How to Write a Business Plan For a Small Retail Business
By U.S. Small Business Administration
See also: PDF-version
The material in this publication may not be reproduced
or transmitted in any form or by any means -- electronic,
mechanical, photocopying or other -- without prior written permission
of the U.S. Small Business Administration. "How to Write
a Business Plan." Copyright 1990, Linda Pinson
and Jerry Jinnett. All right reserved.
All of SBA's programs and services are extended to
the public on a nondiscriminatory basis.
TABLE OF CONTENTS
What Is a Business Plan?
What's in This for Me?
What Business Am I In?
Determining Sales Potential
In-Store Sales Promotion
PUT YOUR PLAN INTO DOLLARS
Cash Flow Projection
Is Additional Money Needed?
IS YOUR PLAN WORKABLE?
IMPLEMENTING YOUR PLAN
KEEP YOUR PLAN CURRENT
A. Income Projection Statement
B. Monthly Cash Flow Projection
C. Balance Sheet
D. How to Write a Business Plan
E. Information Resources
A good business plan gives the small retail firm a pathway
to profit. This publication is designed to help an
owner-manager develop a sound business plan.
To profit in business, you need to consider the following
questions: What business am I in? What goods do I
sell? Where is my market? Who will buy my goods? Who is my competition?
What is my sales strategy? What merchandising methods
will I use? How much money is needed to operate my
store? How will I get the work done? What management controls
are needed? How can they be carried out? When should
I revise my plan? Where can I go for help?
As the owner-manager, you must answer these questions as
you draw up your business plan.
This publication is a combination of text and suggested
analyses so you can organize the information you
gather from research to develop your plan.
What Is a Business Plan?
The success of your business depends largely on the decisions
you make. A business plan allocates resources and
measures the results of your actions, helping you set realistic
goals and make logical decisions.
What's in This for Me?
You may be thinking, Why should I spend my time drawing
up a business plan? What's in it for me? If you've
never worked out a plan, you are right in wanting to hear about
the possible benefits before you do the work. Remember
first that the lack of planning leaves you ill-prepared to
anticipate future decisions and actions needed to run your business
A business plan offers many benefits. For example:
! A business plan gives
you a path to follow.
! A plan with goals and
action steps allows you to guide your business through
turbulent, often unforeseen economic conditions.
! A plan gives your banker
insight into the condition and direction of your business so
your business can be more favorably considered for a loan.
! A plan can tell your
sales personnel, suppliers and others about your operations
! A plan can help you develop
as a manager. It can give you practice in thinking and
figuring out problems about competitive conditions, promotional
opportunities and situations that are good or bad
for your business. Such practice over a period
of time can help increase an owner-manager's ability to make
! A sound plan tells you
what to do and how to do it to achieve the goals you have set
for your business.
What Business Am I in?
In making your business plan, the first question to consider
is, What business am I really in? At first reading,
this question may seem silly. If there is one thing I know, you
say to yourself, it is what business I'm in. Hold
on and think. Some owner-managers have gone broke and others have
wasted their savings because they did not define
their businesses in detail. A clearly defined business
will not only help your planning, it could mean greater profits.
Consider this example. Mr. Jet on the East Coast maintained
a dock and sold and rented boats. He thought he was
in the marina business. But when he got into financial trouble
and asked for outside help, he learned that he was
not simply in the marina business. He was in the restaurant business
with a dockside cafe, serving meals to boating parties. He was
in the real estate business, buying and selling lots.
He was in the boat repair business, buying parts and hiring a
mechanic as demand arose. Mr. Jet was trying to be
too many things and couldn't decide which venture
to put money into and how much return to expect. What slim resources
he had were fragmented.
Before he could make a profit on his sales and a return
on his investment, Mr. Jet had to decide what business
he really was in and concentrate on it. After much study, he realized
that he should stick to the marina format buying,
selling and servicing boats.
Decide what business you are in and write it down. Define
your business. To help you decide, think of answers
to questions like: What do you buy? What do you sell? Which of
your lines of goods yields the greatest profit? What
do people ask you for? What are you trying to do better, more
of or differently from your competitors?
When you have decided what business you are in, you are
ready to consider another important part of your
business plan: marketing. Successful marketing starts with the
owner-manager. You must know the merchandise you
sell and the needs of your customers. The objective is to move
the stock off the shelves and display racks at the
right price and bring in sales dollars.
The following text and work spaces are designed to help
you work out a marketing plan for your store.
Determining Sales Potential
In a retail business, your sales potential depends on location.
Like a tree, a store has to draw nourishment from
the area around it. To work through the problem of selecting a
profitable location, answer the following questions.
