INTRODUCTION

After deciding to start your business, it is crucial that you take time to formulate a realistic path for
yourself. One of the most certain ways to be successful in business is to adequately plan where you
want to go with your ideas. People who enter a business venture without properly mapping their road
to success often find themselves in serious administrative and financial trouble several months later,
when they realize they have failed to prepare properly.

What is a business plan?

A business plan is a recognized management tool used by successful and/or prospective businesses of
all sizes to document business objectives and to propose how these objectives will be attained within a
specific period of time. It is a written document which describes:

• Who you are

• What you plan to achieve
Your Business plan is a highly
• Where your business will be located recommended tool that will map out
• When you expect to get underway the future of your business. Take it
step by step, just like the directions
• How you will overcome the risks involved you would follow to get to a
• Your anticipated returns destination.

Why do you need a business plan? What’s in it for me?

A business plan will provide information of your proposed venture to lenders, investors, and suppliers to
demonstrate how you plan to use their money, and to establish a basis for credibility of your project.
You should do a business plan for a number of important reasons. Some of these reasons include:

• Your own thinking process is solidified through the planning process. The planning outline leads
you through a series of questions and issues that you may have forgotten about when just thinking
about your business idea. Remember that you are an investor in your own business. You are
the first person who must be convinced of the validity of your business concept.
• Your investors (bank, CFDC, Others) will need to be convinced of the viability of your business,
or your business expansion. The business plan is a communication tool. Inform and influence the
reader towards some action – providing a loan, extending credit or investing in your business.
• Your business plan provides some guideposts in running your business. You will set goals and
then, once you are in business, you can measure those goals against the actual performance.

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When should a business plan be prepared?

The sooner you develop your business plan, the better. You will find that the final copy of your
business plan may differ from the original draft, as you will be updating, revising and refining it as you
go. It is important that you examine all the relevant factors now. Therefore, you will be able to
anticipate any surprises after your business has opened the doors.

Who should prepare your business plan?

Your business plan should be prepared by those persons who will be implementing it.

Outside assistance from consultants, accountants, bookkeepers and experienced business people can
definitely help, but YOU must draft the initial plan. After all, you are the one that is going to run the
business once it is open.

Here’s the bad news…

Creating a business plan for your new company will be one of the toughest jobs you’ve ever tackled.
You will ruthlessly question every aspect of your business operations and every assumption about your
product or service and your market. You’ll rigorously evaluate the strengths and shortcomings of your
management team, the capabilities of your competition and your ability to forecast external events that
could cause your company to stumble or soar. Not much fun, right?

Now, here’s the good news…

A good business plan is your company’s roadmap to the future. It describes, in detail, the company you
will be running, and identifies every important step you must take to build that company. It even gives
you advance warning of the dangers you may encounter along the way.

Keep in mind:

The following questions should remind you that you must seek both a return on your investment
(ROI) in your own business as well as a reasonable salary for the time you spend in operating that
business.

1. How much income do you desire and what is the minimum you require?
2. What financial investment will be required for your business?
3. How much could you earn by investing this money elsewhere?
4. How much could you earn by working

If this income is greater than what you can realistically expect from your business, are you prepared to
forego this additional income just to be your own boss with only the prospects of more substantial
profit/income in future years?

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Supply

1. Do you know the quantity, quantity, quality, technical specifications, and price ranges desired?
2. Will the price available allow you to achieve an adequate markup?

Expenses

1. Do you know what your expenses will be? e.g. rent, wages, insurance, utilities, advertising, etc.
2. Do you know which expenses are Fixed or Variable?

Venture Feasibility

1. Are you aware of the major risks associated with your product/Service/Business and can you
minimize any of them?
2. Are you aware that there is less than a 50/50 chance that you will be in business two years from
now?

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THE BUSINESS PLAN OUTLINE
1) TABLE OF CONTENT
2) EXECUTIVE SUMMARY
3) BUSINESS OVERVIEW
• Description of the business
• Description of products and services
• Mission, vision, goals and objectives
• Human resources

4) OPERATIONAL PLAN
5) MARKET RESEARCH
• Industry analysis
• Market analysis/research
• Target market
• Competitive analysis
• S.W.O.T. analysis

6) MARKETING PLAN
• First “P” of marketing : Product or Service
• Second “P” of marketing : Price
• Third “P” of marketing : Place
• Fourth “P” of marketing : Promotion

7) FINANCIAL PLAN
• Start-up budget
• Cash flow
• Projected income statement
• Balance sheet

8) APPENDIX

not: Follow this outline and use it as a guide to complete all of the sections to ensure a
thorough plan.

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TABLE OF CONTENT

The purpose of the Table of Content is to quickly find information throughout your business plan
document.

A table of content is a list of the sections of a book or document organized in the order in which the
sections appear. It usually appears after the title page and they indicate page numbers where each
section begins.

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EXECUTIVE SUMMARY

The purpose of the Executive Summary is to get the reader’s attention by summarizing
the key elements of the business plan. It must be short, to the point and very well
written. It is your business plan in a nutshell!

The Executive Summary of the business plan provides your readers with an overview
of the business plan. Think of it as an introduction to your business. Therefore, your
business plan’s executive summary will include summaries of:
• a description of your company, including your products and/or services
• your business’s management
• the market and your customer
• marketing and sales
• your competition
• your business’ operations
• financial projections and plans

The executive summary should end with a summary statement, a sentence or two designed to
persuade the readers of your business plan that your business is a winner.

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BUSINESS OVERVIEW
The Business Overview section is where you can elaborate on the details of
your business. The who, what, where, when, and why of the business
should fall into place and readers should have a clear understanding of how
the company will function. In this section, consider covering the Description
of the Business, the Description of Products and Services, the Human
Resource requirements and the Operations.

DESCRIPTION OF THE BUSINESS

The Description of the Business section should outline your basic business concept. You should detail
exactly what your business does for the customer and what makes these offerings desirable to the
customer.

When describing your business, you should explain:

• Describe what your business does in general terms.
• Describe what differentiates your business from others.
• Briefly describe your business history if applicable.
• Business Structure: is it a new independent business, a purchase of an existing business, an
expansion, a franchise?
• Business type: retail, manufacturing or service.
• Legalities - business form: sole proprietorship, partnership or corporation. The licenses or permits
you will need.
• Business information: What you have learned about your kind of business from outside sources
(trade suppliers, bankers, other franchise owners, franchisor, publications).
• Profitability: Why your business will be profitable. What are the growth opportunities?
• Provide any other information that will excite the reader about your business.

Emphasize any special benefits that you feel will appeal to customers and explain how and why these
benefits are appealing. Identify your mission, goals and objectives. Your business description should
clarify why you are, or why you want to be, in business.

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 DESCRIPTION OF PRODUCTS AND SERVICES

The purpose of the Product and Services section is to detail exactly

what your business does for the customer and what makes these
offerings desirable to the customer.

Key Products (Goods Business)

• Describe each product you sell. This is your product mix.

• If you cannot list each product, break the business down into
logical categories.
• Describe the key product features, and how your products are different from those of your
competition. (Functionality, durability, ease of use etc.)
• Describe product protection such as patents, copyrights and trademarks. (if applicable)

Key Services (Service Business)

• Describe each type of service you offer. (Be specific)

• Describe the service features in terms important to the customer.
• Describe any service protection such as copyrights or trademarks. (if applicable)

Hint: For information on patents, copyrights and trademarks visit the Canadian
Intellectual Property Office website:

www.cipo.ic.gc.ca
.

