SAMPLE BUSINESS PLAN
Tulsa SCORE Chapter 0194
907 S Detroit Suite 1001
TulsaOK74120
Phone 918-581-7462
FAX 918-581-6908
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This document is to furnish a sample Business Plan as guidance for those preparing a Plan to start a small business. The sample is based on a Plan used by a Tulsa SCORE client to obtain a loan and start a successful business. Permission was granted to use his work as an example for other clients provided names were changed.
The writer of this Plan did have advantages when seeking financing:
Money to partially fund the startup
Experience managing a small business
A long term relationship with his bank
A good credit rating
Outside income
Several things about this Plan arenoteworthy:
The Plan demonstrates that there is no one correct format for successful Business Plans. However, there is certain basic information required for every Plan.
The Plan is brief. A comment frequently heard from lenders is that Plans are too long.
The Plan does not have an Executive Summary or a Mission Statement. Executive Summaries are not needed unless the Plan exceeds six or seven pages. Mission Statements are generally superfluous and unrelated to business decisions.
The Plan was written almost ten year ago. Today a Marketing Plan would place greater emphasis on the internet and social media,but basic marketing concepts are the same. Define the customer base, assess the competition, develop a pricing strategy and establish a program to reach the person making the buying decision.
The most important sections of a Business Plan are the Marketing Plan and the Financial Plan. Normally it is best to start by working on the Marketing Plan. Other sections cannot be completed until the product or service is fully defined, a detailed marketing program with costs has been developed, pricing strategy established and sales volumes projected.
There are other documents in the Tulsa Chapter website library that will assist in preparing a Business Plan.
Financial Formats – Normally AccrualAccounting formats should be used. Those provided are similar to the Sample Plan formats
Glossary of Financial Terms
Tulsa Small Business Guide
These documents are accessed by going to Near the bottom of the Home page click on Click for Chapter Library Linkand select the desired document.
Save the Financial Formats on a hard drive for use in preparing your Plan.
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BUSINESS PLAN FOR ABC, LLC
Prepared by John Doe
123 Noname Street
Anywhere OK 74000
918-000-0000
January 1, 2004
Table of Contents
Purpose, Legal Form, Ownership...... 1
The Product...... 1
The Market
Market Analysis...... 1
Revenue Projections...... 1
Product Cost ………………………………………………………….. 2
Competition...... 2
Sales Strategy...... 2
Marketing Plan ……………………………………………………….. 2
Marketing Budget...... 3
Operations / Management Plan
Management...... 3
Space Requirements...... 4
Insurance...... 4
Business Taxes...... 4
Initial Start-up plan...... 4
Start-up Funding
Cash Required at Start-up...... 5
Requested Bank Financing...... 5
Financial Plan
Startup Cash Flow ……………………………………………………. 6
Income Statement – Year one by month...... 7
Cash Flow Statement – Year one by month...... 8
Income Statement – Three year projected...... 9
Cash Flow Statement – Three year projected...... 10
Balance Sheet – Three year projected...... 11
Appendix...... 12
PURPOSE, LEGAL FORM , OWNERSHIP
The purpose of ABC is to establish a franchise business which will (1) sell and install Electronic Product (EP) to pick-up owners on a retail basis and (2) sell and install EP on new pick-up trucks for dealerships before they sell them to retail customers.
ABC will operate as a Limited Liability Company (LLC) which will be formed immediately upon approval of the bank loan.
ABC, LLC will be owned 100% by John Doe.
THE PRODUCT
About EP
EP is a patented product manufactured and sold through franchisees by The Big Company, Inc. (TBC). EP is an electronic device which monitors and regulates a pick-up’s performance. The savings gained through this monitoring and regulation will pay for the installation of EP in six months and makes it very popular with pick-up owners.
THE MARKET
Market Analysis
This product will be marketed in the Tulsa area. Since the product has been created to monitor and regulate a pick-up truck’s performance, marketing programs will be specifically directed towards pickup truck owners. Demographic information obtained through library research has narrowed the target area for initial advertising. This information helps identify the appropriate communication channels to reach target customers.
Recent studies have shown a steady increase in pick-up truck sales in the northeast Oklahoma region since 2002 (based upon dealership data and public reports).
Revenue Projections
The sales projections included in the pro forma financial statements were developed with the assistance of TBC from their experience with other franchises which have used the same marketing program. The sales are projected to grow from 15 the 1st month to 46 the 12th month and from 421 the 1st year to 750 the 3rd year. TBC believes that these are conservative estimates but the owner is reluctant to use the higher estimates for purposes of this Business Plan. The per unit sales price will be $350.
