February 28, 2013

How to Write a Business Plan

How to Write a Business Plan

U.S. Small Business Administration                       MP-32

                    Managing and Planning Series


Copyright 1993, Linda Pinson and Jerry Jinnett.  All rights
reserved. No part may be reproduced, transmitted or transcribed
without the permission of the authors.  SBA retains an
irrevocable, worldwide, nonexclusive, royalty-free, unlimited
license to use this copyrighted material.  While we consider the
contents of this publication to be of general merit, its
sponsorship by the U.S. Small Business Administration does not
necessarily constitute an endorsement of the views and opinions
of the authors or the products and services of the companies with
which they are affiliated.

All of SBA's programs and services are extended to the public on
a nondiscriminatory basis.

                         TABLE OF CONTENTS




    Legal Structure     2
    Description of the Business   2
    Products or Services     3
    Location  3
    Management     3
    Personnel 3
    Methods of Record Keeping     3
    Insurance 4
    Security  4
    Summary   5

    Target Market  5
    Competition    5
    Methods of Distribution  5
    Advertising    7
    Pricing   7
    Product Design 7
    Timing of Market Entry   7
    Location  8
    Industry Trends     8

    Summary of Financial Needs    8
    Sources and Uses of Funds Statement     9
    Cash Flow Statement (Budget)  9
    Three-year Income Projection  10
    Break-even Analysis Graph     15
    Actual Performance Statements 16
    Balance Sheet  16
    Summary   21

    Personal Resumes    22
    Personal Financial Statement  22
    Credit Reports 22
    Copies of Leases    22
    Letters of Reference     22
    Contracts 22
    Legal Documents     23
    Miscellaneous Documents  23


    Making Revisions    23
    Implementing Changes     23
    Anticipating Problems    24





There are two main purposes for writing a business plan. The
first, and most important, is to serve as a guide during the life
of your business. It is the blueprint of your business and will
serve to keep you on the right track. To be of value, your plan
must be kept current. If you spend the time to plan ahead, many
pitfalls will be avoided and needless frustrations will be
eliminated. Second, the business plan is a requirement if you are
planning to seek loan funds. It will provide potential lenders
with detailed information on all aspects of the company's past
and current operations and provide future projections.

The text of a business plan must be concise and yet must contain
as much information as possible. This sounds like a
contradiction, but you can solve this dilemma by using the Key
Word approach. Write the following key words on a card and keep
it in front of you while writing:

 Who     What     Where     When     Why     How     How Much

Answer all of the questions asked by the key words in one
paragraph at the beginning of each section of the business plan.
Then expand on that statement by telling more about each item in
the text that follows.
There is no set length to a business plan. The average length
seems to be 30 to 40 pages, including the supporting documents
section. Break the plan down into sections. Set up blocks of time
for work with target dates for completion. You may find it
effective to spend two evenings per week at the library where the
reference materials needed will be close at hand. It takes
discipline, time and privacy to write an effective business plan.

You will save time by compiling your list of supporting documents
while writing the text. For example, while writing about the
legal structure of your business, you will realize the need to
include a copy of your partnership agreement. Write partnership
agreement on your list of supporting documents. When compiling
that section of your plan, you will already have a list of
necessary documents. As you go along, request any information
that you do not have, such as credit reports.

With the previous considerations in mind, you are ready to begin
formulating your plan. Read through this entire publication to
get an overall view of the business planning process.


The first page of your business plan will be the cover sheet. It
serves as the title page of your plan. It should contain the
following information:

    Name of the company
    Company address
    Company phone number (include area code)
    Logo (if you have one)
    Names, titles, addresses, phone numbers (include area code)
       of owners
    Month and year in which the plan is issued
    Name of preparer

 The following example will serve as a guide.

                          ABC CORPORATION
                        372 East Main Street
                          Burke, BY 10071
                          (207) 526-4319

             John Smith, President     (207) 814-0221
                           724 South Street
                        Jamestown, NY 10081

          Mary Blake, Vice President     (207) 764-1213
                           86 West Avenue
                           Burke, NY 10071

           James Lysander, Secretary     (207)842-1648
                         423 Potrero Avenue
                          Jessup, NY 10602

           Tandi Higgins, Treasurer     (207) 816-0201
                          321 Nason Street
                           Adams, NY 10604

                     Plan prepared September 1992
                         by Corporate Officers


The statement of purpose is also called the mission statement or
executive summary. If your lender were to read only this
information, he or she would know the name and nature of your
business, its legal structure, the amount and purpose of your
loan request and your plan for repayment. Use the key word
approach mentioned earlier. Be concise and clear. The statement
of purpose is contained on one page. Although it is positioned
after the cover sheet, it is most effectively written after the
plan has been completed. At that time, all the information and
financial data needed are available.

