U.S. Small Business Administration                     MP-15







       THE BUSINESS PLAN FOR THE HOME-BASED BUSINESS





               Management and Planning Series

_________________________________________________________________



Copyright 1991, Carol Eliason. "How to Write a Business Plan."

Copyright 1990, Linda Pinson and Jerry Kinnett.  All rights

reserve. No part may be reproduced, transmitted or transcribed

without permission of the author.  SBA retains and irrevocable,

worldwide, nonexclusive royalty-free, unlimited license to use

this copyrighted material.



While we consider the contents of this publication to be of

general merit, its sponsorship by the U.S. Small Business

Administration does not necessarily constitute an endorsement of

the views and opinions of the authors or the products and

services of the companies with which they are affiliated.



All of SBA's programs and services are extended to the public on

a nondiscriminatory basis.

_________________________________________________________________



                      TABLE OF CONTENTS



INTRODUCTION   1



INFORMATION GATHERING    1



THE ENTREPRENEURIAL PERSONALITY    1



SELECTING A BUSINESS     2



TIME MANAGEMENT     3



EVALUATING THE SITE FOR YOUR HOME-BASED BUSINESS

     Is a Home-based Business Site Workable? 3

     Is a Home-based Business Allowed at the Site?     3

     Is the Site Insurable?   4

     Overall Site Evaluation  4



WRITING THE BUSINESS PLAN

     What Is a Business Plan? 5

     Why Create a Business Plan?   5

     Who Should Write a Business Plan?  5

     When Should a Business Plan Be Used?    5



OUTLINE FOR A HOME-BASED BUSINESS PLAN

     Cover Page     6

     Statement of Purpose     6



PART I THE BUSINESS

     Legal Structure and Function  6

     Organization and Management   6



PART II THE MARKETING PLAN

     Who Is Your Market? 9

     How Large Is the Market? 9

     Who Is Your Competition? 9

     What Percentage of the Market Will You Penetrate? 10

     What Is Your Pricing?    10

     What Is Your Sales Plan? 10

     What Is Your Advertising Plan?     11



SUMMARY   12



PART III THE FINANCIAL PLAN

     Income (Profit and Loss) Projection     13

     Sources of Funds Schedule     14

     Pro Forma Balance Sheet  14

     Cash Flow Projection     14



A FINAL WORD   15



APPENDIXES

     A. Income Projection Statement     17

     B. Balance Sheet    21

     C. Monthly Cash Flow Projection    25

     D. How to Write a Business Plan    27

     E. Information Resources 31

_________________________________________________________________



INTRODUCTION



Homework has taken on a new meaning for more than 10 million

Americans. The drive for economic self-sufficiency has motivated

many people to market their skills and talents for profit from

home. The increasingly service-oriented economy offers a widening

spectrum of opportunities for customized and personalized small

business growth.



Though untrained entrepreneurs traditionally have had a high rate

of failure, small businesses can be profitable. Success in a

small home-based business is not an accident. It requires both

skills in a service or product area and management competency.



This publication will help you take stock of your interests,

aptitudes and skills. Many people have good business ideas but

not everyone has good business skills. If you are convinced that

you can operate a profitable home business, use this publication

as a guide to developing a business plan for your success.

_________________________________________________________________



INFORMATION GATHERING



A helpful tool to determine if you are ready to take the risk of

a home business operation is the U.S. Small Business

Administration (SBA) publication entitled Checklist for Going

Into Business (MP-12). It will help you focus on the basic steps

in information gathering and business planning.



While home-based business operations may vary from one that

supplements family income with a few hundred dollars to a

sophisticated technical consulting service billing hundreds of

thousands of dollars, there are many common characteristics and

challenges to be considered in launching most home-based

businesses. Some tasks are universal to all small business

start-ups, while others are unique to home-based businesses. For

example, careful research into legal and tax issues, evaluation

of proper space utilization and time management discipline are

essential. Inadequate attention to the development of a detailed

business plan can be costly for you and your family in terms of

lost time, wasted talent and disappearing dollars.

_________________________________________________________________



THE ENTREPRENEURIAL PERSONALITY



Research indicates that successful small business entrepreneurs

have some common characteristics. How do you measure up? On the

following checklist, write Y if you believe the statement

describes you, N if it doesn't and U if you can't decide.



_____ I have a strong desire to be my own boss.



_____ Win,, lose or draw,, I want to be master of my own

      financial destiny.



_____ I have significant specialized business ability based on my

      education and experience.



_____ I have an ability to conceptualize the whole of a business

      -- not just its individual parts, but how those parts

      relate to each other.



_____ I develop an inherent sense of what is right for a business

      and have the courage to pursue it.



_____ One or both of my parents were entrepreneurs; calculated

      risk-taking runs in the family.



_____ My life is characterized by a willingness and capacity to

      persevere.



_____ I possess a high level of energy,, sustainable over long

      hours, to make the business successful.



While not every successful home-based business owner starts with

an affirmative answer to all questions, three or four negative

and undecided answers should be sufficient reason for you to stop

and give second thought to going it alone. Many potential

proprietors seek extra training, as well as help from skilled

business advisors such as accountants, bankers and attorneys.

_________________________________________________________________



SELECTING A BUSINESS



Perhaps you have already decided what your home-based business

will be. You know how you will serve your market and with what.

If not, you need to decide exactly what business you will enter.

A logical first step for the undecided is to list areas of

personal background, special training, educational and job

experience and special interests that could be developed into a

business. Review the following list of activities that have

proved marketable for others. On a scale of zero (no interest or

strength) to 10 (maximum interest or strength), indicate the

potential for you and a total score for each activity.



For other ideas, check your local public library for books and

articles about working from home.



     _______________________________________________________



                       My Level    Personal   Market   Total

                      of Interest Strength  Strength  Points



     Personal services

     _ house cleaning   ________  ________  ________  ______

     _ babysitting      ________  ________  ________  ______

     _ tutoring         ________  ________  ________  ______

     _ secretarial      ________  ________  ________  ______

     _ catering         ________  ________  ________  ______

     _ direct mail      ________  ________  ________  ______

     Handicraft

     _ needle work      ________  ________  ________  ______

     _ ceramics         ________  ________  ________  ______

     _ jewelry design   ________  ________  ________  ______

     _ upholstering     ________  ________  ________  ______

     Artistic work

     _ painting         ________  ________  ________  ______  

     _ photography      ________  ________  ________  ______  

     _ prints           ________  ________  ________  ______  

     _ wire sculpture   ________  ________  ________  ______  

     _ engraving        ________  ________  ________  ______  

     Repair services

     _ sml. appliances  ________  ________  ________  ______  

     _ furniture        ________  ________  ________  ______  

     _ clothing         ________  ________  ________  ______  

     _ TV & radio       ________  ________  ________  ______  

     _ automotive       ________  ________  ________  ______  

     Instruction skills

     - languages        ________  ________  ________  ______  

     - math             ________  ________  ________  ______  

     - gourmet cooking  ________  ________  ________  ______  

     _ music            ________  ________  ________  ______  

     - home repairs     ________  ________  ________  ______  

     Mail order ideas

     _ product sales    ________  ________  ________  ______  

     _ repairs          ________  ________  ________  ______  

     - business service ________  ________  ________  ______  

     Seasonal products

     _ foodstuffs       ________  ________  ________  ______  

     _ clothing         ________  ________  ________  ______  

     - gift items       ________  ________  ________  ______  

     Party sales

     - cookware         ________  ________  ________  ______  

     - plants           ________  ________  ________  ______  

     - plastic goods    ________  ________  ________  ______  

     - cosmetics        ________  ________  ________  ______  

     Your own ideas

     _________________  ________  ________  ________  ______  

     _________________  ________  ________  ________  ______  

     _________________  ________  ________  ________  ______  



     SCORING:

