THE BUSINESS PLAN

AN OUTLINE TO SUCCEED

It has often said that SMALL BUSINESSES come and go just like NIGHT and DAY.  How often have you driven by a business and observed a sign announcing a “GRAND OPENING” ; then, within one year or less, driven by the same location, this time seeing a new sign saying: “GOING OUT OF BUSINESS SALE”?

How often do we hear stories about people and companies having to close or file bankruptcy?  And why is it that we keep hearing statistics that say  9 out of 10 new businesses will fail or close within two years?  The answers can be found in any number of reasons.  Some of these reasons include:  

·        Insufficient capital

·        Low sales volume

·        Wrong location

·        Incorrect merchandise

·        Competition is too strong

·        Ineffective advertising

·        Changing market conditions

·        Poor management  

·        Lack of know how

One could list a dozen more reasons why businesses fail.  Regardless of the reason, the one way of insuring a much higher degree of success when starting or expanding a business, and even continuing with a current business, is to have a business plan.  Putting together a business plan forces you to take an objective and critical look at your business.   A business plan should be neat, not fancy, and should include: 

COVER PAGE

List the business name, address, mailing address, telephone number and the name of the owner(s).  Identify your primary goals and objectives.

BUSINESS DESCRIPTION

Include an accurate and concise description of the business.

A.  What is the principal activity?  Be specific.  Give product or service descriptions.

B.  How will the business be started/expanded?

C.  Why will it succeed?  Why do you want to expand?

D.  What is your experience in this type of business?

MARKETING

Remember, marketing is the core of your business.  Carefully think about these questions:

A.  How will you market your business?

B.  Who and what is your market?

C.  What pricing and sales terms are you planning?

D.  How will you be competitive?

THE FINANCIAL PLAN

Money is what fuels all businesses.  With a little planning you’ll find that you can avoid most financial difficulties.  When you’re drawing up a financial plan, don’t worry about using estimates.  The process of thinking through these questions helps develop your business skills and leads to solid financial planning.

Start-up Costs:  To estimate your start-up/expansion costs, include all initial expenses such as fees, licenses, permits, telephone deposit, tools, office equipment and promotional expenses.  Business experts say, when starting a new business, you should not expect a profit for the first eight to ten month, so be sure to give  yourself enough cushion.

Projecting Operating Expenses:  Include salaries, utilities, office supplies, loan payments, taxes, legal services and insurance premiums.  Don’t forget to include your normal living expenses.

Projecting Income:  It is essential you know how to estimate your sales on a daily and monthly basis.  From the sales estimates, you can develop projected income statements, break-even points and cash flow statements.  Use your marketing research to estimate initial sales volume.

Cash Flow:  Cash pays your bills, not profits.  Even though your assets may look great on the balance sheet, if  your cash is tied up in receivable or equipment, your business is technically insolvent.  Or to put it in layman’s terms, you’re broke (bankrupt).

Make a list of all anticipated expenses and projected income for each week and month.  If you see a cash flow crisis developing, cut back on everything but the necessities.

Remember, preparation is the foundation of success.  Talk to business people, join a professional association or “moonlight” at a similar business.  Learn how to use business resources to strengthen your business.  Success doesn’t just happen, you have to make it your business to know what business information is available, where to get it and, most importantly, how to use it.  

To be competitive, small business owners must plan and prepare for all future events and market changes.  Possibly the most important aspect of preparation is effective cash-flow planning.  Failure to properly plan cash flow is one of the leading causes for small business failures in the United States.

Assistance in the Loan Process:  Financing a growing business is among the owner’s greatest challenges.  CPA’s can explain financial needs to a banker in a logical and organized way.  The result can be a well-structured loan with appropriate collateral for the bank, a reasonable level of debt for the borrower, and a realistic repayment schedule.

Quality Services:  As advisors, CPA’s are bound by a stringent code of professional ethics.  This code requires that CPA’s maintain objectivity and integrity in all engagements.  Management advisory services performed by CPA’s combine a wide range of business knowledge and skills, plus knowledge of the client’s industry, to best meet the needs of the organization.

Do you need help with your business?  Do you need a bank loan or want to expand your existing business?  Call us, we give a free hour of consultation to discuss this.  Call and set up an appointment today. Ed@128CPA.com

Conclusion:  Your business plan should look professional,  but the lender needs to know that it was done by you.  A business plan will be the best indicator he or she has to judge your potential for success. 

Most companies write a business plan when first starting their business and never do it again.  This can have the effect of limiting your ability to achieve a higher degree of profits than would otherwise be realized.  Let us help you see the potential that you have not been able to realize.

We provide assistance in developing writing and implementing business plans.  We’ve been doing this for more than 20 years.

Submit a request for an estimate to:

Edward F. Connelly

Certified Public Accountant

And Business Advisor

400 Hunnewell Street

Needham, MA 02494

781-449-8700

Ed@128CPA.com