BUSINESS PLAN


 
This guide and handbook is designed to provide an outline and template of the information that should be included in your business plan.  You may tailor it to suit your needs.  You may want to add tables, images and graphs to demonstrate and summarize statistics.  Click HERE to download the business plan template and HERE to download the finance template.

The business plan is simply a document that contains information about your business.  The information should be current and accurate - supported by facts.  It should be easy to read and use.  A business plan provides a clear and realistic image of our business and/or project.  It is a summary which describes past, current and future activities while clearly explaining your business objectives and goals.  It is a vital element with the launching of any venture. In fact, the business plan will help you determine if your business and/or project is financially and logically sound.  It will provide you with a road map or path to follow so you have direction and focus.  It will also be used as a atool on which to base your business decisions.

Therefore, please take your time to carefully prepare your business plan. 

A business performance...a consequenceof its planning

A well written business plan will help you tink through every asdpect of a business and will function as a base for goal setting and ompany direction.  A thoroughly researched plan also provides a quantifiable method of measuring future success.  Use as many resources as possible in preparing your business plan.  A complete business proposal will greatly enhance your presentation.

Well prepared, your business plan will:
  • be an important tool in guiding your business;
  • help you determine whether the venture is viable or not;
  • force you to look at each aspect under a magnifying glass;
  • help you ensure you have researched all areas before startin a business;
  • assit investors evaluate the investment opportunity;
  • help you identify what you already know and gather information on what you don't;
  • help you understand the legal implicatios and regulations for your business and/or project;
  • help you determin if this is right for you;
  • guide you and show where you want to go with your business and/or project;
  • show you how to get where you want to be.
If you are convinced that your idea will be aa success, a business plan will provide you with an organized framework to conduct your investigation.
  1. Become a good decision maker  The information you gather will turn you into an expert on your business idea and will lead to more informed decisions.
  2. Are you ready?  Researching for your business plan helps you anticipate problems so you can develop possible solutions before a crisis actually occurs.
  3. Prediction for implementing an organized plan  The business plan provides a timetable for accomplishing your stated objectives.  It helps keep you focused and on track to set up your business by your chosen start date.
  4. Expand business options  Knowledge is power.  The more you learn about your industry, competition and opportunity, the more choices you have to solve problems.
  5. Contingency plan  The business plan can help you work out "worst case" and "best case" cash flow scenarios before they really occur.  This gives you the opportunity to planstrategies to ensure your business is capable of withstanding the pressures of unexpected external changes in the economy, your comptetition or your customers.
  6. Selling tool  If you need to secure financing, you must present the investors your business plan.  It will help them understand what you are doing and that you are serious about it.  Investors will require a business plan which will be analyzed for funding consideration.
The business structure you choose influences everything.  From day-to-day operations, to how much you pay in taxes, to your ability to raise money, to the paperwork you need to file, to how much of your personal assets are at risk.  You should choose a business structure that gives you the right balance of legal protections and benefits.  Choose carefully. While you may convert to a different structure in the future, there may be restrictions based on your location.  This could also result in tax consequences and unintended dissolution, among other complications.  Consulting with a business consultant, a lawyer and an accountant can be helpful.

When you decide to start your own business, you need to determine what type of business structure best suits your needs.  The three most common business structures are:

SOLE PROPRIETORSHIP

With this type of business organization, you are the sole owner and all profits are yours to keep.  You are also fully responsible for all debtsand abligations related yo your business.

Advantages
  • Easy and inexpensive to register;
  • Low start-up costs (minimal working capital required);
  • Greater freedom from regulations;
  • Direct control of decision making;
  • Some tax advantages;
  • All profits go directly to you.
Disadvantages
  • Unlimited liability;
  • Lack of continuity;
  • Difficulty raising capital;
  • Less status and credibility;
  • Income is taxable at your personal rate;
  • If your business is profitable, this could put you in a higher tax bracket.
PARTNERSHIP

A partnership is a non-incorporated business that is created between two or more people.  In a partnership, your financial resources are combined with those of your business partner(s) and put into the business.  If you are establishing a partnership, be sure to seek legal advice to prepare a proper partnership agreement.  This could help avoid disagreements and considerable legal costs later.