        0 to 10     Almost a sure loser

       11 to 15     Reconsider but proceed with caution

       16 to 20     Some potential here, worth further study

       21 to 25     Probably a winner, if you answered

                    correctly

       26 to 30     How can you lose?

     _______________________________________________________



TIME MANAGEMENT



For both the novice and the experienced businessperson planning a

small home-based enterprise, a major concern is time management.

It is very difficult for some people to make and keep work

schedules even in a disciplined office setting. At home, as your

own boss, the problem can be much greater. To determine how much

time you can devote to your business, begin by drafting a weekly

task timetable listing all current and potential responsibilities

and the blocks of time required for each. When and how can

business responsibilities be added without undue physical or

mental stress on you and your family? Potential conflicts must be

faced and resolved at the outset and as they occur; otherwise,

your business can become a nightmare. During the first year of

operation, continue to chart, post and check off tasks on a

daily, weekly and monthly basis.



Distractions and excuses for procrastination abound. It is

important to keep both a planning and an operating log. These

tools will help avoid oversights and provide vital information

when memory fails.



To improve the quality of time for work at home, install a

separate telephone line for the business and attach an answering

machine to take messages when you do not wish to be distracted or

are away from home. A business line has the added advantage of

allowing you to have a business listing in the phone book and, if

you wish to buy it, an ad in the classified directory.

_________________________________________________________________



EVALUATING THE SITE FOR YOUR HOME-BASED BUSINESS



Is a Home-based Business Site Workable?



Where in the home will the business be located? What adjustments

to living arrangements will be required? What will be the cost of

changes? How will your family react? What will the neighbors

think?



It is important to set aside a specific work area. For example,

more than one business ledger has gone up in smoke, been chewed

by the family dog or been thrown out with the trash when business

records were not kept separate from family papers. Ready access

to business records during work hours is essential, but these

records must be protected.



Check the reasons below for and against working at home that

apply to you. List any additional drawbacks or obstacles to

operating a business at home.



            Pros                         Cons

   Low start-up costs              Isolation

   Low fixed costs                 Space limitations

   Tax benefits                    Zoning

   Life-style flexibility          Security concerns

   No commuting                    Household interference

   ______________________          _____________________ 

   ______________________          _____________________ 

   ______________________          _____________________ 

   ______________________          _____________________ 

 



Note that changes in personal habits will be required. For

example:



   *  Exercising the self-discipline to keep the television off

      while you are working.



   *  Limiting personal telephone calls.



   *  Being diligent in meeting work deadlines when no one is

      checking.



Ask family members to comment on pros and cons. Their concerns

may require reconsideration of some specifics.



Is a Home-based Business Allowed at the Site?



Investigate potential legal and community problems associated

with operating a business from home. There may be limitations

that can make your planned business impossible or require

expensive modifications to your property. You should research

federal, state, county and municipal laws and regulations

concerning home-based business operations. Keep a topical file

for future reference, including forms that will be needed for

your business plan.



The following items should be investigated:



To do  Done 

_____  _____  County, city and state zoning code restrictions.



_____  _____  Permits and licenses for operation.



_____  _____  Deed or lease restrictions, such as covenants and

              restrictive conditions of purchase.



_____  _____  Access and parking for customers and deliveries.



_____  _____  Sanitation, traffic and noise codes.



_____  _____  Signs and advertising.



_____  _____  State and federal code requirements for space,

              ventilation, heating and lighting.



_____  _____  Limitations on the number and types of workers.

              Check with the local chamber of commerce office.



_____  _____  Concerns that neighbors may have about a business

              being located next to or near them.



Here are some ways to collect information. Call or visit the

zoning office at county headquarters or city hall. In some

localities, a city or county office for economic development has

materials available to pinpoint key items affecting home-based

businesses.



Even in rural areas, the era of unlimited free enterprise is

over. Check before investing in inventory, equipment or marketing

programs. If in doubt, call the state office for industrial

development or the nearest SBA district office. In some states

the county agent or home demonstration agent will have helpful

information concerning rural or farm business development.



For income tax rules regarding a home-based business, be sure to

obtain the Internal Revenue Service (IRS) Publication #587,

Business Use of Your Home. See Information Resources (Appendix E)

for how to contact the IRS.



Is the Site Insurable?



It is almost certain that significant changes will be required in

your insurance coverage when you start a home-based business.

When you have written a good description of your business, call

your agent for help in properly insuring against new hazards

resulting from your business operations, such as



   *  Fire, theft and casualty damage to inventory and equipment.



   *  Business interruption coverage.



   *  Fidelity bonds for employees.



   *  Liability for customers, vendors and others visiting the

      business.



   *  Group health and life insurance.



   *  Product liability coverage if you make or sell a product;

      workmanship liability for services.



   *  Business use of vehicle coverage.



Overall Site Evaluation



After you have gathered as much information as seems practical,

evaluate a home-based site versus one or more other nearby

locations. Here's a handy checklist. Using the zero to 10 scale,

with 10 as the top score, grade these vital factors:





                                                 Grades

    Factors                                    Home    Other



    Customer convenience.                      _____   _____

    Availability of merchandise or raw  

       materials.                              _____   _____

    Nearby competition.                        _____   _____

    Transportation availability.               _____   _____

    Quality & quantity of employees available. _____   _____

    Availability of parking facilities.        _____   _____

    Adequacy of utilities (sewer,water, 

       power and gas).                         _____   _____

    Traffic flow.                              _____   _____

    Tax burden.                                _____   _____

    Quality of police and fire services.       _____   _____ 

    Environmental factors.                     _____   _____

    Physical suitability of the building.      _____   _____

    Provision for future expansion.            _____   _____

    Vendor delivery access.                    _____   _____

    Personal convenience.                      _____   _____

    Cost of operation.                         _____   _____

    Other factors including how much the 

       business can grow without moving.       _____   _____



                                 Totals        _____   _____

 

The greater the difference between the totals of the two columns,

the clearer your decision should be. In the space below, write

your decision and the reasons that support it.

