THE BUSINESS PLAN: ROAD MAP TO SUCCESS
*This information was taken from the U.S. Small Business Administration home page at http;//www.sba.gov/
By the end of this workshop, you should be able to:
* Understand the role of the business plan.
* List several reasons for developing a business plan.
* Identify sources where you can get help in developing a
* Identify the type of information to include in the business
* Prepare an outline for a business plan.
THE BUSINESS PLAN - BUSINESS PLAN OUTLINE
Below is an outline for a business plan. Use this model as a
guide when developing the business plan for your business.
Elements of a Business Plan
1. Cover sheet
2. Statement of purpose
3. Table of contents
I. The Business
A. Description of business
D. Operating procedures
F. Business insurance
G. Financial data
II. Financial Data
A. Loan applications
B. Capital equipment and supply list
C. Balance sheet
D. Breakeven analysis
E. Pro-forma income projections (profit & loss statements)
- Three-year summary
- Detail by month, first year
- Detail by quarters, second and third years
- Assumptions upon which projections were based
F. Pro-forma cash flow
- Follow guidelines for letter E.
III. Supporting Documents
- Tax returns of principals for last three years
- Personal financial statement (all banks have these
- In the case of a franchised business, a copy of
franchise contract and all supporting documents
provided by the franchisor
- Copy of proposed lease or purchase agreement for
- Copy of licenses and other legal documents
- Copy of resumes of all principals
- Copies of letters of intent from suppliers, etc.
THE BUSINESS PLAN - WHAT IT INCLUDES
What goes in a business plan? This is an excellent question. And,
it is one that many new and potential small business owners
should ask, but oftentimes don't ask. The body of the business
plan can be divided into four distinct sections: 1) the
description of the business, 2) the marketing plan, 3) the
financial management plan and 4) the management plan. Addenda to
the business plan should include the executive summary,
supporting documents and financial projections.
THE BUSINESS PLAN - DESCRIPTION OF THE BUSINESS
In this section, provide a detailed description of your business.
An excellent question to ask yourself is: "What business am I
in?" In answering this question include your products, market and
services as well as a thorough description of what makes your
business unique. Remember, however, that as you develop your
business plan, you may have to modify or revise your initial
The business description section is divided into three primary
sections. Section 1 actually describes your business, Section 2
the product or service you will be offering and Section 3 the
location of your business, and why this location is desirable (if
you have a franchise, some franchisors assist in site selection).
1. Business Description
When describing your business, generally you should explain:
1. Legalities - business form: proprietorship,
partnership, corporation. The licenses or permits
you will need.
2. Business type: merchandizing, manufacturing or
3. What your product or service is.
4. Is it a new independent business, a takeover, an
expansion, a franchise?
5. Why your business will be profitable. What are the
growth opportunities? Will franchising impact on
6. When your business will be open (days, hours)?
7. What you have learned about your kind of business
from outside sources (trade suppliers, bankers, other
franchise owners, franchisor, publications).
A cover sheet goes before the description. It includes the name,
address and telephone number of the business and the names of all
principals. In the description of your business, describe the
unique aspects and how or why they will appeal to consumers.
Emphasize any special features that you feel will appeal to
customers and explain how and why these features are appealing.
The description of your business should clearly identify goals
and objectives and it should clarify why you are, or why you want
to be, in business.
THE BUSINESS PLAN - 2. Product/Service
Try to describe the benefits of your goods and services from your
customers' perspective. Successful business owners know or at
least have an idea of what their customers want or expect from
them. This type of anticipation can be helpful in building
customer satisfaction and loyalty. And, it certainly is a good
strategy for beating the competition or retaining your
1. What you are selling.
2. How your product or service will benefit the
3. Which products/services are in demand; if there will
be a steady flow of cash.
4. What is different about the product or service your
business is offering.
THE BUSINESS PLAN - 3. The Location
The location of your business can play a decisive role in its
success or failure. Your location should be built around your
customers, it should be accessible and it should provide a sense
of security. Consider these questions when addressing this
section of your business plan:
1. What are your location needs?
2. What kind of space will you need?
3. Why is the area desirable? the building desirable?
4. Is it easily accessible? Is public transportation
available? Is street lighting adequate?