In what part of the city or town will you locate? In the downtown
business section? In the area right next to the downtown business
section? In a residential section? On the highway
outside of town? In the suburbs? In a suburban shopping center?
On a worksheet, write where you plan to locate and give
the reasons why you chose that particular location.
Now consider these questions that will help you narrow
down a site in your location area.*
What is the competition in the area you have picked?
How many of the stores look prosperous? How many
look as though they are barely getting by? How many similar stores
went out of business in this area last year? What
price line does the competition carry? Which store or stores in
the area will be your biggest competitors?
* The local
chamber of commerce may have census data for your area. Census
Traces on Population, published by the U.S. Census Bureau, may
be useful. Other sources on marketing statistics are trade associations
Again, write down the reasons for your opinions. Also write
out an analysis of the area's economic base and give
the reasons for your opinion. Is the area in which you plan to locate
supported by a strong economic base? For example, are
nearby industries working full time? Only part time?
Did any industries go out of business or move from the area in the
past several months? Are new industries scheduled to
open in the next several months?
When you find a building that seems to be what you need,
answer the following questions. Is the neighborhood
becoming run down? Is the neighborhood new and growing? Are any
super highways or throughways planned for the neighborhood? Is street
traffic fairly heavy all day? Do pedestrians look like
prospective customers? How close is the building to bus lines and
other transportation? Are there adequate parking spaces
convenient to your store? Are sidewalks in good repair
(you may have to repair them)? Is the street lighting good? Is your
store on the sunny side of the street? What is the
occupancy history of this building? Does it have a reputation for
failures? (Have stores opened and closed after a short
time?) Why have other businesses failed in this location?
What is the physical condition of the store? What services does
the landlord provide? What are the terms of the lease?
How much rent must you pay each month? Estimate the
gross annual sales you expect in this location.
When you think you have solved the site location question,
ask your banker to recommend people who know most
about locations in your line of business. Contact these people
and listen to their opinions, weigh what they say
and then make your final decision.
When you have a location in mind, you should work through
another aspect of marketing. How will you attract
customers to your store? How will you pull business away from
your competition? Many small retailers find competitive
advantages within this aspect of marketing. The ideas
they develop are as good as and often better than those the large
companies develop. The following work blocks are
designed to help you think about image, pricing, customer service
policies and advertising.
Every store has an image. For example, throw some merchandise
onto shelves and onto display tables in a dirty,
dimly lit store and you've got an image. Shoppers think of it
as a dirty, junky store and avoid coming into it.
The same merchandise displayed on brightly lit, well-organized
shelves could project a high-tech image.
Your image should be focused enough to promote in your
advertising and other promotional activities. For
example, home cooked food might be the image of a small restaurant.
What is the image you want shoppers and customers to have
of your store?
Value received is the key to pricing. A store can have
low prices by selling low-priced merchandise. Thus,
what you do about the prices you charge depends on the lines of
merchandise you buy and sell. Pricing also depends
on what your competition charges for these lines
of merchandise. Your answers to the following questions should
help you to decide what to do about pricing.
In what price ranges are your lines of merchandise sold?
What services will you offer to justify your prices if
they are higher than your competitor's prices?
Will you sell for cash only? If you use credit card systems,
what will they cost you? Will you have to add a surcharge
to the original price in order to absorb the cost?
Customer Service Policies
The services you provide your customers may be free to
them, but you pay for them. For example, if you provide
free parking, you pay for your own parking lot or share the cost
of a lot with other retailers.
List the services your competitors offer and estimate the
cost of each service. How many of these services
will you have to provide just to be competitive? Are there other
services that would attract customers that competitors
are not offering? If so, estimate the cost of such services. Now
list all the services you plan to offer and the estimated
costs. Total this expense and figure out how you
can include those added costs in your prices without pricing your
merchandise out of the market.
Who is your customer?
your typical customer.
Male, female, both_______________________
Number in family_________________________
Annual family income_____________________
Buying patterns _________________________
Reason to buy from you___________________
! Geographically describe
your trading area (i.e., county, state, national).
! Economically describe your
trading area (single family, average earnings, number of
Consider advertising last, after you have determined your
image, price range and customer services. Only then
are you ready to tell prospective customers why they should shop
in your store.
When advertising dollars are limited, it is vital that
your advertising be on target. Before you can consider
how much money you can afford for advertising, take time to determine
your advertising goals. What are the strong points
of your store? What makes your store different from
your competitors? What facts about your store and its merchandise
should you tell prospective customers?
When you have answered these questions, you are ready to
think about the form and potential cost of your advertising.
Ask the local media (newspapers, radio and television and direct
mail printers) for information about the services
and results they offer.
How you spend advertising money is your decision, but don't
fall into the trap that snares many retailers who
have little or no experience with advertising copy and media selection.
