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U
...
Small Business Administration

MP-32

HOW TO WRITE A BUSINESS PLAN
Managing and Planning Series

______________________________________________________________________________
Copyright 1993, Linda Pinson and Jerry Jinnett
...
No part may be reproduced,
transmitted or transcribed without the permission of the authors
...
While
we consider the contents of this publication to be of general merit, its sponsorship by the U
...

Small Business Administration does not necessarily constitute an endorsement of the views and
opinions of the authors or the products and services of the companies with which they are
affiliated
...

______________________________________________________________________________
TABLE OF CONTENTS
INTRODUCTION 1
COVER SHEET 1
STATEMENT OF PURPOSE (MISSION STATEMENT)
THE BUSINESS
Legal Structure
2
Description of the Business 2
Products or Services 3
Location 3
Management 3
Personnel 3
Methods of Record Keeping 3
Insurance 4
Security 4
Summary
5
MARKETING
Target Market 5
Competition 5

2

Methods of Distribution 5
Advertising 7
Pricing
7
Product Design 7
Timing of Market Entry
Location 8
Industry Trends
8

7

FINANCIAL DOCUMENTS
Summary of Financial Needs 8
Sources and Uses of Funds Statement
Cash Flow Statement (Budget) 9
Three-year Income Projection 10
Break-even Analysis Graph 15
Actual Performance Statements 16
Balance Sheet 16
Summary
21

9

SUPPORTING DOCUMENTS
Personal Resumes
22
Personal Financial Statement 22
Credit Reports 22
Copies of Leases
22
Letters of Reference 22
Contracts 22
Legal Documents
23
Miscellaneous Documents 23
PUTTING YOUR BUSINESS PLAN TOGETHER

23

KEEPING YOUR BUSINESS PLAN CURRENT
Making Revisions
23
Implementing Changes
23
Anticipating Problems
24
REFERENCES

24

APPENDIX: INFORMATION RESOURCES

25

______________________________________________________________________________
INTRODUCTION
There are two main purposes for writing a business plan
...
It is the blueprint of your business and will
serve to keep you on the right track
...
If you spend

the time to plan ahead, many pitfalls will be avoided and needless frustrations will be eliminated
...
It will provide
potential lenders with detailed information on all aspects of the company's past and current
operations and provide future projections
...
This sounds like a contradiction, but you can solve this dilemma by using the Key
Word approach
...
Then expand on that statement by telling more about each item in
the text that follows
...
The average length seems to be 30 to 40 pages,
including the supporting documents section
...
Set up blocks of
time for work with target dates for completion
...
It takes
discipline, time and privacy to write an effective business plan
...
For
example, while writing about the legal structure of your business, you will realize the need to
include a copy of your partnership agreement
...
When compiling that section of your plan, you will already have a list of
necessary documents
...

With the previous considerations in mind, you are ready to begin formulating your plan
...

______________________________________________________________________________
COVER SHEET
The first page of your business plan will be the cover sheet
...
It should contain the following information:
Name of the company
Company address
Company phone number (include area code)
Logo (if you have one)
Names, titles, addresses, phone numbers (include area code) of owners
Month and year in which the plan is issued
Name of preparer

The following example will serve as a guide
...
If your
lender were to read only this information, he or she would know the name and nature of your
business, its legal structure, the amount and purpose of your loan request and your plan for
repayment
...
Be concise and clear
...
Although it is positioned after the cover sheet, it is most
effectively written after the plan has been completed
...

If you are writing your plan for a lender, be specific about the use of funds
...
Include this information in the supporting documents section
...
You want to show the lender your company's ability to meet
payments of interest as well as principal
...
e
...
When you have answered the key word questions, you are ready
to present that information in one or two concise paragraphs
...

______________________________________________________________________
STATEMENT OF PURPOSE
ABC CORPORATION, an S-Corporation established in 1985, is a
tool and die company that manufactures specialized parts for the
aerospace industry and is located at 372 East Main Street, Burke,
N
...
The company is seeking growth capital in the amount of
$50,000 for the purpose of purchasing new and more modern
equipment and for training existing personnel in the use of that
new equipment
...
There is a two-month period between
order placement and delivery date
...
Repayment
of the loan and interest can begin promptly within 30 days of
receipt and can be further secured by real estate, which is owned
by the company and which has a 1990 assessed valuation of
$185,000
...
Begin this section with a
one-page summary addressing the key elements of your business
...
Use the key word system to help you write concisely
...