If you are writing your plan for a lender, be specific about the
use of funds. Support the amount requested with information such
as purchase orders, estimates from suppliers, rate sheets and
marketing results. Include this information in the supporting
documents section. Address the question of loan repayment. You
want to show the lender your company's ability to meet payments
of interest as well as principal. Some investors like to see two
ways out, i.e., two different sources of repayment. When you have
answered the key word questions, you are ready to present that
information in one or two concise paragraphs. A sample statement
of purpose follows.

                     STATEMENT OF PURPOSE

          ABC CORPORATION, an S-Corporation established in 1985,
     is a tool and die company that manufactures specialized
     parts for the aerospace industry and is located at 372 East
     Main Street, Burke, N.Y.  The company is seeking growth
     capital in the amount of $50,000 for the purpose of
     purchasing new and more modern equipment and for training
     existing personnel in the use of that new equipment.

          Funding is needed in time for the equipment to be
     delivered and in place by 11 January 1993. There is a two-
     month period between order placement and delivery date.

          The modernized equipment will result in a 35 percent
     increase in production and a 25 percent decrease in the
     unit cost. Repayment of the loan and interest can begin
     promptly within 30 days of receipt and can be further
     secured by real estate, which is owned by the company
     and which has a 1990 assessed valuation of $185,000.


The first major section of your plan covers the details of your
business. Begin this section with a one-page summary addressing
the key elements of your business. The following text will expand
on each area presented in the summary. Use the key word system to
help you write concisely. Address all of the topics as they
relate to your business in an order that seems logical to you.
Include information about your industry in general, and your
business in particular. Be prepared to back up statements and
justify projections with data in the supporting documents

Legal Structure

State the reasons for your choice of legal structure. If you are
a sole proprietor, you may include a copy of your business
license. If you have formed a partnership, include a copy of your
partnership agreement in the supporting documents section. Your
agreement should include provisions for partners to exit and for
the dissolution of the company. It must spell out the
distribution of the profits and the financial responsibility for
any losses. Explain the reasoning behind the terms of the
agreement. If you have formed a corporation, explain why this
legal form was chosen and how the company will operate within the
corporate structure, and include a copy of the charter and
articles in the supporting document section.

If you plan to change your legal structure in the future, make
projections regarding why you would change, when the change would
take place, who would be involved and how the change would
benefit the company.

Description of the Business

This is the section of the plan in which you go into greater
detail about your business. Answer the key word questions
regarding the business's history and present status, and your
future projections for research and development. Outline your
current business assets and report your inventory in terms of
size, value, rate of turnover and marketability. Include industry
trends. Stress the uniqueness of your product or service and
state how you can benefit the customer. Project a sense of what
you expect to accomplish three to five years into the future.

Products or Services

Give a detailed description of your product from raw materials to
finished item. What raw materials are used, how much do they
cost, who are your suppliers, where are they located and why did
you choose them? Include cost breakdowns and rate sheets to back
up your statements. Although you may order from one main
supplier, include information on alternate suppliers. Address how
you could handle a sudden increase of orders or a loss of a major

You may hear a lender refer to the worst case scenario. This
means that the lender wants you to be able to anticipate and
solve potential problems. It is also to your advantage to think
in terms of alternatives and to prepare for the unexpected so
that your business can continue to run smoothly. Some businesses
fail because they become too successful too soon. Therefore, it
is also good to plan for the best case scenario. If you are
inundated with orders, your business plan should contain
information needed to hire staff and contact additional

If you are providing a service, tell what your service is, why
you are able to provide it, how it is provided, who will be doing
the work and where the service will be performed. Tell why your
business is unique and what you have that is special to offer to
your customers. If you have both a product and a service that
work together to benefit your customer (such as warranty service
for the products you sell) be sure to mention this in your plan.
Again the key words come into use. List future services you plan
to add to your business. Also, anticipate any potential problem
areas and work out a plan for action.

You should state any proprietary rights, such as copyrights,
patents or trademarks, in this section.