Seek professional advice on what kind and how much
advertising your store needs.
Use the following worksheet to determine what advertising
When you have figured your advertising cost for the next
12 months, check it against what similar stores spend.
Trade associations and other organizations often gather data on
advertising expenses as one operating ratio (expenses
as a percentage of sales). If your estimated cost for advertising
is substantially higher than the average for your line of merchandise,
take a second look. No single expense item should
be allowed to get way out of line if you want to make a profit.
Your task in determining how much to spend for advertising comes
down to the question, How much can I afford to spend
and still do the job that needs to be done?
In-Store Sales Promotion
To complete your work on marketing, think about what you
want to happen after prospective customers come into
your store. Your goal is to move stock off your shelves and displays
at a profit and to satisfy your customers. You want
repeat customers and money in your cash register.
At this point, if you have decided to sell for cash only,
take a second look at your decision. Don't overlook
the fact that Americans like to buy on credit. Often a credit
card, or other system of credit and collections,
is needed to attract and hold customers. Customers will have more
buying confidence and be more comfortable in your
store if they know they can afford to buy. Credit makes
To encourage people to buy, self-service stores rely on
layout, attractive displays, signs and clearly marked
prices on items offered for sale. Other stores combine these techniques
with personal selling. List the display counters,
racks, special equipment (something peculiar to your business
like a frozen food display bin or a machine to measure and cut
cloth) and other fixtures.
Figure the cost of all fixtures and equipment by listing
them on a worksheet as follows:
Type of equipment: number x unit cost
Draw several layouts of your store and attach the layout
that suits you to the cost worksheet. Determine how
many signs you may need for a twelve-month operation and estimate
that cost also.
If your store is a combination of self-service and personal
selling, how many salespersons and cashiers will
you need? Estimate your personnel costs as follows:
I will need salespersons at $ ______ each per week (include
payroll taxes, insurance and employee benefits) for
a total of $ __________ per year.
Personal attention to customers is one competitive tool
for a small store. When training employees, emphasize
that everyone has to pitch in and get the job done. Customers
are not interested in job descriptions they are interested
in being served promptly and courteously.
Nothing is more frustrating to a customer than being ignored
by an employee. Decide what training you will give
your salespeople in how to greet customers, show merchandise,
suggest other items and handle customer needs and
When buying merchandise for resale, you need to answer
these questions: Who sells the line to retailers?
Is it sold by the manufacturer directly or through wholesalers
and distributors? What delivery service can you get
and what shipping charges must you pay? What are the terms of
buying? Can you get credit? How quickly can the vendor
You should establish a source of supply on acceptable terms
for each line of merchandise and estimate a plan
for purchasing as follows:
time -- How many days or weeks does it take the
supplier to deliver the merchandise to your store?
costs -- Who pays you or the supplier? Freight
or transportation costs are a big expense item.
policy -- What is the supplier's policy on reorders?
Do you have to buy a gross, a dozen or will the supplier ship
only two or three items? How long does it take for delivery to
First, list the equipment (for example, a marking machine for
pricing, shelves, a cash register) you will need for
your behind-the-scenes work. Next list the supplies you will need
for a year, e.g., brooms, price tags and business forms.
Often shoppers leave without buying because the store did
not have the items they wanted. Stock control, combined
with suppliers whose policies on reorders are favorable to you,
provides a way to reduce walkouts.
The system you use to keep informed about your stock, or
inventory, depends on your line of merchandise and
the delivery dates provided by your suppliers. See page 7 for
information on stock control.
An owner-manager who buys reasonably well can expect to
turn over stock several times a year. For example,
the stock in a small camera shop should turn over four to four-and-a-half
times a year. What is the average stock turnover
per year of your line of merchandise? How many times do
you expect your stock to turn over? List the reasons for your
In a retail store, behind-the-scenes work consists of receiving
merchandise, preparing it for display, maintaining
display counters and shelves and keeping the store clean and attractive
to customers. The following list will help you decide
what to do and the cost of those actions.
Use this format to figure these costs:
Name of equipment/supplies: quantity
x unit = cost
Who will do the back room work and the cleaning that are
needed to make a smooth operation in the store? If
you do it yourself, how many hours a week will it take? Will you
do these chores after closing? If you use employees,
what will they cost? On a worksheet describe how you plan to
handle these tasks. For example:
Back room work will be done by one employee during the
slack sales times of the day. I estimate the employee
will spend hours per week on these tasks at a cost of $ _____
(number of hours times hourly wage) per week and
$ _____ per year.
I will need _____ square feet of space for the back room
operation. This space will cost $ ____ per square
foot or a total of $ ____ per month.