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 MISSION, VISION, GOALS AND OBJECTIVES

A mission is a statement which specifies what the business’ broad program of

activities shall be. It establishes the parameters upon which objectives are set,
strategies are developed and tactics are implemented. The mission is a statement
of core organizational values and is referred to as the “Invisible hand” which guides
employees to work independently and yet collectively towards the organization
prime objectives. Be clear and to the point and make it obvious what your business
is attempting to do.

Examples:
1. Canadian Tire

To be the first choice for Canadians in Automotive, Sports and Leisure, and Home products, providing
total customer value through customer-driven service, focused assortments and competitive operations.

2. TELUS

To be recognized as the premier Communications Company in the world. To help people communicate
effortlessly.

Vision
A vision involves thinking or planning about the future of the business. It is planning for the future
based on the mission statement specified at the inception of the business.

Goals and objectives

Goals and objectives refer to something that is wished for (a purpose or a target). They are things that
a person or a business pursues or desires to achieve.

Goals and objectives may include but are not limited to:
• Achieve x% market share by the end of the first year
• Increase sales by 5% each year
• Reduce customer complaints to 10% of all sales
• Ensure profit margin of 2% by the second year
• Generate sales of $100,000 by the end of the second year

Hint: Look at your business through a magnifying glass when you are writing your
business plan. What you see will be your stepping stones to success.

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HUMAN RESOURCES

The purpose of the Human Resources section is to provide the reader

with a thorough understanding of the people who will contribute to
running the business.

Managing a business requires more than just the desire to be your own boss. It demands dedication,
persistence, the ability to make decisions and the ability to manage both employees and finances.

It's imperative that you know what skills you possess and those you lack, since you might have to hire
personnel or retain a professional advisor to complement your skill set.

Management summary

• How does your background/business experience help you in this business?

• What are your weaknesses and how can you compensate for them?
• How will your management structure impact your business in the day-to-day operations?
• Who will be on the management team?
• What are the technical qualifications of each principle in this enterprise?
• What are their strengths/weaknesses?
• Are their duties clearly defined?

Key personnel (if applicable)

• What are your current personnel needs?

• What are your plans for hiring and training personnel? What are their duties?
• What salary, benefits, vacations and holidays will you offer? If a franchise, are these
issues covered in the management package the franchisor will provide?
• List all experts that will be utilized. (Lawyers, Accountants / Bookkeepers, Bankers,
Insurance providers)

Hint: Resumes and job descriptions can be very useful appendices.

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 OPERATIONAL PLAN
The purpose of the Operations section is to summarize how you plan to operate
the business. (i.e.: Location, capacity?)

Consider these questions when addressing this section of your business plan:

Planning Considerations

• What are the hours of operation? Will that best serve your clients?
• What are the requirements for the facilities and equipment? What are the costs? (one-time or
ongoing costs)
• What are the plant overhead costs going to be? Will you be able to afford what is required?
• What are the purchasing requirements?
• What is the best manufacturing process? Is it cost effective?
• What licensing is required for your venture?
• What are your legal requirements?
• What potential internal and external risks exist for this business?

Location Considerations

• What are your location requirements?

• What kind of space will you need? Will you work from home?
• Why is the area desirable? The building desirable?
• Is it easily accessible? Is public transportation available? Is street lighting adequate?
• Neighbourhood Location (use map). Traffic counts and supporting information such as
population radius is helpful.
• Site Location – place in mall or centre, or city block. Is parking available? Will it affect your
business?
• Facility Location – including a diagram of the business layout.
• Signage both inside and outside the business.
• Check for location risks. A median placed in the middle of your road will cut off access to your
business. Check with your city Planning department before signing a lease.

Hint: All expenses addressed throughout the business plan must be reflected in your
financials (i.e.: license fees, leasehold improvements, equipment costs.)

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Production Plan

The production plan demonstrates your ability to produce products. This section may not apply in
service businesses.

• Provide a flow chart / process diagram showing the entire production process from start to finish.
• List and budget production equipment required for the business.
• Procurement (Businesses that manufacture or sell products)
• Sources of supply and order lead time
• Terms & Conditions of sale
• Alternate sources of supply (this addresses procurement risk)
• Inventory control systems
• Physical space requirements (Unless covered in location sections)
• Who are your suppliers?

Service Plan

• What area of the city do you plan to service?

• Will you complete a job entirely, or will you be hiring contractors?
• How many jobs can you complete in a day?
• Who are your suppliers? What do they charge? Do you have alternative sources of supply?

Business Policies

• Write policies that should be developed for your business. Depending on the topics, these may
need to be posted in your place of business.
• Example: Return or exchange policies

Contingency Plan

In the event that the business fails, what type of exit strategy has been considered?

No new business owner likes to consider this possibility. However, if factors beyond your control force
you to discontinue your business, you should consider what can be done to lessen the problems this
situation presents.

Hint: Keep a copy of all important business documents somewhere outside of your
business location in the event of natural disasters.

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Here are some other things to consider when drawing up contingency plans.

• Have a list of people or firms you can call in case of an emergency.

• Have a good data backup system so that you can retrieve all data you might lose due to some
emergency.
• Prepare for unexpected equipment failures or repairs.
• Have a good idea of the location of the mains switches and valves for electricity, water and gas.
Ensure that your employees also know their location.
• Prepare a will that provides for the future of your business in case of any unfortunate event.
Otherwise, the business may fall into the wrong hands.
• Have a central information base where you have details of business numbers, tax numbers, and
contact addresses of business partners, directors, shareholders and suppliers. Also, maintain a
directory of investments, business plans, licenses/permits, insurance details etc.
• Plan for loss of market; the sector in which you want to invest in case your market stops existing.
• Prepare for power outages, flood and fire disasters, etc.…
• A contingency plan helps you tide over difficulties in your business. It helps you prepare for loss
prevention. A contingency plan helps your business recover from crime, fraud, theft, accidents,
death of the owner, and other difficulties.

The plan must always be kept up to date and applicable to current business circumstances. This means
that any changes to the business process or changes to the relative importance of each part of the
business process must be properly reflected within the plan.

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MARKET RESEARCH
The purpose of the Market Research section is to prove that the market is large
enough, in your area, given the competition to support the survival and growth
of your business.

INDUSTRY ANALYSIS AND TRENDS

Here is where you get to assess the environment in which you are planning on
entering. What external factors are influencing your industry? This analysis will
ensure you understand the needs of your own industry and educate the reader.

Considerations:

• What has been happening in the industry?

• What are the trends? Growing, steady, declining?
• Who are the major players (i.e.: suppliers, distributors, clients) in your industry? What is their
influence or impact on it?
• Are there specific government regulations influencing your industry?

Industry Research

• Describe your industry. The less well known the industry, the more description necessary. (An
industry analysis looks at the big picture – what is going on in the industry beyond your city?)
• Describe the state of the industry. Is it a new industry, growth industry, competitive industry, or
a stable mature industry?
• Document industry trends on a world or national size. Sales, number of customers, number of
units sold, trends in related industries are all good industry indicators.
• Describe the key customers for your specific industry.
• Provide other national / international economic indicators that encourage the health of your
industry.
• Examine risks to the entire industry caused by legislation, technological change or any threat to
the industry as a whole.