Advantages
  • Ease of formation;
  • Low start-up osts and shared equally with you and your partner(s);
  • Limited regulations;
  • Broader management base;
  • Increased source of investment base;
  • Possible tax advantages;
  • Equal share in management, profits and assets.
Disadvantages
  • Unlimited liability;
  • Lack of continuity; 
  • Responsibility for partners' business obligations;
  • Difficulty raising capital;
  • Possible partner conflicts;
  • Divided authority.
CORPORATION

Incorporation can be done at a federal or provincial/territorial level.  When you incorporate your business, it is considered to be a legal entity that is separate from its shareholders.  As a shareholder of acorporation, you will not be personally liable for debts, obligations or acts of the corporation.

Advantages
  • Limited liability;
  • Transferable ownership;
  • Ease of raising capital;
  • Separate legal entity;
  • Continuous existence;
  • Possible tax advantages.
Disadvantages
  • Closely regulated;
  • Higher start-up costs;
  • Losses remain within the business;
  • Yearly reporting;
  • Extensive recordkeeping required;
  • Possible charter restrictions.
An executive summary is different from the business plan.  It is a reflection tool that will allow you to put your ideas on paper, to structure them in order to be able to present your project effectively.  It is an overview to summarize the key points of the business plan for its readers.  It also highlights the essential details of you business plan.

This is why the executive summary is often considered the most important part of the business plan.  If it doesn't capture the reader's attention, te plan will be set aside and unread.  This might mean a failed attempt at financing for your new business.

Although the executive summary is a detailed overview of your entire company, it should not be more than one nto two pages.  It is an introduction to your business plan used to attract the reader's attention.  The goal is to entice them to read your entire plan.  The summary must describe the following elements:
  • Who you are;
  • What are your objectives;
  • What are your goals;
  • What are the company values;
  • What is your product or service;
  • Where will you be located;
  • What are your costs;
  • What is your income potential;
  • What is your marketing strategy;
  • Who are your customers;
  • Who are your suppliers;
  • What type of funing, will you need, if any.
Awell thought out and written executive summary can be the key to succesfully selling your entrepreneurial idea.
You may have considered the prospect of starting your own business many times before.  The thought of being your oen boss, calling the shots, being responsible for your financial rewards is very alluring.  You may have had the drive, the experience, and the financial resourfesnecessary to succeed.  The only thing stopping you was figuring out what type of business you should start.  The following section discusses the three most popular ways that people become entrepreneurs.  Which option is right for you?

Starting a business from scratch can be overwhelming for a new entreprenerus.  If you have a good business concept and are willing to wok hard to build it up, it may be best for you to start your own business.  However, if you want to get a head start and avoid some common pitfalls of starting a business, then buying an existing business or a successful franchise could be a wise choice.

If you decide to start your own business, you will need to devote time ti develop your project.  One of the main benefits of entrepreneurship is to indulge in exciting work that we are passionate about.  Unfortunately, passion is not always a source of profits.  Research, research, research!  The more information you gather on the potential demand of your product or service, on the competition and on the future customer needs, the more you are to succeed.  

STARTING FROM SCRATCH

Advantages
  • You are your own boss;
  • Unlimited potential for wealth;
  • Challenge of bringing your product/service to market;
  • Opportunity to develop your own business policies and practices;
  • Personal satisfaction of accomplishment
Disadvantages
  • Cash flow fluctuation;
  • Lack of support;
  • Sole responsibility;
  • Limites resources and possible gaps between business and technical skills;
  • Difficulty financing.
If you choose to buy an existing business or a franchise, you will benefit from the work that has already been done increating the brand, building relationships with customers, improving operational processes and acquiring assets.  You can generate profits faster and funding is easier because the business model has already proven itself.  On the other hand, the initial investment is often higher that starting your own business.  An economic analysis is the first step.  Assess its strengths, weaknesses position relative to the current market and its competitors.

BUYING AN EXISTING BUSINESS

Advantages
  • Already up and running;
  • Potential for immediate salary;
  • Established company reputation and customer base;
  • Existing facility, equipment and trained employees;
  • Established track record on which to base projections.
Disadvantages
  • Signifant research required to identify and assess viability of business;
  • Business value may be difficult to determine;
  • Assets may be overvalued;
  • Difficulty to begin slowly or try business out;
  • Reduced feeling of personal satisfaction from creating and building a business;
  • Possibility of inheriting employees who do not share your vision;
  • Changing previous practices maycreate customer resistance;
  • Difficulty financing.
BUYING A FRANCHISE

Advantages
  • Easier to access financing;
  • Access to quality training and ongoing support;
  • Established concept with reduced risk of failure;
  • Use of well-known trademark and trade name;
  • Access to lower cost and possible centralized buying;
  • Fewer start-up problems;
  • Access to extensive advertising.
Disadvantages
  • Onerous reporting requirements;
  • Termination policy of franchisors may allow little security;
  • Possible exageration of franchise advantages;
  • Franchisor may saturate your territory;
  • Cost of ranchise and other fees may reduce your profit margins;
  • Inflexibility due to restrictions imposed by franchisor;
  • Cost of supplies and materials may be more expensive.
You must constantly be aware that everything around you is changing.  Your product or service will sell only if people think they need it and they can afford to buy it.  When their needs change, you must assess whether they are still your clients and if you canadjust your product or service to satisfy them, before the competition does.