If location is important to your marketing plan, you may focus on
it in the marketing section. For example, if you are opening a
retail shop, your choice of location will be determined by your
target market. If you are a manufacturer and ship by common
carrier, your location is not directly tied to your target market
so you can discuss location in the business section. You may
begin this topic with a sentence such as "ABC Corporation is
housed in 25,000 square feet of warehouse space located at 372
East Main Street, Burke, NY. This site was chosen because of
accessibility to shipping facilities, good security provisions,
low square footage costs and proximity to sources of supplies."

Now expand on each reason for choosing that location and back up
your statements with a physical description of the site and a
copy of the lease agreement. Give background information on your
site choice and list other possible locations. You may want to
include copies of pictures, layouts or drawings of the location
in the supporting document section.

Use the worksheet on page 4 as a guideline for writing a location
(site) analysis. Cover only those topics that are relevant to
your business. If you need assistance, contact the SBA resource
center nearest you (see Information Resources).



    1.  Address:

    2.  Name of realtor/contact person:

    3.  Square footage/cost:

    4.  History of location:

    5.  Location in relation to target market:

    6.  Traffic patterns for customers:

    7.  Traffic patterns for suppliers:

    8.  Availability of parking: (include diagram)

    9.  Crime rate for area:

   10.  Quality of public services (e.g. police, fire protection)

   11.  Notes on walking tour of area:

   12.  Neighboring shops and local business climate:

   13.  Zoning regulations:

   14.  Adequacy of utilities (get information from utility
        company representatives):

   15.  Availability of raw materials/supplies:

   16.  Availability of labor force;

   17.  Labor rate of pay for the area:

   18.  Housing availability for employees:

   19.  Tax rates (state, county, income, payroll, special

   20.  Evaluation of site in relation to competition:


This section describes who is behind the business. If you are a
sole proprietor, tell about your abilities and include your
resume. Be honest about areas in which you will need help and
state how you will get that help. Will you take a marketing
seminar, work with an accountant or seek the advice of someone in

If you have formed a partnership, explain why the partners were
chosen, what they bring to the company and how their abilities
complement each others. Experience, background and qualifications
will be covered in their resumes in the supporting documents

If your business is incorporated, give detailed information on
the corporate structure and officers. Include a resume for each
officer and describe each one by answering the following
questions: Who are they? What are their skills? Why were they
chosen? What will they bring to the organization?


Who will be doing the work? Why are they qualified? How will they
be hired? What is their wage? What will they be doing? Outline
the duties and job descriptions for all personnel. Explain any
employee benefits. If you are inundated with orders for your
product or items to be serviced, do you have a plan for
increasing personnel?

Methods of Record Keeping

Tell what accounting system will be used and why the system was
chosen. What portion of your record keeping will be done
internally? Who will be responsible for keeping those records?
Will you be using an outside accountant to maximize your profits?
If so, who within your company will be skilled at reading and
analyzing financial statements provided by the accountant? It is
important not only to show that your accounting will be taken
care of, but that you will have some means of using your
financial statements to implement changes to make your company
more profitable. After reading this section, the lender should
have confidence in your company's ability to keep and interpret a
complete set of financial records.


Insurance is an important consideration for every business.
Product liability is a major consideration, especially in certain
industries. Service businesses are concerned with personal
liability, insuring customers' goods while on the premises or
during the transporting of those goods. If a vehicle is used for
business purposes, your insurance must reflect that use. If you
own your business location, you will need property insurance.
Some types of businesses require bonding. Partners may want life
insurance naming each other as the beneficiary. Consider the
types of coverage appropriate to your business. Tell what
coverage you have, why you chose it, what time period it covers
and who the carrier is. Keep your insurance information current.


According to the U.S. Chamber of Commerce, more than 30 percent
of business failures result from employee dishonesty. This
concerns not only theft of merchandise, but also theft of

Address the issue of security as it relates to your business. For
example, if you are disposing of computer printout data, a small
paper shredder may be cost-effective. Anticipate problem areas in
your business, identify security measures you will put into
practice, tell why you chose them and what you project they will
accomplish. Discuss this area with your insurance agent. By
installing security devices you may be able to lower certain
insurance costs along with protecting your business.


You have now covered all the areas which should be addressed in
the business section. Use the key words, be thorough, anticipate
any problem areas and be prepared with solutions, and analyze
industry trends and be ready to project your business into the
future. When you have completed the business section, you are
ready to begin developing the marketing section.


