A Roadmap for Success

Planning a trip often requires a map to figure out the best route to your destination. A business plan is simply a roadmap for your business – it is a way for you as the prospective business owner to communicate ideas to discover the best route to a successful business venture. The development of a business plan allows you to make mistakes on paper before it costs you money, and it allows you to try different options before settling on what works best for your business. Business plans should change with your changing business environment to ensure that you are driving toward your destination.

The Table of Contents simply provides the reader with section headings and page numbers of your business plan for easy reference. This section is important to include as it allows the reader to locate any information required with ease.

The Executive Summary is usually written after the business plan has been completed. This section summarizes your business idea and should include a brief description of the business and its management team, products and/or services offered, the amount of money required and what it will be used for, and the opportunities for growth. Remember that this section is intended to touch on the key elements of your plan and should not be longer than two pages in length.

The purpose of the business section is to provide the reader with background information on the company, as well as profile the industry and its current status. Try to answer this question: why would the reader be interested in financing/supporting this project in this industry?

3.1.1 The Company
This section should describe the company, its structure (sole proprietorship, partnership or corporation) and its status (start-up, expansion). Information that may be included here is rationale behind the business name, projected number of employees and any other information on the company that may be of relevance or interest to prospective readers.

3.1.2 The Industry
This section describes the industry that your business will be involved in and should include information (and statistics) on the current status and future prospects for the industry. It is important to conduct research on the industry your business is in–its history, competition, recent industry breakthroughs, customer base and so on. Industry information can often be located by contacting provincial associations and organizations that can often assist or point you in the right direction.

3.1.3 Management
The experience, talent and skills of the management team are very important to making your business case. In this section, list the owners and management team who will be involved in the business. What strengths do they bring to the business? Be brief–include resumes for the management team in the appendix of your business plan. It is a good idea to list each position within the business and the people responsible for each position. Is there a Board of Directors and/or professional advisors? If so, list their roles and responsibilities. Does your business have a plan for succession (who will take over the business when you move on and/or retire)?

The purpose of the opportunity section is to outline your business idea and is considered the ‘heart of the business plan’. It is important to clearly illustrate your business’s products and/or services and make a case as to why your business can supply these products and/or services in a competitive or specialized market (niche). It is important that the reader understands the opportunity that you are proposing—be creative with the use of diagrams and other aids to make your case whenever possible.

4.1.1 The Product or Service
This section should outline what your product or service is and what it is used for. Is this a new idea and if so, has it been protected by copyright, patent or other legal means? It is important to also describe any unique or distinct features and discuss its longevity in the marketplace-will your product or service become obsolete at some point? Will there be future research and development work to continue to improve or increase product lines and service provision? Again, the use of diagrams, studies, photographs and other aids may be useful to assist in making your business case.

4.1.2 The Market
This section provides the reader with a sense that you, as the business owner, understand who your customers are and what they are willing to spend. The information provided in this section will allow you and the reader to determine whether your projected sales targets can be reached. This section should identify who your potential customers are, how your products and/or services meet the needs of your customers, as well as the use of statistical data on total market size to determine your market share.

4.1.3 Competition
Your competitors are an important factor in determining the feasibility of your business plan. Be sure to identify:

• any major competitors and their market shares;
• if competitor sales are increasing, decreasing or remaining constant (and list why);
• the strengths and weaknesses of your company versus your company’s competitors (based on their size, reputation, location, distribution channels and other important information);
• the strengths and weaknesses of your products and services versus your competitors (price, promotion, distribution, quality, warranties and so on); and
• what you have learned from watching your competition.

4.1.4 Marketing
Your marketing strategy should use the information gathered in The Market section above and illustrate how your product will be sold (personal selling, on-line transactions, retail, wholesale etc). It is important to discuss your marketing strategy– how will you reach the customers you have identified above? List all pertinent information such as product/service features that will be emphasized, how it will be advertised and promoted (newspaper, radio, trade shows, door-to-door and so on). It is also advisable to identify any key seasons that may require more advertising and promotion and adjust your cash flow statement accordingly.