5. Are market shifts or demographic shifts occurring?
It may be a good idea to make a checklist of questions you
identify when developing your business plan. Categorize your
questions and, as you answer each question, remove it from your
THE BUSINESS PLAN - The Marketing Plan
Marketing plays a vital role in successful business ventures. How
well you market you business, along with a few other
considerations, will ultimately determine your degree of success
or failure. The key element of a successful marketing plan is to
know your customers -- their likes, dislikes, expectations. By
identifying these factors, you can develop a marketing strategy
that will allow you to arouse and fulfill their needs.
Identify your customers by their age, sex, income/educational
level and residence. At first, target only those customers who
are more likely to purchase your product or service. As your
customer base expands, you may need to consider modifying the
marketing plan to include other customers.
Develop a marketing plan for your business by answering these
questions. (Potential franchise owners will have to use the
marketing strategy the franchisor has developed.) Your marketing
plan should be included in your business plan and contain answers
to the questions outlined below.
1. Who are your customers? Define your target market(s).
2. Are your markets growing? steady? declining?
3. Is your market share growing? steady? declining?
4. If a franchise, how is your market segmented?
5. Are your markets large enough to expand?
6. How will you attract, hold, increase your market
share? If a franchise, will the franchisor provide
assistance in this area? Based on the franchisor's
strategy? how will you promote your sales?
7. What pricing strategy have you devised?
Appendix I contains a sample Marketing Plan and Marketing Tips,
Tricks and Traps, a condensed guide on how to market your product
or service. Study these documents carefully when developing the
marketing portion of your business plan.
THE BUSINESS PLAN - 1. Competition
Competition is a way of life. We compete for jobs, promotions,
scholarships to institutes of higher learning, in sports -- and
in almost every aspect of your lives. Nations compete for the
consumer in the global marketplace as do individual business
owners. Advances in technology can send the profit margins of a
successful business into a tailspin causing them to plummet
overnight or within a few hours. When considering these and other
factors, we can conclude that business is a highly competitive,
volatile arena. Because of this volatility and competitiveness,
it is important to know your competitors.
Questions like these can help you:
1. Who are your five nearest direct competitors?
2. Who are your indirect competitors?
3. How are their businesses: steady? increasing?
4. What have you learned from their operations? from
5. What are their strengths and weaknesses?
6. How does their product or service differ from yours?
Start a file on each of your competitors. Keep manila envelopes
of their advertising and promotional materials and their pricing
strategy techniques. Review these files periodically, determining
when and how often they advertise, sponsor promotions and offer
sales. Study the copy used in the advertising and promotional
materials, and their sales strategy. For example, is their copy
short? descriptive? catchy? or how much do they reduce prices for
sales? Using this technique can help you to understand your
competitors better and how they operate their businesses.
THE BUSINESS PLAN - 2. Pricing and Sales
Your pricing strategy is another marketing technique you can use
to improve your overall competitiveness. Get a feel for the
pricing strategy your competitors are using. That way you can
determine if your prices are in line with competitors in your
market area and if they are in line with industry averages.
Some of the pricing strategies are:
* retail cost and pricing
* competitive position
* pricing below competition
* pricing above competition
* price lining
* multiple pricing
* service costs and pricing (for service businesses
- service components
- material costs
- labor costs
- overhead costs
The key to success is to have a well-planned strategy, to
establish your policies and to constantly monitor prices and
operating costs to ensure profits. Even in a franchise where the
franchisor provides operational procedures and materials, it is a
good policy to keep abreast of the changes in the marketplace
because these changes can affect your competitiveness and profit
Appendix 1 contains a sample Price/Quality Matrix, review it for
ideas on pricing strategies for your competitors. Determine which
of the strategies they use, if it is effective and why it is
THE BUSINESS PLAN - 3. Advertising and Public Relations
How you advertise and promote your goods and services may make or
break your business. Having a good product or service and not
advertising and promoting it is like not having a business at
all. Many business owners operate under the mistaken concept that
the business will promote itself, and channel money that should
be used for advertising and promotions to other areas of the
business. Advertising and promotions, however, are the life line
of a business and should be treated as such.
Devise a plan that uses advertising and networking as a means to
promote your business. Develop short, descriptive copy (text
material) that clearly identifies your goods or services, its
location and price. Use catchy phrases to arouse the interest of
your readers, listeners or viewers. In the case of a franchise,
the franchisor will provide advertising and promotional materials
as part of the franchise package, you may need approval to use
any materials that you and your staff develop. Whether or not
this is the case, as a courtesy, allow the franchisor the
opportunity to review, comment on and, if required, approve these
materials before using them. Make sure the advertisements you
create are consistent with the image the franchisor is trying to
project. Remember the more care and attention you devote to your
marketing program, the more successful your business will be.