Include information about your industry in general, and your business in particular
...

Legal Structure
State the reasons for your choice of legal structure
...
If you have formed a partnership, include a copy of your
partnership agreement in the supporting documents section
...
It must spell out the
distribution of the profits and the financial responsibility for any losses
...
If you have formed a corporation, explain why this legal form
was chosen and how the company will operate within the corporate structure, and include a copy
of the charter and articles in the supporting document section
...

Description of the Business
This is the section of the plan in which you go into greater detail about your business
...
Outline your current business assets and report your
inventory in terms of size, value, rate of turnover and marketability
...

Stress the uniqueness of your product or service and state how you can benefit the customer
...

Products or Services
Give a detailed description of your product from raw materials to finished item
...

Although you may order from one main supplier, include information on alternate suppliers
...

You may hear a lender refer to the worst case scenario
...
It is also to your advantage to think in terms
of alternatives and to prepare for the unexpected so that your business can continue to run
smoothly
...
Therefore, it is
also good to plan for the best case scenario
...

If you are providing a service, tell what your service is, why you are able to provide it, how it is
provided, who will be doing the work and where the service will be performed
...
If you have both
a product and a service that work together to benefit your customer (such as warranty service for
the products you sell) be sure to mention this in your plan
...

List future services you plan to add to your business
...

You should state any proprietary rights, such as copyrights, patents or trademarks, in this
section
...
For
example, if you are opening a retail shop, your choice of location will be determined by your
target market
...
You may

begin this topic with a sentence such as "ABC Corporation is housed in 25,000 square feet of
warehouse space located at 372 East Main Street, Burke, NY
...
"
Now expand on each reason for choosing that location and back up your statements with a
physical description of the site and a copy of the lease agreement
...
You may want to include copies of pictures,
layouts or drawings of the location in the supporting document section
...
Cover only
those topics that are relevant to your business
...

_____________________________________________________
LOCATION ANALYSIS WORKSHEET
1
...
Name of realtor/contact person:
3
...
History of location:
5
...
Traffic patterns for customers:
7
...
Availability of parking: (include diagram)
9
...
Quality of public services (e
...
police, fire protection)
11
...
Neighboring shops and local business climate:
13
...
Adequacy of utilities (get information from utility company representatives):

15
...
Availability of labor force;
17
...
Housing availability for employees:
19
...
Evaluation of site in relation to competition:
_________________________________________________________
Management
This section describes who is behind the business
...
Be honest about areas in which you will need help and state
how you will get that help
...
Experience, background and
qualifications will be covered in their resumes in the supporting documents section
...
Include a resume for each officer and describe each one by answering the following
questions: Who are they? What are their skills? Why were they chosen? What will they bring to
the organization?
Personnel
Who will be doing the work? Why are they qualified? How will they be hired? What is their
wage? What will they be doing? Outline the duties and job descriptions for all personnel
...
If you are inundated with orders for your product or items to be
serviced, do you have a plan for increasing personnel?

Methods of Record Keeping
Tell what accounting system will be used and why the system was chosen
...
After reading this section, the lender should have confidence in your company's

ability to keep and interpret a complete set of financial records
...
Product liability is a major
consideration, especially in certain industries
...
If a vehicle is used for business purposes, your insurance must reflect that use
...
Some types of businesses require
bonding
...
Consider the
types of coverage appropriate to your business
...
Keep your insurance information current
...
S
...
This concerns not only theft of merchandise, but also theft of
information
...
For example, if you are disposing of
computer printout data, a small paper shredder may be cost-effective
...
Discuss this area with your insurance agent
...

Summary
You have now covered all the areas which should be addressed in the business section
...
When you have
completed the business section, you are ready to begin developing the marketing section
...
A
good marketing plan is essential to your business development and success
...
You must take the time to identify
your customers and find the means to make your product or service available to them
...
It takes time to research and develop a marketing plan, but it is time well spent
...
S
...
S
...
S
...
Remember that you need a clear understanding of who will purchase your
product, who will make use of your service, why they will choose your company and how they
will find out about it
...

