The Business Enterprise Centres Guide To Writing Your Business Plan

Description
Description explain about the business enterprise centres guide to writing your business plan.

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THE BUSINESS ENTERPRISE CENTRE’S GUIDE TO
WRITING YOUR BUSINESS PLAN











Last updated 21 July 2014 TD


The Business Enterprise Centre is a member of
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Checklist
Section Page Notes
1.0 Cover Page 4

1.0 Table of Contents 4

1.0 Executive Summary 4

2.0 Business Profile 7

2.1 Company Overview 8

2.2 Key Management Profile 13

3.0 Market Analysis 16

3.1 Industry Research 18

3.2 Target Market Profile 20

3.3 Pricing Strategy and Sales 22

3.4 SWOT Analysis & Competitive Advantage 26

4.0 Marketing Strategy 27

4.1 Marketing to Date 28

4.2 Objectives 28

4.3 Branding 28

4.4 Marketing Tactics 30

4.5 Metrics 32

5.0 Operations Management 33

5.1 Operations 34

5.2 Succession Plan 38

6.0 Financial Projections 39

6.1 Financing Needs 40

6.2 Past Financial Statements 40

6.3 Pro Forma Cash Flow Statement 41

6.4 Pro Forma Income Statement 42

6.5 Pro Forma Balance Sheet 45

7.0 Appendix — Supporting Documents 46

8.0 Glossary 48

9.0 Acronyms List 54

10.0 Resources 54



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Preface
A business plan is a practical document that all business owners and entrepreneurs should
develop no matter the business industry, sector, and/or stage of development. The process of
writing a business plan forces business owners and entrepreneurs to thoroughly think through
their business idea, gain a deep understanding of their market, identify challenges, and set
benchmarks against which they can measure progress. Essentially, it can be used as a
blueprint for starting and operating your business. The final document that is produced is
essential to acquiring financing and can be valuable in recruiting talent and guiding business
decisions. It is a living document that should be continually updated as you proceed with your
business.
This guide is designed to help you write a business plan. It does not have to be a stressful or
complicated activity. This document provides section-by-section guidance on what
information should be included in your business plan, and how to find that information. The
blue words found throughout the guide are key terms with definitions located in the Glossary,
page 48, for easy reference.
While the guide is directed at new start-up businesses, it is written to be useful for all types
of businesses, regardless of industry or stage of development. Therefore, there are likely
some parts of the guide that won’t apply to all business types. Use your best judgment and
talk with your business development consultant to determine what to include.
This document works in conjunction with our series of guides, including:
• Writing a Business Plan: Frequently Asked Questions;
• Starting Up a Business;
• Developing Your Marketing Strategy;
• Projecting Your Cash Flow; and
• Importing and Exporting.

The Business Enterprise Centre offers a wide range of free services and resources for
entrepreneurs interested in starting, buying, or expanding their business. Contact us today to
learn how we can help you!
12 Elm Street North
Timmins, Ontario P4N 6A1
Telephone: 705-360-2600 x 7082
Toll-free: 1-877-470-8332
www.northeastbec.com





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Section 1:
Cover Page, Table of Contents,
& Executive Summary
In this section you will learn about the opening pages of your business plan.
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Cover Page
State the business’ name, address, telephone number, fax number, email address, and the
names of the business owners. Include the date the plan was finalized (e.g. April 2014). While
visuals like pictures and diagrams can be attractive, they can also be distracting and make
your document look cluttered. Ensure that any visuals you use add value to your document.


Table of Contents
If your business plan is more than six to eight pages, you should use a Table of Contents. This
is a single page that lists your section headings with corresponding page numbers. A Table of
Contents facilitates easy access to specific sections of your plan.


Executive Summary
The Executive Summary should directly follow the Table of Contents (if included) or Cover
Page. It is a one to two page summary and a high level picture of all the key aspects of your
business plan.
Since business plans can be long and time consuming to read, many people will read the
Executive Summary in order to decide whether they are interested in reading your entire
business plan. It is therefore important to make your summary interesting and convincing.
The Executive Summary is a summary, so this section should be the last piece of the business
plan that you write.
To write your Executive Summary, imagine being challenged to verbally summarize your
entire business plan in two minutes. What would you include? What would you exclude? This
should help you identify your key points.
Also, remember to tailor your Executive Summary for your audience — a bank loans officer is
interested in different aspects of your plan than a marketing consultant.
Ensure that your Executive Summary includes, at least, the following items:
• Type of business
• Type of legal form
• Products or services being offered
• Unique Selling Proposition
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• Key Management Profile
• Target Market(s), population size, and geographic service area
• Competitive Advantage
• Financing details:
o What is required and how it will be used
o What you are contributing to the business (cash equity and existing assets)
o When the initial investment and financing will be repaid
o An estimate of revenue generated per month
o An estimated timeline for having other financing in place
Finally, remember to clearly tell the reader what you want. Are you seeking a loan? Appealing
to an investor? Recruiting a partner? Telling the reader specifically what you want from them
is a key aspect of your Executive Summary.
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Section 2:
Business Profile
This section of your business plan describes you and your business idea.
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2.1. Company Overview
Unique Selling Proposition
The company overview should begin with your Unique Selling Proposition (USP). This is a one
or two sentence sales pitch that describes how your product or service is different from, and
better than, your competitors. This is also known as an elevator pitch.

Think of it as the introduction to your business — if you had one or two sentences to tell a
potential customer about your product or service, what would you say?


Business Description
The Business Description provides a clear explanation of what you intend to do. Depending on
the complexity of your business, this section may be a paragraph or a couple of pages. It
should address the topics listed below.
• Product/Service: describe what you are selling, how it is unique, and whether you offer
any product or services that complement or are related to the main product or service
(product or service segment) — for example, a men’s clothing store may also offer hats
and belts.
• Industry: categorize your business by sector (primary, secondary, etc.) or by activity
(retail, service, manufacturing, etc.). What industry will your business belong to? What
is the present outlook for this industry and its future possibilities? This will be described
in more detail later on in the Market Analysis section, page 18.
• Target Market: this is the group(s) of customers to whom you have decided to sell your
products/ services and on whom you focus your marketing efforts. For the Business
Description, you only need to briefly state who your target market is — this will be
described in more detail later on in the Market Analysis section, page 20.
• Location and Geographic Service Area: state where your business is located (e.g.
Timmins), whether you have business premises, where your premises are located, and
what area you are servicing (e.g. northeastern Ontario; Timmins, Matheson, and Iroquois
Falls; etc.).
• Distribution Channels: this is the chain of businesses or intermediaries through which
your product or service passes until it reaches the end consumer. For the Business
Description, you only need to briefly describe your core Distribution Channel — this will
be described in more detail later on in the Operations Management section, page 34.
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• Stage of Development: state whether the business is new, or already established.
Describe what stage of development it is in — a common breakdown of these stages is
illustrated below. Also include a timeline indicating your projected start-up progress, if
applicable.
Idea Exit Mature Expansion Established Growth Start-Up
Time
D
e
v
e
l
o
p
m
e
n
t