_________________________________________________________________



_________________________________________________________________



_________________________________________________________________



_________________________________________________________________

________________________________________________________



WRITING THE BUSINESS PLAN



Now that your research and initial planning are nearing

completion, it is time to move into action. If you are still in

favor of going ahead, you should take several specific steps. The

first one is to organize your dream into a business plan.



What Is a Business Plan?



   *  It is the management and financial blueprint for start-up

      and profitable operation.



   *  It serves as a prospectus for potential investors and

      lenders.



   *  It is written by the business owner with outside help as

      needed.



   *  It is accurate and concise as a result of careful study.



   *  It explains how the business will function in the

      marketplace.



   *  It clearly describes the business's characteristics.



   *  It details how the business will be financed.



   *  It outlines how the business will be managed.





Why Create a Business Plan?



   *  The process of putting the business plan together,

      including the thought that you put in before writing it,

      forces you to take an objective, critical and unemotional

      look at your entire business proposal.



   *  The finished written plan is an operational tool that, when

      properly used, will help you manage your business and work

      toward its success.



   *  The completed business plan is a means for communicating

      your ideas to others and provides the basis for financing

      your business.



   *  It will increase your chances of making your business a

      success.



Who Should Write a Business Plan?



The home-based owner to the extent possible should write a plan.

The owner should seek assistance in weak areas, such as

accounting, insurance, capital requirements, operational

forecasting and tax and legal requirements.



When Should a Business Plan Be Used?



   *  To make crucial start-up decisions.



   *  To reassure lenders, investors or backers.



   *  To measure operational progress.



   *  To test planning assumptions.



   *  To adjust forecasts.



   *  To anticipate ongoing capital and cash requirements.



   *  To set the standard for good operational management.

_________________________________________________________________



OUTLINE FOR A HOME-BASED BUSINESS PLAN



The following outline is suggested for a small proprietorship or

family business. Shape it to fit your needs. For more complex

manufacturing or franchise operations, you will want to do

further research on the specific industry that interests you.

Check the Information Resources section (Appendix E) for places

to start your research.



Cover Page



The cover page should include the following:



   *  Business name.



   *  Street address.



   *  Mailing address.



   *  Telephone number.



   *  Month and year in which plan is issued.



   *  Name(s) of owner(s).



   *  Number of the copy.



Statement of Purpose



   *  Why will your business succeed? Promote your idea! State:



      __ How and why your business will be successful.

      __ What is unique about your business.

      __ What your business's niche is.



   *  What is your experience in this business? If you have a

      current resume' of your career, include it as an appendix

      and refer to it here. Otherwise write a narrative of your

      experience here and include a resume' in the finished

      product. If you lack specific experience, detail how you

      plan to gain it, such as training, apprenticeship or

      working with partners who have experience.

_________________________________________________________________



PART I -- THE BUSINESS



Legal Structure and Function



In this section write an accurate, concise description of your

business, answering the following questions:



   *  What is the legal structure of your business and what is

      the date that it was established?



      __ Proprietorship?



      __ Partnership?



      __ Corporation?



      Include copies of key subsidiary documents in an appendix 

      to your business plan. Remember, even partnerships require

      written agreements of terms and conditions to avoid later

      conflicts and to establish legal entities and equities.

      Corporations require charters, articles of incorporation

      and bylaws.



   *  What is your business's principal activity? [Be specific.

      Give product or service description(s).] Examples include



      __ Retail sales.



      __ Manufacturing.



      __ Service.



      __ Other.



   *  How will your business be started?



      __ A new start-up.



      __ The expansion of an existing business.



      __ Purchase of a going business.



      __ A franchise operation.



   *  What is your actual or projected start-up date?



Organization and Management



Who will do what?



Be sure to include four basic sets of information:



   1.  A personal history of principals and related work, hobby

       or volunteer experience (include formal resumes in an

       appendix).



   2.  Specific duties and responsibilities of each principal.



   3.  Benefits and other forms of compensation for each

       principal.



   4.  Other professional resources available to the business,

       such as an accountant, lawyer, insurance broker, banker,

       etc. Describe the relationship of each resource to the

       business; for example, "The accountant will be available

       on a part-time, hourly basis, as needed. The initial

       agreement calls for services not to exceed ________

       hours per month at $_______  per hour."



To make this section graphically clear, start with a simple

organizational chart that lists specific tasks and shows who

(type of person is more important than individual name, other

than for principals) will do what. Use arrows, work flow and

lines of responsibility and/or communications. Consider the

following examples.



                        Company President

                         (owner-manager)



     Shop Manager         Sales Manager              Office

                         (owner-manager)        (owner-manager)



or 



                        Company President

                         (owner-manager)



     Sales Manager         Shop Manager              Office

                         (owner-manager)        (owner-manager)



As the business grows, its organizational chart could look this:



                           Company President

                            (owner-manager)



     Shop Manager         Sales Manager              Office

       Foreman                                  (owner-manager)

       Parts Manager





Answer the following questions.



   *  What are your personnel needs now?



      1. ________________________________



      2. ________________________________



      3. ________________________________



      4. ________________________________



What skills must each key person have?



      1. ________________________________



      2. ________________________________



      3. ________________________________



      4. ________________________________



Are the people needed available? Name them, indicate whether they

are full- or part-time and their salary rates:



      1. ________________________________



      2. ________________________________



      3. ________________________________



      4. ________________________________



Detail a proposed work schedule by week and month for the first

year.



Calculate total salaries, wages, fringe benefits and payroll

taxes for each month of the first year in the workblock below.



                  Compensation Fringe benefits Payroll taxes



     Month 1     $ ____________  $ ___________ $ ___________



     Month 2     $ ____________  $ ___________ $ ___________



     Month 3     $ ____________  $ ___________ $ ___________



     Month 4     $ ____________  $ ___________ $ ___________



     Month 5     $ ____________  $ ___________ $ ___________



     Month 6     $ ____________  $ ___________ $ ___________



     Month 7     $ ____________  $ ___________ $ ___________



     Month 8     $ ____________  $ ___________ $ ___________



     Month 9     $ ____________  $ ___________ $ ___________



     Month 10    $ ____________  $ ___________ $ ___________



     Month 11    $ ____________  $ ___________ $ ___________



     Month 12    $ ____________  $ ___________ $ ___________



     Full year   $ ____________  $ ___________ $ ___________

 

If you have identified any gaps in personnel skills, state how

these will be overcome by training, purchase of outside services

or subcontracting. Check with the nearest state employment office

for assistance. Describe your plan.

_________________________________________________________________



_________________________________________________________________



_________________________________________________________________



_________________________________________________________________



What Is Your Banking Plan?



What will be the location and type of bank accounts opened for

the business? A word of caution: keep business accounts separate

from personal or family accounts. These vital records will be

necessary for future tax and accounting purposes. Describe your

banking plan.

_________________________________________________________________



_________________________________________________________________



_________________________________________________________________



_________________________________________________________________



How Is Your Credit Rating?