Hint: Often a good place to start is to determine the demand for your product or
service. The following links can provide you with useful information for your
industry and market research:
www.ic.gc.ca
www.statcan.gc.ca

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MARKET ANALYSIS/RESEARCH

Why do market research?

Just because your friends and family love the way you take pictures, doesn’t
necessarily mean that your wedding photography business will be an
overwhelming success. Also, innovative ideas and gut feelings aren’t enough
when it comes to predicting success for a product or service. Although you think
that your idea is great, it’s simply impossible to sell people what they don’t want.
Market research is essential in helping you find out what people want and who wants it.

Types of Market Research: Primary Research

Primary research is the gathering of information that does not already exist. It is data that you have to
collect on your own or hire research specialists to do.

The survey is, without a doubt, the most popular method of gathering primary data. In general, there
are 3 types of surveys: the telephone survey, the postal or mail survey, and the personal interview or
‘mall’ survey.

Building a questionnaire for your survey

A questionnaire is an information gathering tool which can be used to tabulate, analyze and discuss
your research. In many situations, a questionnaire serves as the major source of primary information.
Writing questions and constructing a questionnaire takes time and attention. Before you begin, it is
essential to know what kind of information you need to obtain and how the information will be used.
Each questionnaire must be custom-built to the specifications of your business. Here are some
guidelines:
• Make a list of what you need to know. What do you want to achieve with the questionnaire?
• Does the information you need already exist? Always check for secondary information.
• Don’t ask a question unless it has a purpose.
• Eliminate confusing questions.
• What is the purpose of each piece of information? How will you analyze each piece of
information?
• As you write questions, try to view them through the respondents’ eyes. Will the respondents
be able and willing to answer the question?
• Pay attention to where you place questions. In general, a funnel approach is advised. Broad
and general questions at the beginning of the questionnaire, followed by more specific
questions, and closing with more general questions like demographics.
• Avoid loaded or leading words and questions. Could and should, might sound almost the same,
but may produce a 20% difference in agreement to a question. Leading questions may
influence respondents to answer in a socially desirable way.
• At the end of your survey, provide a place for respondents to add comments and thank them for
their assistance.

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Formatting the questionnaire

The following guidelines offer some tips to help you put the questionnaire together.
1. Begin with an introduction that includes the questionnaire’s purpose, identifies its source,
explains how information obtained will be used, and assures respondents’ of confidentiality.
2. The first questions should be easy, avoiding controversial topics. Write interesting questions
that are clearly related to the questionnaire’s purpose. Don’t use open-ended or long
questions with lengthy answer choices in the beginning of the questionnaire.
3. Address important topics early, rather than late, in the questionnaire.
4. Arrange questions so they flow naturally. Keep questions on one subject grouped together.
Start with general questions then move to those that are specific.
5. Try to use the same type of questions and response throughout a series of questions on a
particular topic.
6. Place demographic questions at the end of the questionnaire.
7. Print it in easy-to-read typeface.
8. A numbered response should mean the same thing throughout the questionnaire.
9. Avoid making respondents turn a page in the middle of a question or between a question and
an answer.
10. Be sure that the question is distinguishable from the instructions and the answers. You could
put the instructions in boldface or italics.
11. Questions and answers are easiest to read if they flow vertically.
12. Give direction about how to answer. Include directions in parentheses immediately following
questions. It is better to repeat directions too often than not often enough. Here are some
examples of specific instructions you might use: Circle the number of your choice; circle only
one or check all that apply; please fill in the blank.
13. Make sure to use the KISS rule, Keep It Short and Simple.

Survey Bias:
Remember, there will always be survey bias (margin of error) which you must take into account. The
industry average is 20% and it is used to eliminate respondents that have not been truthful or honest.

Types of Market Research: Secondary Research

Secondary research represents information that has already been gathered and published. It is a
tremendously important source of data for any marketing researcher.

Secondary research is crucial and the quantity of data available is tremendous. A huge amount of
secondary research information is available at little or no cost. The ideal places to access this type of
information are:

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 • The Regional Business Centre
• Canada-Ontario Business Service Centre
• Scott’s Directory of Canadian Manufacturers and Suppliers
• Ontario Business Directory
• Financial Post Canadian Markets
• Canadian Almanac Directory
• The Franchise Annual
• Family Expenditures in Canada
• Government Offices (Federal, Provincial, Municipal)
• Statistics Canada
• Self Counsel Press
• Trade Journals
• Internet (Stats Can, Strategis, Government Sites)
• Public Library
• Reliable Article Sources
TARGET MARKET
The Target Market is the groupings of consumers or businesses most likely to purchase your products
or services. The first group you plan to target is your Primary Target Market; the second is your
Secondary Target Market. It is very important that you understand your target market – after all, these
are the customers you need to keep happy!

Your business plan should include answers to the following questions:

• Who are your customers? Who is most likely going to buy your product/service? Define your
target market(s).
• What are the market trends? Are they growing? Steady? Declining?
• Is the market share growing? Steady? Declining?
• How is the market segmented? (age, sex, income, family, industry, etc)
• Are the markets large enough to expand?
• How many potential clients are there in your area? (population count)

Note: If you are using indirect distribution, it may be necessary to describe both your customer as a
target market, and the end user as a target market.

• Provide the results of any customer survey work you have done
• Provide the sources of information for any of the above

Hint:
You can do your own market research. Get on the phone, go door to door…do not be
afraid to take a long, hard look at the people you intend to sell to.

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 COMPETITIVE ANALYSIS
The purpose of the Competitive Analysis section is to thoroughly analyze the
competition that will exist for your business. Part of developing a successful
business involves being aware of possible competitors and their products.
Competitors are any business which can sell a product/service that accomplishes a
similar type of result as yours; therefore, the features and benefits of a competitor's
product can also appeal to your target market. There is ALWAYS competition!

Ask yourself:

• Who are your direct competitors (exactly what you offer)? Who are your indirect competitors
(offer substitutes)?
• How long have they been in business? How are their businesses: Steady? Increasing?
Decreasing?
• What have you learned from their operations? From their advertising?
• What are their strengths and weaknesses? Ensure you are being unbiased.
• Are there any opportunities and threats that your competition may present?
• How does their product or service differ from yours? What is your competitive advantage?
• List the direct competitors in your local market. These are firms who offer exactly what you offer.
• List the current number and the number in existence for the past three-year period.
• List the indirect competitors in your local market. These are firms who offer substitute products.
• Analyze any competitors who have gone out of business in the past and if possible, why.
• Explain how your firm will compete with these competitors to prove how you can survive in their
markets.
• Examine risks that could occur when you enter the market. For example, what if your key
competitor cuts their price when you open your business?

Hint:
Competition is good for business! Knowing your competition is the only way to stay one
step ahead. You should know who they are, where they are, how they are, how they
operate and what they are capable of.

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 S.W.O.T. ANALYSIS
This tool/exercise will identify the Strengths, Weaknesses, Opportunities and Threats of an
organization.

Specifically, SWOT is a basic, straightforward model that assesses what an organization can and
cannot do as well as its potential opportunities and threats. The method of SWOT analysis is to take the
information from an environmental analysis and separate it into internal (strengths and weaknesses)
and external issues (opportunities and threats). Once this is completed, SWOT analysis determines
what may assist the firm in accomplishing its objectives, and what obstacles must be overcome or
minimized to achieve desired results.