A more detailed explanation of the marketing plan and how to
develop an effective marketing program is provided in the
Workshop on Marketing. See Training Module 3 - Marketing Your
Business for Success.
THE BUSINESS PLAN - THE MANAGEMENT PLAN
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.
Your management plan, along with your marketing and financial
management plans, sets the foundation for and facilitates the
success of your business.
Like plants and equipment, people are resources -- they are the
most valuable asset a business has. You will soon discover that
employees and staff will play an important role in the total
operation of your business. Consequently, it's imperative that
you know what skills you possess and those you lack since you
will have to hire personnel to supply the skills that you lack.
Additionally, it is imperative that you know how to manage and
treat your employees. Make them a part of the team. Keep them
informed of, and get their feedback regarding, changes. Employees
oftentimes have excellent ideas that can lead to new market
areas, innovations to existing products or services or new
product lines or services which can improve your overall
Your management plan should answer questions such as:
* How does your background/business experience help you
in this business?
* What are your weaknesses and how can you compensate
* Who will be on the management team?
* What are their strengths/weaknesses?
* What are their duties?
* Are these duties clearly defined?
* If a franchise, what type of assistance can you expect
from the franchisor?
* Will this assistance be ongoing?
* What are your current personnel needs?
* What are your plans for hiring and training personnel?
* What salaries, benefits, vacations, holidays will you
offer? If a franchise, are these issues covered in the
management package the franchisor will provide?
* What benefits, if any, can you afford at this point?
If a franchise, the operating procedures, manuals and materials
devised by the franchisor should be included in this section of
the business plan. Study these documents carefully when writing
your business plan, and be sure to incorporate this material. The
franchisor should assist you with managing your franchise. Take
advantage of their expertise and develop a management plan that
will ensure the success for your franchise and satisfy the needs
and expectations of employees, as well as the franchisor.
THE BUSINESS PLAN - THE FINANCIAL MANAGEMENT PLAN
Sound financial management is one of the best ways for your
business to remain profitable and solvent. How well you manage
the finances of your business is the cornerstone of every
successful business venture. Each year thousands of potentially
successful businesses fail because of poor financial management.
As a business owner, you will need to identify and implement
policies that will lead to and ensure that you will meet your
To effectively manage your finances, plan a sound, realistic
budget by determining the actual amount of money needed to open
your business (start-up costs) and the amount needed to keep it
open (operating costs). The first step to building a sound
financial plan is to devise a start-up budget. Your start-up
budget will usually include such one-time-only costs as major
equipment, utility deposits, down payments, etc.
The start-up budget should allow for these expenses.
* personnel (costs prior to opening)
* legal/professional fees
* payroll expenses
An operating budget is prepared when you are actually ready to
open for business. The operating budget will reflect your
priorities in terms of how your spend your money, the expenses
you will incur and how you will meet those expenses (income).
Your operating budget also should include money to cover the
first three to six months of operation. It should allow for the
* loan payments
* miscellaneous expenses
* payroll expenses
The financial section of your business plan should include any
loan applications you've filed, a capital equipment and supply
list, balance sheet, breakeven analysis, pro-forma income
projections (profit and loss statement) and pro-forma cash flow.
The income statement and cash flow projections should include a
three-year summary, detail by month for the first year, and
detail by quarter for the second and third years.
The accounting system and the inventory control system that you
will be using is generally addressed in this section of the
business plan also. If a franchise, the franchisor may stipulate
in the franchise contract the type of accounting and inventory
systems you may use. If this is the case, he or she should have a
system already intact and you will be required to adopt this
system. Whether you develop the accounting and inventory systems
yourself, have an outside financial advisor develop the systems
or the franchisor provides these systems, you will need to
acquire a thorough understanding of each segment and how it
operates. Your financial advisor can assist you in developing
this section of your business plan.
The following questions should help you determine the amount of
start-up capital you will need to purchase and open a franchise.
* How much money do you have?
* How much money will you need to purchase the
* How much money will you need for start-up?
* How much money will you need to stay in business?
Other questions that you will need to consider are:
* What type of accounting system will your use? Is it a
single entry or dual entry system?
* What will your sales goals and profit goals for the
coming year be? If a franchise, will the franchisor
set your sales and profit goals? Or, will he or she
expect you to reach and retain a certain sales level
and profit margin?