There may be several partial answers to this question. All will

be important to the future of the business. First, what is your

personal history of paying debts? Just to be safe, purchase a

copy of your personal credit record from a local credit bureau

and make sure that it is accurate. Look in the classified

telephone directory under Credit Reporting Agencies.



To establish a credit rating, it is necessary to secure and use

credit from a number of businesses. Your rating will be based

upon your record of paying for goods and services according to

the agreed terms. If your prior credit rating is poor, discuss

with your lawyer, accountant and banker options for improving it

before you seek business credit.

_________________________________________________________________



PART II -- THE MARKETING PLAN



The marketing plan is the core of your business rationale. To

develop consistent growth in sales, a home-based businessperson

must become knowledgeable about the market. To demonstrate your

understanding, answer several basic questions.



Who Is Your Market?



   *  Describe your typical customer.



      Age ____________________________



      Gender _________________________



      Family size ____________________



      Annual family income ___________



      Location _______________________



      Buying patterns ________________



      Reason to buy from you _________



      Other __________________________



   *  Describe your market in geographic terms (e.g., county,

      state, national, etc.).

      ___________________________________________________________



      ___________________________________________________________



   *  Describe your market in economic terms (single family,

      average earnings, number of children, etc.).

      ___________________________________________________________



      ___________________________________________________________







How Large Is the Market?



   *  Total units or dollars ___________



   *  Growing ______  Steady ______ Decreasing ______



   *  If growing, annual growth rate _______________



Who Is Your Competition?



No small business operates in a vacuum. Get to know and respect

the competition. Identify direct competitors (both in terms of

geography and product lines) and those who are similar or

marginally comparable. Begin by listing names, addresses and

products or services. Briefly detail the following information

concerning each of your competitors:



   *  Who are the nearest ones?



   *  How are their businesses similar to or competitive with

      yours?



   *  Do you have a unique "niche"? Describe it.



   *  How will your service or product be better or more saleable

      than your competitors?



   *  Are their businesses growing? Stable? Declining? Why?



   *  What can be learned from observing their operations or

      talking to their present or former clients?



   *  Will you have competitive advantages or disadvantages by

      operating from home? Be honest!



Remember, your business can become more profitable by adopting

your competitors' good practices and by avoiding their errors.



To help you evaluate your potential success, candidly evaluate

the following characteristics of your product or service (you may

want to add more characteristics from your knowledge of your

field). Use a scale of zero (theirs puts mine to shame) to 10

(mine puts theirs to shame).

  

     Characteristic                             Score

 

     Price                                      _____

     Performance                                _____

     Durability                                 _____

     Versatility                                _____

     Speed/accuracy                             _____

     Ease of operation or use                   _____

     Ease of maintenance or repair              _____

     Ease or cost of installation               _____

     Size, weight or color                      _____

     Appearance, styling or packaging           _____ 



                           Total                _____



A total score of less than 60 indicates that you might reconsider

the viability of your product or service or think about how you

can improve it. Over 80 points indicates a clear competitive

edge.



What Percentage of the Market Will You Penetrate?



   1. Estimate the market in total units or dollars.



      ________________________________________________________



   2. Estimate your planned volume.



      ________________________________________________________



   3. Estimate the volume of total market.



      ________________________________________________________



   4. Subtract #2 from #3.



      ________________________________________________________



      Line 4 represents the amount of your planned volume that

      must be taken away from the competition.



What Is Your Pricing?



The primary consideration in pricing a product or service is the

value that it presents to the customer. If, according to the

previous checklist of characteristics, your product is truly

ahead of the field, you can command premium price. On the other

hand, if your product is not unique but one of many similar

products, you may have to lower your price to buy a share of the

market and get a foothold. After you have established a market

for your product, try raising the price. This is always risky and

difficult. One rule will always hold: Ultimately, the market will

set the price. Know your competitors' pricing policies. Send a

friend to comparison shop. Is there discounting? Special sales?

Price leaders? Make some blind phone calls to your competitors.

Remember, though, if your selling price does not exceed your

costs and expenses by the margin necessary to keep your business

healthy, you will fail. Detail your pricing policy below.

_________________________________________________________________



_________________________________________________________________



_________________________________________________________________







What Is Your Sales Plan?



Describe how you will sell, distribute or service what you sell.

Be specific. Some common practices are outlined below.



Direct Sales



Direct sales are made by telephone or in person. The tremendous

growth of individual sales representatives who sell by party

bookings, door-to-door and through distribution of call-back

promotional campaigns suggests that careful research is required

to be profitable.



Mail Order



Specialized markets for mail order products have grown as more

two-income families find less time to shop. Be aware of recent

mail order legislation and regulations.



Franchising



You may decide to either buy into someone else's franchise as a

franchisee or create your own franchise operation that sells

rights to specific territories or product lines to others. Each

option will require legal, financial and marketing research.



An excellent starting point if you are considering franchise

involvement is the SBA publication Evaluating Franchising

Opportunities. The International Franchise Association (IFA) also

publishes a number of valuable aids in this field. Write to them

at 1350 New York Avenue NW, Suite 900, Washington, D.C. 20005.



Distributors



You may decide to work as a local or regional distributor for

several different product lines.

Outline your sales plan below.



What Is Your Advertising Plan?



Each product or service will need its own advertising strategy as

part of a total marketing plan. Before developing an advertising

campaign for your business, review a few basic assumptions. By

definition, advertising is any form of paid, nonpersonal

promotion that simultaneously communicates with a large number of

potential customers. The purpose of advertising is to inform,

persuade and remind customers about your company's products or

services. Every advertising activity should have specific goals.

Common examples are



   *  To bring in sales orders or contracts.



   *  To promote special events, such as sales, business openings

      or new products.



   *  To bring in requests for estimates or a sales

      representative's call.



   *  To establish yourself before start-up and to get potential

      customer feedback.



Initial forms of advertising might include one or more of the

following:



   *  Purchase and distribution of business cards to potential

      clients.



   *  Posting notices on free bulletin boards in area

      supermarkets or office complexes.



   *  A telephone survey of potential clients to alert them to

      your start-up plans.



To determine what types of advertising are appropriate and within

company budget projections, carefully review your customer

profile and write a clear statement of your advertising goals.

The next step is to answer the following crucial questions about

your advertising:

_________________________________________________________________



_________________________________________________________________



_________________________________________________________________



_________________________________________________________________



What should be said about the business and how should it be

stated?



   *  What media should be used?



   *  How much can be spent on advertising?



   *  How can the advertising program be implemented?



   *  How can its effectiveness be measured?



Address the following areas in selecting the types of media for

your advertising.



   *  Trading area -- Do you plan to serve or sell to an  

      industrial market, a national market, a neighborhood or a

      specialized market? Describe your market area.



   *  Customer type -- What does your potential customer read or

      listen to? Where? How often? What image of your product or

      service does the media you are considering suggest? Does it

      fit your customer? Describe your customer.