The second major section of your business plan covers the details
of your marketing plan. A good marketing plan is essential to
your business development and success. Include information about
the total market with emphasis on your target market. You must
take the time to identify your customers and find the means to
make your product or service available to them. The key here is
time. It takes time to research and develop a marketing plan, but
it is time well spent. Most of the information you need will be
found in your public library and in the publications of the U.S.
Department of Commerce, the U.S. Small Business Administration
(SBA) and the U.S. Census Bureau. Remember that you need a clear
understanding of who will purchase your product, who will make
use of your service, why they will choose your company and how
they will find out about it.

Begin this section with a one-page summary covering the key
elements of your marketing plan. The following text will expand
on each area presented in the summary. Back up statements and
justify projections with data in the supporting documents
section. Again, the key word approach will help you to thoroughly
cover each area. The topics may be covered in any order that
seems logical to you.

Target Market

The target market has been defined as that group of customers
with a set of common characteristics that distinguish them from
other customers. You want to identify that set of common
characteristics that will make those customers yours. Tell how
you did your market research. What were your resources and your
results? What are the demographics of your target market? Where
do your customers live, work and shop? Do they shop where they
live or where they work? If you are in the business of video
cassette recorder (VCR) repair, how many VCRs are owned within a
certain radius of your shop? Would in-home service be
cost-effective and a benefit to your customers? Back up your
findings with U.S. Census Bureau reports, questionnaires and test
marketing results. State how you feel you can serve this market
in terms of your resources, strengths and weaknesses. Focus on
reasonable, believable and obtainable projections regarding the
size of your potential market. (See Information Resources.)


Direct competition is a business offering the same product or
service to the same market. Indirect competition is a company
with the same product or service but with a different target
market. Evaluate both types of competitors. You want to determine
the competitors' images. To what part of the market are they
trying to appeal? Can you appeal to the same market in a better
way? Or can you find an untapped market?

Use the worksheet to compile, organize and evaluate information
on your competition. Your analysis of this information will help
you plan your market entry. What is the competition's current
market share (what percent of the total customer base is theirs)?
Can you tap into this share or will you need to carve out your
own market niche?


            Item                            1   2   3

     1.  Name of Competitor(s):

     2.  Location:

     3.  Products or services offered:

     4.  Methods of distribution
         (wholesale, retail, marketing
         reps, personal selling,
         corporate sales):

     5.  Image
             Promotional materials:
             Methods of advertising:
             Positioning (customers'
             perception of quality of
             product or service):

     6.  Pricing structure:

     7.  Performance (past and present):

     8.  Market share (by number, type
         and location of customers):

     9.  Strengths (The strengths of the
         competition become your strengths):

     10. Weaknesses (Looking at the
         weaknesses of the competition can
         help you find ways of being unique
         and of benefiting the customer.):

After completing this section you or your lender will know who
your competitors are, where they are located, what products or
services they offer, how you plan to compete, how your customers
can access your business and why you can provide a unique and
beneficial service or product.

Methods of Distribution

Distribution is the manner in which products are physically
transported to the consumer or the way services are made
available to the customer. Distribution is closely related to
your target market.

Establish the purchasing patterns of your customers. If you are
selling a product, do your customers purchase by direct mail, buy
through catalogues or make in-store purchases? Will you sell
directly or through a manufacturer's representative? If you are
shipping the product, who will absorb the shipping costs and what
carrier will be used? Use the key words to answer questions
regarding your distribution plan. Back up your decisions with
statistical reports, rate sheets from shippers, contracts with
manufacturer's representatives or any other supporting documents.
If you are involved in a service business, will you provide
in-shop service? Will you make service calls, and, if so, how
will mileage costs be handled? What is your planned response time
to fill your customers' needs?

List the pros and cons of the various methods of distribution and
give reasons for your choices. Keep in mind the worst case
scenarios mentioned above. Present alternatives. For example, if
United Parcel Service, your major shipper, were to go on strike,
how would you distribute your products? If your mobile service
van were to break down, do you have a vehicle which could be used
as backup? Provide for a smooth business flow.