The following text will expand on each area presented in the summary
...
Again, the key word approach
will help you to thoroughly cover each area
...

Target Market
The target market has been defined as that group of customers with a set of common
characteristics that distinguish them from other customers
...
Tell how you did your market
research
...
S
...
State how you feel you can serve this market in terms
of your resources, strengths and weaknesses
...
(See Information Resources
...
Indirect
competition is a company with the same product or service but with a different target market
...
You want to determine the competitors' images
...
Your
analysis of this information will help you plan your market entry
...
Name of Competitor(s):
2
...
Products or services offered:

1

Competitors
2

3

4
...
Image
Packaging:
Promotional materials:
Methods of advertising:
Positioning (customers'
perception of quality of
product or service):
6
...
Performance (past and present):
8
...
Strengths (The strengths of the competition become your strengths):
10
...
):
_______________________________________________________
After completing this section you or your lender will know who your competitors are, where
they are located, what products or services they offer, how you plan to compete, how your
customers can access your business and why you can provide a unique and beneficial service or
product
...
Distribution is closely related to your target
market
...
If you are selling a product, do your
customers purchase by direct mail, buy through catalogues or make in-store purchases? Will you
sell directly or through a manufacturer's representative? If you are shipping the product, who will
absorb the shipping costs and what carrier will be used? Use the key words to answer questions
regarding your distribution plan
...
If
you are involved in a service business, will you provide in-shop service? Will you make service
calls, and, if so, how will mileage costs be handled? What is your planned response time to fill
your customers' needs?

List the pros and cons of the various methods of distribution and give reasons for your choices
...
Present alternatives
...

Advertising
Advertising presents the message to your customer that your product or service is good and
desirable
...
Your marketing research will have
spelled out which television and radio stations and which publications are of interest to your
target market
...
Analyze your competitors' advertising in these
publications
...
Include copies of your promotional materials,
such as brochures, direct mail advertisements and flyers
...

Pricing
Your pricing structure is critical to the success of your business and is determined through
market research and analysis of financial considerations
...
The price ceiling is determined by
the market; it is the highest cost a consumer will pay for a product or service and is based on
perceived value
...
Consider all costs -- raw materials, office overhead,
shipping, vehicle expense, taxes, loan and interest payments and owner draws are a few
...
The difference allows
for discounts, bad debt and returns
...

Positioning -- predetermining the perceived value in the eyes of the consumer -- can be
accomplished through promotional activities
...

Very few items on the market have universal appeal your product or service cannot be all things
to all people
...


Product Design
Packaging and product design can play a major role in the success of your business
...
Consider the tastes of your target market in the ultimate design
of your product and your package design
...
Packaging attracts a great deal of public attention
...
The U
...
Food and Drug Administration (FDA) has strict procedures for the
labeling of items falling within its jurisdiction
...

Use key words to answer questions regarding your product design and packaging
...
Also include information on any proprietary rights, such as copyrights,
trademarks or patents
...

Having your products and services available at the right time and the right place depends more
on understanding consumer readiness than on your organizational schedule
...
Early January and September are the best times to mail flyers and catalogs, as
consumers seem to be more receptive to mail order purchasing in those months
...

Most wholesale buying takes place at these shows
...
Spring is a better time to introduce a service
...
Tell the
lender when you plan to enter the market and how you arrived at your decision
...
List the reasons for your choice
...
Is the area in which you plan
to locate supported by a strong economic base? What alternate sites were considered?
These are some of the questions to be considered
...

Industry Trends
Be alert for changes in your industry
...
Read trade journals and industry reports
in your field
...

______________________________________________________________________________

FINANCIAL DOCUMENTS
You are now ready to develop the third area of your plan
...
In this section we will cover the major documents you will
want to include in your business plan
...
Your work will be easier if these are done in the order presented
...

