash flow information) A. Sales volume (dollars) B. Accounts receivable (end on month) C.

Bad debt (end of month) D. Inventory on hand (end of month) E. Accounts payable (end of month) INSTRUCTIONS FOR MONTHLY CASH FLOW PROJECTION 1. Cash on hand (beginning of month) — Cash on hand same as (7), Cash position, pervious month 2. Cash receipts- (a) Cash sales– All cash sales. Omit credit sales unless cash is actually received (b) Gross wages (including withdrawals)– Amount to be expected from all accounts.

(c) Loan or other cash injection– Indicate here all cash injections not shown in 2(a) or 2(b) above. 3. Total cash receipts (2a+2b+2c=3) 4. Total cash available (before cash out)(1+3) 5. Cash paid out – (a) Purchases (merchandise)–Merchandise for resale or for use in product (paid for in current month). (b) Gross wages (including withdrawals)–Base pay plus overtime (if any) (c) Payroll expenses (taxes, etc.)– Include paid vacations, paid sick leave, health insurance, unemployment insurance, (this might be 10 to 45% of 5(b)) (d) Outside services–This could include outside labor and/or material for specialized or overflow work, including subcontracting (e) Supplies (office and operating)–Items purchased for use in the business (not for resale) (f) Repairs and maintenance– Include periodic large expenditures such as painting or decorating (g) Advertising–This amount should be adequate to maintain sales volume (h) Car, delivery and travel–If personal car is used, charge in this column, include parking (i) Accounting and legal–Outside services, including, for example, bookkeeping (j) Rent– Real estate only (See 5(p) for other rentals) (k) Telephone (l) Utilities–Water, heat, light and/or power (m) Insurance– Coverage on business property and products (fire, liability); also worker’s compensation, fidelity, etc.

Exclude executive life (include in 5(w)) (n) Taxes (real estate, etc.)– Plus inventory tax, sales tax, excise tax, if applicable (o) Interest–Remember to add interest on loan as it is injected (See 2(c) above) (p) Other expenses (specify each) Unexpected expenditures may be included here as a safety factor Equipment expenses during the month should be included here (non-capital equipment) When equipment is rented or leased, record payments here (q) Miscellaneous (unspecified)–Small expenditures for which separate accounts would be practical (r) Subtotal–This subtotal indicates cash out for operating costs (s) Loan principal payment–Include payment on all loans, including vehicle and equipment purchases on time payment (t) Capital purchases (specify)–Nonexpensed (depreciable) expenditures such as equipment, building purchases on time payment (u) Other start-up costs–Expenses incurred prior to first month projection and paid for after start-up (v) Reserve and/or escrow (specify)– Example: insurance, tax or equipment escrow to reduce impact of large periodic payments (w) Owner’s withdrawals– Should include payment for such things as owner’s income tax, social security, health insurance, executive life insurance premiums, etc. 6. Total cash paid out (5a through 5w) 7. Cash position (end on month) (4 minus 6)– Enter this amount in (1) Cash on hand following month– Essential operating data (non-cash flow information)–This is basic information necessary for proper planning and for proper cash flow projection. Also with this data, the cash flow can be evolved and shown in the above form.

A. Sales volume (dollars)–This is a very important figure and should be estimated carefully, taking into account size of facility and employee output as well as realistic anticipated sales (actual sales, not orders received). B. Accounts receivable (end of month)– Previous unpaid credit sales plus current month’s credit sales, less amounts received current month (deduct C below) C. Bad debt (end on month)– Bad debts should be subtracted from (B) in the month anticipated D. Inventory on hand (end on month)– Last month’s inventory plus merchandise received and/or manufactured current month minus amount sold current month E.

Accounts payable (end of month) Previous month’s payable plus current month’s payable minus amount paid during month. F. Depreciation–Established by your accountant, or value of all your equipment divided by useful life (in months) as allowed by Internal Revenue Service THE BUSINESS PLAN – APPENDIX 3: INFORMATION RESOURCES U.S. Small Business Administration (SBA) The SBA offers an extensive selection of information on most business management topics, from how to start a business to exporting your products. This information is listed in Resource Directory for Small Business Management. For a free copy contact your nearest SBA office.

SBA has offices throughout the country. Consult the U.S. Government section in your telephone directory for the office nearest you. SBA offers a number of programs and services, including training and educational programs, counseling services, financial programs and contract assistance. Ask about * Service Corps of Retired Executives (SCORE), a national organization sponsored by SBA of over 13,000 volunteer business executives who provide free counseling, workshops and seminars to prospective and existing small business people. * Small Business Development Centers (SBDCs), sponsored by the SBA in partnership with state and local governments, the educational community and the private sector.

They provide assistance, counseling and training to prospective and existing business people. * Business Information Centers (BICs), offering state-of-the- art technology, informational resources and on-site counseling for start-up and expanding businesses to create business, marketing and other plans, do research, and receive expert training and assistance. For more information about SBA business development programs and services, call the SBA Small Business Answer Desk at 1-800-U-ASK- SBA (827-5722). Other U.S. Government Resources Many publications on business management and other related topics are available from the Government Printing Office (GPO).

GPO bookstores are located in 24 major cities and listed in the Yellow Pages under the bookstore heading. You can request a Subject Marketing Essays.