* What financial projections will you need to include
in your business plan?
* What kind of inventory control system will you use?
Your plan should include an explanation of all projections.
Unless you are thoroughly familiar with financial statements, get
help in preparing your cash flow and income statements and your
balance sheet. Your aim is not to become a financial wizard, but
to understand the financial tools well enough to gain their
benefits. Your accountant or financial advisor can help you
accomplish this goal.
Sample balance sheets, income projections (profit and loss
statements) and cash flow statements are included in Appendix 2,
Financial Management. For a detailed explanation of these and
other more complex financial concepts, contact your local SBA
Office. Look under the U.S. Government section of the local
THE BUSINESS PLAN - SELF-PACED ACTIVITY
During this activity you will:
* Briefly describe what goes into a business plan.
* Identify advantages of developing the marketing,
management and financial management plans.
* List financial projections included in the financial
* Sketch an outline for a business plan.
THE BUSINESS PLAN - APPENDIX 1
1. THE MARKETING PLAN
2. PRICE/QUALITY MATRIX
3. MARKETING TIPS, TRICKS & TRAPS
This is the marketing plan of____________________________
I. MARKET ANALYSIS
A. Target Market - Who are the customers?
1. We will be selling primarily to (check all that
a. Private sector _______ ______
b. Wholesalers _______ ______
c. Retailers _______ ______
d. Government _______ ______
e. Other _______ ______
2. We will be targeting customers by:
a. Product line/services.
We will target specific lines ________________
b. Geographic area? Which areas? ________________
c. Sales? We will target sales of ________________
d. Industry? Our target industry is ________________
e. Other? ________________
3. How much will our selected market spend on our type
of product or service this coming year?
1. Who are our competitors?
Years in Business ___________________
Market Share ___________________
Years in Business ____________________
Market Share ____________________
2. How competitive is the market?
3. List below your strengths and weaknesses compared to
your competition (consider such areas as location,
size of resources, reputation, services, personnel,
1. The following are some important economic factors
that will affect our product or service (such as
trade area growth, industry health, economic trends,
taxes, rising energy prices, etc.):
2. The following are some important legal factors that
will affect our market:
3. The following are some important government factors:
4. The following are other environmental factors that
will affect our market, but over which we have no
II. PRODUCT OR SERVICE ANALYSIS
1. Describe here what the product/service is and what
1. What advantages does our product/service have over
those of the competition (consider such things as
unique features, patents, expertise, special
2. What disadvantages does it have?
C. Some Considerations
1. Where will you get your materials and supplies?
2. List other considerations:
III. MARKETING STRATEGIES - MARKET MIX
1. First, what kind of image do we want to have (such
as cheap but good, or exclusiveness, or customer-
oriented or highest quality, or convenience, or
speed, or ...)?
1. List the features we will emphasize:
1. We will be using the following pricing strategy:
a. Markup on cost ____ What % markup? _____
b. Suggested price ____
c. Competitive ____
d. Below competition ____
e. Premium price ____
f. Other ____
2. Are our prices in line with our image?
3. Do our prices cover costs and leave a margin of
D. Customer Services
1. List the customer services we provide:
2. These are our sales/credit terms:
3. The competition offers the following services:
1. These are the things we wish to say about the
2. We will use the following advertising/promotion
1. Television ________
2. Radio ________
3. Direct mail ________
4. Personal contacts ________
5. Trade associations ________
6. Newspaper ________
7. Magazines ________
8. Yellow Pages ________
9. Billboard ________
10. Other___________ ________
3. The following are the reasons why we consider the
media we have chosen to be the most effective:
MARKETING TIPS, TRICKS & TRAPS
1. Marketing Steps
* Classifying Your Customers' Needs
* Targeting Your Customer(s)
* Examining Your "Niche"
* Identifying Your Competitors
* Assessing and Managing Your Available Resources
NOTES AND STRATEGIES FOR YOUR BUSINESS
MARKETING TIPS, TRICKS & TRAPS
2. Marketing Positioning
* Follower versus Leader
* Quality versus Price
* Innovator versus Adaptor
* Customer versus Product
* International versus Domestic
* Private Sector versus Government
NOTES AND STRATEGIES FOR YOUR BUSINESS
MARKETING TIPS, TRICKS & TRAPS
3. Sales Strategy
* Use Customer-Oriented Selling Approach - By Constructing
* Phase One: Establish Rapport with Customer - by
agreeing to discuss what the customer
wants to achieve.
