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facing? What benefit would be realized if these problems were solved?

9. Based on the assessment provided in answering questions 1 through 8,
list three to six objectives you want to achieve (long-term and short-

1. ______________________ 4. _________________________

2. ______________________ 5. _________________________

3. ______________________ 6. _________________________

10. Now, for each objective, list the three most important tasks that must
be accomplished in order to achieve the objective.

11. List any operational changes that must occur in order for these tasks
to be accomplished.

12. What internal or external resources must be secured to accomplish
these tasks?

13. What will each objective require in terms of personnel and costs?

14. List the risks associated with tasks to accomplish your objectives.

What action can be taken to minimize or avoid these risks?

15. Which objectives and tasks leverage your strengths? Which are unaf-
fected or limit the vulnerability caused by your weaknesses?

16. Are there any objectives or tasks that you lack the resources to ac-

17. Develop a chart that lists the following: the objectives you have cho-
sen, the most important steps to accomplish for their realization, the
dates for accomplishment, the milestone measures you will use to eval-
uate performance, who will be responsible, any status reports on your
progress to communicate to all involved, and any contingency plans.

XIV. Financial Projections
Financial management can be the determining factor in the survivability as
well as the success of your business. It is important to make careful financial
projections as a way of both planning and controlling the business. While ac-
counting is essentially a record of historical performance of the business, fi-
nancial projections, or the creation of pro forma financial statements and
budgets, helps you to think through the financial implications of the deci-
sions made during the preparation of your business plan.
In previous sections of the business plan, you have analyzed the market
and set objectives. In this section you will put into financial terms the strate-
gies detailed in the business plan. You document the past in financial terms
(if applicable), take a forward look, and complete the final task in writing the
business plan, that is, forecast likely conditions and project allocation of re-
sources to support future operations.

Will You Be Able to Reach Your Objectives?
Your projections are to be structured around the objectives developed by the
management team during the planning process. The marketing, sales, and
operations strategies and plans spell out the financial requirements. The
industry and trend analyses imply specific assumptions about likely future
The key in preparing this section is to be realistic. Critically evaluate the
potential for profitability of your venture. You have to believe in the accu-
racy and attainability of your projections and, equally important, convince
others that the financial projections are realizable. If you have been in busi-
ness, then you will have past financial data to guide your projections. If this
is a start-up, you will need to be creative in seeking out comparative ven-
How to Write and Present an Investor-Oriented Business Plan

tures, be detailed in capturing projected cost data, and be realistic in sales
projections. Be reasonable. If your projections for market share, profit,
growth rate, sales performance, and/or operating margins significantly devi-
ate from industry standards, you will surely face an uphill battle building
trust with funding resources.
Be prepared to defend both your projections and the assumptions behind
the projections. Be consistent about assumptions. Start with all your key as-
sumptions regarding wages, benefits, pricing, production costs, sales, vol-
ume, market projections, and inflation, and support them as clearly as
possible. If you made an assumption in the operating budgets, be sure the
pro forma statements reflect it. Document and footnote all assumptions on
the pro forma statements.

Interrelationships of Financial Projections
We recommend that you include pro forma financial statements, cash budg-
ets, and operating budgets. Begin by projecting separate sets of departmental
budgets based on current and desired funding. Then develop cash flow, in-
come projections, and, lastly, your pro forma balance sheet.
Also, consider developing the projections on a monthly basis for the first
year, quarterly for years two and three, and annually for years four and
five”if you forecast that far into the future. It is critical that you include
footnotes describing significant assumptions used in preparing any financial
statement projection. Worksheets to guide the preparation of your projec-
tions are included at the end of this section.
Begin your financial projections with the operating budgets. These pro-
jections detail forecasted department revenue and expense patterns. For ex-
ample, pro forma sales projections and pro forma departmental expense
budgets can be consolidated into a forecasted operating budget for the sales
department. The sales forecast projects when sales will occur, the volume of
sales, and, thus, your gross revenue. (Refer to Worksheet #1 and Worksheet
#2 for sample schedules.)
Next, develop cash budgets or cash flow statements using Worksheet #3.
Cash flow statements are detailed projections of the cycle of turning sales
into cash that, in turn, pays the cost of doing business and, you hope, returns
a profit. The cash flow statement describes cash in and cash out and when. A
cash flow analysis and projection will reflect your company™s credit and col-
lection policies, trade credit, and other financing activities, and purchase and
disposal of fixed assets. This projection informs you when cash will be
needed before a cash crisis occurs.
Last, prepare the pro forma financial statements, which include your as-
sumptions about future performance and funding requirements, that is, in-
come or profit and loss statement, and balance sheet. The pro forma income