List and analyze all expense items, such as utilities,
office help, insurance, telephone, postage, accountant,
payroll taxes, employee benefits and licenses or other local taxes,
the same way. If you plan to hire others to help
you manage, analyze these salaries also.
PUT YOUR PLAN INTO DOLLARS
This section is designed to help you think
about what your business plan means in terms of dollars.
The first question concerns the source of dollars. After
your initial capital investment in a small retail
store, the main source of money is sales. What sales volume in
dollars do you expect in the first 12 months? Write
your estimate here and justify it: $________________
List the following estimated start-up costs, transferring
your figures from previous worksheets:
|Fixtures and equipment
|Decorating and remodeling
|Installation of equipment
|Deposits for utilities
|Legal and professional fees
|License and permits
|Advertising for the opening
Whether you have the funds (perhaps in savings) or borrow
the money your new business will have to pay back
start-up costs. Keep this fact in mind as you estimate expenses
and other financial aspects of your plan.
A cash flow projection is a management tool that can eliminate
much of the anxiety that can plague you in lean months.
Use the Monthly Cash Flow Projection form (Appendix B) to figure your
In connection with annual sales volume you need to think
about expenses. For example what will it cost you
to do $100,000 worth of business? How much profit will you make?
A business must make a profit or close.
The following exercise will help you estimate your expenses.
To do this exercise you need to know the total cost
of goods sold for your line of merchandise for the period (month
or year) you are analyzing. Cost of goods sold is
expressed as a percentage of sales and is called an operating
ratio. Check with your trade association to get the
operating ratios for your business.
Using your operating ratio for cost of goods sold and estimated
sales revenue you can break down your expenses by
substituting your ratios and dollar amounts in the income statement.
Notice that the gross profit margin must be large
enough to provide for your expenses and profit. Use
the format below to calculate your operating ratios for all items
on the Income Projection Statement. (See Appendix
Continue to fill out the Income Projection Statement each
month. Use the worksheet provided in Appendix A.
Cash Flow Projection
A budget helps you to see your expected revenues and expenses
each month. Then from month to month the question
is Will sales bring in enough money to pay the store's bills?
The owner- manager must prepare for the financial
peaks and valleys of the business cycle.
Is Additional Money Needed?
Suppose at this point your business needs more money than
can be generated by present sales.
What do you do?
If your business has great potential or is in good financial
condition as shown by its balance sheet you can borrow
money (most likely from a bank) to keep the business operating
during start-up and slow sales periods. The loan
can be repaid during the months when sales are greater than
expenses. Adequate working capital is needed for success and survival
but cash on hand (or lack of it) is not necessarily
an indication that the business is in bad financial shape. A lender
will look at your balance sheet to see the business's
net worth of which cash flow is only a part. The
Balance Sheet (Appendix C) shows a business's net worth (financial
position) at a given time say as of the close of
business at the end of the month or at the end of the year.
Even if you do not need to borrow money you may want to
show your plan and balance sheet to your banker.
It is never too early to build good relations and credibility
(trust) with your banker. Let your banker know you
are a manager with specific goals rather than someone who merely
hopes to succeed.
CONTROL AND FEEDBACK
To make your plan work you need feedback. For example a
year-end profit and loss (income) statement shows
whether your business made a profit or took a loss for the past
Don't wait 12 months for the score. To keep your plan on
target you need readings at frequent intervals. An
income statement compiled at the end of each month or at the end
of each quarter is one common type of feedback.
You must also set up management controls that help you
ensure that the right things are done each day and
week. You as the owner-manager cannot do all the work. You must
delegate work responsibility and authority. All record-keeping
systems should be set up before the store opens. After
you're in business it is too late.
The control system you set up should give you information
about stock sales receipts and disbursements. The
simpler the accounting control system the better. Its purpose
is to give you current useful information and help
you expose trouble spots. Outside advisers such as accountants
The purpose of controlling stock is to provide maximum
service to your customers. Your aim should be to
achieve a high turnover rate on your inventory. The fewer dollars
you tie up in stock the better. In a small store
stock control helps the owner-manager offer a balanced assortment
and determine stock to be ordered on the basis of
what is on hand what is on order and what has been
When setting inventory controls keep in mind that in addition
to the cost of the stock there are also the costs
of purchasing receiving and storing stock and the cost of keeping
stock control records.
Your stock control system should enable you to determine
what needs to be ordered on the basis of what is
on hand what is on order and what has been sold. Some trade associations
and suppliers provide systems to members and customers.
Otherwise your accountant can set up a system that
is best for your business. Inventory control is based on either
a perpetual or a periodic method of accounting involving
cost considerations as well as stock control.