Advertising presents the message to your customer that your
product or service is good and desirable. Tailor your advertising
to your target market. Your marketing research will have spelled
out which television and radio stations and which publications
are of interest to your target market. Those are the ones you
will use. Analyze your competitors' advertising in these
publications. Be ready to back up your decisions. Include copies
of your promotional materials, such as brochures, direct mail
advertisements and flyers. Tell the lender where you will put
your advertising dollars, why you chose those methods, how your
message will reach your target market, when your advertising
campaign will begin, how much your plan will cost and what format
your advertising will take.


Your pricing structure is critical to the success of your
business and is determined through market research and analysis
of financial considerations. Basic marketing strategy is to price
within the range between the price ceiling and the price floor.
The price ceiling is determined by the market; it is the highest
cost a consumer will pay for a product or service and is based on
perceived value. What is the competition charging? What is the
quality of the product or service you are offering? What is the
nature of the demand and what is the image you are projecting?
The price floor is the lowest amount at which you can offer a
product or service, meet all your costs and still make your
desired profit. Consider all costs -- raw materials, office
shipping, vehicle expense, taxes, loan and interest payments and
owner draws are a few. The profitable business operates between
the price ceiling and the price floor. The difference allows for
discounts, bad debt and returns. Be specific about how you
arrived at your pricing structure and leave room for some

Positioning -- predetermining the perceived value in the eyes of
the consumer -- can be accomplished through promotional
activities. To be successful, you must decide what your product
or service offers that your competitor's does not and promote it
as the unique benefit. Very few items on the market have
universal appeal your product or service cannot be all things to
all people. However, if you position your product or service
properly, prospective purchasers or users will immediately
recognize its benefits to them.

Product Design

Packaging and product design can play a major role in the success
of your business. It's what first catches the customer's eye.
Consider the tastes of your target market in the ultimate design
of your product and your package design. Decide what will be most
appealing in terms of size, shape, color, material and wording.
Packaging attracts a great deal of public attention. Be advised
of the Fair Packaging and Labeling Act, which established
mandatory labeling requirements. The U.S. Food and Drug
Administration (FDA) has strict procedures for the labeling of
items falling within its jurisdiction. The packaging guidelines
can be obtained from the FDA or found in the library.

Use key words to answer questions regarding your product design
and packaging. Include sketches or photographs. Also include
information on any proprietary rights, such as copyrights,
trademarks or patents.

Timing of Market Entry

The timing of your entry into the marketplace is critical and
takes careful planning and research. Having your products and
services available at the right time and the right place depends
more on understanding consumer readiness than on your
organizational schedule. The manner in which a new product is
received by the consumer can be affected by the season, the
weather and holidays. Early January and September are the best
times to mail flyers and catalogs, as consumers seem to be more
receptive to mail order purchasing in those months. The major
gift shows are held in the summer months (June, July, August) and
again in January and February. Most wholesale buying takes place
at these shows. November and December are not good months for
introducing new service businesses unless they relate in some way
to the holiday season. Spring is a better time to introduce a
service. Trade journals and trade associations in your field can
provide the information you need on the timing patterns of your
industry. Tell the lender when you plan to enter the market and
how you arrived at your decision.


If your choice of location is related to your target market,
cover it in this section of your business plan. List the reasons
for your choice. What is the character of the neighborhood? Does
the site project your business image? Where is the competition in
the area? What is the traffic pattern? What are the terms of the
lease? What services, if any, does the landlord provide? What is
the occupancy history of your location? Did any companies in the
area go out of business within the past few months? If so, try to
find out if it was related to location. Is the area in which you
plan to locate supported by a strong economic base? What
alternate sites were considered?

These are some of the questions to be considered. Refer to
Location in the business section for additional information.

Industry Trends

Be alert for changes in your industry. New technology may bring
new products into the marketplace that will generate new service
businesses. Read trade journals and industry reports in your
field. Project how your market may change and what you plan to do
to keep up.


You are now ready to develop the third area of your plan.
Financial records are used to show past, current and projected
finances. In this section we will cover the major documents you
will want to include in your business plan. They will consist of
both pro forma (projected) and actual financial statements. Your
work will be easier if these are done in the order presented.

  Summary of Financial Needs
  Application of Loan Funds
  Cash Flow Statement (Budget)
  Three-year Projection
  Break-even Analysis
  Actual Performance Statements:
     Balance Sheet
     Income (Profit and Loss) Statement
     Loan Application/Financial History

Summary of Financial Needs

If you are applying for a loan, your lenders and investors will
analyze the needs of your business. They will distinguish among
the three types of capital to be used as follows:

Working capital -- Used to meet fluctuating needs that are to be
repaid through cash during the business's next full operating
cycle, generally one year.