statement projects the company™s revenues, expenses, and earnings over a
specific period of time. When you subtract your expenses from your income,
you will have your net profit or loss for the period. Use Worksheet #4 as a
sample income statement to guide your projections. The balance sheet shows
the assets and liabilities of the company on a given date. When you subtract
liabilities from assets and owners™ equity, the difference is the company™s net
worth. Worksheet #5 will guide your preparation of a pro forma balance
sheet. Also, include historical income statements and balance sheets, if they
are appropriate.
Demonstrate that you understand break-even point. Describe the level
of sales volume required to break even and candidly discuss the likelihood of
earning at least that much. The break-even point is that level of sales that
covers the fixed and variable costs of providing your product or service. You
will need to know your fixed costs (rent, utilities, insurance, etc.), those that
remain constant regardless of sales. You will also need to know your variable
costs (cost of goods, sales commissions, etc.), those that will increase with
sales. Explain why you are confident in meeting or exceeding the break-even
Comment on how you will adjust to situations differing from stated ex-
If you are an existing business, include income statements, balance
sheets, and cash flow statements for the past three years.

What Are Your Financial Needs?
The purpose of these financial documents is to help you assess future per-
formance and funding requirements. After completing the projections and
statements mentioned above, you will be able to state (1) the amount of
funds needed over the course of time covered by the business plan, (2) when
funding will be needed, (3) the types of funding most appropriate (e.g., debt
or equity based), and (4) what you are willing to give up to get the funding.
In the case of a loan (e.g., loan amount, collateral, interest rate, and repay-
ment schedule) or in the case of equity financing, state the percentage of the
company to be given up, proposed return on investment, and the anticipated
method for taking out the investor (buy-back, public offer, or sale). You also
will be on firm ground when describing how the funding will be used and be
able to prepare a uses of funds statement.

Funds Sought and Exit Strategy
Indicate how much money you are seeking, how many investors you plan to
have, how the funds raised will be used, and how investors or lenders will get
their money out. (Use Worksheet #6 to guide your preparation of a “Sources
How to Write and Present an Investor-Oriented Business Plan

and Use of Funds Statement.”) Attach a risk disclosure document that in-
cludes an evaluation of potential risks inherent in your enterprise; assess
risks and describe steps to minimize risks.

XV. Supporting Documents
Once you have completed the main body of the business plan, consider the
additional records that should be included pertaining to your business. These
supporting documents are records that back up the statements and decisions
in the body of the plan. Include resumes, financial statements, credit reports,
copies of leases, contracts and letters of commitment to purchase, legal doc-
uments, maps of location, descriptive materials about your products or serv-
ices, collateral sales and marketing materials, reference lists, glossary of
terms, and any other miscellaneous documents best assembled with the plan.



Product Line(s)
YEAR Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
1. Product 1
Shipments (Units)
x Avg Price/Unit
Gross Sales

2. Product 2

3. Product 3

n. Product N




How to Write and Present an Investor-Oriented Business Plan




TOTAL 1 st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Basic data:
Unit sales (number of units):
Product A

Product B

Product C
Price level (per unit):
Product A

Product B

Product C

Number of salespersons:

Operating budget ($000):
Sales revenue
Less: returns, allowances

Net sales
Cost of goods sold

Margin before delivery

Delivery expense

Gross margin

Selling expense (controllable):
Salesperson™s compensation
Travel and entertainment

Sales support costs

Gross contribution

Departmental period costs
Net contribution

Corporate support (transferred):
Staff support



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