Who, What When, Where and How…..
A business plan is a tool to assist existing and/or potential entrepreneurs/business owners to expand or develop a business. It covers who you are, what you want to do in business, when you will do this work, where you will operate or start your business and how you will do it.
Start with a brief description of the business. This shows potential investors and others the kind of opportunity your business represents. Highlight the competitive advantages of your business over others in the field. If the plan concerns an existing business (modernization or expansion), give a brief history including successes and failures. Also, note the location where you will operate and what are the benefits in this region for your business.
Describe the market you will engaged in or wish to enter and describe who will buy your product or service and why. A great idea for a new product is of little use if there is no market for it. Occasionally companies must create a new market, particularly in emerging technologies, but this takes deep pockets. Generally it is cheaper and easier to enter existing markets.Describe your proposed product or service. Highlight the key features that will distinguish the product or service from competitors. Products may be described as a collection of attributes (size, colour, shape, materials, etc.). The status of patent or trademark, and other protection should be addressed in this section.
Estimate the size of the market. Describe whether the market is growing or shrinking. Explain how you intend to capture a slice of that market and the strategy you will follow. For example, will you produce a high quality relatively expensive product aimed at a niche, up-market group, or will you mass produce inexpensively for a larger market? Are your key markets local or export? What will be your distribution strategy? Who is the competition, and how do you propose to deal with it? What will be your promotional/advertising strategy? For example, if you are entering or expanding into the tourism sector, answer the following: what tourist are you targeting; how many visit your area; what steps will you take to inform them of your business/service, i.e. advertisements, highway signage, brochures, web site, facebook etc.
Investors will place a great deal of importance on the proposed management of the business. Describe your own background and that of key employees and managers/owner(s). Include any special skills that you or your employees have that will help make the business a success, i.e. include resumes, time frames, etc…
If your business requires raw material, explain where you will access this material, i.e. wood products require a supply of trees etc…
Describe how you plan to manufacture the product or deliver the service. Describe any special equipment or processes involved. Cover items such as facilities, equipment, labour, materials, sources of supplies, materials handling, and storage. Highlight critical stages of the production/delivery process.
Financial statements should include a projected balance sheet, income statement, and cash flow statement for the first five years, with the first year broken down monthly. Provide a detailed list of assumptions included in the financial projections, as well as a statement of the cost to develop the product or service. Assistance in preparing financial statements is available through Community Business Development Centres, the Department of Innovation, Business & Rural Development and the Atlantic Canada Opportunities Agency. (Please see attached cost breakdown example).
Describe the amount of investment required and the timing of cash requirements. Detail the sources of funding, personal, other and the purpose. Outline the repayment terms of borrowed funds. Pay particular attention to long-term capital costs versus day to day operating costs (working capital).
You should identify the relevant licenses and permits you will require to operate your business. The Government Service Centre for your area can provide you with information and help you file the appropriate applications. Contacting your local municipality to ensure you address town or city by-laws is very important. You will not be able to get a permit to operate your business unless you comply with all town or city by-laws.
Other Benefits of a Business Plan
When your business plan is completed, it may be possible to further analyze you proposed business.
Market Research will provide you with a range of prices that consumers will accept. (Please see the section on Market Research)
Analyzing your financial information will help you determine the cost of producing the product or service. Fixed Costs include any of the costs of doing business and remain the same while levels of production and sales increase. Examples include equipment costs, rent, some utilities, advertising, and salaries, as long as payroll remains constant. Variable Costs include those items that can change and include such items as repair costs and the cost of materials. The level of output required to break even can be calculated in a break-even analysis based on the fixed costs and variable costs.
The above is a summary of a business plan and outlines the basic information that investors, banks or government departments/agencies require. Please go to the ACOA, IBRD or CBDC’s websites for a detailed outline for writing a business plan.