A target market is defined as a relatively homogenous group of potential customers. Your business can target eithr consumers or other businesses.  Regardless, you are trying to reach individuals who are either making a buying decision on their own behalf or on behalf of an organization for which they work.  It is very important to know who these individuals are and how they are motivated to make a buying decision.

Identifying the target market is an essential setp for your business in the development of a marketing plan.  Not knowing who the target market is could cost a lot ofmoney and time for an entrepreneur.

Target markets are generally categorized by age, location, income and lifestyle.  Defining a specific target market allows you to come home in on specific market factors to reach and connect with customers through sales and marketing efforts.

Testing a target market often occurs well before a product is released.  During the testing phase, you may use limites product roll-outs and focus groups, allowing you to get the feel for which aspects of the products or serice are the strongest. Once you release your product or service, you can continue to monitor the demographics through sales tracking,customer surveys and various other activities that will allow you to understand what the customer wants.

Not knowing your target market can be a big mistake.  Defining your market means the difference between selling a product or service and sitting on the side-lines while competition boosts its revenue.
In order to ensure that your business is on track, you must set out objectives for your efforts.  At their most basic, these objectives should include a forecast for your sales for the first year in business and projected growth for the years thereafter.  These orijections will be based on the results of your research into market demand and on your capacity as a business to fulfill the demand.

Know your business.  Beaware of the trends andchanges in your industry.

Always be sure to update your sales information to be dynamic and fresh.

Work on your image. Take a llok at the company's perceptionon the market.  Be sure to reflect this image.

Be sure to minimize your expenses and maximize your sales.  New opportunities will arise every day for you.  Don't miss them.


The classic elements included in a marketing strategy revolve around what is know as the "4 P's: PRODUCT, PRICE, PROMOTION AND PLACE"

PRODUCT

Clearly define the product or service you are providing including adescription of the needs it meets.
  1. Describe who your market will be.
  2. Do you plan to sell to young people, seniors?
  3. Does your product/service primarly target women, men, both?
  4. Is it a necessity product/service or a prestige item?
  5. Will you sell to individuals, other businesses, organizations?
Describe:
  • your product/service;
  • the feature that make your product/service better than those offered by your competitors; 
  • the history of your product/service sales;
  • your product/service sales objectives;
  • why your product/service is unique.
PRICE

Once your product/service is defined, you must set a competitive price for it.  A number of factors come into play when setting your price.
  1. You must look at the competittion environment and what your competition is charging.
  2. You must consider the price your market can bear by referring back to the market research you undertook.
  3. You must make sure that the price you will charge is one that is profitable for you.
  4. You must refer back to your sales projections to ensure that the price you are charging covers both your overhead and costs of sales.
Describe:
  • the retail price of your product/service;
  • the production cost of each product/service;
  • your profits for the production of each product/service;
  • your discounts and credit policies;
  • your warranties and after-sales service policies.
PROMOTION

This is an element of your marketing strategy where you communicate to your target market in order to make them aware of the product or service you are offering.  As with the marketing objectives, it is important to set objectives for your promotionalprogram.  For example, you may wish to generate overall awarness leading to increased traffic to your location.

Describe:
  • how you will promote your product/service (social media, brochures, posters, business cards, samples, trade shows and events, sponsorships,networking, loyalty programs, etc.);
  • how you will measure the success of your promotional projects;
  • how you will attract new customers;
  • how you will encourage people to buy your product/service;
  • how often you plan to carry out your marketing activities.
PLACE

Place refers to your distribution strategy which includes your business location and how you will distribute your product or service.  Regardless of which option is appropriate for your business, the key is to ensure that your customers can easily access your product or service.  Either by personal sales, whole sales, mail orer, retail store or sales agent.