* Phase Two: Determine Customer Objective and
Situational Factors - by agreeing on
what the customer wants to achieve
and those factors in the environment
that will influence these results.
* Phase Three: Recommend a Customer Action Plan - by
agreeing that using your product/
service will indeed achieve what
* Phase Four: Obtaining Customer Commitment - By
agreeing that the customer will
acquire your product/service.
* Emphasize Customer Advantage
Must be Read: When a competitive advantage can not
be demonstrated, it will not
translate into a benefit.
Must be Important
to the Customer: When the perception of competitive
advantage varies between supplier and
customer, the customer wins.
Must be Specific: When a competitive advantage lacks
specificity, it translates into mere
puffery and is ignored.
Must be Promotable: When a competitive advantage is
proven, it is essential that your
customer know it, lest it not exist
NOTES AND STRATEGIES FOR YOUR BUSINESS
MARKETING TIPS, TRICKS & TRAPS
4. Benefits vs. Features
* The six "O's" of organizing Customer Buying Behavior
ORIGINS of purchase: Who buys it?
OBJECTIVES of purchase: What do they need/buy?
OCCASIONS of purchase: When do they buy it?
OUTLETS of purchase: Where do they buy it?
OBJECTIVES of purchase: Why do they buy it?
OPERATIONS of purchase: How do they buy it?
* Convert features to benefits using the "...Which Means..."
* Sales Maxim: "Unless the proposition appeals to their
INTEREST, unless it satisfies their
DESIRES, and unless it shows them a
GAIN--then they will not buy!"
* Quality Customer Leads:
Level of need Ability to pay
Authority to pay Accessibility
Sympathetic attitude Business history
One-source buyer Reputation (price or
NOTES AND STRATEGIES FOR YOUR BUSINESS
CONVERT FEATURES INTO BENEFITS--
THE "...WHICH MEANS..." TRANSITION
FEATURES "WHICH MEANS" BENEFITS
Performance Time Saved
Reputation Reduced Cost
Colors Bigger Savings
Sizes Greater Profits
Uses Uniform Production
Applications Uniform Accuracy
Ruggedness Continuous Output
Service Increased Sales
Price Economy of Use
Design Ease of Use
Availability Reduced Inventory
Installation Low Operating Cost
Lab Tests Reduced Upkeep
Terms Reduced Waste
Workmanship Long Life
Economy of Purchase Pride of
Economy of Use Pride of Ownership
Efficient Profits Desire of Prestige
Increased Profits Desire for
Durability Desire to Imitate
Accurate Performance Desire for Variety
Simple Construction Desire to Create
Simple Operation Desire for
Ease of Repair Convenience
Ease of Installation Desire to Be
Desire to be Unique
PRICE / QUALITY MATRIX
PRICE/QUALITY HIGH MEDIUM LOW
HIGH "Rolls Royce" "We Try Harder" "Best Buy"
Strategy Strategy Strategy
MEDIUM "Out Performs" "Piece of the Rock" "Smart Shopper"
Strategy Strategy Strategy
LOW "Feature Packed" "Keeps on Ticking" "Bargain
Strategy Strategy Hunter"
THE BUSINESS PLAN - APPENDIX 2
1. Income Projection Statement
- Instructions for Income Projection Statement
2. Balance Sheet
- Instructions for Balance Sheet
3. Monthly Cash Flow Projection
- Instructions for Monthly Cash Flow Projection
4. Information Resources
INCOME PROJECTION STATEMENT
Industry J F M A M J J A S O N D Annual Annual
% total %
Total net sales (revenues)
Costs of sales
Gross profit margin
Total fixed expenses
Net profit (loss)
Net profit (loss) after
INSTRUCTIONS FOR INCOME PROJECTIONS STATEMENT
The income projections (profit and loss) statement is valuable as
both a planning tool and a key management tool to help control
business operations. It enables the owner/manager to develop a
preview of the amount of income generated each month and for the
business year, based on reasonable predictions of monthly levels
of sales, costs and expenses.
As monthly projections are developed and entered into the income
projections statement, they can serve as definite goals for
controlling the business operation. As actual operating results
become known each month, they should be recorded for comparison
with the monthly projections. A completed income statement allows
the owner/manager to compare actual figures with monthly
projections and to take steps to correct any problems.