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Cost of EP and Inventory Levels
EP will be purchased from TBC at a cost of $120 per unit. In addition, $10 per unit of shop supplies will be required to install it. It is anticipated that three dozen units ($4,320) of inventory will be required for start up. This inventory will also be delivered on day one of the lease. Franchise fees are included in the cost of the equipment and units purchased from TBC.
Competition
There is one other product of a similar nature available but it is not being marketed in the Tulsa area. Comparative tests show that the competitive product does not provide the savings that EP provides but it is still possible that it will be offered in the Tulsa market in the future.
Sales Strategy
The primary sales approach to pick-up owners who call or who drive into the shop will be based upon the fact that EP greatly improves the performance of pick-up trucks and that the savings gained from this improved performance will save the average owner enough money to pay for EP in 6 months. The Operations Manager who has been chosen to run the shop on a day to day basis has excellent communications skills which will be used to explain the benefits of EP to the pick-up owners. In addition, there are hundreds of very positive references available from pick-up owners in other parts of the U.S. who have purchased and used EP and experienced its benefits. The same sales approach will be used by ABC, LLC’s owner when he calls on pick-up dealers. The development of a wholesale distribution network will provide a compelling reason for facilities-based dealers of trucks to become a distributor for EP.
Marketing Plan
- A large, easily visible sign will be prepared prior to start up. It will be installed on the leased building and will contain product information in addition to the company name.
- Radio spots furnished by TBC will be aired to three local radio stations that best reach our target market based upon data provided by radio stations. Starting the first day of operation, their use will be continued monthly.
- Brochures prepared by TBC will be available prior to start-up and will contain the name of ABC, LLC.
- From a list provided by TBC, direct mailings of brochures will be made to 1,000 Tulsa households who own pick-up trucks. These mailings will be made on the day of start-up to pick-up truck owners in the zip codes specified above. The list has been narrowed down to households with median incomes of $45,000 to $76,000 that own a pick-up truck. If the response rate is good, brochures will be sent out to additional households.
- The owner, prior to start up, will make sales calls to all pick-up dealers in the Tulsa area. The product will be explained and brochures will be given to them.
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- An ad will be placed in the yellow pages with a one year contract.
- A website will be developed by TBC. This site will be 5 to 7 pages and contain company information, product information, and contact information.
- Development of a short-term publicity campaign to obtain news coverage about the product. This will reinforce the direct mail effort. This hinges on developing a viable news angle. The owner will develop a newsworthy story and pitch it to the Tulsa media.
Media
Vehicle / Schedule / Budget Amount
Sign on building / One time prior to start-up / $3,000
Radio spots / Average 3 spots daily / $650/month
Brochures / 2,000 printed at start-up / $315
Direct mailing / At start-up and as needed thereafter / $780/1000 brochures
Yellow pages ad / One year contract / $485/year
Website development and maintenance / One time fee with a monthly maintenance fee / $600
Total / $5,830
Marketing Budget
The marketing budget is set for $5,830 in the first month and $830 a month thereafter. Marketing funds will come out of working capital as listed in start-up costs below.
OPERATIONS / MANAGEMENT PLAN
Management
Since 75% of the owner’s time is spent in managing another business which he owns, an Operations Manager (OM) will be employed to run the company on a day to day basis. He will install EP and will supervise the installation of EP by an hourly person when the sales volume reaches the level that two people are required. The OM has been selected and has agreed to accept the position. The second employee is anticipated to be required in month seven of operations. TBC will provide on site training to the OM for installation and testing of EP.
The owner will provide supervision and guidance for the OM. He will also retain
responsibility for direct marketing to dealerships plus banking, accounting, insurance, legal, and other administrative functions.
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Space Requirements
Prior experience of TBC with other franchisees shows that a “warehouse” with 2500 sq. ft. of space will be adequate to operate the business for at least the first 5 years. Up to 300 sq. ft. of this space will be utilized as an office and customer waiting room. A search of the Tulsa real estate market indicates that the maximum cost of this type space in a highly visible area is $10/sq. ft./year ($25,000 per year). A facility with such space available has been located.
Insurance
The owner contacted three insurance agencies to determine the needed coverage and the cost of such coverage. It was determined that the following coverage would be obtained: (1) Liability (2) Multi Peril (coverage of assets contained in the leased building) (3) Truck (4) Workers’ Comp and (5) Health coverage for the OM and his family. An agency has been decided upon and the coverage will be made available on day one of the building lease.
Business Taxes
Business taxes include the following: (1) Personal Property Taxes for TulsaCounty (2) Franchise Taxes for the State of Oklahoma and (3) Excise Taxes for the truck. In addition, ABC will be required to collect sales taxes and submit them to the state.