The production and operation of your business is another key factor in building your business case. It is important to illustrate to the reader that you, as the business owner, understand the industry you are in and how to run your operation in the most cost-effective manner.

5.1.1 Location
Describe the location of your business and discuss the advantages and disadvantages (if any) of the site. It is important to discuss your location’s proximity to markets, suppliers, transportation routes and available labour. Depending on the nature of your business, it may also be important to include any provincial and municipal laws that may apply– including zoning.

5.1.2 Facilities
In this section, please describe the facilities in use or to be acquired–is the building owned or leased (please state the terms of the arrangements). Briefly describe your facilities–you may want to include diagrams and floor plans to fully illustrate your facilities to the reader. Other important information to include may be a real estate appraisal (if the building is being purchased), any future plans for renovations and any potential environmental liabilities that may arise.

5.1.3 Materials/Supplies
The availability of materials often affects the turnaround time that a business can get its products manufactured and sold. Please describe any risks associated with your materials/supplies. Can supplies be obtained from only one source? Are your supplies perishable? Does your facility have the storage capacities required for your supplies? Are there complementary supplies (items that could be used instead of another if the prices of your supplies increase)? For example: canola oil can be substituted for vegetable oil in many recipes.

5.1.4 Personnel
Describe the personnel requirements for your business. What positions will you create to assist with your business needs and what are the training needs and skills required for each position? Indicate the compensation that will be provided for each position including salaries, overtime, health and pension benefits.

5.1.5 Set Up
Discuss how long it will take to acquire your facilities, equipment, hire your personnel and so on. How long will it take to produce your first line of products/services? Do you need any special licenses or permits?

5.1.6 Operations
What will your business’s hours of operation be? Will it be open on holidays and weekends? Have you, as the business owner, considered when inventory will be replenished, when the manufacturing process will occur or when supplies will be reordered?

This section will determine the profitability potential of your business idea through financial analysis. It is this information that should be looked at very closely to assure that the business idea has the ability to generate profits and repay a loan should financial assistance be required. Remember that you must be able to justify the numbers that you include in your projections–for example, if you estimate that your busiest month will fall in December, your sales projections should reflect this and vice versa.

6.1.1 Startup Costs
It is important to first determine what you will require to start your business–what equipment, land and buildings will you purchase and what other supplies are required? It is a good idea to itemize each startup purchase required into a list along with the price of each item. This is very important for those potential business owners requiring financing–your lender will want to see what you are using loan funds for and what they may take as security on the loan. Be sure to include written estimates when available for verification purposes.

6.1.2 Required Investment
In this section, list the total amount of funding required– what will you, as the business owner, contribute to the project? Are there outside parties willing to invest in your business idea? What will you require from a lender? It is important to state the use of funds in each case– what funds will be used for equipment, renovations, inventory, working capital and so on? Please note that there are very few financial institutions willing to provide 100% financing for business loans.

6.1.3 Cash Flow Projections
A cash flow statement identifies monthly inflows and outflows of cash. A cash flow statement reveals to the reader and the business owner whether a company will have enough money to meet its needs on a monthly basis. Financial institutions require a minimum one-year to three-year cash flow statement, depending upon the magnitude of the venture and financing required. Please see Appendix A for a detailed look at a cash flow statement.

6.1.4 Other Financial Data
Other financial data may be required in order to clearly depict your business’s financial picture. Two financial statements that are commonly required in addition to the cash flow statement are the balance sheet and the income statement. The balance sheet is a snapshot of what you own and what you owe on a specific date and contains two sections: assets and liabilities. Both the assets and the liabilities section must balance with one another (for example, if I show $300,000 in assets, there must be $300,000 in liabilities). The income statement is a financial statement that reveals whether a business has earned a profit or has suffered a loss after a specified period and may also be known as the profit and loss statement. Please see Appendix B for a detailed look at these statements.