In the industry percentage column, enter the percentages of total
sales (revenues) that are standard for your industry, which are
derived by dividing
Costs/expenses items x 100%
total net sales
These percentages can be obtained from various sources, such as
trade associations, accountants or banks. The reference librarian
in your nearest public library can refer you to documents that
contain the percentage figures, for example, Robert Morris
Associates' Annual Statement Studies (
Industry figures serve as a useful bench mark against which to
compare cost and expense estimates that you develop for your
firm. Compare the figures in the industry percentage column to
those in the annual percentage column.
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
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.
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
total net sales
Controllable (also known as Variable) Expenses
- Salary expenses -- Base pay plus overtime.
- Payroll expenses -- Include paid vacations, sick leave,
health insurance, unemployment insurance and social
- Outside services -- Include costs of subcontracts,
overflow work and special or one-time services.
- Supplies -- Services and items purchased for use in the
- Repair and maintenance -- Regular maintenance and repair,
including periodic large expenditures such as painting.
- Advertising -- Include desired sales volume and classified
directory advertising expenses.
- Car delivery and travel -- Include charges if personal car
is used in business, including parking, tools, buying
- Accounting and legal -- Outside professional services.
- 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
Net Profit (loss)
(before taxes) - Subtract total expenses from gross profit.
Taxes - Include inventory and sales tax, excise
tax, real estate tax, etc.
Net Profit (loss)
(after taxes) - Subtract taxes from net profit (before
Annual Total - For each of the sales and expense items in
your income projection statement, add all
the monthly figures across the table and
put the result in the annual total column.
Annual Percentage - Calculate the annual percentage by dividing
Annual total x 100%
total net sales
- Compare this figure to the industry
percentage in the first column.
As of ____________________________, 19____
Petty cash $_______
Accounts receivable $_______
Short-term investment $_______
Prepaid expenses $_______
Long-term investment $_______
Total assets $______
Accounts payable $______
Notes payable $______
Interest payable $______
Federal income tax $______
State income tax $______
Self-employment tax $______
Sales tax (SBE) $______
Property tax $______
Payroll accrual $______
Notes payable $______
Total liabilities $______
Net worth (owner equity) $______
(name's) equity $_____
(name's) equity $_____
Capital stock $_____
Surplus paid in $_____
Retained earnings $_____
Total net worth $_____
Total liabilities and
total net worth $_____
(Total assets will always equal total liabilities and total net
INSTRUCTIONS FOR BALANCE SHEET
Figures used to compile the balance sheet are taken from the
previous and current balance sheet as well as the current income
statement. The income statement is usually attached to the
balance sheet. The following text covers the essential elements
of the balance sheet.
At the top of the page fill in the legal name of the business,
the type of statement and the day, month and year.
List anything of value that is owned or legally due the business.
Total assets include all net values. These are the amounts
derived when you subtract depreciation and amortization from the
original costs of acquiring the assets.
- 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., checking
accounts and regular savings accounts.
- Petty cash -- If your business has a fund for small
miscellaneous expenditures, include the total here.
- Accounts receivable -- The amounts due from customers in
payment for merchandise 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 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.
Also called long-term assets, these are holdings the business
intends to keep for at least a year and that typically yield
interest or dividends. Included are stocks, bonds and savings
accounts earmarked for special purposes.
Also called plant and equipment. Includes all resources a
business owns or acquires for use in operations and 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.
- Land -- List original purchase price without allowances
for market value.
List all debts, monetary obligations and claims payable within 12
months or within one cycle of operation. Typically they include
- Accounts payable -- Amounts owed to suppliers for goods
and services purchased in connection with business
- 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.
Notes payable -- List notes, contract payments or mortgage
payments due over a period exceeding 12 months or one cycle of
operation. They are listed by outstanding balance less the
current position due.
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 match that for total
MONTHLY CASH FLOW PROJECTION
Name of Business Owner Type of Business Prepared by Date
Pre-start- 1 2 3 4 5 6 Total
up position Columns 1-6
Est.* Act.* Est.Act. Est.Act. Est.Act. Est.Act. Est.Act.
1. Cash on hand (beginning
2. Cash receipts
(a) Cash sales
(b) Collections from credit
(c) Loan or other cash
3. Total cash receipts
4. Total cash available
(before cash out) (1+3)
5. Cash paid out
(a) purchases (merchandise)
(b) Gross wages (excludes withdrawals)
(c) Payroll expenses (taxes, etc.)