Growth capital -- Used to meet needs that are to be repaid with
profits over a period of a few years. If you seek growth capital,
you will be expected to show how the capital will be used to
increase your profits enough to be able to repay the loan within
several years (usually not more than seven).

Equity capital -- Used to meet permanent needs. If you seek
equity capital, it must be raised from investors who will take
the risk in return for some combination of dividend returns,
capital gains or a specific share of the business.

Keeping the above in mind, you must now prepare a summary of
financial needs. This document is an outline telling why you are
applying for a loan and how much you need.

                    SUMMARY OF FINANCIAL NEEDS

          I.  ABC Corporation is seeking a loan to increase
              its growth capital in the following areas of
              A.  Equipment (new and more modern)
              B.  Training of personnel in operation of above.

          II. Funds needed to accomplish above goal will be
              A.  See "Use of Funds" for distribution of
                  funds and backup statement.

Uses of Funds Statement

The potential lender will require a statement of how the money
you intend to borrow will be used. It will be necessary for you
to tell how you intend to disperse the loan funds. Back up your
statement with supporting data.

You must be sure that your supporting data can be easily found by
the loan officer who is examining your application. If you do not
have your information well organized and retrievable, your
application may be refused for the simple reason that the
material cannot be found. It will be necessary to have a well
written table of contents.

                         USES OF FUNDS


         ABC Corporation will use anticipated loan funds in
         the amount of $50,000 to modernize its production
         equipment. This will necessitate the purchase of
         two new pieces of equipment and the training of
         present personnel in the operation of this equipment.


         a.  The equipment needed is as follows:
             (1) High-speed F-34 Atlas Press
                 (purchase price -- $32,900)
             (2) S71 Jaworski Ebber (purchase
                 price -- $2,800)

         b. The training is available from the manufacturer
            as a three-week intensive program (cost: 10
            employees @ $1,200 = $12,000).

         c. The remaining $2,300 will be used for the first
            monthly installment on loan repayment -- a
            period of low production due to employee

         d. The equipment will result in a 35 percent
            increase in production, a 25 percent decrease in
            unit cost, and a net profit increase sufficient
            to repay the loan and interest within three years
            with a profit margin of 15 percent.

     Note: Refer to page 17* of the production plan of ABC
     Corporation.  See pages 27 and 28* of the marketing
     section for market research and projected trends in
     the industry.

     When writing your business plan be sure that your
     production plan includes a description of the equipment,
     how the work will be done, by whom and at what cost.

     The market research will show projected needs for your
     product, and thus show how increased production will
     results in increased sales and ultimately in the
     capability to enable you to repay the loan.

     (*The page numbers are hypothetical and do not refer
      to page numbers in this book.)

Cash Flow Statement (Budget)

Cash flow statements are the documents that project what your
business plan means in terms of dollars. They show cash inflow
and outflow over a period of time and are used for internal
planning. If you have been in business for some time, worksheets
can be put together from the actual figures of income and
expenses of previous years combined with projected changes for
the next period. If you are starting a new business, you will
have to project your financial needs and disbursements. Your
profit at the end of the year will depend on the proper balance
between cash inflow and outflow. The cash flow statement

    *   When cash is expected to be received.
    *   How much cash will be received.
    *   When cash must be spent to pay bills and debts.
    *   How much cash will be needed to pay expenses.

It also allows the manager to identify the source of necessary
cash, i.e., will it come from sales and services rendered or must
it be borrowed? Be sure that your projections take into account
receivables and how long it will take your customer to pay. The
cash flow statement deals only with actual cash transactions and
not with depreciation and amortization of goodwill or other
noncash expense items.

A cash flow statement can be prepared for any period of time. It
is recommended that you match the fiscal year of your business.
It should be prepared on a monthly basis for the next year and
revised not less than quarterly to reflect actual performance in
the preceding three months of operations.

In preparing your cash flow statement, it might be useful to
compile several individual budgets. They could be as follows:

   1. Cost of sales budget.
   2. Fixed expenses budget.
   3. Variable expenses budget.

Two worksheets can be used in developing a cash flow statement:

     Sources of cash worksheet -- Contains all the financing
     sources for the business.

     Cash to be paid out worksheet -- Identifies how much cash is
     expected to be spent to pay expenses and obligations.