Initial Action - Start-up
Immediately upon receipt of approval for a bank loan, the LLC will be formed, a lease agreement will be executed, the equipment and furniture will be ordered, and the required city, county, and state permits will be obtained. The equipment and furniture will be delivered on day one of the lease agreement. Special equipment manufactured by TBC is required to install and test EP. TBC has this equipment in stock and it requires no installation time or cost so that it can be up and running almost immediately after the building lease commences. TBC will have a trainer on site the day of start up to train the OM in the use of the installation equipment and the process of installing EP. The cost for this equipment from TBC is $39,500. This rapid start up will allow ABC time to sell and install at least the estimated15 units the first month.
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START-UP FUNDING
Cash Required at Start-up
Cash will be required at start up for the following items:
Product Inventory $4,300
Equipment Purchases 39,500
Pickup Truck Purchase 15,000
Office/Waiting Room Furniture 2,000
Security Deposits 3,000
Accounting & Legal 1,200
Advertising 5,000
Insurance 3,200
Other 310
Working Capital 29,990
Total $103,500
Working capital includes accounts receivable, cash to cover losses the first year, and $5,550 for a cash cushion going into year two when ABC produces positive pre-tax income.
The pro forma statements assume that all purchases for ABC will be on a COD basis. It is quite likely that TBC, and perhaps others, will give ABC at least 30 day terms. If this happens, the cash position of ABC will be enhanced.
Requested Bank Financing
Pro forma financial statements show that a total of $103,500 will be required to start ABC and operate it through the initial loss period. The owner will provide $18,000 of the startup capital. The truck dealer will provide 90% vehicle financing ($13,500) with the truck as collateral. A $72,000, seven year bank loan is requested. The pro forma indicates that cash flow will be adequate to make interest and principal payments each month. However, to ease the cash flow situation during the start up loss months, pro forma statements were prepared showing the loan as an interest only loan for the first six months. This consideration is requested as part of the loan agreement.
FINANCIAL PLAN
Attached are the following pro forma financial statements:
- Startup Cash Flow Worksheet
- Income Statement by month for year one.
- Cash Flow Statement by month for year one.
- Income Statement for the first three years.
- Cash Flow Statement for the first three years.
- Balance Sheets for years one through three
Statements were developed using assumptions outlined in this plan and show that after the first year the project produces an excellent rate of return on sales and assets employed. 5
ABC LLC / STARTUP CASH FLOW WORKSHEETSOURCES OF FUNDS
Owner's Investment / $18,000
Loan Proceeds - Bank / 72,000
Loan Proceeds - Other / 13,500
Total Available / 103,500
APPLICATION OF FUNDS
Inventory / Product / $4,300
Raw Material / 0
Shop Supplies / 0
Total Inventory / 4,300
FIXED ASSETS / Shop Equipment / 39,500
Office Equip & Software / 0
Furniture / 2,000
Retail Counters & Fixtures / 0
Remodeling & Refurbishment / 0
Truck / 15,000
Total Fixed Assets / 56,500
DEPOSITS / Leases / 2,080
Utilities / Electric / 500
Gas / 320
Water / 100
Total Deposits / 3,000
Expensed Items / Accounting & Legal / 1,200
Advertising / 5,000
Bank & CC Fees / 120
Insurance / 3,200
Office Supplies / 90
Telephone / 100
Total Expensed / 9,710
ADJUSTMENTS / Accounts Payable / 0
CASH ON HAND FOR OPENING
Checkbook Balance / 29,990
Total Cash on Hand / 29,990
TOTALS / $103,500 / $103,500 / 6
ABC LLC / INCOME STATEMENT Years 1 through 3