   *  Budget restrictions -- How will the amount of money you

      have to spend limit the media you can use? How can you

      spread your budget over a year to give a repetitive,

      continuous message? While you may have to spend more at the

      start, a useful guide is that advertising should not exceed

      1 or 2 percent of sales. How much are you willing to invest

      in advertising in the first year?



      $ ______________________________________



      Break this amount into monthly or quarterly installments.



      $___________per month

      $___________per quarter



   *  Continuity of message -- How will the type of product or

      service, customer profile and seasonal buying patterns

      affect your choice of media and the frequency with which

      you advertise? Explain.



      ___________________________________________________________



      ___________________________________________________________



      ___________________________________________________________



    

Past performance -- What is the track record of the advertising

media you are considering for your type of business? What do your

competitors use? What does your trade association suggest? Record

appropriate comments.



      ___________________________________________________________



      ___________________________________________________________



      ___________________________________________________________

_________________________________________________________________



SUMMARY



Summarize the various operations of your business in a list that

includes cost of operation. This outline will be helpful when you

create the financial section of your business plan. In addition,

you will want to summarize the advantages and disadvantages of a

home-based business operation.



_________________________________________________________________



_________________________________________________________________



_________________________________________________________________



_________________________________________________________________



_________________________________________________________________



_________________________________________________________________



_________________________________________________________________



_________________________________________________________________



_________________________________________________________________



PART III -- THE FINANCIAL PLAN



The most critical section of your business plan is the financial

plan. In formulating this part of the document, you will

establish vital schedules that will guide your business through

the troubled waters of the first year and beyond.



Before going into the details of building the financial plan, it

is important to realize that some basic knowledge of accounting

is essential to the productive management of your business. If

you are like most home business owners, you probably have a deep

and abiding interest in the product or services that you sell or

intend to sell. You like what you do, and it is even more

fulfilling that you are making money doing it. There is nothing

wrong with that. Your conviction that what you are doing is

worthwhile is vitally important to success. Nonetheless, the

salary of a coach who takes the greatest pride in producing a

winning team will largely depend on someone keeping score of the

wins and losses.



The business owner is no different. Your product or service may

improve the condition of mankind for generations to come but

unless you have access to an unlimited bankroll, you will fail if

you don't make a profit. If you don't understand the financial

side of your business, you are not in a very good position to

assure its profitability.



Cash method accounting is the simplest form of accounting. Sales

are recorded when cash is received and expenses are recorded when

they are paid. As your business grows, you may want to switch to

the accrual method, a system that allows you to record sales and

expenses when they are incurred rather than when they are

collected or paid.



Most home-based businesses will use the cash method of

accounting. This system of record keeping consists of little more

than a carefully annotated checkbook in which all receipts and

expenditures are recorded, supported by a few forms of original

entry (invoices, receipts, cash tickets, etc.). For a sole

proprietorship, the very minimum of recorded information needed

is that required to accurately complete the IRS Form 1040,

Schedule C. Other business types (partnerships, joint ventures

and corporations) have similar requirements but use different tax

forms.



If your business is, or will be, larger than just a small

supplement to family income, you will need more sophisticated

record keeping. Stationery stores can provide you with several

small business accounting systems complete with simple journals

and ledgers and detailed, understandable instructions.



If you think your accounting knowledge is so rudimentary that you

will need professional assistance to establish your accounting

system, the classified section of your telephone directory can

lead you to a number of small accounting services. You can buy as

much as you need, from simple "peg-board" systems all the way to

a computerized accounting and tax return service and monthly

consulting services to assess the profitability of your business. 

An initial consultation will usually be free.  Look under the

heading, "Business Consultants," and make some calls.  Be sure to

indicate the size of your business so you find consultants who

specialize in home-based operations. Many of them are home-based

entrepreneurs themselves and know what you will be going through.



The financial plan includes the following:



   *  Assumptions -- These are short statements of the conditions

      under which you plan to operate.



      __ Market health. _________________________________________



      __ Date of start-up._______________________________________



      __ Sales build-up._________________________________________



      __ Gross profit margin. ___________________________________



      __ Equipment, furniture and fixtures required.



      ___________________________________________________________



      ___________________________________________________________



      __ Payroll and other key expenses that will impact the

         financial plan.

      ___________________________________________________________



   *  Income (profit and loss) projection -- This is prepared for

      the first year, broken into twelve months. It should become

      your first year's budget. See Appendix A.



   *  Sources of funds schedule -- This shows the sources of your

      funds to capitalize the business and how the funds will be

      distributed among your fixed assets and working capital.

      See Table 1.





   *  Pro forma balance sheet -- Pro forma refers to the fact

      that the balance sheet is before the fact, not actual. This

      form displays assets, liabilities and equity of the

      business. It indicates how much investment will be required

      by the business and how much of that investment will be

      used as working capital in the operation of the business.

      See Appendix B.



   *  Cash flow projection -- This will forecast the flow of cash

      into and out of your business throughout the year. It helps

      you plan for staged purchasing, high volume months and slow

      periods. See Appendix C.



Income (Profit and Loss) Projection



Refer to Appendix A. Create a wide sheet of analysis paper with a

three-inch-wide column at the extreme left and 14 narrow columns

across the page. Write at the top of the first page the planned

name of your business. On the second line of the heading, write

Income Projection (P & L Projection). On the third line, write

First Year.



Note the headings for each month on Appendix A and copy them onto

your 14-column sheet. If the actual start-up date is indefinite,

write Month #1, Month #2, etc. Column 14 should be headed Annual

Total.



In the wide, unnumbered column on the left of your sheet, copy

the headings from the similar area on Appendix A. Follow the

example set by Appendix A and list all of the other components of

your income, cost and expense structure. You may add or delete

specific lines of expenses to suit your business. Guard against

consolidating too many types of expenses under one heading

because it will make the accounting more difficult. Appendix A

provides ample detail for most home-based businesses.



Controllable expenses (salaries, supplies, advertising, etc.)

will be estimated monthly, based on planned volume and seasonal

or other fluctuations.



Depreciation allowances for fixed assets, such as production

equipment, office furniture and machines, vehicles, etc., will be

calculated from the source of funds schedule.



The instructions describe line by line how the values on the

income (profit and loss) projection are developed. Use it as your

guide.



Sources of Funds Schedule



To create this schedule, you will need to create a list of all of

the assets you intend to use in your business, how much

investment each will require and the source of funds to

capitalize them. A sample of such a list is shown below in

Table 1.

     _______________________________________________________



               TABLE 1 Sources and Costs of Assets



     Asset                        Cost       Source of funds



     Cash                       $2,500      Personal savings



     Accounts receivable         3,000      From profits



     Inventory                   2,000      Vendor credit



     Pickup truck                5,000      Currently owned



     Packaging machine          10,000      Installment 

                                               purchase



     Office desk and chair         300      Currently owned



     Calculator                     20      Personal cash



     Personal computer*          3,000      Personal savings



     A note about office equipment: Although this publication

     has been written for home-based business operators in

     general, if you plan an enterprise that produces printed

     products or a large volume of correspondence, you should

     consider purchasing desktop software for your computer 

     and a laser printer. Compare two or more systems that 

     appear to meet your needs and select the one with which

     you feel most comfortable. Don't be afraid to ask for

     advice.