When you have chosen the system you will use to control
stock estimate its cost. You may not need an extensive
(and expensive) control system if you do not need the detailed
information such a system collects. The system must
justify its cost or you will waste money and time on a useless
Many stores (e.g. bookstores shoe stores and clothing stores)
use computerized software systems to control inventory.
A computerized inventory system is especially helpful if you must
maintain a large variety of products as in a bookstore
a liquor store or a shoe store. A computerized system
allows you to avoid overstocking items that do not sell in large
quantities by providing detailed reports on sales
and stock turnover. Speak to your accountant about the feasibility
and cost of using a computerized inventory system
or visit your local computer store to see what inventory
systems are available. The best system usually will be one designed
for your line of business.
In a small store sales slips and cash register tapes give
the owner-manager feedback at the end of each day.
To keep on top of sales answer questions such as How many sales
were made? What was the dollar amount? What were
the best-selling products? At what price? What credit terms were
given to customers?
Break out your receipts into receivables (money still owed
such as charge sales) and cash. You will then know
how much credit you have given how much more you can give and
how much cash you have with which to operate.
Your management controls should also give you information
about the dollars your company pays out. In checking
on your bills you do not want to be penny-wise and pound-foolish.
Pay bills on time to take advantage of supplier discounts.
Your review systems should also give you the opportunity
to make judgments on the use of funds. In this manner you can
be on top of emergencies as well as routine situations.
Your system should also tell you that tax monies such as
payroll income tax deductions are being set aside and deposited
at the proper time.
Break-even analysis is a management control device that
approximates how much you must sell in order to cover
your costs with no profit and no loss. Profit comes after you
pass the break- even point.
Profit depends on sales volume selling price and costs.
Break-even analysis helps you estimate what a change
in one or more of these factors will do to your profit. To figure
a break-even point fixed costs (like rent) must be
separated from variable costs (like the cost of goods sold). The
break-even formula is as follows:
Breakeven point (in sales dollars) equals
total fixed costs divided by 1 minus total variable
costs divided by corresponding sales volume.
For example Bill Mason plans to open a shoe store and estimates
his fixed expenses at about $9000 the first year.
He estimates variable expenses of about $700 for every $1000 of
sales. Howmuch must the store gross to break even?
Breakeven point equals $9,000 divided
by 1-700 divided by 1000 which equals $9000 divided
by 1- .7 Which equals $9,000 divided by 3 which
IS YOUR PLAN WORKABLE?
Stop when you have worked out your break-even point. Whether
the break-even point looks realistic or way off base
it is time to make sure your plan is workable.
Reexamine your plan before you back it with money. If the
plan is not workable it is better to learn it now
than to realize six months down the road that you are pouring
money into a losing venture.
In reviewing your plan look at the cost figures from your
breakdown of yearly expenses (operating ratios on
the income statement). If any of your cost items are too high
or too low change them. You can write your changes
above or below your original entries on the expenses worksheet.
When you finish making your adjustments you will have a revised
projected statement of sales and expenses.
With your revised figures work out a revised break-even
analysis. Whether the new break-even point looks
good or bad take one more precaution. Show your plan to someone
who has not been involved in working out the details
with you. Get an impartial knowledgeable second opinion. Your
banker contact person at Small Business Administration or other
adviser may see weaknesses that you did not see.
This expert also may see strong points your plan should emphasize.
IMPLEMENTING YOUR PLAN
When your plan is as thorough and accurate as possible
you are ready to put it into action. Keep in mind
that action is the difference between a plan and a dream. If a
plan is not acted upon it is of no more value than
a wishful dream.
Look back over your plan for things that must be done to
put it into action. What needs to be done will depend
on your situation and goals. For example if your business plan
calls for an increase in sales you may have to provide
more funds for this expansion. Have you more money to
put into this business? Can you borrow from friends or relatives?
From your bank? From your suppliers (through credit
terms)? If you are starting a new business one action might be
to get a loan for fixtures stock employee salaries
and other expenses. Another action will be to find and hire
Now list things that must be done to put your plan into
action and give each item a completion date.
KEEP YOUR PLAN CURRENT
Once you put your plan into action look out for changes.
They can cripple the best business no matter how
well planned. Stay on top of changing conditions and adjust your
business plan accordingly. Sometimes the change is
within your company -- for example several of your salespersons
may quit. Sometimes the change is with customers whose desires
and tastes change or refuse to change. Sometimes
the change is technological as when new products are created and
In order to adjust your plan to account for such changes
you the owner-manager must
! Be alert
to the changes in your line of business market and customers.
! Check your plan
against these changes periodically.
what revisions if any are needed in the business plan and implement
Be sure to read trade and business papers and magazines.
You must be constantly updating and improving. A
good business plan must evolve from experience and the best current
information. Certainly you will have more accurate
dollar amounts to work with after you have been in business
for a time. A good business plan is good business.