• Background: The purpose of this section is to describe how the business got to where it
is today. Some items to mention are when the business was founded, its key milestones,
sales records, and its former financing arrangements. If it is an acquired business,
describe the former owners and why they sold the business. If this is a completely new
business venture, you may not have to include a background description.
• Legal Form: in Canada, your business may take one of many legal forms. After stating
what form your business takes, you should discuss the tax implications of this form and
associated liability concerns with a financial professional. The most common types of
legal forms are:
o Sole Proprietorship: A business owned and operated by a single individual, with no
formal business structure is established and no legal distinction between the owner
and the business. This is simple and inexpensive to create and operate, with profits
and losses reported on the owner’s personal tax return. The owner is personally
liable for any business debts. This is one of the more common legal forms.
o Corporation: a form of business organization which is chartered by a state and
given many legal rights as an entity separate from its owners. A corporation is
characterized by the limited liability of its owners and company ownership via
shares. This is one of the more common legal forms.
o General Partnership: an agreement between two or more people who equally
share responsibility and liability. This is simple and inexpensive to create and
operate. The partners are personally liable for any business debts. If you are
pursuing a general partnership legal form, it is recommended that you and your
partner(s) create and sign into a partnership agreement. This would cover key
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things such as percentage ownership, who is responsible for what tasks, how each
are paid, the process in instances of major disagreement, process to follow if one
or more partners want to leave or pass away, etc. Templates of these legal
partnership agreements can be found online (for example, from Entrepreneur.com
and MaRS); once you have developed a solid draft, bring it to a lawyer to be
reviewed. General Partnership is one of the more common legal forms.
o Other legal forms of businesses include limited partnerships, joint ventures, and
co-operatives.
• Profitability: describe why your business is/will be profitable. This should relate to your
Unique Sales Proposition; however, while your USP is an enthusiastic sales pitch, the
description of your profitability should be strongly based in facts and evidence. This is a
good place to describe your Competitive Advantage, which is discussed in the Market
Analysis section, page 26.
Ensure to base all of your statements on reliable data and footnote sources of information as
appropriate. Sources of information can also be provided via an appendix and reference list.
This demonstrates that you have done your research and are knowledgeable about the
business market. When citing, ensure to use a consistent citation format – citing in the
Chicago Manual of Style is recommended.
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Values, Vision, Mission
The identification of your Mission Statement, Vision Statement, and Values demonstrate your
business motivations and priorities. These elements build upon each other. The pyramid
below illustrates how the lower-level elements give purpose and context to the higher-level
elements.
Your Values represent what is important to your company. Generally businesses select
between three and six core Values. These Values must be selected
carefully because they guide every business decision you make.
Your Vision Statement is a single sentence that explains why
you are doing what you are doing and ultimately what you
want to achieve through your success. It should be
consistent with your core Values.
Your Mission Statement is a single sentence that
defines the purpose of your company and the
approach you follow in order to achieve your Goals.
Think of your Mission as the route you will follow to
achieve your Vision. Therefore, it is important
that your Mission Statement and your Vision
Statement be consistent.
Hilton Worldwide (owner of the Hilton Hotel chain, amongst others) provides a strong
example. Notice how they relate back to the specific service they provide.

Hilton Worldwide says:
Our Vision: To fill the earth with the light and warmth of hospitality.
Our Mission: To be the preeminent global hospitality company — the first choice of
guests, team members, and owners alike.
Our Values:
HOSPI TALI TY We’re passionate about delivering exceptional guest experiences.
I NTEGRI TY We do the right thing, all the time.
LEADERSHI P We’re leaders in our industry and in our communities.
TEAMWORK We’re team players in everything we do.
OWNERSHI P We’re the owners of our actions and decisions.
NOW We operate with a sense of urgency and discipline.
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Goals
Your Goals identify what you want to accomplish with your business, and how you will
measure your success. All of your business activities should be directed towards achieving
these Goals.
There is no limit on the number of Goals you may have, as long as they follow the SMART
criteria:
Criteria Application
Specific Target a specific area for improvement; include specific details
Measureable Quantify or suggest progress indicators
Assignable Identify who is responsible for achieving this Goal
Realistic Ensure your Goal is achievable given current state and resources
Time-related
Establish time-related milestones for when progress should be measured
and when the Goal should be achieved
In addition, try to identify short, medium, and long-term Goals. What will you achieve in the
next year? In the next three years? In the next ten years? Short-term Goals should be very
specific, while long-term Goals can be more general. List your Goals in order of importance
(if there is an order).
Some common Goal areas include:
• Growth targets (e.g. sales, production, capacity to produce, market share)
• Product or service quality
• Research, development, and adoption of the production and marketing methods
• Comparative profitability (i.e. return to owners or investors, profit/ investment)
So, your Goals may look something like this:
• The Marketing Manager will increase website hits by 20% in the next six months
through increased radio advertising.
• The Owner will negotiate new supply rates upon the conclusion of the supplier
contract in the fourth quarter.
• The Sales Manager will host three customer focus groups to gauge customer
satisfaction and identify up to 10 actionable areas for improvement by 2015.
Note that short-term Goals can relate to the business operations or be about getting your
business up and running.
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2.2. Key Management Profile
Management Biographies
This section introduces the management team. These Biographies should include the owner(s)
and any business employees who are influential in developing and steering the business. The
Biographies should include:
• Who you are
• What your experiences and qualifications are:
o What are the business and management skills of the key management
members?
o Does your management team have direct operational or managerial experience
in your business field?
• Why you are passionate about this business
• What your duties and responsibilities within the business are
Note that this section should not be a copy of your resume; instead, the Biographies should be
tailored for the business plan. Resumes may be attached as supporting documents in the
appendix.

Management Skills Development (optional)
If some skills are missing amongst the members of the management team, provide a plan for
how to fill these gaps. This plan may involve training of key management members, hiring
new team members or consultants, or contracting out some work.
Whatever plan you suggest, ensure that it is realistic, affordable, and will meet your needs.

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Organizational Structure
This section illustrates how your business is organized and the management hierarchy. The
most simple and effective way to illustrate this is through a flowchart.
The type of flowchart depends on the complexity of your business. It may be a simple family-
run sole proprietorship, illustrated below.
Sally Smith
Owner/
Manager
Carl Smith
Marketing &
Administration
Tina Jones
Sales


Or your Organizational Structure may be more complex.

Suzie Summer
Co-Owner
Jim Jones
Co-Owner
James Fox
Product
Development
Jessie Gagnon
Manufacturing
Rupert Smith
Office
Management &
Administration
Mike Wilson
Domestic Sales
Valerie Roy
International
Sales


Your Organizational Structure does not need to list every employee, but it should provide a
clear indication of who is in charge of what.


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Compensation and Ownership
This section describes how each member of the management team will be compensated, and
how that compensation will be provided. Compensation may take one or a combination of the
forms listed in the table below, or another form altogether. In this section, you should
include exact figures, if possible.
Compensation Type Information Required
Salary: a periodic, formally agreed upon
monetary payment.
• How much will each person earn?
• When will they start drawing their
salary?
Benefits: various types of non-wage
compensation, including housing, group
insurance (health, dental, life etc.), disability
income protection, retirement benefits,
daycare, sick leave, vacation, social security,
education/ training funding, etc.
• What benefits are offered?
• Who is eligible to receive benefits?
• When will benefits be available?
• How are the benefits administered?
• Can employees opt out of the benefits
package?
Incentive bonus: a monetary payment
awarded upon meeting or exceeding a pre-
determined goal.
• How much are the incentive bonuses?
• How are bonuses earned?
• Who is eligible to receive bonus?
• When will bonuses be awarded?
• Is there a bonus cap?
Profit sharing: a form of incentive plan or
benefit that provides direct or indirect
payments to employees based upon the
company's profitability in addition to
employees' regular salary.
• How will profits be divided?
• Are profits awarded directly (monetary
payment) or indirectly (retirement
fund, etc.)?
This section should also describe the company Ownership. While the legal form of the
company has already been discussed in the Business Description section (page 8), this section
should list each investment in the company, who made the investment, and the percentage of
the company they own. If the business has stockholders, include a list of stockholders and the
number of shares they hold.

Board Members/ Investors/ Mentors (as applicable)
If you have board members, investors who are not shareholders, or mentors involved in your
business, they should be described in this section. Identify who is involved, what their role is,
and what they have contributed or will be contributing to the business. If pertinent, this
section may include short biographies.
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Section 3:
Market Analysis
This section analyzes the market your business is entering, the market you are selling to, and
what sets your business apart.


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It is common for new business owners to underestimate the value of market research and
analysis, believing that they fully understand the industry and market that they are
entering. They are often wrong, which increases the chances of failure.
Analyzing your market allows you to make more educated decisions about your business
model, target market(s), and your product or service line. Another advantage of conducting
market research is that it provides evidence to investors or suppliers that your business is
primed for success.
Market analysis relies on a lot of data. Data can be collected via primary research (research
that you do yourself) or secondary research (findings from research somebody else did). It is
feasible for you to do some research yourself; for example, surveying potential customers or
analyzing a competitor’s product line. It is easier to retrieve more broad data (e.g. Timmins
residents’ Internet usage; cinema revenues nationwide) via secondary data.
The box below identifies free secondary data sources that will help you with your market
analysis.

