Business Plan FAQ United States
Lenders and investors are constantly presented with new business proposals. If you provide all the required information in a consistent format then lenders and investors can make an efficient and fair analysis about the viability of your business ideas. By preparing a comprehensive business plan you send a message to your lenders and investors that you have already made an objective assessment of your business ideas and that you are serious about your business plan.
Benefits of a Business Plan include:
An executive summary is a brief overview of a document. It allows the reader to quickly get an understanding of the content of a document without having to read the entire document.
A Mission Statement describes the current purpose for the business. It answers the question "What is our current business?". It should identify the products, services, markets and customers of the business. The mission statement should be easily understood and should help employees and customers understand the day-to-day focus of the business. Be honest and objective when drafting a mission statement. A mission statement that is unrealistic or inaccurate may cause cynicism in employees as well as in existing customers.
A Vision Statement describes the future aspirations for the company. The Vision Statement should describe a strong and positive future that is beyond the comfort level of current day-to-day expectations.
In any market there are businesses that target the high-end luxury market, companies that target the middle market (good value but lower price) and finally companies that sell a comparable product but for the least cost. Typically the product in this final category is a no-name brand and may be of a lesser quality. This final group is called the 'least-cost' provider.
A SWOT analysis is a planning tool to help you objectively assess a business situation. The acronym SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Strengths and Weaknesses are internal factors affecting the success of your venture while Opportunities and Threats are external factors affecting your success. A SWOT analysis helps you objectively analyze the potential for your organization. A SWOT analysis can be used for planning at the organizational level or it may be used at a departmental level.
A capital requirements plan describes how much money you need to finance any new business purchases as well as day-to-day operations in order to accomplish your business plan. It should describe how much cash you and other investors have provided and how much more you will need. It should also describe how this cash will be paid back.
The income statement (also called profit and loss statement) establishes the profit or loss a business has made in a given period by comparing revenue to expenses. The income statement will show the financial progress of an organization over a period of time.
The cash flow statement shows the net change in cash holdings for an organization by comparing the cash coming in to the cash going out for a fixed period of time. Projected cash flow statements will help an organization anticipate cash requirements and help prevent crippling cash shortages.
The balance sheet describes the net worth of an organization by comparing assets, liabilities, and owners equity. The balance sheet shows the financial state of the company at one point in time.
In a manufacturing environment, Cost of Goods Sold includes the material costs AND the direct labor costs necessary to produce finished goods. In a simple retail or wholesale environment COGS can be calculated as beginning inventory plus purchases minus ending inventory. Ideally this indicates the inventory consumed in the reporting period.