The income projection (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 projects are developed and entered into the
income projection 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
In the industry percentage column, enter the percentages
of total sales (revenues) that are standard for your
industry which are derived by dividing
cost/expense items by 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
(1 Liberty Place, Philadelphia PA 19103)
Industry figures serve as a useful benchmark against which
to compare cost and expense estimates that you develop
for your firm. Compare the figures in the industry column to those
in the annual percentage column
Total Net Sales (Revenues)
Determine the total number of units or 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 projection to review your pricing practices.
! What returns, allowances
and markdowns can be expected?
! Exclude any revenue that
is not strictly related to the business.
The key to calculating your cost of sales is that you do
not overlook any costs that you have incurred. Calculate
cost of sales for all products and services used to determine
total net sales. Where inventory is involved, do
not overlook transportation costs. Also include any direct labor.
Subtract the total cost of sales from the total net sales
to obtain gross profit.
Gross Profit Margin.
The gross profit margin is expressed as a percentage of
total sales (revenues) it is calculated by dividing
gross profits by total net sales
! 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.
-- Services and items purchase for use in the business.
! Repairs and maintenance
-- Regular maintenance and repair, including periodic large
expenditures such as painting.
-- Include desired sales volume and classified directory advertising
! Car, delivery and travel
-- Include charges if personal car is used in business, including
parking, tolls, buying trips, etc.
and legal -- Outside professional services.
-- List only real estate used in the business
-- Amortization of capital assets.
-- Water, heat, light, etc.
-- Fire or liability on property or products. Include workers'
! Loan repayments
-- Interest on outstanding loans.
-- Unspecified; small expenditures without separate accounts.
Net Profit (loss)
Subtract total expenses from gross
Include inventory and sales taxes, excise tax,
real estate tax, etc.
|Net Profit (loss)
Subtract taxes from net profit (before taxes)
For each of the sales and expense items in your
income projection statement, add all the monthly
figures across the table and put the results
in the annual total column.
Calculate the percentage by dividing annual total
by total net sales x 100%
Compare this figure to the industry percentage
in the first column
APPENDIX B: MONTHLY CASH FLOW PROJECTION
This is a form which cannot be reproduced in this format.
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.
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.
-- 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 operations). 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
-- Includes raw materials on hand, work in progress and all
finished goods, either manufactured or purchased
! Short-term investments
-- Also called temporary investments in 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
! Prepaid expenses
-- Goods, benefits or services a business buys or rents in advance.
Examples are office supplies, insurance protection and floor
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.
Also called plant and equipment. Includes all resources
a business owns or acquires for use in operations
and no intended for resale. Fixed assets, except for land, are
listed at cost less depreciation. Fixed assets may
be leased. Depending on the leasing arrangement, both the value
and the liability of the leased property may need
to be listed on the balance sheet.
-- List original purchase price without allowances for market
List all debts, monetary obligations and claims payable
within 12 months or within one cycle of operations.
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 die to pay off short-term debt for
borrowed funds. Also include the current amount
due of total balance on notes whose terms exceed
! 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.
Notes payable -- List notes, contract payments or mortgage
payments due over a period exceeding 12 months or
one cycle of operations. They are listed by outstanding balance
less the current portion due.
Also called owner's equity, net worth is the claim of the
owner(s) on the assets of the business.
In proprietorship or partnership, equity is each owner's
original investment plus any earnings or withdrawals.
Total Liabilities and Net Worth
The sum of these two amounts must always match at of total
APPENDIX D: HOW TO WRITE A BUSINESS PLAN
The following pages provide a suggested outline of the
material that should be included in your business
plan. Your final plan may vary according to your needs or because
of the individual requirements of your lender.
What Are the Benefits?
Every business can benefit from the preparation of a carefully
written plan. There are two main purposes for writing
1. To serve as a guide during the lifetime
of the business. It is the blueprint of your business
and will provide you with the tools for analysis and change.
2. A business plan is a requirement if you
are planning to seek a loan. It will provide potential
lenders with detailed information on all aspects of your company's
past and current operations and provide future projections.
Serves as the title page of your business plan. It should
contain the following:
! 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 your
plan was issued
! Name of preparer
II. Statement of purpose
(Same as executive summary.) This is the thesis statement
and includes business plan objectives. Use the key
words (who, what, where, when, why, how, and how much) to briefly
tell about the following:
! What your company is (also who what
where and when).
! What your objectives are.
! If you need a loan why you need it.
! How much you need.
! Why you will be successful.
! How and when you
plan to repay your loan.
A page listing the major topics and references.
Covers the details of your business. Include information
about your industry in general, and your business
in particular. Address the following:
! Legal structure
-- Tell what legal structure you have chosen and state reasons
for your choice.