Generic Canadian Data Sources
• Canada Business Network: provides secondary market data upon request, such
as information about business associations, manufacturers, suppliers and
competitors; articles about consumer, business and industry trends; Canadian
consumer spending statistics and demographic data; sample business plans; and
international trade data.
• Canadian Industry Statistics: hosts free data on economic indicators associated
with a wide variety of industries.
• Statistics Canada: offers a very wide variety of data sets, including
demographics, consumption patterns, industry, and business. Specific sources
of data include the Canadian Census, the National Household Survey, the
Labour Force Survey, and Canadian Business Patterns (Business Register). Much
of the data is free; some specific data and cross-tabulations require a fee.
• Timmins Economic Development Corporation: has access to a vast array of data
pertaining specifically to communities in northern and northeastern Ontario,
and will provide data for free upon request.
For more specific or niche data sets, or for American or other international data
sources, discuss with your business development consultant.
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3.1. Industry Research

Industry Characteristics
In this section demonstrate that you fully understand the industry that you are entering. This
means providing a specific and accurate description of the industry, as it currently is and as it
is projected to develop in the future. This section should include:
• Size: industry size is estimated in multiple ways. A common measure is the total
aggregate sales of other businesses in this industry. This helps determine the market
potential, and demonstrate whether your business is entering a broad or niche market.
Many start-ups may only consider industry size from a local or regional perspective. For
example, a dry cleaning business in Matheson may not consider dry cleaners in Sudbury
or Toronto because those businesses will not affect its market potential. Businesses
which sell products/ services nationally or internationally must consider a larger
geographic area.
• Composition: the industry composition looks at the number and size of companies
operating within your market area. Is it dominated by a few very large companies, or
fragmented by many small companies? Is there a mix of large and small companies?
• History: what has happened in the past with this industry? Is it cutting-edge (e.g.
software development, new technologies) or is it a well established industry (e.g. legal
services, a brewery, an office supply store)? How has this industry been affected by local
and global events (e.g. 2008 recession, changes in policies and regulations, etc.)?
• Barriers to Market Entry: these are obstacles that make it difficult to enter a given
market. These barriers are unique to each industry, but examples include government
regulation and patents, licensing requirements, monopolies, distributor agreements,
high cost of entry (capital requirements), intellectual property, zoning, etc. Barriers can
be advantageous to start-ups; the more barriers, the less likelihood of new competitors
entering the market.
• Trends and threats: trends emerge from studying the industry’s history and current state
— locally, regionally, nationally, and internationally. What patterns have been
identified? Are they expected to continue in the future? Common trends include growth
or decline patterns or cycles, shifts in consumption patterns or consumer
characteristics, and shifts in Supply Chain or Distribution Channel characteristics.
Unfavourable trends are called threats. Threats identify what is going on in the market
area and even worldwide that impede the success of your industry. Trends and threats
tend to fall into six categories, described in the table below.
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Category Description
Demographic
An increase or decrease over time in the number of people (or businesses,
for business-to-business offerings), in various demographic groups (age,
income, gender, education, ethnicity, etc).
Sociocultural
An increase or decrease over time in the number of people (or business)
engaged in lifestyle or other activities based on social or cultural trends.
Economic
Changes in income levels; household and discretionary spending patterns;
economic growth; interest rates; credit, loan, or mortgage rates or criteria;
cost of living and consumer price index; or other economic indicators.
Technological
Developments in information and communication technologies,
biotechnologies, entertainment technologies, etc.
Regulatory
Changes in laws, by-laws, regulations, and government policies that affect
your industry and/ or business.
Natural
Developments or events such as global warming, natural resource
depletion, natural disasters, etc.

Operational Environment
In this section, you describe the environment in which you operate, and identify how its
characteristics will affect your business. Note that your business’ Operational Environment
and your geographic service area may not be the same. For example, a business may operate
out of Timmins, but provide services in the Hudson Bay Lowlands.
Some things to keep in mind when describing your Operational Environment are listed below.
• Location, accessibility, connectivity: How does your location affect your business (e.g.
inventory must be shipped from Toronto to Matheson)? Does your business have
appropriate access to transportation routes, connectivity infrastructure (i.e. Internet)?
• Demographics and labour force: Who resides in your Operational Environment? What are
their characteristics? Are they also your customers, or could they be? Are they your
employees? If yes, are the skill sets required for your employees present?
• Economy: Is the economy growing, stable, or declining? Is the economy dependent on a
few key sectors, or diverse? How will this economic atmosphere affect your business?

Competitors
Every business has Competitors, whether they are providing the same product or service (a
direct competitor) or a different product or service that satisfies the same needs (an
indirect competitor). For example, if your business idea is to open an arcade in Timmins, you
may have no direct competitors, as there are no other arcades. However, the cinema offers
arcade-style games, as do some restaurants. Other businesses, such as bowling or mini-putt,
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may provide alternatives for your target market(s) to spend their money on recreation.
Therefore, those businesses would be your indirect Competitors.
Depending on your business idea, your Competitors may be limited to your geographic service
area, or may be worldwide. In this section, you should identify how many Competitors you
have, who they are, what their market share is, uniqueness and Competitive Advantage —
why do their customers like their product or service? It can be tempting to focus on the
negatives about your Competitors, but that is not productive in your business plan. By placing
an equal emphasis on their positives and negatives, you can learn from what they do right and
wrong.
A good way to analyze and compare your business to the Competition is to conduct a SWOT
Analysis on your key Competitors. Instructions for why and how to perform a SWOT analysis
are provided later on, in the SWOT Analysis section, located on page 26.

3.2. Target Market Profile
As part of your Market Analysis, you must identify your target market(s). This is the group of
customers towards whom a business has decided to aim its marketing efforts. While almost
anybody could be your customer, these are the people whom you are targeting. For example:
a computer repair business may accept any clients, but their target market(s) may be small
office-based organizations with under 15 computers. Essentially, target markets are those
people whom you believe will purchase more of your products/ services on a more frequent
basis than the average consumer.
As demonstrated by the example, your target market is a specific group, not a broad sweep of
the population. ‘Adults’ are not a target market, but ‘Men aged 19 to 29’ are. Commonly,
businesses that sell products or services to people define their target markets by a
combination of the following characteristics:
• Age
• Location
• Gender
• Language
• Income level
• Education level
• Marital or family status
• Occupation
• Ethnic background
• Personality
• Attitudes
• Values
• Interests/ hobbies
• Lifestyles
• Behaviours
Businesses that sell products or services to other businesses, organizations, or institutions
usually definite their target markets by a combination of these characteristics:
• Industry
• Size (No. of Employees)
• Size (Revenue)
• Business type
• Geography
• Language
• Product or Service Line
• Values
• Security
• Power
• Esteem
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The characteristics with which you define your target market(s) depend on each individual
business. When working to identify your target market(s) keep these tips in mind:
• Look at your current customer base — who are you selling to?
• Look at your competitors — who are they targeting, and how might you differentiate
to find your niche?
• Analyze your product or service — what benefits do they provide, and who would want
those benefits?
• Think about specific demographic groups — who would want your product or service?

Once you have identified a possible target market(s), take a moment to evaluate it. Ask
yourself:
• Are there enough people that fit my criteria?
• Will my target market(s) benefit from my product/service? Will they see a need for it?
• Do I understand what drives my target market(s) to make decisions?
• Can they afford my product/service?
• Can I reach them with my message? Are they easily accessible?

The challenge for a business owner is to avoid getting too specific with the target market(s)
and thus not have enough people to support your business. On the other hand, if you are too
broad you cannot target the individuals well with marketing messages. Remember that you
can identify multiple target markets, but it is recommended not to go beyond two or three.
In your business plan, you want to include a thorough description of the target market(s) you
have identified. This description should include, but is not limited to, the following
characteristics:
• Demographics
• Lifestyle
• Income (average and disposable)
• Population size and growth prospects
• Location (this is particularly important if there are foreign market complications)
• Purchase motivations (customer need being fulfilled)



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3.3. Pricing Strategy and Sales

Pricing Model
In this section, you must identify what price(s) you will be charging for your products or
services, and why. Ensure to also identify what the direct cost of producing your product or
providing your service will be (without any profit mark-up).

When deciding upon the price you will charge, you should consider a number of different
factors, such as your costs, product demand, desired profit levels, competitor prices, and the
price the market will bear. Because costs tend to be underestimated, you must calculate
them very carefully. Consider not only raw material and distribution costs, but also costs
related to the day-to-day running of the business. These may include (among others):
• Utilities
• Labour
• Marketing
• Bad debts
• Quality control expenses
• Equipment leases
• Taxes
• Loan payments
• Employee benefits

Calculating these costs properly is particularly important because it is much more difficult to
raise your prices (if you underestimate your costs) than to lower them (if you overestimate
your costs). To help you calculate your price, there are five basic rules to keep in mind:
1. All prices must cover your costs.
2. The best and most effective way of lowering your sales prices is to lower your costs.
3. Your prices must reflect the dynamics of cost, demand, and changes in the market,
and respond to your competition.
4. Prices must be established to assure sales. Do not set your prices based on your
competitor — rather, price to sell.
5. Product utility, longevity, maintenance, and end use must be judged continually, and
target prices adjusted accordingly.