When using SWOT analysis, be realistic about the strengths and weaknesses of your organization.
Distinguish between where your organization is today, and where it could be in the future. Also
remember to be specific by avoiding gray areas and always analyze in relation to the competition (i.e.
are you better or worse than the competition?).

Finally, keep your SWOT analysis short and simple, and avoid complexity and over-analysis since
much of the information is subjective. Thus, use it as a guide and not a prescription.

Hint:
S – Strengths: What this business does best.

W – Weaknesses: Areas that this business needs to improve.

O – Opportunities: What conditions in the industry or the community might the business
use to improve its position?

T – Threats: What conditions in the industry or community might undermine the success
of the business operation?

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 SWOT Analysis Template
(This particular example is for a new business opportunity. Identify criteria appropriate to your own SWOT situation.)

CRITERIA EXAMPLES CRITERIA EXAMPLES

STRENGTHS WEAKNESSES
Advantages of proposition? Disadvantages of proposition?
Capabilities? Gaps in capabilities?
Competitive advantages? Lack of competitive strength?
USP's (unique selling points)? Reputation, presence and reach?
Resources, Assets, People? Financials?
Experience, knowledge, data? Own known vulnerabilities?
Financial reserves, likely returns? Timescales, deadlines and
Marketing - reach, distribution, pressures?
awareness? Cashflow, start-up cash-drain?
Innovative aspects? Continuity, supply chain
Location and geographical? robustness?
Price, value, quality? Effects on core activities,
Accreditations, qualifications, distraction?
certifications? Reliability of data, plan
Processes, systems, IT, predictability?
communications? Morale, commitment, leadership?
Cultural, attitudinal, behavioural? Accreditations, etc?
Management cover, succession? Processes and systems, etc?
Philosophy and values? Management cover, succession?

CRITERIA EXAMPLES CRITERIA EXAMPLES

OPPORTUNITIES THREATS
Market developments? Political effects?
Competitors' vulnerabilities? Legislative effects?
Industry or lifestyle trends? Environmental effects?
Technology development and IT developments?
innovation? Competitor intentions - various?
Global influences? Market demand?
New markets, vertical, horizontal? New technologies, services, ideas?
Niche target markets? Vital contracts and partners?
Geographical, export, import? Sustaining internal capabilities?
New USP's? Obstacles faced?
Tactics: i.e.: surprise, major Insurmountable weaknesses?
contracts? Loss of key staff?
Business and product development? Sustainable financial backing?
Information and research? Economy - home, abroad?
Partnerships, agencies, distribution? Seasonality, weather effects?
Volumes, production, economies?
Seasonal, weather, fashion
influences?
 MARKETING PLAN
The marketing plan is developed based on careful planning. This ensures that the company uses its
limited resources wisely and effectively. The marketing plan is the master plan in a company’s effort to
satisfy the needs of a particular market segment (portion of the population). This is achieved by
coordinating all the elements of the marketing mix (4 P’s: product, price, place/distribution, promotion).

FIRST “P” OF MARKETING: PRODUCT OR SERVICE

Unlike the Business Overview section, in which you listed and described the products or services
offered, in this section it is important to describe your products and services in terms of their features
and benefits. Features are product characteristics such as size, color, horsepower, functionality,
design, hours of business, fabric content, and so forth. Benefits answer the customer's question: Why
would I want to own it? The key features and benefits you identify should help you determine the focus
of your marketing plan. Some of the features and characteristics you should discuss are, but are not
limited, to:

• Functionality
• Styling
• Quality
• Safety
• Repairs and Support
• Warranty
• Accessories and services
• Etc…

To identify your product or services’ benefits, try to consider the customer’s point of view.

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SECOND “P” OF MARKETING: PRICE

Setting the right price involves taking three important factors into account:

1. What it costs you to produce or purchase a product or service.

2. What your competitors are charging.

3. What the customer is willing to pay.

There are many ways in which the price of a product or service can be determined. The following are
some of the pricing strategies:

• retail cost and pricing

• competitive position
• pricing below competition
• pricing above competition
• service costs and pricing (for service businesses only)
• service components
• material costs
• labor costs
• overhead costs

Consider addressing the following questions in this section of your business plan:

• What are your prices for different products and services?

• How did you arrive at those prices? (Charge going rate, industry standard mark-up etc.)
• Do you have any “price packages”?
• What is your price image? (Bargain, middle of the road, high end) Is this consistent with your
target market?
• How do your prices compare with your competition?
• What are your profit margins?

Once you have determined your price, it is important to conduct a Break Even Analysis.

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BREAK EVEN ANALYSIS

The Break Even Point in your business is the point at which your sales revenue is equal to your total
expenses. At that point you neither make money, nor do you lose any. This point is where your
business has sold enough products or services to pay for all costs.

The break-even can also be used to evaluate a business expansion or any other business expenditure.
You are simply asking how much additional revenue will be required to cover the additional cost. There
are some key definitions necessary to determine the break-even for the business.

They are:

• Fixed Costs (Overhead) are costs that do not vary directly with sales. Utilities, salaries,
advertising, office supplies and telephone are just a few examples. They do not have to be the
same every month. What is important is that you pay them regardless of sales made.
• Variable Costs (Cost of Goods) are the actual costs of making the product or providing the
service. They can include materials, shipping and contract labour.
• Capacity governs your output. It can be measured in units of production, billable hours, or
sales volume.

Now we will display how to calculate the break-even point.

24
 THIRD “P” OF MARKETING: PLACE (DISTRIBUTION)

A good location means more than just your chosen physical business
address. Location also has meaning in your distribution strategy. The
characteristics of the product can play a determining role in the choice of
distribution channel. Perishable items, like fruits and vegetables, must be
distributed quickly by using direct channels. The producer may ship the
goods directly to the retailer or even to the consumer. Whereas, mass
consumption items such as canned foods have a long distribution channel:
from manufacturer, to wholesaler, to retailer, to the consumer.

• What channels will you use to get your product(s) to the customer?
• Consider the benefits to the customer: time, accessibility and possession.
• Having the products on location when the customers wish to purchase them can save precious
time.
• Having the products accessible to the customer where they want to purchase them is favorable.
• Possession is realized when the goods pass from the manufacturer or the retailer to the end
consumer.

Hint:
Your distribution channel can greatly affect your costs and therefore can affect your pricing
strategy.

25
 FOURTH “P” OF MARKETING: PROMOTION
The promotion section of the marketing plan is also known as the
communication strategy. It serves to inform the consumers, to persuade
them to buy and influence their purchasing decision. The appropriate
communication strategy will be a combination of all the promotional factors
(advertising, promotion, public relations and personal sales) acting hand-
in-hand to transmit your business’ message.

• Provide a list of the media you plan to use. You may include newspapers, magazines, radio,
television, direct mail, Internet advertising, etc.
• Develop a monthly advertising schedule with planned budgeted amounts.
• Personal selling or service plan? (Personal one-on-one contact with your target customers. It is
the one personal and direct link between your business and your target market.)
• Describe how you will prospect and find new customers.
• If you have letters of agreement, contracts or other sales tools, it is sometimes advisable to
include them as appendices to the business plan.