Year / 1 / 2 / 3
INCOME
Units per Year @ $350 / 421 / 625 / 750
Sales / $147,350 / 218,750 / 262,500
Total Income / $147,350 / $218,750 / $262,500
COST OF GOODS SOLD
Shop Labor @ $8.50 / 8,820 / 17,700 / 17,700
Payroll Taxes / 720 / 1,470 / 1,470
Workers Comp / 180 / 360 / 360
Material @ $120 per unit / 50,520 / 75,000 / 90,000
Shop Supplies@$10/ unit / 4,210 / 6,250 / 7,500
Total COGS / $64,450 / $100,780 / $117,030
GROSS INCOME / $82,900 / $117,970 / $145,470
% of Total Income / 56.3% / 53.9% / 55.4%
FIXED EXPENSE
Salary Owner / 0 / 3,000 / 3,000
Salary Manager / 30,000 / 30,000 / 30,000
Bonus Manager / 0 / 1,000 / 4,000
Payroll Taxes / 2,520 / 2,920 / 3,170
Benefits / 4,200 / 4,200 / 4,200
Workers Comp / 600 / 680 / 740
Accounting/Legal / 1,200 / 300 / 300
Advertising/Promotion / 14,960 / 10,000 / 8,000
Bank & CC Charges / 480 / 300 / 300
Depreciation / 8,040 / 8,040 / 8,040
Insurance / 3,200 / 3,200 / 3,200
Interest / 7,390 / 6,260 / 5,290
Office Supplies / 810 / 500 / 500
Rent / 24,960 / 25,000 / 25,000
Repairs & Maintenance / 2,000 / 2,000 / 2,000
Small Tools / 0 / 0 / 0
Taxes / 0 / 500 / 600
Telephone / 2,500 / 3,000 / 3,200
Trash Service / 600 / 600 / 600
Travel & Entertainment / 0 / 500 / 500
Utilities / 3,600 / 3,800 / 4,000
Truck Operating Exp / 1,800 / 1,800 / 1,800
Total Fixed Expense / $108,860 / $107,600 / $108,440
% of Total Income / 73.9% / 49.2% / 41.3%
NET INCOME before taxes / -$25,960 / $10,370 / $37,030
% of Total Income / -17.6% / 4.7% / 14.1%
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ABC LLC / CASH FLOW YEARS 1 Through 3Year / 1 / 2 / 3
SOURCES OF FUNDS
Beginning Cash / $0 / $5,550 / $4,710
Owner Investment / 18,000 / 0 / 0
Loan Proceeds - Bank / 72,000 / 0 / 0
Loan Proceeds - Truck / 13,500 / 0 / 0
Net Income / -25,960 / 10,370 / 37,030
Depreciation / 8,040 / 8,040 / 8,040
Accounts Payable Change / 0 / 0 / 0
Other Accrued Exp Change / 0 / 0 / 0
TOTAL AVAILABLE / $85,580 / $23,960 / $49,780
APPLICATION OF FUNDS
Fixed Assets / 56,500 / 0 / 0
Security Deposits / 3,000 / 0 / 0
Inventory Change / 4,300 / 4,300 / 0
Acc'ts Receivable Change / 10,080 / 920 / 2,100
Loan Principal Payments-Bank / 3,720 / 8,360 / 9,190
Loan Principal Payment-Truck / 2,430 / 2,570 / 2,700
Distribution to Owner / 0 / 3,100 / 11,300
TOTAL APPLIED / $80,030 / $19,250 / $25,290
PERIOD NET CASH FLOW / $5,550 / -$840 / $19,780
ENDING CASH / $5,550 / $4,710 / $24,490
ABC LLC / BALANCE SHEET
END / END / END
YEAR 1 / YEAR 2 / YEAR 3
ASSETS
Current Assets
Cash / 5,550 / 4,710 / 24,490
Accounts Receivable / 10,080 / 11,000 / 13,100
Inventory / 4,300 / 8,600 / 8,600
Total Current Assets / $19,930 / $24,310 / $46,190
Fixed Assets / 56,500 / 56,500 / 56,500
Less: Depreciation / 8,040 / 16,080 / 24,120
Total Net Fixed Assets / $48,460 / $40,420 / $32,380
Other Assets
Security Deposits / 3,000 / 3,000 / 3,000
TOTAL ASSETS / $71,390 / $67,730 / $81,570
LIABILITIES & EQUITY
Current Liabilities
Accounts Payable / 0 / 0 / 0
Other Accrued Expenses / 0 / 0 / 0
Total Current Liabilities / $0 / $0 / $0
Long Term Liabilities
Loan Balance - Bank / 68,280 / 59,920 / 50,730
Loan Balance - Truck / 11,070 / 8,500 / 5,800
Total Long Term Liabilities / $79,350 / $68,420 / $56,530
TOTAL LIABILITIES / $79,350 / $68,420 / $56,530
EQUITY
Owner's Investment / 18,000 / 18,000 / 18,000
Retained Earnings / 0 / -25,960 / -18,690
Distributions to Owners / 0 / -3,100 / -11,300
Current Year Income / -25,960 / 10,370 / 37,030
TOTAL EQUITY / -$7,960 / -$690 / $25,040
TOTAL LIAB. & EQUITY / $71,390 / $67,730 / $81,570
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APPENDIX
Supplementary information such as: resume’s of the principals, detailed product descriptions and market research data was placed in an Appendix to the Business Plan.
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