Clearly, determining your price can be very complex. Seek help from an accountant if
necessary. So with that advice in mind, there are multiple methods of establishing your price.
Some common methods are listed below.
• Cost-plus pricing or mark-up pricing: this method takes the costs (fixed and variable)
per product and adds the desired profit percentage. It is used mainly by manufacturers.
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• Demand pricing: this method offers differing prices based on demand; it is often used
by companies that sell their product through a variety of sources.
• Competitive pricing: a method that undercuts the competition by a small percentage;
used when entering a market where there is already an established price and it is
difficult to differentiate one product from another.
• Value-based pricing: also called value optimized pricing, this strategy sets prices
primarily, but not exclusively, on the estimated or perceived value of the product/
service to the customer, rather than on the cost of the product or historical prices.
Where it is successfully used, it improves profitability due to the higher prices without
impacting greatly on sales volumes. However, it can be very challenging to accurately
measure estimated or perceived value.

Price Comparison
Another pricing concern that should be included in your business plan is how your prices
compare to your key competitors’ prices. This section should explain why your pricing is
competitive.
This can be done through a simple table, with a brief statement explaining the results (e.g.
“As you can see, the proposed prices are 3% higher than Business A’s, and 1% higher than
Business B’s. This price increase will be supported by the market due to the higher quality of
product…”).
As demonstrated by this example, remember that your prices do not need to be lower than
your competition; however, you must be able to rationalize why a customer would want to
purchase your product or service rather than your competitors’.

Discounts or Rebates
If you are planning to offer any discounts or rebates as part of your pricing strategy, make
sure to describe them in your business plan. State what type of discount or rebate you plan to
offer, how often it will be offered, and what the criteria/ eligibility for them are.
Common types of discounts or rebates include sales promotions, volume discounts, coupons,
product bundling, online promotion codes, customer loyalty programs, referral rewards, etc.
Discounts and rebates can be especially effective when introducing a new product to the
market, or when trying to convince your competitor’s current customers to try your product.
However, over-use of these strategies may make some customers reluctant to purchase your
product at its regular price. Remember that to offer discounts or rebates, you must have
some flexibility within your pricing model. If your margins are too low, it is very difficult to
offer these incentives.
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Payment Policy
Your Payment Policy does not need to be complicated. In this section, you simply want to
state whether customers must pay immediately for the product or service, or if you plan to
run a credit-based business (i.e. no money down for 30 days), or a combination of both
options. When describing your Payment Policy, make sure to include what Payment Policy is
most commonly used in your industry.
Remember that customer payment terms are especially important for start-up businesses, as
cash outflow can be very high in the first few years. Cash received must at least equal cash
outflow in order for the business to operate. For this reason, your business will want to
develop a Payment Policy that ensures that cash is continually coming in.
Also keep in mind that many businesses that offer credit have a certain amount of credit
which is never paid — this is called bad debt and is accounted for in cash flow statements.
Offering credit increases the amount of risk involved for the business.


Proj ected Sales Volume & Market Share
The first numbers you must project is your sales volume. This refers to the quantity of goods
or services you will sell in a given period of time. For the purposes of your business plan, it is
recommended that you project your hard and soft purchase commitments, and your predicted
sales, for your first three years of business.
Hard purchase commitments are certain future purchases; for example, if you were opening
a catering business and already had bookings for three events, these represent hard purchase
commitments.
Soft purchase commitments are uncertain but likely future purchases; for example, your
catering company is in the process of getting hired for six other events. Soft purchase
commitments do not include customers that you have never talked to, but may possibly be
interested in your product or service.
Besides hard and soft purchase commitments, your projected sales volume should also include
predicted sales. These may be estimated based on similar-sized competitors and/ or market
research surveys.
When describing your estimated sales volume, ensure to justify where you got your data from.
All the data should be presented as an organized table for easy viewing.
This section requires you to make some predictions based on hard evidence that you have
collected.
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The other numbers you must project relate to your market share. Market share is the
percentage of the market’s total sales that you will capture. Projecting your market share is a
subjective estimate based on a detailed analysis of the market; specifically, on the degree of
competition of your distribution, pricing, and promotional strategies.
You need to ask yourself — out of all of my potential customers (market potential), how
many of them will my marketing efforts influence? Who can be reached through my
distribution network? How long will it take to create awareness of my business in the market
area?
Market share estimates should be provided for multiple time periods to demonstrate plans for
growth. It is recommended that you project your market share for your first two years of
business and present it in a table. This growth should be consistent with what your Goals
state you will do.

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3.4. SWOT Analysis & Competitive Advantage
SWOT Analysis
A SWOT Analysis is very valuable in your business plan and provides a clear understanding and
analysis of your main competition. This type of analysis is used to identify the strengths,
weaknesses, opportunities, and threats associated with the business start-up.
The strengths and weaknesses are internal factors the business has control over. The
opportunities and threats identified address external factors that are beyond the business’
control.
A SWOT Analysis is commonly arranged in a grid, with simple bullet points as text. Below is an
example of a SWOT Analysis. You can also find many examples of SWOT Analyses online.
A SWOT Analysis for your
business is a valuable
positioning tool. By clearly
identifying your strengths,
you also identify things you
can market and promote. By
identifying opportunities,
you recognize areas that you
can work towards to increase
your business’ success. By
identifying your weaknesses,
you identify what you need
to work on to make your
business stronger. And
finally, by identifying your
threats, you can make plans
to avoid, mitigate, or adapt
to their impact.

Competitive Advantage
The Competitive Advantage section is a form of conclusion for the entire Market Analysis. In
this section, you should describe what advantage your business idea will have over its
competitors. Common Competitive Advantages include greater sales generation, greater
profit margins, or high customer retention. Your Competitive Advantage considers everything
you have learned through your Market Analysis and uses it to identify why your business will
be profitable.

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Section 4:
Marketing Strategy
This section describes how you plan to market your business. Note that if your business will
rely heavily on marketing you are recommended to develop a separate marketing plan. Refer
to The Business Enterprise Centre’s Guide to How to Developing Your Marketing Strategy for
help with this.
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Marketing encompasses all business activity you conduct to promote and sell your products or
services, including market research, advertising, networking, and branding. However, keep in
mind that marketing is much more than simply spending money on advertising. It involves a
significant portion of the business owner’s time and energy. Marketing is about the on-going
engagement of the target market(s), making them feel like they are part of the business, and
having the products, services, and ultimately the brand mean something to them.

4.1. Marketing to Date (if applicable)
If any other marketing has been conducted for your business, briefly describe it in this
section. If you are not sure whether some activities count as marketing or not, review the
Tactics section below. If your business is a new start-up with no marketing history, then you
do not need to include this section.

4.2. Objectives
One of the first items to outline in your marketing strategy is your marketing Objectives.
What do you want to accomplish with your marketing strategy? These Objectives help you
determine the appropriate marketing tactics to pursue.
Like your business plan Goals, these can be short, medium, and long-term. They can also
relate to start-up activities (i.e. launch a website) or day-to-day operations (host quarterly
sales promotions). These Objectives should also follow the SMART criteria described in the
Goals section on page 12.
Examples of some marketing Objectives are:
• Hire a web developer to design and launch a website by the third quarter of 2014.
• Increase walk-in business by 20% by January 2015.
• Double the number of prospective clients on our mailing list for the summer
promotion.
4.3. Branding
Your brand is your promise to your customer. It tells them what they can expect from your
products and services, and it differentiates your offering from your competitors'. It should tie
in directly with your Unique Selling Proposition, Vision, and Values.
Branding can include many different visual and audio aspects, including but not limited to:
• Logo
• Colour palette
• Slogan
• Jingle
• Font
• Mascot
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However, it also includes many intangible aspects, such as what you do to differentiate
yourself: Are you innovative? Reliable? Known for great customer service? Other intangibles
that form your brand are your Vision and Values — these are elements that you want your
business to be known for.
This section should provide a description of your brand (the tangibles and intangibles) and
how you plan to apply it. Also include whether you plan to copyright your brand.
You may choose to design your own branding, or hire a professional to help you. Whichever
way you choose to do it, remember that your branding must appeal to your target market(s).
Consider the characteristics of your target market(s): Are they professional? Bilingual?
Youthful? Determine what would be most attractive to them. Also make sure that your
branding is memorable, easy to understand, and timeless.
A few examples of strong branding are described in the box below.
The Porter Airlines Raccoon: Porter Airlines has branded their business
with Mr. Porter, a jet-setting cartoon raccoon mascot. The graphic is one
part of a larger branding identity created to evoke the carefree feeling of
retro air travel. Now, Mr. Porter is inseparable from the brand, showing
up on the company’s brochures, water bottle labels and in-flight meal
boxes. “Raccoons are intelligent, adaptable creatures that succeed in a
variety of environments and unfavorable conditions, so our mascot choice
was no accident,” said Porter founder and CEO Robert Deluce.