Examples of advertising ideas:

• Point of sales promotion (POP) • Social Media

• Promotional items • Newsletters (print/online)
• Samples • Website
• Coupons/ discounts • Vehicle Decals
• Contests • Online Ads/Banners
• Trade fairs • Billboards
• Newspapers ads • Signage
• Television ads • Business Cards
• Radio ads • Brochures
• Public relations/Networking • And so much more!
• Postal or mail advertisements

Hint:
If you have written any ads, brochures, press releases or any type of advertising material,
include them as appendices to the business plan.

26
 FINANCIAL PLAN
The financial plan is critical to the success of your business plan, especially if it is for the purpose of
getting a bank loan. Sound financial management is one of the best ways for your business to remain
profitable. As a business owner, you will need to identify and implement policies that will lead to and
ensure that you will meet your financial obligations. Your financial plan should include the following 4
sections:

1) Start-up Budget
2) Cash Flow
3) Projected Income Statement
4) Balance Sheet

1. THE START-UP BUDGET

This key component in your business plan will determine whether or not your business idea
is viable. Be realistic!

27
 THE START-UP BUDGET EXPLANATION

Begin by determining what you will need "day one" of your business, in order to
open the doors and begin accepting customers.

The included budget template will help you develop your very own start-up
budget for your business.

Here are some examples of the most common expenses:

• Facility: lease security deposits, furniture and fixtures, leasehold improvements, and signage.
• Equipment: office furniture, computers, and equipment.
• Materials and supplies: for your office and production areas and a supply of start-up advertising
and promotion materials.
• Other costs: initial attorney and accounting set-up fees, licenses and permits and insurance
deposits.

The template will also allow you to divide the expenses depending on the lending opportunity – this is a
great way to organize who is paying for what. Some lenders will fund only specific expenses.

For example:

Start-Up Budget
Items Estimated Costs Owners Cash NOHFC Grant Royal Bank
Renovations 20,000 17,000 3,000
Equipment 5,000 4,250 750
Materials 5,000 1,540 3,460
Insurance 1,200 1,200
Rent 1,400 1,400
Marketing 1,000 800 200
Licenses/Permits 60 60

Working Capital 2,000 2,000

TOTAL Start-Up Costs $35,660 $5,000 $21,450 $9,210

28
 2. THE MONTHLY CASH FLOW STATEMENT

What is a Cash Flow Statement?

One of THE most important tools for any business, the cash flow statement
often appears more intimidating to prepare than it actually is. The cash flow
statement, on a month-by-month basis, summarizes cash coming in and
cash going out of the business. It displays how much cash a business will
have at the end of each month.

A cash flow statement can be based upon actual amounts or on forecasted figures. Both forms of cash
flows ARE valuable financial tools.

Why should I prepare a cash flow forecast?

• To determine if your business idea, after costs, will make money.

• To highlight months where there is not enough cash to cover expenditures. This step will allow time
to consider other sources of cash, for example, a line of credit.

• To assist in securing money from lending institutions as it outlines the viability of a business
venture.

• To highlight months where it might be possible to take drawings from the business.

• To outline cash that may be available for additional expenditures, for example, hiring new staff,
purchasing equipment or increasing marketing budget.

How Do I Prepare a Cash Flow Forecast?

A cash flow forecast comprises of the following 5 parts:

1) Estimated Sales
2) Cash Receipts (Cash in)
3) Cash Payments (Cash out)
4) Cash Summary
5) Notes to a Cash Flow

It is a good idea to commence with the "Estimated sales" section.

Hint:
Contact Enterprise Temiskaming for ready to use start-up cash flow statements.

29
 1) Estimated Sales

Estimated sales are both cash and credit sales that your business expects to
make in the first year. Begin by projecting your yearly sales figure.

Step 1: Project your yearly sales figure

If you distributed a survey, the results can help you project your yearly sales
figure. From your completed survey, extract what age group and what gender gave the strongest
positive approval for your business idea. This group is your primary target group. For example, you
may believe your target group is men between the ages of 30-39 years.

Next, obtain demographic information relating to the area you surveyed. The demographic information
for the area surveyed will tell you how many of your target group lives there. For example, if you
conducted a survey in Garson, you would look for the demographical information available for the
Garson area.

Your completed survey will also tell you:

• on average how much people spend per visit and

• the frequency of the visit.

From all this information, you can generate an estimated yearly sales figure.

Confused?
Let's take a look at the survey Wilma conducted to determine if there was a demand for a craft store in
Garson.

Wilma conducted a survey in Garson and received 200 responses. Of the 200 responses, 81 people
said they would support the opening of a new craft store in Garson.

From the survey results, Wilma was able to summarize the 81 Yes votes into the following age and
gender splits.

Hint:
Estimated sales for your business are based on your assessment of:

1) The advantages of your products/services

2) Your customers

3) The size of your market

4) Your competition

30
Female Male
Age Yes Vote Age Yes Vote
> 19 5 > 19 0
20-29 7 20-29 1
30-39 11 30-39 0
40-49 32 40-49 2
50-59 17 50-59 0
60+ 6 60+ 0
Total 78 Total 3

Wilma believes her primary target market to be females between the ages of 40-49 living in Garson.
From the demographical information Wilma found, there are 4,223 females living in Garson. Next,
determine the percentage of females with respect to the total population of Garson:

Total females in Garson = 4,223 = 0.51 (51%)

Total population of Garson 8,207

Next, determine what percentage of the Garson population is aged 40-49:

Age 40-44 = 8.3%
Age 45-49 = 7.1%
Total = 8.3 + 7.1 = 15.4%
15.4% x 8,207 (total population of Garson) = 1264 people

Finally, determine how many women are aged 40-49 in Garson:

51% (percentage of females in Garson) x 1264 people = 645 females in Garson

In addition, the survey revealed that:

• the average purchase from a craft store = $45
• the average visit = every 2 months or 6 times a year

With the above information, an estimated yearly sales figure can be generated.

1) Begin by determining your potential target market:

The demand for Wilma's product is:
81 (total Yes votes) / 200 (total votes) = 40.5%

2) The potential market is:

645 (female population in Garson) x 40.5% = 261 potential customers

3) Allow for a 20% survey bias

261 x 0.8 = 209 potential customers

31
4) Estimate of total yearly sales
209 (potential customers) x $45 (average purchases amount) x 6 (purchase frequency/year) =
$56,430 for 12 months

Step 2: Allocate the yearly estimate of sales to each month

The yearly sales figure of $56,430 must be allocated to each month of your first year. Consider a
variety of different factors:
• What are similar businesses generating in sales revenue? Investigate industry trend
information.
• Is your business seasonal or affected by special events, for example, Christmas?
• Is your estimate reasonable in terms of the value of the products you sell? For example, if the
maximum value of your product is $10, is it reasonable to assume you will sell $20,000 in a
month? This amount would equate to 100 items a day.
• What did your survey results suggest? For example, what on average did the survey
participants say they would spend and how often?
• What is your promotional plan? Will this increase your sales for any particular month?
• What are your competitors doing? For example, are they having a major promotion? Will this
affect your sales?

Let's return to Wilma's results.

32
Therefore, in one year approximately 1254 (209 x 6) people will visit the store and on every visit, they
will spend $45. From research, it is apparent the craft industry booms around Christmas and in the
winter months. However, for summer and spring, the industry is quiet.

Wilma believes that the $56,430 should be allocated to each month based upon her expected number
of customers each month.