     _______________________________________________________



Before you leave your source of funds schedule, indicate the

useful life (in months) for depreciable fixed assets. (In the

example, the pickup truck, the packaging machine and the

furniture and office equipment would be depreciable.) Generally,

any individual item of equipment, furniture, fixtures, vehicles,

etc., costing over $100 should be depreciated. Divide the cost of

each fixed asset item by the number of months over which it will

be depreciated. You will need this data to enter as monthly

depreciation on your profit and loss projection. All of the data

on the sources of funds schedule will be needed to create the

balance sheet.



For more information on allowances for depreciation, request free

publications and assistance from your local IRS office.



Pro Forma Balance Sheet



Refer to Appendix B, the balance sheet form. There are a number

of variations of this form and you may find it prudent to ask

your banker for the form that the bank uses for small businesses.

It will make it easier for them to evaluate the health of your

business. Use Appendix B to get started and transfer the data to

your preferred form later. The instructions describe line by line

how to develop the balance sheet.



Even though you may plan to spread the purchase of some assets

through the year, for the purposes of this pro forma balance

sheet, assume that all assets will be provided at start-up.



Cash Flow Projection



An important subsidiary schedule to your financial plan is a

monthly cash flow projection. A prudent business practice is to

keep no more cash in the business than is needed to operate it

and to protect it from catastrophe. In most small businesses, the

problem is rarely one of having too much cash. A cash flow

projection statement indicates the amount of cash that is going

to be absorbed by the operation of the business and compares it

against the amount that will be available.



The SBA has created an excellent cash flow projection form, shown

in Appendix C. Your projection should be prepared on 13-column

analysis paper to allow for a twelve-month projection. The

instructions give you a line-by-line description and explanation

of the components of the cash flow projection, including a

step-by-step method of preparation. Contact your local SBA office

to obtain a free copy of Form 1100.

_________________________________________________________________



A FINAL WORD



In completing this publication, you have put in a great deal of

time and effort. You should now have all the elements needed to

present as simple or sophisticated a prospectus for your

enterprise as you desire. More important, you have created the

management tools to guide you in your venture. Once the business

opens its doors, you will be inundated by the details, problems,

challenges and joys of going it alone. It will be difficult to

hold to your course through the rough seas ahead, but don't

forget this chartbook; it will see you through to Port Profit. It

should be a living document, referred to regularly and often

revised to reflect your experience. Begin a planning cycle that

expands this first year plan into one that spans three or five

years. Update it at regular intervals. Set your goals and live by

them. Your success is in your hands. Good planning and good

execution!

_________________________________________________________________



APPENDIX A: INCOME PROJECTION STATEMENT



                   Industry J F M A M J J A S O N D Annual Annual

                      %                               total   %



Total net sales

  (revenues)          _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

 Cost of sales        _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

 Gross profit         _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

 Gross profit 

   margin             _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

                

Controllable 

   expenses    

 Salaries/wages       _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

 Payroll expenses     _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

 Legal/accounting     _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

 Advertising          _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

 Automobile           _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

 Office supplies      _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

 Dues/subscriptions   _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

 Utilities            _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

 Miscellaneous        _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

 Total controllable 

   expenses           _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

                

Fixed expenses

 Rent                 _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

 Depreciation         _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

 Utilities            _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

 Insurance            _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

 Licenses/permits     _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

 Loan payments        _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

 Miscellaneous        _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

 Total fixed 

   expenses           _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

                

Total expenses        _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

                

Net profit (loss) 

   before taxes       _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  

 Taxes                _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  



Net profit (loss) 

   after taxes        _     _ _ _ _ _ _ _ _ _ _ _ _     _     _  



The income projection (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 projects are developed and entered into the income

projection 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.



Industry Percentage



In the industry percentage column, enter the percentages of total

sales (revenues) that are standard for your industry which are

derived by dividing



          cost/expense items by total net sales x 100%



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 (1 Liberty Place,

Philadelphia PA  19103)



Industry figures serve as a useful benchmark against which to

compare cost and expense estimates that you develop for your

firm. Compare the figures in the industry column to those in the

annual percentage column



Total Net Sales (Revenues)



Determine the total number of units or 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 projection

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 for 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 margin is expressed as a percentage of total

sales (revenues) it is calculated by dividing



              gross profits by total net sales



Controllable Expenses



   *  Salary expenses -- Base pay plus overtime.



   *  Payroll expenses -- Include paid vacations, sick leave, 

      health insurance unemployment insurance and social security

      taxes.



   *  Outside services -- Include costs of subcontracts, overflow

      work and special or one-time services.



   *  Supplies -- Services and items purchase for use in the

      business.



   *  Repairs 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, tolls, buying

      trips, etc.



   *  Accounting and legal -- Outside professional services.



Fixed Expenses



   *  Rent -- List only real estate used in the 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 (loss)        *  Subtract total expenses from gross

(before taxes)              profit.



Taxes                    *  Include inventory and sales taxes,

                            excise tax, real estate tax, etc.



Net Profit (loss)        *  Subtract taxes from net profit

(after taxes)               (before taxes)



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

                            results in the annual total column.



Annual Percentage        *  Calculate the percentage by dividing

                                      annual total by 

                                      total net sales x 100%



                         *  Compare this figure to the industry

                            percentage in the first column

_________________________________________________________________



APPENDIX B: MONTHLY CASH FLOW PROJECTION



This is a form which cannot be reproduced in .txt format.



_________________________________________________________________



APPENDIX C: BALANCE SHEET



                         COMPANY NAME



             As of _________________________, 19_____



Assets                             Liabilities



Current assets                     Current Liabilities



 Cash               __________      Accounts Payable   __________



 Petty Cash         __________      Notes Payable      __________



 Accounts Receivable__________      Interest Payable   __________



 Inventory          __________      Taxes Payable

                                     Fed. income tax   __________

 Short-term Invest-                  State income tax  __________

   ments            __________       Self-employment   __________

                                     Sales tax (SBE)   __________

 Prepaid expense    __________       Property tax      __________



Long-term invest-                   Payroll accrual    __________

   ments            __________

                                   Long-term liabil-

Fixed assets                        bilities          



 Land               __________      Notes payable      __________

                                                     ____________

 Buildings          __________

                                   Total liabilities   __________

 Improvements       __________     ______________________________

                                   

 Equipment          __________     Net worth (owner equity)



 Furniture          __________      Proprietorship     __________

                                     or Partnership

 Automobiles/                        (name's) equity   __________

  vehicles          __________       (name's) equity   __________

                                            or

Other assets                        Corporation

                                      Capital stock    __________

  1.                __________        Surplus paid in  __________



                                      Retained earnings__________

  3.                __________                      _____________



  4.                __________      Total net worth    __________



                 _____________                      _____________

                                    Total liabilities

Total assets        __________       and net worth  _____________

    (Total assets will always equal total liabilities and 

     total net worth)

      ____________________________________________________



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.