Siva’s Family Restaurant: no one in Timmins can think of Siva’s Family
Restaurant without picturing the smiling face of Siva himself. His
constant presence in the restaurant and the use of his image in
advertising on the restaurant website, billboards, and catering trucks
provides a consistent image of the restaurant. The restaurant’s
reputation as ‘family-friendly’ is supported through community
involvement and a friendly staff.

Rainville Health: as winners of the 2014 Nova RBC Marketing Innovation Achievement
Award, Rainville Health provides an intriguing advertising example. Their Timmins
billboard appeared to be vandalized, originally reading “Say goodbye to Painville”, but
had been spray painted to say “Say hello to Rainville”. This advertisement provoked
interest and discussion amongst residents as they worked to understand what it meant.
While this example is merely one advertisement as opposed to a branding campaign, it
demonstrates how effective advertising can raise interest and awareness about your
brand.
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Marketing Tactics
Once you have decided your Objectives you must identify what tactics will help you achieve
them.
For example, if you own a hair salon and want to increase walk-in business by 20% by January
2015, you may choose to use radio advertisements, a mail-out flyer with a coupon promotion,
or put a sandwich board outside your premise to advertise that you accept walk-ins.
There are multiple considerations to keep in mind when selecting your tactics. Ask yourself:
• Will this tactic reach my target market(s)?
• Will this catch my target market(s)’s attention?
• Will this tactic contribute towards achieving my Objective(s)?
• Can I afford to use this tactic?
• Is there a simpler or more cost-effective way to do this?
• Is this tactic consistent with my brand?
• Is this the best way to communicate this message?
For your business plan, you need to list what tactics you will use, how you will use them, and
outline why they are good ideas. For example, if you are opening a law office, perhaps one of
your tactics would be to develop your own brand. In your business plan, you would describe
how you are going to hire a graphic designer to develop your office stationary (letterheads,
envelopes, business cards), which will help clients have visual recognition of your business.
There are many different types of marketing tactics utilized. Note that small business owners
should focus on doing a few tactics very well rather than many tactics poorly. The list below
provides descriptions of some common types. For more details, see The Business Enterprise
Centre’s Guide to Developing Your Marketing Strategy.
Packaging:
Most products, and some services, require some form of packaging. This is an easy
opportunity to incorporate your brand into your product, and make your product attractive
and memorable to your customer and others who see the packaging. Packaging includes tags,
boxes, labels, shopping bags, shipping materials, receipts and invoices, staff uniforms, etc.
Web Presence:
Developing a web presence, such as a website, can help your customers connect with you.
Furthermore, your web presence is not limited to a website. Online business directories,
product and service reviews, community sites, professional associations, etc. can all
contribute to your web presence.
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Search Engine Optimization (SEO):
SEO is the process of affecting the visibility of a website or a web page in a search engine's
"natural" or un-paid search results. In general, the earlier on the search results page, and
more frequently a site appears in the search results list, the more visitors it will receive from
the search engine's users. While SEO is an unreliable marketing tactic due to the frequent
changes in search engine algorithms, it can increase traffic to your website significantly.
Social Media:
Social media is a very popular marketing tactic that is usually free and easy to use. Its
effectiveness as a tactic is strongly dependent on the natures of your business, your target
market(s), and the message you share. While social media is easy to use, it is not always easy
to use well and can be very time-consuming.
Traditional Advertising (television, radio, print):
Purchasing advertising time or space via television or radio commercials or print ads is
perhaps the most common form of advertising. While these forms of advertising reach a broad
audience, they are also costly and should be used sparingly and strategically.
Sponsorship:
Many companies choose to sponsor community events or teams. This has the dual advantage
of contributing to your community and advertising your business. Depending on what you
choose to advertise, this option can be expensive.
Flyers:
Flyers are a useful tool to market a specific sales promotion or business offering. They can be
hand-delivered, mailed out, or emailed. Each option has its challenges: producing hard copies
for hand delivery and mail outs, and paying for delivery, can be expensive. Emailed flyers
require you to possess an email directory which must adhere to the Anti-Spam regulations.
Trade Shows:
Attending trade shows as a vendor can help you reach a very broad audience. They can also
be expensive to attend. The usefulness of trade shows is highly dependent on your product or
service.
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Events:
Hosting events can be a fun and memorable way to promote your business. A grand opening
party is a common example of such an event. Other examples: A new restaurant may host a
Mother’s Day brunch; an accounting office may host a financial literary workshop for new
business owners; a landscaping company may host a tree planting party at the beginning of
the summer; a clothing store may host a fashion show. Events can also be planned
collaboratively with complementary businesses to share the burden of cost and effort.

Note that many businesses rely heavily on word-of-mouth to promote their business. Word-of-
mouth can be a great promoter as it is free and easy. Of course, if customers are unsatisfied
with your product or service, word-of-mouth can quickly turn against you. It is important to
remember that word-of-mouth is not a marketing tactic, as it is not something you do, but
rather something that happens whether you like it or not.
If your tactics involve producing marketing materials (websites, brochures, poster
advertisements, flyers, billboards, etc.), ensure to describe what they are, what message
they will convey, who is designing them, and how they will be distributed/ communicated/
accessed by your target market(s).

4.4. Metrics
Metrics must be associated with your marketing Objectives and tactics. Metrics measure the
performance of an effort. In this section describe how you will know if you have achieved
your Objectives and if your tactics were effective. Before employing any marketing tactic,
you should decide what would have to happen for you to consider it a success. This decision
must be made with consideration for the Objective the tactic means to achieve.
So, if your Objective was to grow your clientele base by 15 new clients in 2015, your
associated metric would be “Number of new clients in 2015”, with a target goal of 15. If the
main tactic you used to pursue this Objective was a wine-and-cheese networking function,
then the metrics associated with the function may be “Number of Attendees”, “Press
Coverage of the Event”, and “Event Expenses”.
Remember that with each metric you should identify a target. You may be aiming for 50
event attendees, one mention of the event in the newspaper, and be striving to stay within a
pre-determined event budget.
These metrics demonstrate that you have thoroughly thought through your marketing strategy
and what you plan to achieve with it.
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Section 5:
Operations Management
The purpose of this section is to discuss how your business will operate on a day-to-day basis,
and what you are doing to ensure it will continue operating.
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5.1. Operations

Supply Chain
In this section, you describe all the steps that are required to deliver your product or service
to your target market(s).
Generally, the first step of this process is your Supply Chain. A Supply Chain is the network of
companies involved in producing, handling, and/ or distributing a specific product. More
specifically, the Supply Chain encompasses the steps it takes to get a good or service from the
supplier to the consumer. Managing your Supply Chain can be a crucial way to keep your costs
low.
Your business plan should include the following:
• List the major suppliers of your product/ service, associated costs, and identify which
you are considering. Their location is also important due to shipping costs and delivery
time.
• Briefly describe how long the suppliers have been in business, what their shipment
turnaround time is, and their return policy for damaged items, to attest to whether they
are efficient and reliable. Also describe their credit terms.
• Letters of intent show commitment on the part of suppliers to provide your business
with raw materials or products. These letters should be mentioned and included in the
Appendix — Supporting Documents section — see page 46.
• When evaluating suppliers you should also identify an alternate supplier, just in case.
Having too few suppliers leaves your business vulnerable to delivery delays, stops in
production, and loss of productivity.
Supply Chains vary depending on your business. A farmer opening a market stall may have a
very short Supply Chain for the majority of his/ her products. A clothing store may have a
very long Supply Chain, involving multiple intermediaries between the store and the original
clothing producers. Either way, describing where you get your product from demonstrates
that you are knowledgeable about your business.
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It may be useful to draw a diagram of your Supply Chain to support your description. The
diagram below provides a simplified example of the Apple Inc. Supply Chain.

Goods Production or Service Delivery
In this section, you should describe the production and delivery process. This may be a simple
description or very complex, depending on your business model.

Distribution Channels
So far you have described how your product or service gets to you, the business owner, and
what you do with it. Your Distribution Channel(s) describe how your product or service gets
to the end user. A Distribution Channel can include wholesalers, retailers, and the internet,
depending on your business model. In the diagram above, the Distribution Channels are
demonstrated by the “Distribution” section.
For your business plan, describe the following:
• How your product or service will get to your customer — this may involve retail outlets,
direct sales (mobile sales force or service providers), facilities, brokers (local, custom,
and export), catalogue marketing, transport companies, manufacturing agents, or any
combination of these.
• Discuss any advantages and disadvantages associated with your business location. These
may include labour availability, proximity to customers, suppliers, Distribution
Channels, utilities, zoning, etc. Also describe whether the land will be leased or owned;
if leased, include the terms of the lease in the appendix.
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• If your business involves shipping products and covers some or all shipping costs, you
must factor in the expense to your pricing strategy. It is suggested that you determine
what the standard practice is in your industry and make your decision from there.