! Description of the business
-- Detail your business. Tell about your history present
status and future projections. Outline your product or service
in terms of marketability. Project a sense of what
you expect to accomplish in the next few years.
! Products or services
-- Give a detailed description of your products from raw materials
to finished items. Tell about your manufacturing process. If
you provide a service tell what it is how it is
provided and why it is unique. List future products
or services you plan to provide.
-- Describe site and why it was chosen. (If location is important
to your marketing plan focus on this in the marketing
-- Describe who is behind the business. For each owner tell
about responsibilities and abilities. Support with
-- Who will be doing the work why are they qualified what is
their wage what are their responsibilities?
! Methods of record keeping
-- What accounting system will you use? Who will do your
record keeping? Do you have a plan to help you use your records
in analyzing your business?
-- What kinds of insurance will you need? What will these cost
and who will you use for a carrier?
-- Address security in terms of inventory control and theft
Covers the details of your marketing plan. Include information
about the total market with emphasis on your target
market. Identify your customers and tell about the means to make
your product or service available to them.
! Target market
-- Identify characteristics of your customers. Tell how you
arrived at your results. Back up information with
demographics questionnaires and surveys. Project
size of your market.
-- Evaluate indirect and direct competition. Show how you can
compete. Evaluate competition in terms of location
market and business history.
! Methods of distribution
-- Tell about the manner in which products and services will
be made available to the customer. Back up decisions with statistical
reports rate sheets etc.
-- How will your advertising be tailored to your target market?
Include rate sheets promotional material
and time lines for your advertising campaign.
-- Pricing will be determined as a result of market research
and costing your product or service. Tell how you
arrived at your pricing structure and back it up
with materials from your research.
! Product design
-- Answer key questions regarding product design and packaging.
Include graphics and proprietary rights information.
! Timing of market entry
-- Tell when you plan to enter the market and how you arrived
at your decision.
-- If your choice of location is related to target market cover
it in this section of your business plan. (See
location in the business section of this outline.)
! Industry trends
-- Give current trends project how the market may change and
what you plan to do to keep up.
VI. Financial documents
These are the records used to show past, current and projected
finances. The following are the major documents you
will want to include in your business plan. The work is easier
if these are done in the order presented.
! Summary of financial
needs -- This is an outline indicating why
you are applying for a loan and how much you need.
! Sources and uses
of funds statement -- It will be necessary
for you to tell how you intend to disperse the
loan funds. Back up your statement with supporting data.
! Cash flow statement
(budget) -- This document projects what your
business plan means in terms of dollars. It shows
cash inflow and outflow over a period of time and
is used for internal planning. Cash flow statements show both
how much and when cash must flow in and out of
! Three-year income
projection -- A pro forma income statement
showing your projections for your company for the
next three years. Use the pro forma cash flow statement
for the first year's figures and project the next according
to economic and industry trends.
! Break-even analysis
-- The break-even point is when a company's expenses exactly
match the sales or service volume. It can be expressed in total
dollars or revenue exactly offset by total expenses
or total units of production (cost of which exactly
equals the income derived by their sales). This analysis can
be done either mathematically or graphically.
Note: The following are actual performance statements
reflecting the activity of your business
in the past. If you are a new business owner your financial
section will end here and you will add a
personal financial history. If you are an established business
you will include the actual performance statements that follow.
! Balance sheet
-- Shows the condition of the business as of a fixed date. It
is a picture of your firm's financial condition
at a particular moment and will show you whether
your financial position is strong or weak. It is usually done
at the close of an accounting period and contains
assets liabilities and net worth.
! Income (profit and
loss) statement -- Shows your business financial
activity over a period of time (monthly annually).
It is a moving picture showing what has happened
in your business and is an excellent tool for assessing your
business. Your ledger is closed and balanced and
the revenue and expense totals transferred to this
! Business financial
history -- This is a summary of financial information
about your company from its start to the present.
The business financial history and loan application
are usually the same. If you have completed the rest of the
financial section you should be able to transfer
all the needed information to this document.
VII. Supporting documents
These are the records that back up the statements and decisions
made in the three main parts of your business plan.
Those most commonly included are as follows:
! Personal resumes
-- Should be limited to one page and include work history educational
background professional affiliations and honors and special
! Personal financial
statement -- A statement of personal assets
and liabilities. For a new business owner this
will be part of your financial section.
! Credit reports
-- Business and personal from suppliers or wholesalers credit
bureaus and banks.
! Copies of leases
-- All agreements currently in force between your company and
a leasing agency.
! Letters of reference
-- Letters recommending you as being a reputable and reliable
business person worthy of being considered a good
risk. (Include both business and personal references.)