Note: Projections in the two worksheets must be made for the same
time period (monthly, quarterly or annually).

Once you have completed the two worksheets, you are ready to
transfer the information into your cash flow statement. You will
need to think your way through each month, projecting what amount
from each category of the worksheets will be appropriate to what
month. For example, if your total sales amount to $100,000, you
will have to project the individual amounts that will probably
occur in each month.

              (Cash Flowing Into Your Business)

      Cash on Hand                            $ __________

        Sales                                   __________
        Service Income                          __________
        Deposits on sales or services           __________
        Collections on accounts receivable      __________

      Miscellaneous income
        Interest income                         __________

      Sale of long-term assets                  __________

         Loans (banks, finance companies,
           SBA, etc)                            __________

         Owner investments (sole proprietor
           or partnership)                      __________

         Contributed capital (corporation)      __________
         Venture capital                        __________

               Total Cash Available             __________



              (Cash Flowing Out of Your Business)

      Start-up costs
         Business license (annual expense)      ___________
         DBA filing fee (one time cost)         ___________
         Other start-up costs
         ___________________                    ___________
         ___________________                    ___________
         ___________________                    ___________

      Inventory purchases
          Cash out for items for resale
              or services                       ___________

      Variable expenses (controllable)
         Advertising               __________
         Freight                   __________
         Packaging costs           __________
         Parts and supplies        __________
         Sales salaries            __________
         Misc. direct expenses     __________
       Total direct expenses                    ___________

      Fixed expenses (overhead)
         Insurance                 __________
         Licenses & permits        __________
         Office salaries           __________
         Rent expense              __________
         Utilities                 __________
         Misc. indirect expenses   __________
       Total indirect expenses                   __________

      Assets (long-term purchases)
        Cash to be paid in current period        __________
      Owner equity
        Cash to be withdrawn by owner            __________

                Total cash to be paid out       $__________

Completing Your Cash Flow Statement

The vertical columns of a cash flow statement represent the
twelve months, preceded by a total column. Horizontal rows on the
statement contain figures for the sources of cash and cash to be
paid out copied from the two previous worksheets and from
individual budgets.

The figures are projected for each month, reflecting the flow of
cash in and out of your business for a one-year period. Begin
with the first month of the business cycle and proceed as

  1. Project the beginning cash balance. Enter under the first
     month of the business cycle.
  2. Project the cash receipts for the first month.
  3. Add beginning cash balance and cash receipts to determine
     total cash available.
  4. Project the direct, indirect and interest expenses for the
     first month.
  5. Project monies due on taxes, long-term assets and loan
     repayments. Also project any amounts to be drawn by owners.
  6. Total all expenses and draws. This is total cash paid out.
  7. Subtract total cash paid out from total cash available.
     Enter the result under cash balance/deficiency. If the
     result is negative, be sure to bracket this figure.
  8. Project loans to be received and equity deposits to be made.
     Add to cash balance/ deficiency to get ending cash balance.
  9. Carry forward the ending cash balance for January as
     February's beginning cash balance.
 10. Repeat the process through the last month of the business

To complete the total column, proceed as follows:

  1. Enter the beginning cash balance for the first month in the
     first space of the total column.
  2. Add the monthly figures for each category horizontally and
     enter the result in the corresponding total category.
  3. Compute the total column in the same manner as each of the
     individual months. If you have been accurate in your
     computations, the December ending cash balance will be
     exactly the same as the total ending cash balance.

Note: If your business is new, you will have to base your
projections solely on market research and industry trends. If you
have an established business, you will also use your financial
statements from the previous tax years.

A quarterly budget analysis should be used as a record to compare
your cash flow statement (or budget) with your business's actual
performance. Its purpose is to let you know whether or not you
are operating within your projections and to help you maintain
control of all phases of your business operations. If your
analysis shows that you have gone over budget in some areas you
will have to compensate by adjusting your cash flow statement
with future cuts in those or other areas. If properly used, a
cash flow statement can prove to be an invaluable tool to help
you reach your financial goals.

Your cash flow statement can be compiled on a month-by-month
basis and then compared with actual monthly performance. The
SBA's Form 1100 (4-82) is very useful in this regard; for a free
copy, contact your local SBA office. Prepared in this manner,
your statement can provide an annual projection for your next
fiscal year.