Describe:
  • why you chose this location;
  • why you think your area can support your proposed project;
  • the advantages and disadvantages to this area;
  • whether your business will be generating only within your community or will it attract key surrounding communities;
  • your proximity to your clients;
  • your proximity to your competitors;
  • your proximity to your supplers.
A competitive analysis is a critical part of your business' marketing plan.  With this assessment, you can determine what makes your product or service unique and therefore, the attibutes you play in order to attract your target market.  It is important to regularly conduct a thorough competitive analysis to stay one step ahead.

Your analysis should clearly outline the difference and similarities between your company and your competitors, including their strenghts and weaknesses.

Honesty is the best policy!  Potential investors/lenders want to see if other businesses are already profitable and experiencing success in your market.

There are different ways to conduct a competitive analysis.  These can inclue:
  • Identify your top ten competitors;
  • Identify your competitor's background, products and facilites;
  • Analyse and compare competitor's pricing;
  • Analyse and compare competitor's location;
  • Analyse and compare competitor's publicity, promotions, social medias;
  • Identify the areas you surpass them;
  • Identify the areas of improvement.
Evaluateyour competitors by placing them in strategic groups according to how directly they compete for a share of the customer's dollar. For each competitor or strategic group, list:
  • their product or service;
  • their profitability;
  • their growth pattern;
  • their marketing objectives and assumptions;
  • their current and past stragegies;
  • their organizational and cost structure;
  • their strnghts and weaknesses;
  • their size (in sales).
Whether you are starting or growing your business, you need to be aware of business regulations, requirements and laws.  Regulations set the standards and rules that ensure the Canadian marketplace is safe, consistent and fair to everyone.

In addition to registering your business, you might need municipal, provincial and federal business licences and permits.  Begin with talking to all municipalities that you will be operating in to find out what regulations, licences and permits apply to your business.  Then check provincial and federal laws and regulations.

You may want to seek legal advice to:
  • help you research and understand what applies to your business activities;
  • help you reseaarh and understand different areas, such as:
    • employment standards;
    • occupational health and safety;
    • environment;
    • taxation;
    • consumer protection.
  • help you research and understand all the resources available to ensure your business is in compliance with industry standards.
This section is also important because lenders are often more interested in the applicant(s) than in the business being proposed.  A person who demonstrates motivation with the necessary skills is more likely to succeed at any venture so it is important to explain why you beleive you have what it takes to succeed.

Lenders also base their decision on the direct experience of key personnel.  You must also demonstrate that you and the people on your team also have what it takes.  A good business plan should include information on the following issues:
  1. Organizational structure/principal leaders.
  2. Salaries.
  3. Job descriptions, roles and responsibilities.
  4. Service and employee contract.
  5. Details of advisors and associates.
  6. Full-time versus part-time.
  7. Future human resources plan.
  8. Employee benefits
YOU AND YOUR LAWYER

You may not need the services of a lawyer right now.  However, it is a good idea to know how to deal with a lawyer when a business situation arises that will require legal expertise.  Before choosing a lawyer, a goodplace to start is to ask a friend or colleague for a recommendation.  You can also conduct a research online as most law firms have web sites.

 As your business grows and changes to meet new challenges, your need for legal advice and services will also evolve.  The following list outlines common situations that could require professional legal advice:
  • obtain advice onwhat legal structure is best for your business;
  • obtain advice prior to purchasing or selling a business;
  • obtain advice on structuring finaning for your business;
  • obtain advice on contracts for employees or independent contractors;
  • review and advise you on legal implications of signing a contract or to write a contract for your business.  This may include:
    • contracts for lease/commercial space or office;
    • franchise agreements;
    • distribution agreements;
    • sub-contractors and shareholders' agreements;
    • partnership agreements;
    • loan agreements and/or;
    • to represent your business during a legal dispute.
YOU AND YOUR ACCOUNTANT

An accoutant offers many types of valuable expertise inaddition to being a tax expert.  It is critical to have an accounting system in place and a basic understanding of recordkeeping methods when you are setting up your business.

The following list outlines some of the situations that may require you to seek the advice of an accountant:
  • recommendation of a strategy to maximize retained earnings or net profit by drcreasing your tax liability.  It is very important for you to understand the different tax implications, for both you and your business, between a sole proprietorship, partnership or corporation;
  • completion of your annual tax return;
  • advice on the allowable depreciation value of assets.  The Canada Revenue Agency (CRA) continually updates and changes the perscentage ofdepreciation you are allowed to claim on particular assets.  This deduction affects your net profit and may help you make a good decision on the right time to make a capital expenditure;
  • help you understand, analyse and complete accurate cash flow statements, income statements and balance sheets.  These three statements are critical to secure financing, investors and understand the general health of your business.
Arranging for financing for a new business is no easy task.  New businesses do not have sales or a track record.  Hence, they are considered much higher risk than financing an established business.  New business entrepreneurs alsofind it difficult to estimate the amount of money they'll need to get a business up and running.  More often than not, entrepreneurs significantly underestimate the amount of funds they require.  They leave no room for unexpected obstacles or opportunities.