They will distinguish among the three types of capital to be used as follows:
Working capital -- Used to meet fluctuating needs that are to be repaid through cash during the
business's next full operating cycle, generally one year
...
If you seek growth capital, you will be expected to show how the capital will be used to
increase your profits enough to be able to repay the loan within several years (usually not more
than seven)
...
If you seek equity capital, it must be raised from
investors who will take the risk in return for some combination of dividend returns, capital gains
or a specific share of the business
...
This document
is an outline telling why you are applying for a loan and how much you need
...


ABC Corporation is seeking a loan to increase

its growth capital in the following areas of
production:
A
...

Training of personnel in operation of above
...


Funds needed to accomplish above goal will be
$50,000
...

See "Use of Funds" for distribution of
funds and backup statement
...
It will be necessary for you to tell how you intend to disperse the loan funds
...

You must be sure that your supporting data can be easily found by the loan officer who is
examining your application
...
It will
be necessary to have a well written table of contents
...
DISPERSAL OF LOAN FUNDS
ABC Corporation will use anticipated loan funds in
the amount of $50,000 to modernize its production
equipment
...

2
...


The equipment needed is as follows:
(1) High-speed F-34 Atlas Press
(purchase price -- $32,900)
(2) S71 Jaworski Ebber (purchase
price -- $2,800)

b
...


c
...

d
...

Note: Refer to page 17* of the production plan of ABC
Corporation
...

____________________
When writing your business plan be sure that your production plan
includes a description of the equipment, how the work will be
done, by whom and at what cost
...

(*The page numbers are hypothetical and do not refer to page
numbers in this book
...
They show cash inflow and outflow over a period of time and are used for internal
planning
...
If you are starting a new business, you will have to project your financial needs and
disbursements
...
The cash flow statement identifies
!

When cash is expected to be received
...


!

When cash must be spent to pay bills and debts
...


It also allows the manager to identify the source of necessary cash, i
...
, will it come from sales
and services rendered or must it be borrowed? Be sure that your projections take into account
receivables and how long it will take your customer to pay
...

A cash flow statement can be prepared for any period of time
...
It should be prepared on a monthly basis for the next year and
revised not less than quarterly to reflect actual performance in the preceding three months of
operations
...

They could be as follows:
1
...

3
...

Fixed expenses budget
...


Two worksheets can be used in developing a cash flow statement:
Sources of cash worksheet -- Contains all the financing sources for the business
...

Note: Projections in the two worksheets must be made for the same time period (monthly,
quarterly or annually)
...
You will need to think your way through each month, projecting what
amount from each category of the worksheets will be appropriate to what month
...

_______________________________________________________
SOURCES OF CASH WORKSHEET
(Cash Flowing Into Your Business)
Cash on Hand
Sales-Revenues
Sales
Service Income
Deposits on sales or services

$ __________

__________
__________
__________

Collections on accounts receivable

__________

Miscellaneous income
Interest income

__________

Sale of long-term assets

__________

Liabilities
Loans (banks, finance companies, SBA, etc) __________
Equity
Owner investments (sole proprietor or partnership) __________
Contributed capital (corporation)
__________
Venture capital
__________
Total Cash Available
__________
_______________________________________________________
_______________________________________________________
CASH TO BE PAID OUT WORKSHEET
(Cash Flowing Out of Your Business)
Start-up costs
Business license (annual expense)
DBA filing fee (one time cost)
Other start-up costs
___________________
___________________
___________________

___________
___________
___________
___________
___________

Inventory purchases
Cash out for items for resale or services

___________

Variable expenses (controllable)
Advertising
Freight
Packaging costs
Parts and supplies
Sales salaries
Misc
...
indirect expenses
Total indirect expenses

__________
__________
__________
__________
__________
__________

Assets (long-term purchases)
Cash to be paid in current period

__________

Owner equity
Cash to be withdrawn by owner

__________

Total cash to be paid out
$__________
_______________________________________________________
Completing Your Cash Flow Statement
The vertical columns of a cash flow statement represent the twelve months, preceded by a total
column
...

The figures are projected for each month, reflecting the flow of cash in and out of your business
for a one-year period
...

2
...

4
...

6
...

8
...

10
...
Enter under the first month of the business
cycle
...

Add beginning cash balance and cash receipts to determine total cash available
...

Project monies due on taxes, long-term assets and loan repayments
...

Total all expenses and draws
...