Step 3: Estimated sales figures are inserted on the first line of your cash flow work sheet

Refer to page 43 to view Wilma's Forecasted Cash flow.

2) Cash Receipts

Step 1: Decide how much of your sales will be credit or cash

Your business may only make sales on a cash basis. If this is the case, the
numbers you inserted in your "Estimated Sales" row, will be the same
numbers you insert in the row "Cash from Sales" under the Cash Receipts section.

However, if some or all of your sales will be a mixture of cash and credit, you must estimate when your
credit customers will pay for the goods they bought off you on credit.

Be realistic in estimating when your creditors will pay! Larger corporations may delay payment for up to
90 days. A cash flow will only be a useful tool to your business if you are realistic in your assumptions
and expectations of cash collection!

Wilma will grant 30 days credit on craft sales, but only for her major customers who regularly shop with
her. Wilma has researched these customers and they are prompt payers with good credit histories.
These customers, in the survey, estimated they would spend the following:

January $3,500 ***

February $2,200
March $650
April $670
May $500
June $500
July $500
August $500
September $700
October $900
November $5,000
December $4,500

*** Therefore, the $3,500 of purchases in January won't be received, by Wilma, until February.

33
Wilma estimated her sales for January to be $8,100. As $3,500 of it will be sales made on credit,
Wilma will only receive $4,600 (8,100-3,500) in cash for January.
For January, the cash flow worksheet will show $4,600 in the "Cash from Sales" row and $0 in the
"Account Receivable Collected" rows.

In February the "Cash from Sales" row will show $2,075 [$4,275 (estimated sales) - $2,200 (credit
sales)]. Accounts Receivable Collected records collection of prior credit sales. For February, this will
be $3,500. (Credit sales made in January).

Step 2: Insert the amount you expect to borrow

On the "Small Business Loan" row, of your cash flow forecast, insert the money in the month you will
receive it. This amount can be revised later.

Wilma wants to borrow $15,000 and will receive it in January.

Step 3: Insert your Contribution

In the row “Owner’s Equity Contribution", insert the amount of money that you, the business owner, will
be investing in the business.

Wilma will contribute $5,000 in January, from her personal savings.

Refer to Wilma’s cash flow on page 43.

2. Cash payments

Step 1: Initial Start-up Costs

List all of the items you must buy and services you must pay for to open
your business. Completing this step will help you decide how much
money you may need to borrow. (This was done on page 47)

To open her craft store, Wilma has the following start up costs.

Advertising $200
Business name search and registration $68
Business License $50
Equipment: Cash Register $50
Equipment: Adding Machine $40
Equipment: Computer and Printer $3,000
Fixtures: Shelving $2,000
Furniture: Chairs $500
Furniture: Coffee Table $200
Furniture: Counter $400

34
Insurance (1st months) $200
Inventory $15,000
Legal expenses (signing of lease) $200
Office Stationery $200
Plastic Bags $200
Rent (first and last months) $1,400
Security Alarm $500
Telephone (Connection and rental) $150

Total $24,358

Step 2: What recurring expenses can you expect?

After deciding what it will cost to commence your business, it is now necessary to determine what it will
cost to stay in business.

Your expenses may be either fixed or variable. Fixed costs, such as rent, are not affected by how
much the business sells. Fixed costs will stay the same month to month. Variable costs will change
depending upon the volume of sales. Variable costs include wages, advertising, heat and hydro. Begin
by listing all of the expenses that your business is likely to incur, in the first 12 months of operation.
Note if they are a fixed or variable expenditure and when they will have to be paid.

To run the craft store, Wilma thinks she will incur the following expenditures.

Expenses Fixed/Variable Payment Date

Advertising Variable Bimonthly
Bank Fees Variable Monthly
Insurance Fixed Monthly
Inventory Variable Monthly
Loan Payment Fixed Monthly
Office stationary Variable Bimonthly
Owner’s drawings Variable Monthly
Plastic Bags Variable 1/2 yearly
Rent Fixed Monthly
Security Monitoring Fixed Monthly
Telephone Fixed Monthly
Heat and Hydro Variable Monthly

35
Step 3: Record the cash payments you will make

Record the expenses in the month you will actually pay cash for it. For example, if you pay $1,500 in
January for insurance for 12 months, record the $1,500 as an expense in January. DO NOT, divide the
$1,500 by 12 and record it as an expense each month.
For variable expenses, such as materials/inventory purchases, you will not know exactly the level of
expenditure. You must estimate this figure based on your revenue figure. For example, if you estimate
that the sale of your products will increase in December, you would expect your materials/inventory
expenses to increase in December.

NEVER "flat line" expenses! Not every month will incur the same level of expenditures. Research your
expenditures to make them as accurate as possible.

Refer to page 43 to view Wilma's cash flow. Remember in the first month, of your cash flow, you will
have start-up and recurrent costs.

36
Cash Summary

Step 1: Calculate Net Cash

For each month, take Total Receipts and subtract Total Payments to end with a
Net Cash figure.

For Wilma, January's net cash will be -$413 ($24,600 - $25,013).

Step 2: Complete the Cash Summary section

Insert your opening cash balance; this will normally be zero for the first month. Add the Net Cash figure
to your Opening Cash Balance, the total is the Closing Cash Balance. This balance then becomes the
Opening Cash Balance for the next month and so on.

The Closing Cash Balance amount is the amount of cash that the business has at the end of the month.
This is NOT a profit figure. The profit figure comes from the Income Statement.

Refer to Wilma's cash flow. At the end of January,

Total Receipts $24,600
Total Payments ($25,013)
Net Cash -$ 413

Opening Cash 0
Net Cash Movement -$413
Closing Cash -$413

For February, -$413 will be the opening cash balance.

3) Notes to the Cash Flow

Make sure you include notes to explain your cash flow. Below are the notes that Wilma inserted to
explain her craft shop expenses.

Estimated Sales
Based upon Wilma’s prior industry knowledge and her survey results, she has estimated her sales as
per the table below.

37
 Average Estimated
Month Season Activity # Customers
Purchase Sales
January Winter Busy 180 $45 $8,100
February Winter Busy 95 $45 $4,275
March Spring Quiet 80 $45 $3,600
April Spring Quiet 50 $45 $2,250
May Spring Very Quiet 43 $45 $1,935
June Summer Very Quiet 43 $45 $1,935
July Summer Very Quiet 25 $45 $1,125
August Summer Very Quiet 44 $45 $1,980
September Autumn Moderate 105 $45 $4,725
October Autumn Moderate 99 $45 $4,455
November Autumn Very Busy 240 $45 $10,800
December Winter Very Busy 250 $45 $11,250

Total 1,254 $56,430

At the peak of her business, Wilma has estimated 250 customers for the month of December. In
December, she plans to be open for 25 days. This calculation would average to 10 customers per day.
She will trade for 9 hours per day; therefore, she would be serving 1.1 customers per hour. She
believes this number to be a reasonable estimate.

Cash Receipts

Cash from Sales and Accounts Receivable

Wilma will only grant credit to major customers. She has researched their credit histories and checked
their references. There were no "black" marks, they have good credit histories and usually pay within
30 days. From the survey, these customers indicated they would spend the following:

January $3,500
February $2,200
March $650
April $670
May $500
June $500
July $500
August $500
September $700
October $900
November $5,000
December $4,500

38
Small Business Loan

Wilma will borrow $15,000 from her bank in January and $10,000 in September.