TYPE OF FINANCING

Equity financing


Investment in the business as an owner, partner or buying shares in a corporation.

Loan financing

Funds that is loaned to the business from an outside source that is paid back over time. 

A mis of both types of financing can help a business.  An improper balance may lead to problems.  You need to factor any loan payments you make into your cash flow statement.  Starting a business under-financed can lead to serious problems very quickly.

Financing research - top ten tips
  1. Be prepared when meeting an investor or banker.  Have your completed business plan, executive summary or prospectus, and financial statements with you.  Demonstrate your knowledge of the industry.  Know the strenghts and weaknesses of your plan.  Understand your financial information.  Be clear and concise about the opportunity.
  2. Invest some of your own capital to demonstrate your own commitment and belief in the business.
  3. Find financing to suit your business.  be prepared to walk away from a deal that doesn't suit your needs.
  4. Use your contacts.  Networking is the key to "getting the word out".  Make a list of everyone you know.  Add a list of everyone they know.  You will be amazed at how you can come up with someone who knows, or knows someone who knows a key investor you may be trying to reach.  This really works!
  5. Make sure you have the ability to repay of withdraw the investment.
  6. Emphasize managerial abilities and credentials; particularly with equity investors whose investment decisions are largely driven by their confidence in your ability to grow a company.
  7. Develop a long term financing strategy.
  8. Seek strategic alliances or joint ventures with suppliers or clients to leverage your financial resources.
  9. Re-examine the capital structure of your business regularly to ensure it is appropriate.  Proportion of bank financing, private investment and owner's equity maychange depending on the circumstances.
  10. Know your financial objectives.  Do you want control or do you want growth?  Sometimes financial growth means giving up control.
Completing a thorough financialanalysis of your business will help you determine whether or not the business is viable.  Can you make enough money in this business for your personal needs to run the business and make a profit?  Knowing your monthly sales and expenses helps you make decisions such as when to purchase equipment, hire staff or use your line of credit.  There are six key elements to consider in this section of the plan (each title ontains a link of finance template) .
  1. Start up costs:  Howmuch will it cost to start your business?  What expenses should be considered when calculating the total cost of starting your business?  Make a list of all your start-up costs including legal fees, marketing fees (website, brochures, etc.), computers, furniture, equipment, commercial space and inventory, to name a few.
  2. Cash flow projections:  This is an estimate of the inflows and outflows that a business hould expect in the near future.  It also takes the impact of certain costs and investments into consideration.  The cash flowprojection provides managers with a clear overview of the financial feasibility and viability ofcertain business activity decisions.
  3. Income statement projections (3 years):  A projected income statement shows the projected profit/loss for your business for a given year and shows the "health" of the business.  It is an estimate of all sale revenues, direct, indirect and administrative expenses (including depreciation, interest expenses and taxes payable) and subsequent profit and loss for the first 3 years.
  4. Projected balance sheet:  Your opening balancesheet is a snapshot of what the business owes and owns at a particular moment in time.  It consists of a projected statement of assets, liabilities and equity for the first 3 years.  Assests include cash, inventory, accounts receivable, building and equipment.  Liabilities include short term debt, accounts payable, taxes payable and long term debt.
  5. Owner's equity or shareholder's capital:  This represents the total investment made by the business' owner or shareholder.
  6. Risk analysis:  Risk analysis can be shown using scenarios based on best/worst case occurences.  Often, three different cash flow statements are included in the plan.  You can do a optimistic, a pessimistic and a realistic cash flow to show how your business would adjust to different market scenarios.  Be sure to include information or the assumptions you made for each scenario.
Click HERE to download the complete finance template.
Once you are up and running as a business, it is important to take the time, at regular intervals, to assess how you are doing.  It is easy to get caught up in the day-to-day of running a business and forget about the big picture, specifically how your business is doing against the objectives you have set for it.  The most important way of assessing how your business is doing is to refer back to your business plan.  You may find the following checklist useful for assessing your business (click on titles to download the lists).

THE FIRST 90 DAYS

THE FIRST 6 MONTHS

THE FIRST YEAR