Subtract total cash paid out from total cash available
...
If the result is negative, be sure to bracket this figure
...
Add to cash balance/
deficiency to get ending cash balance
...

Repeat the process through the last month of the business cycle
...

2
...

Add the monthly figures for each category horizontally and enter the result in the

3
...

Compute the total column in the same manner as each of the individual months
...


Note: If your business is new, you will have to base your projections solely on market research
and industry trends
...

A quarterly budget analysis should be used as a record to compare your cash flow statement (or
budget) with your business's actual performance
...
If your analysis shows that you have gone over budget in some areas you
will have to compensate by adjusting your cash flow statement with future cuts in those or other
areas
...

Your cash flow statement can be compiled on a month-by-month basis and then compared with
actual monthly performance
...
Prepared in this manner, your statement can provide an
annual projection for your next fiscal year
...
The difference is that the three-year
projection only includes income and deductible expenses while the cash flow statement includes
all sources of cash and cash to be paid out
...
e
...
If this income projection is for
the purpose of obtaining a loan, talk to the lender about his or her specific requirements
...

Sources of Information
Information for a three-year income projection can be found in your cash flow statement, sales
forecast and individual budgets, and your business and marketing analyses if you are new in
business
...
Be sure to take into account
fluctuations anticipated in costs, efficiency of operation, changes in the market and any other
factors
...
These changes should
be reflected in any projections
...
An example of this might be the computer industry, where competition
has increased greatly and standardization of components has caused a decrease in both the cost

and the sales price of certain items
...
It is the point at which the business will neither make a profit nor incur a loss
...
It can be expressed
in total dollars or revenue exactly offset by total expenses or in total units of production (cost of
which equals exactly the income derived by sales)
...
Fixed costs do not vary with sales or output
...
The greater the volume of sales, the higher the cost
...

Sources of Information for a Break-even Analysis
All of your figures can be derived from your three-year projection
...
It should be a simple matter to retrieve the figures to plug into the following formula
...

Formula:
B-E point sales (at break-even point) = fixed costs
+ [1 - variable costs expressed as % of total sales]
Terms used:
B-E point sales = volume of sales at break-even point
Fixed costs = fixed expenses, depreciation, interest
Variable costs = cost of sales and variable expenses
Sales revenues = income from sales of goods/services
over a specified period
Values used:
B-E point sales (S) = ?
Fixed costs = $25,000
Variable costs = $45,000
Sales revenues = $90,000
Computation:
S (at break-even point) =

________$25,000_______
1-($45,000/90,000

S

=

__$25,000__
(1-0
...
50)


...

Using the same figures as in the above formula, draw three lines in the graph: horizontal line at
point representing fixed costs (25); total expenses (TC = FC + VC) line from left end of fixed
cost line sloping upward to point where total (fixed plus variable) costs on vertical scale (7) meet
total sales revenues on the horizontal scale (9); total revenues (sales) line from zero through a
point describing total revenues (sales) on both scales (9)
...
This business estimates that it will break even when sales volume reaches
$50,000
...
The triangular area
above and to the right of the point represents potential profit
...
If you are a new business owner, you have no business history
...
If you
are an established business, you will include the following actual performance statements:
Balance sheet
Profit and loss (income) statement
Business financial history or loan application

Balance Sheet
The balance sheet is a financial statement, usually prepared at the close of an accounting period,
that shows the financial position of the business as of a fixed date
...
By regularly preparing this statement, you will be
able to identify and analyze trends in the financial strength of your business and thus implement
timely modifications
...
The three are
related in that at any given time a business's assets equal the total contributions by its creditors
and owners
...

Liabilities = Debts owed by the business to any of its creditors
...

The relationship between these terms is simply illustrated in the following accounting formula:
Assets = Liabilities + Net Worth
Examined as such, it becomes apparent that if a business possesses more assets than it owes to
creditors, its net worth will be a positive value
...

Format
The balance sheet also must follow an accepted format
...

All assets are divided under three headings:
Current assets -- Assets that can be converted into cash within one year of the date on the
balance sheet
...

Fixed assets -- The resources a business owns and does not intend for resale (land,
buildings, equipment, automobiles, etc
...