Owner’s Equity

She will invest $5,000 from her personal savings in January and $5,000 in September.

Cash Payments

Bank Fees
Standard monthly charge $20
Cheque Book $50

(This entitles Wilma to 200 cheques. Every 3 months, she will need another book.)

Advertising
Wilma plans to advertise promotions and competitions in the slower months (May - August) to boost
sales.

On-going advertisement in local paper $50 per month

Quarter page promotion $500 May
Flier inserts in local paper $150/mth (June-Aug)
Coupon insert in local papers $150 December

Insurance
Yearly quote payable monthly $2,400 ($200/mth)

Inventory
Wilma’s opening inventory will be $15,000. In September, she plans to buy another $15,000 in stock.

Line of Credit Repayment

Wilma will need a $2,000 line of credit in May. She is required to pay 2% of the outstanding balance
each month. The interest rate is 10%. Her monthly payment is $44.

In September, she will draw another $5,000 on her line of credit. She will owe $7,000 and her monthly
payment will be $154.

Loan Repayment
Wilma will initially borrow $15,000 from the bank in January at 10% repayable over 5 years. Her
monthly payment is $325.

In September, she will borrow another $10,000 on the same terms. Her monthly payment will increase
to $543.

39
Office Stationary
Initial supply should easily last 2 months. Wilma then plans to order every 2 months spending $100 per
order.

Owner’s Drawings
In order to live, Wilma must withdraw $1,400 from the business each month, commencing in February.

Plastic Bags
Wilma initially bought 1,000 for $200, which should last 6 months. Her next purchase will be in June.

Rent
Rent is $700 per month.

Security Monitoring
This expense is a set rate at $30 per month.

Telephone
This expense is a flat fee of $50 per month
Long distance would be minimal. Expect it to be $10/mth

Heat and Hydro

Based upon the prior tenant's bills, winter hydro peaked at $170/mth, while summer hydro peaked at
$80/mth.

LIST OF LIKELY EXPENSES

• Accounting Fees • Promotional Expenses

• Advertising • Rent
• Bank Fees • Research Expenses
• Business Taxes • Salary
• Conferences • Shipping
• Equipment Purchases • Source Deductions
• Insurance • Tax Remittance
• Inventory • Telephone
• Legal Fees • Trade Shows
• Licenses • Training
• Loan Repayment • Travel Expenses
• Office Expenses • Utilities
• Owners Drawings • Vehicle Operating Costs
• Professional Development • Wages

40
 SAMPLE- Wilma's - CASH FLOW FORECAST FOR THE FIRST 12 MONTHS OF OPERATION
Notes Jan Feb Mar Apr May June Jul Aug Sept Oct Nov Dec TOTAL
Estimated Sales 1 $8,100 $4,275 $3,600 $2,250 $1,935 $1,935 $1,125 $1,980 $4,725 $4,455 $10,800 $11,250 $56,430
CASH RECEIPTS (IN)
Cash From Sales $4,600 $2,075 $2,950 $1,580 $1,435 $1,435 $625 $1,480 $4,025 $3,555 $5,800 $6,750 $36,310
Accounts Receivable Collected 2 $0 $3,500 $2,200 $650 $670 $500 $500 $500 $500 $700 $900 $5,000 $15,620
Small Business Loan 3 $15,000 $10,000 $25,000
Owner’s Equity Contribution 4 $5,000 $5,000 $10,000
Other: Line of Credit 5 $2,000 $5,000 $7,000
Total Receipts (A) $24,600 $5,575 $5,150 $2,230 $4,105 $1,935 $1,125 $1,980 $24,525 $4,255 $6,700 $11,750 $93,930

CASH PAYMENTS (OUT)

Fixed Expenses
Rental Expense $1,400 $700 $700 $700 $700 $700 $700 $700 $700 $700 $700 $700 $9,100
Business License $50 $50
Insurance Expense $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $2,400
Security Monitoring $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $360
Telephone Expense $210 $60 $60 $60 $60 $60 $60 $60 $60 $60 $60 $60 $870

Variable Expenses
Advertising Expense 6 $200 $50 $50 $50 $550 $200 $200 $200 $50 $50 $50 $200 $1,850
Bank Charges / Account Fees $70 $20 $20 $70 $20 $20 $70 $20 $20 $70 $20 $20 $440
Equipment Purchases $3,090 $3,090
Furniture and Fittings $3,100 $3,100
Heat and Hydro $170 $170 $170 $80 $80 $80 $80 $80 $80 $80 $80 $170 $1,320
Legal Fees $200 $200
Materials / Inventory Expense $15,000 $15,000 $30,000
Office Stationary $200 $100 $100 $100 $100 $100 $700
Personal Drawings $1,400 $1,400 $1,400 $1,400 $1,400 $1,400 $1,400 $1,400 $1,400 $1,400 $1,400 $15,400
Plastic Bags $200 $200 $400
Security Alarm $500 $500
Other : $0
Sub-total Payments $24,620 $2,630 $2,730 $2,590 $3,140 $2,890 $2,840 $2,690 $17,640 $2,590 $2,640 $2,780 $69,780
Other Expenses
Line of Credit Repayment 7 $44 $44 $44 $44 $154 $154 $154 $154 $792
Loan Repayment 8 $325 $325 $325 $325 $325 $325 $325 $325 $543 $543 $543 $543 $4,772
Total Payments (B) $24,945 $2,955 $3,055 $2,915 $3,509 $3,259 $3,209 $3,059 $18,337 $3,287 $3,337 $3,477 $75,344

Net Cash (A)-(B)=(C) ($413) $2,620 $2,095 ($685) $596 ($1,324) ($2,084) ($1,079) $6,188 $968 $3,363 $8,273 $18,518

CASH SUMMARY
Opening Cash Balance $0 ($413) $2,207 $4,302 $3,617 $4,213 $2,889 $805 ($274) $5,914 $6,882 $10,245
Net Cash Movement © ($413) $2,620 $2,095 ($685) $596 ($1,324) ($2,084) ($1,079) $6,188 $968 $3,363 $8,273
Closing Cash Balance
(Overdraft of $500 available) ($413) $2,207 $4,302 $3,617 $4,213 $2,889 $805 ($274) $5,914 $6,882 $10,245 $18,518

NOTES TO CASH FLOW

Cash Receipts (IN)
1. Estimated Sales: $56,430 based on 1254 clients in one year with an average purchase of $45.00. (Average purchased price based
on market research data.
Average Estimated
Month Season Activity # Customers
Purchase Sales
January Winter Busy 180 $45 $8,100
February Winter Busy 95 $45 $4,275
March Spring Quiet 80 $45 $3,600
April Spring Quiet 50 $45 $2,250
May Spring Very Quiet 43 $45 $1,935
June Summer Very Quiet 43 $45 $1,935
July Summer Very Quiet 25 $45 $1,125
August Summer Very Quiet 44 $45 $1,980
September Autumn Moderate 105 $45 $4,725
October Autumn Moderate 99 $45 $4,455
November Autumn Very Busy 240 $45 $10,800
December Winter Very Busy 250 $45 $11,250
Total 1,254 $56,430
Cash Payments (OUT)

2. The business will grant a 30 day credit on craft sales to major customers. These customers were surveyed and have estimated
these monthly purchases.