Importing and Exporting
If your Supply Chain or Distribution Channels involve international imports and/ or exports,
this activity should be described in your business plan. You must ensure to register for an
import-export program account with the Canadian government, which will facilitate timely
customs processing. To learn more about importing and exporting, see The Business
Enterprise Centre’s Guide to Importing and Exporting.

Operating Facilities
All businesses have facilities from which they are operated. For example, a hair salon would
have premises with a number of styling chairs, a deli would have a store location, or a
landscaping company many have an office and equipment garage. In this section, describe
your facilities — size, layout, features, etc. Some businesses may not require facilities; for
example, a physiotherapist who only does house calls; in which case this section would
describe the premises from which the physiotherapist operates, such as a home-based office.

Capital Requirements
The purpose of this section is to provide a brief description of the investments you need to
start your business. These goods may fall into the categories of capital goods, inventory, raw
materials, building construction/acquisition/renovation, etc.
Capital goods are machines and tools used in the production of other goods (consumer goods)
or services. Inventory is the merchandise or stock a company owns that are destined to be
sold to the end-user. Raw materials are the business inputs used in the production process to
produce the goods.
At Joe’s Diner, capital goods may include tables and chairs, a cash register, industrial kitchen
appliances, the catering van, the office computer, accounting software, dishware, flatware,
glassware, etc. Joe’s Diner’s raw materials inventory would include all food stocks that need
to be processed (cooked, sliced, etc.) while his inventory would be all food items ready to be
sold to customers, and other consumables like paper napkins and condiments.
In the business plan, you should list all capital goods, inventory, raw materials, building
construction/acquisition/renovation, etc required to start your business. Identify what items
you already own and what items you must acquire.

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Personnel
In this section, describe your staffing requirements.
If you are the only employee that your business will have, then state that clearly here. If you
have already hired other staff (besides the key management members described in the
Business Profile section, page 8), provide a brief description of their position(s).
If you plan to hire staff, describe how many staff people you plan to hire, what their role(s)
will be, what qualifications are required for those roles, and how they will be compensated.
Also include other details pertaining to your personnel, such as employment characteristics
(seasonal, part-time, temporary, contract), whether it will be a unionized work environment,
etc.

Capacity
In this section, describe your business’ capacity. This refers to the maximum amount of
products or services you can produce based on the number of sales people or service
providers on staff, the size of your premises, the amount of equipment you own, the capacity
of your equipment, seasonal influences, etc. Capacity is very important later on, when
projecting your revenue.

Licenses & Permits
All businesses require some form of licensing or permitting, based on municipal, provincial,
and/ or federal regulations. In this section, you should list what licenses and permits you
require, and whether you have already acquired them or are in the process of doing so.
For more details on how to identify the licenses and permits you need, see The Business
Enterprise Centre’s Guide to Starting Up a Business.






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Insurance
All businesses require some form of insurance, and most require multiple forms. In this
section, list your business’ insurance requirements, whether you already possess the
insurance or are in the process of getting it, and the main details (e.g. liability coverage,
deductibles). Insurance provides a financial buffer against hardship by transferring the cost of
a potential loss to the insurance company, in exchange for a fee.
Some types of insurance that business owners frequently need include:
• General liability insurance
• Property insurance
• Business interruption insurance
• Commercial auto insurance
• Worker’s compensation
• Professional liability insurance
• Directors and officers insurance
• Data break policy
• Renter’s insurance
Depending on your insurer, some of these insurance policies may be bundled in a business
owner’s policy.
5.2. Succession Plan

All businesses benefit from the development of a Succession Plan. Succession planning
involves identifying, developing, retaining, and replacing talent for key positions, including
yourself. Basically, what will you do if people in key positions leave? If you are operating a
partnership, what will happen if your partner decides to leave? When the time comes, how
will you exit your business?
Early planning will give you the opportunity to consider all of your options, including
strategies that may take time to implement. If you plan on passing your business on to your
children once you are ready to retire, you'll need sufficient time to train them and integrate
them into your business.
The most common options are:
• Transfer to a family member
• Sell to a partner, management team, or employees
• Sell to a third party
• Close the business: dismantle and sell-off assets
Business partners are strongly advised to sign a partnership agreement.

In your business plan, provide a brief summary of your Succession Plan — describe what you
are going to do, with whom, and when.
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Section 6:
Financial Projections
This section provides the financial evidence that your business idea is feasible and profitable.
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Financial projections demonstrate that you have a clear understanding of the profitability of
the proposed new business or expansion.
As you develop your financial projections, ensure that they are accurate and based on facts.
Unrealistic or unfounded financial claims do not help make your business appear more viable
or strengthen your proposal to potential lenders — in fact this can jeopardize your chances of
receiving financing. Unrealistic financial projections also set-up false expectations for the
business development and often lead to cash flow problems and other issues.
Please note that while this guide provides a description of what your financial statements
should include, you are advised to work with a financial advisor when developing financial
projections.

6.1. Financing Needs
The final financial section required in your business plan is a description of your financial
needs. Most entrepreneurs write business plans to help them secure funding, financing and
other forms of investment. In this section, you must outline your financial needs for your
start-up or expansion. Include the following details:
• Immediate and long-term requirements: how much money do you need up front,
and in the long-term?
• Intended use: how will you be using the money? Is it earmarked for capital or
operating expenses?
• Source(s): where have you applied for financing/funding from? How much from
each source and for what expenses?
• Terms: what are the terms of the financing?
• Timing: When do you anticipate financing/funding to be in place?
• Contingency plan in case you underestimated your need and/or are turned down
for financing and funding from one or more sources.

6.2. Past Financial Statements

If your business is already running, it is advisable to include at least the past three years
financial statements in your business plan to illustrate your past performance. Make sure to
provide a few summary statements to tell readers what the financial statements show (i.e.
amount of growth, profit, loss; sales trends; etc.).
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6.3. Pro Forma Cash Flow Statement

A cash flow statement reports the outflow and inflow of cash during a specified time period.
This statement demonstrates your cash flow strength to investors. A cash flow statement is
the most common financial statement required for a business start-up seeking financing or
funding.
The cash flow statement is particularly important for companies who use accrual accounting.
The income statements they release each quarter may not necessarily reflect changes in their
cash positions.
For example, if a company lands a major contract, this contract would be recognized as
revenue (and therefore income), but the company may not yet actually receive the cash from
the contract until a later date. While the company may be earning a profit in the eyes of
accountants (and paying income taxes on it), the company may, during the quarter, actually
end up with less cash than when it started the quarter.
For your business plan, it is suggested that you provide cash flow projections for the next
three years. Ensure that any start-up costs are included in your cash flows. For help
developing these projections see The Business Enterprise Centre’s Guide to Projecting Your
Cash Flow and The Business Enterprise Centre’s Cash Flow Template.
Cash flow is determined by looking at three components by which cash enters and leaves a
company: operating, investing, and financing activities.

• Operating activities: this reflects how much cash is generated from a company's
products or services by measuring the cash inflows and outflows from business
operations. Generally, changes made in cash, accounts receivable, depreciation,
payroll, lease payments, inventory and accounts payable are reflected in cash from
operations.
• Investing activities: Changes in equipment, assets or investments relate to cash from
investing. Usually cash changes from investing are a "cash out" item, because cash is
used to buy new equipment, buildings or short-term assets such as marketable
securities. However, when a company divests of an asset, the transaction is considered
"cash in" for calculating cash from investing.
• Financing activities: Changes in debt, loans or dividends are accounted for in cash
from financing. Changes in cash from financing are "cash in" when capital is raised,
and they're "cash out" when dividends are paid.
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An example of a cash flow statement is provided below.