Long-term liabilities -- Outstanding balance less current portion due (e
...
, mortgage,
vehicle)
...

Corporation -- The sum of contributions by owners or stockholders plus earnings
retained after paying dividends
...
income tax
State income tax
Self-employment
Sales tax (SBE)
Property tax

__________
__________
__________
__________
__________

__________

Short-term Investments

__________

Prepaid expenses

__________

Long-term investments
Fixed assets

__________

Payroll accrual
Long-term liabilbilities

Land

__________

Notes payable

Buildings

__________

__________

__________

Improvements

__________

Total liabilities
__________
______________________________

Equipment

__________

Net worth (owner equity)

Furniture

__________

Automobiles/
vehicles

__________

Proprietorship __________
or Partnership
(name's) equity
__________
(name's) equity
__________
or

Other assets
1
...


__________

Corporation
Capital stock __________
Surplus paid in __________
Retained earnings__________
_____________

3
...
In contrast to the balance sheet, which shows a picture of your
business at a given moment, this statement can be likened to a moving picture, which shows
what has happened in your business over a period of time
...
You will be able to pick out weaknesses in your operation and
plan ways to run your business more effectively and thereby increase your profits
...
In following years, you may decide to use your advertising funds more effectively by using
them at a time of increased customer spending
...
Comparison of the income statements from several years will give you an even
better picture of the trends in your business
...

Development
The income statement shows where your money has come from and where it was spent over a
specific period of time
...
It is one of the two principal financial statements prepared from
the ledgers and records of a business
...
The remaining asset, liability and capital information provides the figures for
the balance sheet
...
Balances
from the revenue accounts and the expense accounts must be transferred to your profit and loss
statement
...

Cost of goods sold (see IRS Form 1040, Schedule C for computation)
...

Expenses
Selling expenses (direct, controllable, variable)
...

Total expenses
Income from operations (gross profit total expenses)
Other income (interest income)
Other expenses (interest expense)
Net profit (loss) before income taxes
Income taxes (federal, state, self-employment)
Net profit (loss) after income taxes
Two sample income statements are shown for your use
...
Fill
it in monthly after balancing your ledgers
...
The second form can be used for your monthly and
annual profit and loss statements
...
Net Sales
2
...
Gross profit (1 minus 2)

_ _ _ _ _ _ _ _ _ _ _ _
_ _ _ _ _ _ _ _ _ _ _ _
_ _ _ _ _ _ _ _ _ _ _ _

EXPENSES
1
...
(controllable)
a
...
Freight
_
c
...
Parts & supplies
_
e
...
Misc
...
Legal fees
_

_
_
_
_
_
_
_

_
_
_
_
_
_
_

_
_
_
_
_
_
_

_
_
_
_
_
_
_

_
_
_
_
_
_
_

_
_
_
_
_
_
_

_
_
_
_
_
_
_

_
_
_
_
_
_
_

_
_
_
_
_
_
_

_
_
_
_
_
_
_

_
_
_
_
_
_
_

2
...
Insurance
b
...
Office salaries
d
...
Utilities
f
...
indirect expenses
g
...
Net sales (gross-returns @ allowance)
2
...
Inventory (Jan
...
Purchases
c
...
Deduct inventory (Dec
...
Gross profit on sales
Expenses
1
...
Advertising
b
...
Packaging costs
d
...
Sales salaries
f
...
direct expenses

__________
__________
__________
__________
__________
__________

__________
__________
__________
__________
__________
__________

2
...
Insurance
b
...
Office salaries
d
...
Utilities
f
...
indirect expenses

__________
__________
__________
__________
__________
__________

Total expenses

__________

Income from operations (gross
profit less expenses)

__________

Other income
1
...
Interest expenses

__________
__________

Net profit (loss) before taxes

__________

Income taxes

_________

Net profit (loss) after income taxes
__________
_______________________________________________________
Business Financial History
The financial history is the last of the financial statements required in your business plan
...

If you are a new business, you will have only projections for your business
...
This will be of benefit in that it will
show the lender the manner in which you have conducted your personal business and be an
indication as to the probability of succeeding in your new business
...
This document should be completed last, but placed first in the
financial section of your plan
...
The format may
vary slightly
...
Answer all questions and, by all means, be certain that your
information is accurate and that it can be verified if the need should arise
...
All of the
information needed will have been compiled in earlier parts of your plan and in the completed

financials
...
Go back to your balance sheet and bring these figures forward
...
g
...