Assets



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.



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 operations). 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

      in 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.



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 no intended

for resale.  Fixed assets, except for land, are listed at cost

less depreciation. Fixed assets may be leased.  Depending on the

leasing arrangement, 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.



   *  Buildings



   *  Improvements



   *  Equipment



   *  Furniture



   *  Automobiles/vehicles



Liabilities



Current liabilities



List all debts, monetary obligations and claims payable within 12

months or within one cycle of operations.  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 die to pay off

      short-term debt for borrowed funds.  Also include 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 or mortgage

payments due over a period exceeding 12 months or one cycle of

operations. They are listed by outstanding balance less the

current portion due.



Net Worth



Also called owner's equity, net worth is the claim of the

owner(s) on the assets of the business.  In proprietorship or

partnership, equity is each owner's original investment plus any

earnings or withdrawals.



Total Liabilities and Net Worth



The sum of these two amounts must always match at of total

assets.

_________________________________________________________________



APPENDIX D: HOW TO WRITE A BUSINESS PLAN



The following pages provide a suggested outline of the material

that should be included in your business plan. Your final plan

may vary according to your needs or because of the individual

requirements of your lender.



What Are the Benefits?



Every business can benefit from the preparation of a carefully

written plan. There are two main purposes for writing that plan:



   1.  To serve as a guide during the lifetime of the business.

       It is the blueprint of your business and will provide you

       with the tools for analysis and change.



   2.  A business plan is a requirement if you are planning to

       seek a loan. It will provide potential lenders with

       detailed information on all aspects of your company's past

       and current operations and provide future projections.

 

Business Plan Outline



I.   Cover sheet



     Serves as the title page of your business plan. It

     should contain the following:



     *  Name of the company

     *  Company address

     *  Company phone number (include area code)

     *  Logo (if you have one)

     *  Names titles addresses phone numbers (include area code)

        of owners

     *  Month and year your plan was issued

     *  Name of preparer

 

II.  Statement of purpose



     (Same as executive summary.) This is the thesis statement

     and includes business plan objectives. Use the key words

     (who, what, where, when, why, how, and how much) to

     briefly tell about the following:

     *  What your company is (also who what where and when).

     *  What your objectives are.

     *  If you need a loan why you need it.

     *  How much you need.

     *  Why you will be successful.

     *  How and when you plan to repay your loan.

 

III. Table of contents



     A page listing the major topics and references.



IV. The business



    Covers the details of your business. Include information

    about your industry in general, and your business in

    particular. Address the following:



    *  Legal structure -- Tell what legal structure you have

       chosen and state reasons for your choice.

    *  Description of the business -- Detail your business. Tell

       about your history present status and future projections.

       Outline your product or service in terms of marketability.

       Project a sense of what you expect to accomplish in the

       next few years.

    *  Products or services -- Give a detailed description of

       your products from raw materials to finished items. Tell

       about your manufacturing process. If you provide a service

       tell what it is how it is provided and why it is unique.

       List future products or services you plan to provide.

    *  Location -- Describe site and why it was chosen. (If

       location is important to your marketing plan focus on this

       in the marketing section below.)

    *  Management -- Describe who is behind the business. For

       each owner tell about responsibilities and abilities.

       Support with resumes.

    *  Personnel -- Who will be doing the work why are they

       qualified what is their wage what are their

       responsibilities?

    *  Methods of record keeping -- What accounting system will

       you use? Who will do your record keeping? Do you have a

       plan to help you use your records in analyzing your

       business?

    *  Insurance -- What kinds of insurance will you need? What

       will these cost and who will you use for a carrier?

    *  Security -- Address security in terms of inventory control

       and theft of information.



V.   Marketing



     Covers the details of your marketing plan. Include

     information about the total market with emphasis on your

     target market. Identify your customers and tell about the

     means to make your product or service available to them.



     *  Target market -- Identify characteristics of your

        customers. Tell how you arrived at your results. Back up

        information with demographics questionnaires and surveys.

        Project size of your market.



     *  Competition -- Evaluate indirect and direct competition.

        Show how you can compete. Evaluate competition in terms

        of location market and business history.



     *  Methods of distribution -- Tell about the manner in which

        products and services will be made available to the

        customer. Back up decisions with statistical reports rate

        sheets etc.

     *  Advertising -- How will your advertising be tailored to

        your target market? Include rate sheets promotional

        material and time lines for your advertising campaign.

     *  Pricing -- Pricing will be determined as a result of

        market research and costing your product or service. Tell

        how you arrived at your pricing structure and back it up

        with materials from your research.

     *  Product design -- Answer key questions regarding product

        design and packaging. Include graphics and proprietary

        rights information.

     *  Timing of market entry -- Tell when you plan to enter the

        market and how you arrived at your decision.

     *  Location -- If your choice of location is related to

        target market cover it in this section of your business   

        plan. (See location in the business section of this

        outline.)

     *  Industry trends -- Give current trends project how the

        market may change and what you plan to do to keep up.

 

VI.  Financial documents



     These are the records used to show past, current and

     projected finances. The following are the major documents

     you will want to include in your business plan. The work is

     easier if these are done in the order presented.



     *  Summary of financial needs -- This is an outline

        indicating why you are applying for a loan and how much

        you need.

     *  Sources and uses of funds statement -- It will be         

        necessary for you to tell how you intend to disperse the

        loan funds. Back up your statement with supporting data.

     *  Cash flow statement (budget) -- This document projects

        what your business plan means in terms of dollars. It

        shows cash inflow and outflow over a period of time and

        is used for internal planning.

     *  Cash flow statements show both how much and when cash

        must flow in and out of your business.

     *  Three-year income projection -- A pro forma income

        statement showing your projections for your company for

        the next three years. Use the pro forma cash flow

        statement for the first year's figures and project the

        next according to economic and industry trends.

     *  Break-even analysis -- The break-even point is when a

        company's expenses exactly match the sales or service

        volume. It can be expressed in total dollars or revenue

        exactly offset by total expenses or total units of

        production (cost of which exactly equals the income

        derived by their sales). This analysis can be done either

        mathematically or graphically.



        Note: The following are actual performance statements

        reflecting the activity of your business in the past. If

        you are a new business owner your financial section will

        end here and you will add a personal financial history.

        If you are an established business you will include the

        actual performance statements that follow.



     *  Balance sheet -- Shows the condition of the business as

        of a fixed date. It is a picture of your firm's financial

        condition at a particular moment and will show you

        whether your financial position is strong or weak. It is

        usually done at the close of an accounting period and

        contains assets liabilities and net worth. 

     *  Income (profit and loss) statement -- Shows your business

        financial activity over a period of time (monthly

        annually). It is a moving picture showing what has

        happened in your business and is an excellent tool for

        assessing your business. Your ledger is closed and

        balanced and the revenue and expense totals transferred

        to this statement.