-- Include all business contracts both completed and currently
! Legal documents
-- All legal papers pertaining to your legal structure proprietary
rights insurance titles etc.
! Miscellaneous documents
-- All other documents that have been referred to but are
not included in the main body of the plan (e.g. location plans,
demographics, advertising plan etc.).
Putting Your Plan Together
When you are finished: Your business plan should look professional,
but the lender needs to know that it was done by
you. A business plan will be the best indicator he or she has
to judge your potential for success. It should be
no more than 30 to 40 pages long. Include only the supporting
documents that will be of immediate interest to your potential
lender. Keep the others in your own copy where they
will be available on short notice. Have copies of your plan bound
at your local print shop, or with a blue, black or
brown cover purchased from the stationery store. Make
copies for yourself and each lender you wish to approach. Do not
give out too many copies at once, and keep track
of each copy. If your loan is refused, be sure to retrieve your
business plan. For a more detailed explanation of
each section of the business plan outline, see SBA's publication,
How to Write a Business Plan, which includes step-by-step
directions and sample sections of actual business
plans. Also available from the SBA is a VHS videotape and workbook,
The Business Plan: Your Roadmap for Success.
APPENDIX E: 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 The Small Business Directory.
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.
! 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
! Small Business Institutes
(SBIs), organized through SBA on more than
500 college campuses nationwide. The institutes
provide counseling by students and faculty to small
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
are listed in the Yellow Pages under the bookstore
heading. You can request a Subject Bibliography by writing
to Government Printing Office, Superintendent of Documents, Washington,
Many federal agencies offer publications of interest to
small businesses. There is a nominal fee for some,
but most are free. Below is a selected list of government agencies
that provide publications and other services targeted
to small businesses. To get their publications, contact the regional
offices listed in the telephone directory or write to the addresses
Consumer Information Center (CIO)
P.O. Box 100
Pueblo, CO 81002
The CIO offers a consumer information catalog of
Consumer Product Safety Commission (CPSC)
Washington, DC 20207
The CPSC offers guidelines for product safety requirements.
U.S. Department of Agriculture (USDA)
12th Street and Independence Avenue, SW
Washington, DC 20250
The USDA offers publications on selling to the USDA.
Publications and programs on entrepreneurship are
also available through county extension offices nationwide.
U.S. Department of Commerce (DOC)
Office of Business Liaison
14th Street and Constitution Avenue, NW
Washington, DC 20230
DOC's Business Assistance Center provides listings
of business opportunities available in the federal
government. This service also will refer businesses to different
programs and services in the DOC and other federal
U.S. Department of Health and Human Services
Public Health Service
Alcohol, Drug Abuse and Mental Health Administration
5600 Fishers Lane
Rockville, MD 20857
Drug Free Workplace Helpline: 1-800-843-4971. Provides
information on Employee Assistance Programs.
National Institute for Drug Abuse Hotline:
1-800-662-4357. Provides information on preventing
substance abuse in the workplace.
The National Clearinghouse for Alcohol and Drug Information:
Provides pamphlets and resource materials on substance
U.S. Department of Labor (DOL)
Employment Standards Administration
200 Constitution Avenue, NW
Washington, DC 20210
The DOL offers publications on compliance with labor
U.S. Department of Treasury
Internal Revenue Service (IRS)
P.O. Box 25866
Richmond, VA 23260
The IRS offers information on tax requirements for
U.S. Environmental Protection Agency (EPA)
Small Business Ombudsman
401 M Street, SW (A-149C)
Washington, DC 20460
1-800-368-5888 except DC and VA
703-557-1938 in DC and VA
The EPA offers more than 100 publications designed
to help small businesses understand how they can
comply with EPA regulations.
U.S. Food and Drug Administration (FDA)
FDA Center for Food Safety and Applied Nutrition
200 Charles Street, SW
Washington, DC 20402
The FDA offers information on packaging and labeling
requirements for food and food-related products.
For More Information
A librarian can help you locate the specific information
you need in reference books. Most libraries have
a variety of directories, indexes and encyclopedias that cover
many business topics. They also have other resources,
! Trade association
Ask the librarian to show you a directory of
trade associations. Associations provide a valuable
network of resources to their members through publications and
services such as newsletters, conferences and seminars.
Many guidebooks, textbooks and manuals on small
business are published annually. To find the names
of books not in your local library check Books In Print,
a directory of books currently available from publishers.
! Magazine and newspaper articles
Business and professional magazines provide
information that is more current than that found
in books and textbooks. There are a number of indexes to help
you find specific articles in periodicals.
In addition to books and magazines, many libraries offer
free workshops, lend skill-building tapes and have
catalogues and brochures describing continuing education opportunities.
Published - May 2011