6.4. Pro Forma Income Statement
An income statement is a financial statement that measures a company's financial
performance over a specific accounting period, typically over a fiscal quarter or year. Income
statements help investors and creditors determine the past financial performance of the
enterprise, predict future performance, and assess the capability of generating future cash
flows through report of the income and expenses.
Cash Flow Forecast - Year 1
Month Sept Oct Nov Dec Jan Feb Mar Apr May June July Aug Total
Assumptions - sales per month
Product 1 - 25 35 35 45 50 45 50 55 70 65 75 550
Product 2 - - - - - - - - - - - - 0
Product 3 - - - - - - - - - - - - 0
Product 4 - - - - - - - - - - - - 0
Cash Inflow Avg $
Product 1 $100 $0 $2,500 $3,500 $3,500 $4,500 $5,000 $4,500 $5,000 $5,500 $7,000 $6,500 $7,500 $55,000
Product 2 $50 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Product 3 $25 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Product 4 $10 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Tot al Cash Sales $0 $2,500 $3,500 $3,500 $4,500 $5,000 $4,500 $5,000 $5,500 $7,000 $6,500 $7,500 $55,000
Owner's Investment $4,000 $4,000
CYBF Loan $15,000 $15,000
Other Loan BDC $15,000 $15,000
Tot al Ot her Cash Inflow $34,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $34,000
(A) TOTAL CASH INFLOW $34,000 $2,500 $3,500 $3,500 $4,500 $5,000 $4,500 $5,000 $5,500 $7,000 $6,500 $7,500 $89,000
Cash Out flow
Inventory
Product 1 $10,000 $8,000 $18,000
Product 2 $2,000 $2,000
Product 3 $1,000 $1,000
Product 4 $1,000 $1,000
(B) INVENTORY COSTS $0 $0 $0 $0 $0 $0 $10,000 $0 $0 $0 $8,000 $4,000 $22,000
General Expenses
Owner's draw/salary $0 $0 $0 $0 $1,000 $1,000 $1,000 $1,500 $1,500 $1,500 $1,500 $1,500 $10,500
Employee/contractor $0
Legal $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $200 $200
Accounting $0 $0 $0 $0 $0 $0 $400 $0 $0 $400
Advertising and promotion $300 $300 $400 $11,100
Rent $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $12,000
Property taxes $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Utilities $120 $120 $120 $120 $120 $120 $120 $120 $120 $120 $120 $120 $1,440
Insurance $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $1,200
Bank Charges $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $360
Office supplies & postage $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $360
Telephone & Internet $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $1,200
Alarm System $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $600
Subscriptions & Memberships $0 $0 $500 $0 $0 $0 $0 $0 $0 $500 $1,000
Training $0 $0 $0 $0 $0 $0 $500 $0 $0 $500 $1,000
(C) TOTAL GENERAL EXPENSES $1,730 $1,430 $1,930 $1,430 $2,730 $2,430 $2,430 $2,930 $4,230 $2,930 $3,130 $3,930 $41,360
Other disbursements $0
Start-up Costs $29,500 $29,500
Income Tax $0
CYBF Loan - Interest Payment +Admin Fee $0
CYBF Loan - Principal Payment $0
BDC - Interest Payment $0
BDC - Principal Payment $0
(D) TOTAL OTHER DISBURSEMENTS $29,500 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $29,500
(E) TOTAL CASH OUTFLOW (B+C+D) $31,230 $1,430 $1,930 $1,430 $2,730 $2,430 $12,430 $2,930 $4,230 $2,930 $11,130 $7,930 $82,760
(F) NET CASHFLOW (A-E) $2,770 $1,070 $1,570 $2,070 $1,770 $2,570 ($7,930) $2,070 $1,270 $4,070 ($4,630) ($430) $6,240
(G) CASH FROM PREVIOUS PERIOD $0 $2,770 $3,840 $5,410 $7,480 $9,250 $11,820 $3,890 $5,960 $7,230 $11,300 $6,670 $0
(J) CUMULATIVE CASHFLOW (F+G) $2,770 $3,840 $5,410 $7,480 $9,250 $11,820 $3,890 $5,960 $7,230 $11,300 $6,670 $6,240 $6,240
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For the purposes of your business plan, it is suggested that you project your income
statements for the next three years. Your income statement may look something like this:
Projected Income Statement
Year 1 Year 2 Year 3
Revenues
Sales
Product 1 55,000 77,000 83,500
Product 2 0 23,500 27,000
Product 3 0 1,550 2,700
Product 4 0 2,550 4,000
(A) Total Sales 55,000 104,600 111,200
Inventory
Product 1 18,000 37,000 39,750
Product 2 2,000 9,000 12,000
Product 3 1,000 1,000 1,350
Product 4 1,000 1,000 14,800
(F) Total Cost of Inventory 22,000 48,000 67,900
(G) GROSS MARGIN (A-F) $33,000 $56,600 $49,300
Expenses
General Expenses
Owner's draw/salary 10,500 22,500 24,000
Employee/contractor 0 1,000 1,200
Legal 200 200 200
Accounting 400 600 600
Advertising and promotion 11,100 500 750
Rent 12,000 12,000 12,000
Property taxes 0 0 0
Utilities 1,440 1,440 1,440
Insurance 1,200 1,200 1,200
Bank Charges 360 360 360
Office supplies & postage 360 600 650
Telephone & Internet 1,200 1,800 1,800
Alarm System 600 960 960
Subscriptions & Memberships 1,000 1,500 1,500
Training 1,000 1,000 1,000
(I) TOTAL GENERAL EXPENSES $41,360 $45,660 $47,660
Other disbursements
Start-up Costs 29,500 0 0
CYBF Loan - Interest Payment +Admin Fee 0 0 0
BDC - Interest Payment 0 0 0
(J) TOTAL OTHER EXPENSES $29,500 $0 0
(K) TOTAL EXPENSES $70,860 $45,660 $47,660

NET PROFIT BEFORE TAX (G-K) ($37,860) $10,940 $1,640
Income Tax (estimated at 25%) $0 ($2,735) ($410)
NET PROFIT AFTER TAX ($37,860) $8,205 $1,230



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Ensure to include your revenue and other sources of income, Cost of Goods Sold (COGS),
capital expenditures, and operating expenses, described in the table below. Ensure that
your income statement projections include all dollars entering and leaving your business.
Revenue is the total amount of money received by your company for goods sold or services
provided during a certain time period. In the same section of your income statement, you
should describe other forms of income your company may receive, such as government
funding, grants, loans, etc. which are not exchanged for goods/ services.
Cost of Goods Sold (COGS) is the costs that go into creating the products that a company
sells; therefore, the only costs included in the measure are those that are directly tied to the
production of the products. For example, the COGS for an automaker would include the
material costs for the parts that go into making the car along with the labor costs used to put
the car together. The cost of sending the cars to dealerships and the cost of the labor used to
sell the car would be excluded.
Capital expenditures (CAPEX) are costs associated with acquiring or upgrading physical
assets, usually associated with equipment and property. If an expenditure is useful for more
than a year, chances are that it is a capital expenditure.
Operating expenditures (OPEX) are the selling, general and administrative expenses incurred
by a business. Basically, how much do you pay to keep your business running on a day-to-day
basis? These costs vary depending on the business. Common operating expenditures include:
• Accounting expenses
• License fees
• Maintenance and repairs
• Advertising
• Office expenses
• Attorney and legal fees
• Utilities, such as telephone
• Rent
• Insurance
• Property management
• Property taxes
• Travel and vehicle expenses
• Leasing commissions
• Salary and wages


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6.5. Pro Forma Balance Sheet