Inventory details -- Information about inventory is derived from your inventory record
...

Income statement -- This is revenue and expense information
...

Real estate holdings, stocks and bonds -- Refer back to the business portion of your plan
...

Sole proprietorship, partnership or corporation information -- There are generally three separate
schedules on the financial history one for each form of legal structure
...
In the business section, you will have covered two
areas that will serve as the source of this information -- legal structure and management
...

Audit information -- Refer back to your business section under record keeping
...

Insurance coverage -- You will be asked to provide detailed information on the amounts of
different types of coverage (i
...
, merchandise, equipment, public liability, earthquake,
automobile, etc
...

Summary
The financial documents covered in this section will probably be sufficient for both your own
use and that of potential lenders
...
The important thing to note in compiling any financial
statements is that the information must be correct and that you must have records to support your
figures
...
If you have done your homework, the
financial documents you have prepared will be invaluable to you in the assessment of your
operation and may very well be the determining factor in whether or not you succeed in your

business!
______________________________________________________________________________
SUPPORTING DOCUMENTS
Now that you have completed the main body of your business plan, you will need to include a
separate section for any additional records that should be included to support your plan
...
As you are compiling the first three sections, it is a good idea to
keep a separate list of the supporting documents that you mention or that come to mind
...
If you are considering applying for a loan to purchase
equipment, your supporting documents might be existing equipment purchase agreements or
lease contracts
...
You will be
ready to sort them into a logical sequence and add any new ones that come to mind
...

Personal Resumes
If you are a sole proprietor, include your own resume
...
If you are a corporation, include resumes for all officers of
the corporation
...
Preferably, it should
be contained on one page for easy reading
...
Begin with most
recent
...

Educational background -- Names of schools and dates you attended them, degrees earned,
fields of concentration
...
g
...

Personal Financial Statement
The owner(s) should include a statement of personal assets and liabilities
...
Use the same format and list all assets and
liabilities to determine net worth
...

Credit Reports

Credit ratings are of two types, business and personal
...
Personal credit ratings can be obtained through credit
bureaus, banks and companies with whom you have dealt on a basis other than cash
...

Some examples are the lease agreement for your business premises, equipment, automobiles, etc
...
There are two types of letters of reference: business references, or those
written by business associates, suppliers and customers; and personal references, or those written
by nonbusiness associates who can assess your business skills (not friends or relatives)
...
Some examples are current
loan contracts, papers on prior business loans, purchase agreements on large equipment, vehicle
purchase contracts, service contracts and maintenance agreements
...
Some of these are articles of
incorporation, partnership agreements, copyrights, trademark registrations, patents, insurance
policies, property and vehicle titles, etc
...
A good example would be those records
related to selecting your location that may have been finalized as the result of developing a
location plan
...

Please note: All supporting documents need not be included in every copy of your business plan
...
The
rest of the information should be kept with your copy of the plan and be easily accessible should
it be requested by the lender
...
To create a favorable impression, it

should be as follows:
Appearance -- Use a plastic spiral binding or covers purchased from your local stationery store
...
Bankers are usually conservative
...
When you are writing each section, think of it as being a summary
...
A potential lender does not want to
have to wade through volumes of words to get the information needed
...
However, do not go to the
unnecessary expense of paying for typesetting and high-powered computer graphics
...

Table of contents -- Be sure to include a table of contents in your business plan
...
Make it detailed enough so the lender can locate any of the areas addressed
in the plan
...

Number of copies -- Make copies for yourself and each lender you wish to approach
...
Do not try to work with too many potential lenders at one time
...

When you are finished, your business plan should look professional, but the lender should know
that it was done by you
...
Be sure that your business plan represents your best efforts
...
Changes necessitating revisions can be
attributed to three sources: changes within the company, changes originating with the customer
and technological changes
...

Implementing Changes
As the owner, you must be aware of changes in your industry, market and community
...
You will have to compare your plan with the changes
discussed above
...
However, the final judgment as to revisions will rest with you, the owner
...