(d) Outside services
(e) Supplies (office and
(f) Repairs and maintenance
(h) Car, delivery and travel
(i) Accounting and legal
(n) Taxes (real estate, etc.)
(p) Other expenses (specify
(s) Loan principal payment
(t) Capital purchases
(u) Other start-up costs
(v) Reserve and/or escrow
(w) Owner's withdrawal
6. Total cash paid out (5a
7. Cash position (end of
month) (4 minus 6)
Essential operating data
(non-cash flow information)
A. Sales volume (dollars)
B. Accounts receivable
(end on month)
C. Bad debt (end of
D. Inventory on hand (end
E. Accounts payable (end
INSTRUCTIONS FOR MONTHLY CASH FLOW PROJECTION
1. Cash on hand (beginning of month) -- Cash on hand same as (7),
Cash position, pervious month
2. Cash receipts-
(a) Cash sales-- All cash sales. Omit credit sales unless cash
is actually received
(b) Gross wages (including withdrawals)-- Amount to be
expected from all accounts.
(c) Loan or other cash injection-- Indicate here all cash
injections not shown in 2(a) or 2(b) above.
3. Total cash receipts (2a+2b+2c=3)
4. Total cash available (before cash out)(1+3)
5. Cash paid out -
(a) Purchases (merchandise)--Merchandise for resale or for use
in product (paid for in current month).
(b) Gross wages (including withdrawals)--Base pay plus
overtime (if any)
(c) Payroll expenses (taxes, etc.)-- Include paid vacations,
paid sick leave, health insurance, unemployment insurance,
(this might be 10 to 45% of 5(b))
(d) Outside services--This could include outside labor and/or
material for specialized or overflow work, including
(e) Supplies (office and operating)--Items purchased for use
in the business (not for resale)
(f) Repairs and maintenance-- Include periodic large
expenditures such as painting or decorating
(g) Advertising--This amount should be adequate to maintain
(h) Car, delivery and travel--If personal car is used, charge
in this column, include parking
(i) Accounting and legal--Outside services, including, for
(j) Rent-- Real estate only (See 5(p) for other rentals)
(l) Utilities--Water, heat, light and/or power
(m) Insurance-- Coverage on business property and products
(fire, liability); also worker's compensation, fidelity,
etc. Exclude executive life (include in 5(w))
(n) Taxes (real estate, etc.)-- Plus inventory tax, sales tax,
excise tax, if applicable
(o) Interest--Remember to add interest on loan as it is
injected (See 2(c) above)
(p) Other expenses (specify each)
Unexpected expenditures may be included here as a safety
Equipment expenses during the month should be included
here (non-capital equipment)__________________________
When equipment is rented or leased, record payments here
(q) Miscellaneous (unspecified)--Small expenditures for which
separate accounts would be practical
(r) Subtotal--This subtotal indicates cash out for operating
(s) Loan principal payment--Include payment on all loans,
including vehicle and equipment purchases on time payment
(t) Capital purchases (specify)--Nonexpensed (depreciable)
expenditures such as equipment, building purchases on time
(u) Other start-up costs--Expenses incurred prior to first
month projection and paid for after start-up
(v) Reserve and/or escrow (specify)-- Example: insurance, tax
or equipment escrow to reduce impact of large periodic
(w) Owner's withdrawals-- Should include payment for such
things as owner's income tax, social security, health
insurance, executive life insurance premiums, etc.
6. Total cash paid out (5a through 5w)
7. Cash position (end on month) (4 minus 6)-- Enter this amount
in (1) Cash on hand following month--
Essential operating data (non-cash flow information)--This is
basic information necessary for proper planning and for proper
cash flow projection. Also with this data, the cash flow can be
evolved and shown in the above form.
A. Sales volume (dollars)--This is a very important figure and
should be estimated carefully, taking into account size of
facility and employee output as well as realistic
anticipated sales (actual sales, not orders received).
B. Accounts receivable (end of month)-- Previous unpaid credit
sales plus current month's credit sales, less amounts
received current month (deduct "C" below)
C. Bad debt (end on month)-- Bad debts should be subtracted
from (B) in the month anticipated
D. Inventory on hand (end on month)-- Last month's inventory
plus merchandise received and/or manufactured current month
minus amount sold current month
E. Accounts payable (end of month) Previous month's payable
plus current month's payable minus amount paid during
F. Depreciation--Established by your accountant, or value of
all your equipment divided by useful life (in months) as
allowed by Internal Revenue Service