While an income statement shows how a business is doing over a period of time, a balance
sheet provides a snapshot of the business’ financial condition at a given point in time. A
balance sheet represents three aspects of your business: assets, liabilities, and owner’s
equity. It is called a balance sheet because assets minus liabilities (net assets) must equal the
owner’s equity (they must balance).
It is possible that you may be asked to provide a pro forma (projected) balance sheet when
applying for a loan. If you are, it is suggested that you work with a financial advisor or
accountant as it balance sheets can be very complex. A sample balance sheet is illustrated
below.
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Section 7:
Appendix – Supporting Documents
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The appendices of your business plan are where you would include supporting documents and
evidence. These may include:
• Management resume(s)
• Copies of legal documents: leases, contracts, agreements, deeds, insurance
policies/quotes, business licenses, patent information, etc.
• Letters of intent or contract from suppliers or customers
• Customer/ target market(s) study results
• Product mockups/ pictures
• Promotional material samples
• Store layouts
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Section 8:
Glossary
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Accounts Receivable: a legally enforceable claim for payment from a business to its
customer/clients for goods supplied and/or services rendered in execution of the customer's
order.
Accounts Payable: money owed by a business to its suppliers shown as a liability on a
company's balance sheet.
Accrual Accounting: an accounting method that records revenues and expenses when they
are incurred, regardless of when cash is exchanged.
Advertising: the act or practice of calling public attention to one's product, service.
Amortization: the spreading of payments for loans or intangible assets over multiple periods.
Assets: the resources that a business uses to operate its business such as cash, inventories,
land and buildings, and equipment. Essentially, assets are any items of value owned or
controlled by the business that contributes towards generating revenue. Assets are
categorized as either current or non-current assets.
Balance Sheet: a financial statement which demonstrates a business’ state at a given point in
time and provides a snapshot of the business’ financial condition.
Barriers to Market Entry: obstacles that make it difficult to enter a given market.
Benefits: various types of non-wage compensation, including housing, group insurance
(health, dental, life etc.), disability income protection, retirement benefits, daycare, sick
leave, vacation, social security, education/ training funding, etc.
Branding: the process involved in creating a unique name and image for a product in the
consumers' mind.
Capacity: the maximum amount of products or services you can offer based on your current
business plan.
Capital Goods: machines and tools used in the production of other goods (consumer goods).
Capital Expenditures (CAPEX): costs associated with creating future benefits, usually
acquiring or upgrading physical assets.
Cash Flow Statement: reports the cash generated and used during a specified time period.
Competitive Advantage: An advantage that a firm has over its competitors, allowing it to
generate greater sales or margins and/or retain more customers than its competition.
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Competitive Pricing: undercuts the competition by a small percentage; used when entering a
market where there is already an established price and it is difficult to differentiate one
product from another.
Co-operative: an organization owned by the members who use its services or are employed
there. Co-ops and credit unions provide consumers with a distinct values-based and
community-owned and controlled alternative. Co-operatives are democratically controlled
and regulated by special provincial and federal legislation.
Corporation: a form of business organization which is chartered by a state and given many
legal rights as an entity separate from its owners. A corporation is characterized by the
limited liability of its owners and company ownership via shares.
Cost-Plus Pricing: takes the costs (fixed and variable) per product and adds the desired profit
percentage. It is used mainly by manufacturers.
Cost of Goods Sold (COGS): the costs that go into creating the products that a company sells;
therefore, the only costs included in the measure are those that are directly tied to the
production of the products.
Demand Pricing: offers differing prices based on demand; it is often used by companies that
sell their product through a variety of sources.
Depreciation: the allocation of an asset’s costs among the periods that an asset is expected
to be used; or, the decline in value of an asset over time.
Direct Competitor: a company that produces a virtually identical good or service that is
offered for sale within the same market as those produced by one or more other producers.
Distribution Channel: The chain of businesses or intermediaries through which a good or
service passes until it reaches the end consumer. A distribution channel can include
wholesalers, retailers, distributors, and the internet. Channels are broken into direct and
indirect forms, with a "direct" channel allowing the consumer to buy the good from the
manufacturer and an "indirect" channel allowing the consumer to buy the good from a
wholesaler. Direct channels are considered "shorter" than "indirect" ones.
General Partnership: an agreement between two or more people who equally share
responsibility and liability. This is simple and inexpensive to create and operate. The partners
are personally liable for any business debts.
Goals: identify what you want to accomplish with your business, and how you will measure
your success.
Hard Purchase Commitments: certain future purchases; for example, if you were opening a
catering business and already had bookings for three events, these represent hard purchase
commitments.
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Incentive Bonus: a monetary payment awarded upon meeting or exceeding a pre-determined
goal.
Income: all monies received, including but not limited to revenue, government funding,
grants, loans, interests, etc.
Indirect Competitor: a competitor who supplies a different type of product or service that
satisfies the same needs.
Industry: the component of the economy to which your business belongs. It is commonly
categorized by sector (primary, secondary, etc.) or by activity (retail, service, manufacturing,
etc.).
Inventory: the merchandise or stock a company owns that are destined to be sold to the end-
user.
Joint Venture: A business activity shared by two or more business entities. The joint
venture's activities must be finite in terms of either time or scope.
Legal Form: the definition of a business entity according to the legal system, in order to
shape and administer the commercial law and regulations governing the business entity.
Liable: financially and legally responsible.
Liabilities: the financial obligations or debts of the business and include claims that creditors
have on the business’s resources such as accounts payable, bank overdrafts, provision for
employees’ annual leave and long service leave, tax liabilities, and loans payable. Essentially,
liabilities are amounts owed by the business to external parties. Liabilities are categorized as
either current or non-current liabilities.
Limited Partnership: a form of partnership similar to a general partnership, except that in
addition to one or more general partners, there are one or more limited partners. It is a
partnership in which only one partner is required to be a general partner. Limited partners
are usually investors. A limited partnership limits both the liability and the participation of
the investor.
Marketing: the action or business of promoting and selling products or services, including
market research and advertising.
Market Potential: the estimated maximum total sales revenue of all suppliers of a product in
a market during a certain period.
Market Share: the percentage of a total market (either units or revenue) that goes to an
individual firm.
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Mark-Up Pricing: takes the costs (fixed and variable) per product and adds the desired profit
percentage. It is used mainly by manufacturers.
Metrics: measure the performance of an effort.
Mission Statement: a single sentence that defines the purpose of your company and the
effect you intend to have on the world around you. Your Mission Statement and your Vision
Statement should be consistent.
Operating Expenditures (OPEX): the selling and general and administrative expenses
incurred by a business on a day-to-day basis (does not include capital expenses).
Owner’s Equity: the residual interest in the assets of a business after liabilities are deducted.
It is the net worth of a business and equals the difference between assets and liabilities.
Equity represents the amount belonging to the owner once all financial obligations have been
met.
Product or Service Segments: a related off-shoot of the main product or service — for
example, a menswear retail store may also offer hats and belts.
Profit Sharing: a form of incentive plan or benefit that provides direct or indirect payments
to employees based upon the company's profitability in addition to employees' regular salary.
Revenue: the total amount of money received by your company for goods sold or services
provided during a certain time period. Note that all revenue is income, but not all income is
revenue.
Salary: a periodic, formally agreed upon monetary payment.
Sales Volume: the quantity of goods or services you will sell in a given period of time.
Search Engine Optimization (SEO): the process of affecting the visibility of a website or a
web page in a search engine's "natural" or un-paid search results. In general, the earlier on
the search results page, and more frequently a site appears in the search results list, the
more visitors it will receive from the search engine's users.
Soft Purchase Commitments: uncertain but likely future purchases; for example, your
catering company is in the process of getting hired for six other events. Soft purchase
commitments do not include customers that you have never talked to, but may possibly be
interested in your product or service.
Sole Proprietorship: A business owned and operated by a single individual, with no formal
business structure is established and no legal distinction between the owner and the business.
This is simple and inexpensive to create and operate, with profits and losses reported on the
owner’s personal tax return. The owner is personally liable for any business debts.
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Succession Planning: identifying, developing, retaining, and replacing talent for key
positions.
Supply Chain: the network of companies involved in producing, handling, and/ or distributing
a specific product. More specifically, the Supply Chain encompasses the steps it takes to get a
good or service from the supplier to the consumer.
SWOT Analysis: a structured planning method used to evaluate the strengths, weaknesses,
opportunities, and threats involved in a project or in a business venture.
Target Market: the group of customers to whom you have decided to aim your products/
services and marketing efforts. Note that this is a specific demographic group (e.g. men aged
19 to 29), not a broad sweep of the population (e.g. adults aged 18 to 65).
Unique Selling Proposition (USP): a one or two sentence sales pitch that describes how your
product or service is different from and better than your competitors.

Value-Based Pricing: (also called value optimized pricing) pricing strategy that sets prices
primarily, but not exclusively, on the estimated or perceived value of the product/ service to
the customer, rather than on the cost of the product or historical prices. Where it is
successfully used, it improves profitability due to the higher prices without impacting greatly
on sales volumes. However, it can be very challenging to accurately measure estimated or
perceived value.
Values: an element of your business strategy that identifies your company’s principles and
guide every business decision you make.
Vision Statement: a single sentence that demonstrates the impact you would like your
company to have in the long-term. It should be consistent with your core Values.
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Section 9: Acronym List
CAPEX: Capital Expenditure
OPEX: Operating Expenditure
SEO: Search Engine Optimization
SWOT: Strengths, Weaknesses, Opportunities, Threats
USP: Unique Selling Proposition












Section 10: Resources
For more information regarding developing your business plan and general information on
business planning and financing information, check out the following sites:
• Canada Business Ontario: http://www.cbo-eco.ca/en/
• Futurpreneur Canada (formerly Canadian Youth Business Foundation):
http://www.futurpreneur.ca/
• Northern Ontario Heritage Fund Corporation: www.nohfc.ca
• Business Development Bank of Canada: http://www.bdc.ca/EN/Pages/home.aspx
• The Venture Centre: http://www.venturecentre.on.ca/
• Bank websites: banks offer a variety of resources and tools for small business owners


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