Anticipating Problems
Try to see ahead and determine what possible problems may plague you
...
At the same time, you may experience a
sharp decline in sales
...
Also, be cautious when things are too good
...
A product or service that is in demand this year may not be popular next year
...
Awareness of
changes in your industry and revision according to those changes will benefit you greatly
...
Pioneering New Products: A Market Survival Guide
...

Breen, George, and A
...
Blankenship
...
New York:
McGraw-Hill, 1982
...
The Partnership Book
...

Goldstein, Harvey
...
Los Angeles: Granville Publications, 1986
...
That's a Great Idea
...

Lavin, Michael R
...
Phoenix, AZ: Oryx
Press, 1987
...
Guerilla Marketing: Secrets for Making Big Profits from Your Small
Business
...

Ogilvy, David
...
New York: Vintage Books, 1985
...
Anatomy of a Business Plan
...
and Into the Marketplace, 1989
...

Pinson, Linda, and Jerry Jinnett
...

Tustin, CA: Out of Your Mind
...

Pinson, Linda, and Jerry Jinnett
...
and Into the Marketplace
...
and Into the Marketplace, 1988
...
Recordkeeping: the Secret to Growth & Profit
...
and Into the Marketplace, 1989
...
Making Business Location Decisions
...

Worthington, Anita, and Robert E
...
Staffing a Small Business: Hiring,
Compensating, and Evaluating
...

______________________________________________________________________________
APPENDIX: INFORMATION RESOURCES
U
...
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
...
Consult the U
...
Government section in your telephone
directory for the office nearest you
...
Ask about
•

SCORE: Counselors to America’s Small Business, a national organization sponsored by
SBA of over 11,000 volunteer business executives who provide free counseling,
workshops and seminars to prospective and existing small business people
...
score
...


•

Small Business Development Centers (SBDCs), sponsored by the SBA in partnership
with state governments, the educational community and the private sector
...


•

Women’s Business Centers (WBCs), sponsored by the SBA in partnership with local
non-government organizations across the nation
...


For more information about SBA business development programs and
services call the SBA Small Business Answer Desk at 1-800-U-ASKSBA (827-5722) or visit our website, www
...
gov
...
S
...
GPO bookstores are located in 24 major cities and are listed
in the Yellow Pages under the bookstore heading
...
gpo
...
There is a

nominal fee for some, but most are free
...
To get their publications,
contact the regional offices listed in the telephone directory or write to the
addresses below:
Federal Citizen Information Center (FCIC)
Http://www
...
gsa
...

Consumer Product Safety Commission (CPSC)
Publications Request
Washington, DC 20207
http://www
...
gov/cpscpub/pubs/pub_idx
...

U
...
Department of Agriculture (USDA)
12th Street and Independence Avenue, SW
Washington, DC 20250
http://www
...
gov
The USDA offers publications on selling to the USDA
...

U
...
Department of Commerce (DOC)
Office of Business Liaison
14th Street and Constitution Avenue, NW
Washington, DC 20230
http://www
...
doc
...
This service also will refer businesses to different programs and services in
the DOC and other federal agencies
...
S
...
workplace
...
gov
Helpline: 1-800-workplace
...

U
...
Department of Labor (DOL)
Employment Standards Administration
200 Constitution Avenue, NW
Washington, DC 20210
The DOL offers publications on compliance with labor laws
...
S
...
irs
...
html
The IRS offers information on tax requirements for small businesses
...
S
...
gov/sbo
Hotline: 1-800-368-5888
The EPA offers more than 100 publications designed to help small businesses understand how
they can comply with EPA regulations
...
S
...
fda
...

For More Information
A librarian can help you locate the specific information you need in reference books
...
They also have other resources, such as
•

Trade association information
Ask the librarian to show you a directory of trade associations
...


•

Books
Many guidebooks, textbooks and manuals on small business are published annually
...


•

Magazine and newspaper articles
Business and professional magazines provide information that is more current than that
found in books and textbooks
...


•

Internet Search Engines

In addition to books and magazines, many libraries offer free workshops, free access to
computers and the Internet, lend skill-building tapes and have catalogues and brochures
describing continuing education opportunities

---