3. A small business loan of $25,000 from Royal Bank will be injected into the business. One injection in January of $15,000 and another
in September of $10,000.

4. The owner expects to inject a total of $10,000 from personal savings during the first year in business.

5. The business will utilize its Line of Credit at two periods in the first year to top off the cash flow for a total of $7,000

6. The business plans to advertise promotions in the slower months (May – August) to boost sales:
• On-going advertisement in Northern Life $50 per month
• Quarter page promotion – Sudbury Star $500 May
• Flyer insert in Northern Life $150 per month (June – August)
• Coupon insert in Sudbury Star $150 December

7. The business will need a $2,000 Line of Credit injection in May and will be required to pay 2% of the outstanding balance each
month. The interest rate is 10%. The monthly payment is $44.

8. The business will initially borrow $15,000 from the Royal Bank in January at 10% repayable over 5 years. The monthly payment is
$325.

In September, the business will borrow $10,000 on the same terms. The monthly payments will increase to $543.
 3. THE PROJECTED INCOME STATEMENT

The purpose of the Projected Income Statement is to summarize the

operating activities of a business over a specific period of time. All
projected income statements are prepared in a standardized style. This
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.

The following is an example of a Projected Income Statement for a typical small business.

It is good management practice to express all expenses in percentage relative to total sales
figures.

44
Instructions to the Projected Income Statement

Total Net Sales (Revenues):

Determine the total number of units of 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 projections to review your
pricing practices.

• What returns, allowances and markdowns can be expected?

• Exclude any revenue that is not strictly related to the business.

Cost of Sales:
The key to calculating your cost of sales is that you do not overlook any costs that you have incurred.
Calculate cost of sales of all products and services used to determine total net sales. Where inventory
is involved, do not overlook transportation costs. Also include any direct labor.

Gross Profit:
Subtract the total cost of sales from the total net sales to obtain gross profit.

Gross Profit Margin:

The gross profit is expressed as a percentage of total sales (revenues). It is calculated by dividing the
Gross Profit figure by the Total Sales.

Variable Expenses (examples):

• Wages: Base pay plus overtime.

• Payroll expenses: Include paid vacations, sick leave, health insurance, unemployment insurance
and CPP.

• Outside services: Include costs of subcontracts, overflow work and special or one-time services.

• Supplies: Services and items purchased for use in the business.

• Repair and maintenance: Regular maintenance and repair, including periodic large expenditures
such as painting.

• Advertising: Include desired sales volume and classified directory advertising expenses.

• Travel: Include charges if personal car is used in business, including parking, tools, buying trips,
etc.

• Professional fees: Outside professional services.

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Fixed Expenses (examples):

• Rent: List only real estate used in business.

• Depreciation: Amortization of capital assets.

• Utilities: Water, heat, light, etc.

• Insurance: Fire or liability on property or products. Include workers' compensation.

• Loan repayments: Interest on outstanding loans.

• Miscellaneous: Unspecified small expenditures without separate accounts.

Net Profit or Loss (before taxes): Subtract total expenses from gross profit.

Taxes: Include inventory and sales tax, excise tax, real estate tax, etc.

Net Profit or Loss (after taxes): Subtract taxes from net profit (before taxes).

4. THE BALANCE SHEET

The Balance Sheet is designed to show how much is owned (assets) by the business, how much is
owed (liabilities) by the business and net worth (share capital) of a business at a given point in time.

Name of the business

Opening Balance Sheet
As at (insert date)

Assets Liabilities
Current Assets Current Liabilities
Cash Bank Overdraft
A= L + OE Petty Cash Taxes Payable
Accounts Receivable Accounts Payable
A= Liabilities +
Inventory Interest Payable
Owners Equity Short-Term Investments Payroll accrual
Prepaid Expenses
The balance sheet Long-term Investments Total Current

must always Total Current Long Term

balance! Mortgage Loan
Fixed Assets Equipment Loan
Land Notes payable
Buildings
Improvements Total Long Term
Equipment Total Liabilities
Furniture
Vehicles Net Worth
Share Capital
Less: Accum. Depreciation Retained Earnings

Total Fixed Total Net Worh

Total Liabilities and

Total Assets Net Worth

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Instruction to the Balance Sheet

At the top of the balance sheet, fill in the legal name of the business, the type of statement (in this case
it would be 'Balance Sheet') and the day, month and year.

Assets
List anything of value that is owned or legally due to 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.

Current Assets:

Cash: 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 operation). Include money on hand and demand
deposits in the bank, e.g., chequing 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 or services.

Inventory: Includes raw materials on hand, work-in-progress and all finished goods, either
manufactured or purchased for resale.

Short-term investments: Also called temporary investments or marketable securities, these include
interest- or dividend-yielding holdings that are 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 is less.

Prepaid expenses: Goods, benefits or services a business buys or rents in advance. Examples are
office supplies, insurance protection and floor space.

Long-term investments: 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.

Fixed Assets:

Also called plant and equipment. Includes all resources a business owns or acquires for use in
operations and not intended for resale. Fixed assets may be leased. Depending on the leasing
arrangements, both the value and the liability of the leased property may need to be listed on the
balance sheet.

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 • Land: List original purchase price without allowances for market value.
• Buildings
• Improvements
• Equipment
• Furniture
• Automobile/vehicles

Liabilities

Current Liabilities:

List all debts, monetary obligations and claims payable within 12 months or within one cycle of
operation. 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 due to pay off short-term debt for borrowed funds. Also
includes the current amount due of total balance on notes whose terms exceed 12 months.

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.

Long-term Liabilities:

Notes payable: List notes, contract payments, mortgage payments due over a period exceeding 12
months or one cycle of operation. They are listed by outstanding balance

Net worth: Also called owner's equity, net worth is the claim of the owner(s) on the assets of the
business. In a proprietorship or partnership, equity is each owner's original investment plus any
earnings after withdrawals.

Total Liabilities and Net Worth:

The sum of these two amounts must always equal the amount for Total Assets.

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APPENDIX
For a business plan to flow smoothly and to enhance its readability, it is important to minimize
excessive details and background information. That’s where the appendices come in handy. Instead of
including a lengthy piece of information directly in the body of your plan, you can make reference to it
and request that the reader refer to the appendices at the back for further details.

Appendices should include any exhibits, supporting documents, graphs, charts or data that you referred
to or referenced within the written sections of your business plan. Make sure all copies that you include
are legible and complete.

Here is a list of what can often be found in a business plan’s appendices:

• Management Resumes
• Blueprints or Diagrams
• Patents and/or Trademarks
• Personal Financial Statements and Credit Reports
• Demographic Data
• Newspaper or Magazine Articles
• Letters of Reference
• Product Samples and Marketing Literature
• Press Coverage or Clippings
• Photos of the Business or Product
• Additional Financial Documentation
• Vendor Estimates and Quotes
• Organizational Charts and Diagrams
• Significant contracts
o Leases or rental agreements
o Sales contacts
o Purchases contracts
o Partnership / ownership agreements
o Stock option agreement
o Employment / compensation agreements
o Noncompetition agreements
o Customer Contracts or Letters of Intent
o Insurance

You'll be surprised. Some of the most sought after documentation can be found in the appendices of a
business plan. Make sure yours includes all necessary information that best supports and validates
your business idea.

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Enterprise Temiskaming – Business Plan Guide

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