The importance of a comprehensive, well-thought-out business plan cannot be overemphasized. Much hinges on it: outside funding, credit from suppliers, management of both your operation and finances, promotion and marketing of your business, and achievement of your goals and objectives.

"The business plan is a necessity. If the person who wants to start a small business can't put a business plan together, he or she is in trouble," says Robert Krummer, Jr., chairman of First Business Bank in Los Angeles.

Despite the critical nature of a business plan, many owners and managers drag their feet when it comes to preparing a written document. They argue that their marketplace changes too fast for a business plan to be useful or that they just don't have enought time - they are too busy running the business. But just as a builder won't begin construction without a blueprint, eager business owners shouldn't rush into new ventures without a business plan. For without a business plan, you will end up going from crisis to crisis, putting out fires, never looking at your operation in the long term.

This is a suggested outline for an effective business plan, provided by the SBA:

Suggested Outline

Cover Sheet: Name of the business, names of the principals or owners, address and telephone number of business.

Statement of Purpose: To indicate the purpose of the business plan.

Table of contents

I. The Business

a. Description of the business: Includes the type of business, the status of the business, the form of the business organization, why the business is going to be profitable, when the business will or did open, the hours of operation, and whether business is seasonable or not.
b. Market: Define the market and its size, your anticipated share of the market, growth potential of the market, your marketing strategy, and your pricing.
c. Competition: Include your five nearest competitors, your advantage over competitors, the strength of your competitors' business, strengths and weaknesses of competitors, and what you have learned from their operations.
d. Location of business: Indicate your business address, the physical features of your building, renovations anticipated and their costs, the physical features of the neighborhood and businesses surrounding your location, and the advantages and disadvantages of this location.
e. Management: Includes resumes of the management of your business, salary schedules for these personnel and their duties and responsibilities.
f. Personnel: Describe the personnel needs of your business by skills required, salaries or wages, fringe benefits and overtime anticipated.
g. Capital requirements of business: Describe the capital needs of the business including any loans required and the uses of the funds.
h. Summary of the business.

II. Financial Data

a. Sources and applications of funding: Similar to section G above. Used primarily if the business plan is for loan financing purposes.
b. List of capital equipment required for business: Include the cost of this equipment.
c. Balance sheet: Include the most recent description of you business's assets, liabilities and owner's equity or net worth.
d. Break-even analysis: Calculate the break-even point for your business.
e. Income projections: This section indicates the anticipated sales or revenue of your business over a 12-month period in the future, the anticipated expenses for this same period, and the pre-tax profits based on these sales and expenses. Any assumptions made in compiling these figures should be explained carefully.
f. Pro-forma cash flow statements: Describe in detail a monthly breakdown for one year of your expected cash receipts, projected cash disbursements and resultant cash flow of your business.
g. Historical financial statements: This section should be included only for existing businesses or when a business is being purchased and should include statements for at least three years.

III. Supporting Documents:

a. This section should include any personal resumes, personal financial statements, if applicable, cost of living budgets of owner, credit reports, letters of reference, job descriptions, letters of intent, copies of leases or contracts, legal documents, and other documents relevant to the business plan.

Source:
National Business News
Sep 1990
Page 5