     *  Business financial history -- This is a summary of

        financial information about your company from its start

        to the present. The business financial history and loan

        application are usually the same. If you have completed

        the rest of the financial section you should be able to

        transfer all the needed information to this document.



VII. Supporting documents



     These are the records that back up the statements and

     decisions made in the three main parts of your business

     plan. Those most commonly included are as follows:



     *  Personal resumes -- Should be limited to one page and

        include work history educational background professional

        affiliations and honors and special skills.

     *  Personal financial statement -- A statement of personal

        assets and liabilities. For a new business owner this

        will be part of your financial section.

     *  Credit reports -- Business and personal from suppliers or

        wholesalers credit bureaus and banks.

     *  Copies of leases -- All agreements currently in force

        between your company and a leasing agency.

     *  Letters of reference -- Letters recommending you as being

        a reputable and reliable business person worthy of being

        considered a good risk. (Include both business and

        personal references.)

     *  Contracts -- Include all business contracts both

        completed and currently in force.

     *  Legal documents -- All legal papers pertaining to your

        legal structure proprietary rights insurance titles etc.

     *  Miscellaneous documents -- All other documents that have

        been referred to but are not included in the main body of

        the plan (e.g. location plans demographics advertising

        plan etc.).



Putting Your Plan Together



When you are finished: 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. It should be no more than 30 to

40 pages long. Include only the supporting documents that will be

of immediate interest to your potential lender. Keep the others

in your own copy where they will be available on short notice.

Have copies of your plan bound at your local print shop, or with

a blue, black or brown cover purchased from the stationery store.

Make copies for yourself and each lender you wish to approach. Do

not give out too many copies at once, and keep track of each

copy. If your loan is refused, be sure to retrieve your business

plan. For a more detailed explanation of each section of the

business plan outline, see SBA's publication, How to Write a

Business Plan, which includes step-by-step directions and sample

sections of actual business plans. Also available from the SBA is

a VHS videotape and workbook, The Business Plan: Your Roadmap for

Success.



_________________________________________________________________



APPENDIX E: INFORMATION RESOURCES



U.S. Small Business Administration (SBA)



The SBA offers an extensive selection of information on most

business management topics, from how to start a business to

exporting your products.



SBA has offices throughout the country. Consult the U.S. 

Government section in your telephone directory for the office

nearest you. SBA offers a number of programs and services,

including training and educational programs, counseling services,

financial programs and contract assistance. Ask about



     *     SCORE: Counselors to Americas Small Business, a 

           national organization sponsored by SBA of over 11,000

           volunteer business executives who provide free

           counseling, workshops and seminars to prospective and

           existing small business people.  Free online counseling

           and training at www.score.org. 



     *     Small Business Development Centers (SBDCs), sponsored

           by the SBA in partnership with state governments, the

           educational community and the private sector. They

           provide assistance, counseling and training to 

           prospective and existing business people.



     *     Womens Business Centers (WBCs), sponsored by the SBA  

           in partnership with local non-government organizations

           across the nation. Centers are geared specifically to 

           provide training for women in finance, management,

           marketing, procurement and the Internet.



For more information about SBA business development programs and

services call the SBA Small Business Answer Desk at 1-800-U-ASK-

SBA (827-5722) or visit our website, www.sba.gov. 



Other U.S. Government Resources



Many publications on business management and other related topics

are available from the Government Printing Office (GPO). GPO

bookstores are located in 24 major cities and are listed in the

Yellow Pages under the bookstore heading. Find a Catalog of

Government Publications at http://catalog.gpo.gov/F 



Many federal agencies offer Websites and publications of interest 

to small businesses. There is a nominal fee for some, but most 

are free. Below is a selected list of government agencies that 

provide publications and other services targeted to small 

businesses. To get their publications, contact the regional 

offices listed in the telephone directory or write to the 

addresses below:



Federal Citizen Information Center (FCIC)

Http://www.pueblo.gsa.gov 

1-800-333-4636

The CIO offers a consumer information catalog of federal

publications.



Consumer Product Safety Commission (CPSC)

Publications Request

Washington, DC 20207

http://www.cpsc.gov/cpscpub/pubs/pub_idx.html 

The CPSC offers guidelines for product safety requirements.



U.S. Department of Agriculture (USDA)

12th Street and Independence Avenue, SW

Washington, DC 20250

http://www.usda.gov 

The USDA offers publications on selling to the USDA. Publications

and programs on entrepreneurship are also available through 

county extension offices nationwide.



U.S. Department of Commerce (DOC)

Office of Business Liaison

14th Street and Constitution Avenue, NW

Washington, DC 20230

http://www.osec.doc.gov/obl/ 

DOC's Business Liaison Center provides listings of business

opportunities available in the federal government. This service

also will refer businesses to different programs and services in

the DOC and other federal agencies.



U.S. Department of Health and Human Services (HHS)

Substance Abuse and Mental Health Services Administration

1 Choke Cherry Road

Rockville, MD 20857

http://www.workplace.samhsa.gov 

Helpline: 1-800-workplace. Provides information on Employee

Assistance Programs Drug, Alcohol and other Substance Abuse.



U.S. Department of Labor (DOL)

Employment Standards Administration

200 Constitution Avenue, NW

Washington, DC 20210

The DOL offers publications on compliance with labor laws.



U.S. Department of Treasury

Internal Revenue Service (IRS)

1500 Pennsylvania Avenue NW

Washington DC 20230

http://www.irs.gov/business/index.html 

The IRS offers information on tax requirements for small

businesses.



U.S. Environmental Protection Agency (EPA)

Small Business Ombudsman

1200 Pennsylvania Avenue NW

Washington, DC 20480

http://epa.gov/sbo

Hotline: 1-800-368-5888

The EPA offers more than 100 publications designed to help small

businesses understand how they can comply with EPA regulations.



U.S. Food and Drug Administration (FDA)

5600 Fishers Lane

Rockville MD 20857-0001

http://www.fda.gov

Hotline: 1-888-463-6332

The FDA offers information on packaging and labeling requirements

for food and food-related products.



For More Information



A librarian can help you locate the specific information you need

in reference books. Most libraries have a variety of directories,

indexes and encyclopedias that cover many business topics. They

also have other resources, such as



     *     Trade association information

           Ask the librarian to show you a directory of trade

           associations. Associations provide a valuable network

           of resources to their members through publications 

           and services such as newsletters, conferences and

           seminars.



     *     Books

           Many guidebooks, textbooks and manuals on small

           business are published annually. To find the names of

           books not in your local library check Books In Print,

           a directory of books currently available from

           publishers.



     *     Magazine and newspaper articles

           Business and professional magazines provide 

           information that is more current than that found in

           books and textbooks. There are a number of indexes to

           help you find specific articles in periodicals.



      *    Internet Search Engines



In addition to books and magazines, many libraries offer free

workshops, free access to computers and the Internet, lend 

skill-building tapes and have catalogues and brochures 

describing continuing education opportunities.

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