Three-year Income Projection

The three-year income projection is a pro forma income statement
(profit and loss statement for more information, see Income
Statement, page 18). The difference is that the three-year
projection only includes income and deductible expenses while the
cash flow statement includes all sources of cash and cash to be
paid out.

There are various opinions as to what period of time should be
covered in estimating income and expenses, i.e., whether it
should be on an annual or monthly basis. If this income
projection is for the purpose of obtaining a loan, talk to the
lender about his or her specific requirements. If the projections
are for your own use, a three-year projection is suggested with
annual rather than monthly projections.

Sources of Information

Information for a three-year income projection can be found in
your cash flow statement, sales forecast and individual budgets,
and your business and marketing analyses if you are new in
business. Again, if you are an established business, you will
also be able to use past financial statements to help determine
future projections for your business. Be sure to take into
account fluctuations anticipated in costs, efficiency of
operation, changes in the market and any other factors. Increases
and decreases in income and expenses are only realistic. These
changes should be reflected in any projections. Remember, too,
that industry trends can cause decreases in both income and
expenses. An example of this might be the computer industry,
where competition has increased greatly and standardization of
components has caused a decrease in both the cost and the sales
price of certain items.

Break-even Analysis

The break-even point is the point at which a company's expenses
exactly match its sales or service volume. It is the point at
which the business will neither make a profit nor incur a loss.
The break-even point can be calculated in either mathematical or
graph form. It can be expressed in total dollars or revenue
exactly offset by total expenses or in total units of production
(cost of which equals exactly the income derived by sales).

To apply a break-even analysis to a business operation, two types
of expenses must first be projected: fixed costs and variable
costs. Fixed costs do not vary with sales or output. Variable
costs vary in direct proportion to the output. The greater the
volume of sales, the higher the cost. For purposes of the
break-even analysis, make sure to include cost of sales in your
variable costs figure.

Sources of Information for a Break-even Analysis

All of your figures can be derived from your three-year
projection. In fact, by now you should be able to see that each
financial document in your business plan builds on the ones done
previously. It should be a simple matter to retrieve the figures
to plug into the following formula.


An example of calculating the break-even point using a
mathematical formula is shown below.
     B-E point sales (at break-even point) = fixed costs
     + [1 - variable costs expressed as % of total sales]

   Terms used:
     B-E point sales = volume of sales at break-even point
     Fixed costs = fixed expenses, depreciation, interest
     Variable costs = cost of sales and variable expenses
     Sales revenues = income from sales of goods/services
       over a specified period

   Values used:
     B-E point sales (S) = ?
     Fixed costs = $25,000
     Variable costs = $45,000
     Sales revenues = $90,000

    S (at break-even point) =     1-($45,000/90,000

    S = __$25,000__
    S = __$25,000__

    .50S = $25,000

    S = $50,000 (break-even point in terms of revenue exactly
                offset by total expenses)


A firm's sales at break-even point can be plotted as in the
following break-even analysis graph.

Using the same figures as in the above formula, draw three lines
in the graph: horizontal line at point representing fixed costs
(25); total expenses (TC = FC + VC) line from left end of fixed
cost line sloping upward to point where total (fixed plus
variable) costs on vertical scale (7) meet total sales revenues
on the horizontal scale (9); total revenues (sales) line from
zero through a point describing total revenues (sales) on both
scales (9).

The point on the graph where the total expenses line intersects
the total sales revenues line is the break-even point. This
business estimates that it will break even when sales volume
reaches $50,000. The triangular area below that point represents
company losses. The triangular area above and to the right of the
point represents potential profit.

Actual Performance Statements

Actual performance statements are those financial statements
reflecting the activity of your business in the past. If you are
a new business owner, you have no business history. Your
financial section will end with the projected statements and a
personal financial history. If you are an established business,
you will include the following actual performance statements:

     Balance sheet
     Profit and loss (income) statement
     Business financial history or loan application

Balance Sheet

The balance sheet is a financial statement, usually prepared at
the close of an accounting period, that shows the financial
position of the business as of a fixed date. It is a picture of
your firm's financial condition at a particular moment. By
regularly preparing this statement, you will be able to identify
and analyze trends in the financial strength of your business and
thus implement timely modifications.


All balance sheets must contain three categories -- assets,
liabilities and net worth -- that have been established by a
system known as generally accepted accounting principles. The
three are related in that at any given time a business's assets
equal the total contributions by its creditors and owners.

   Assets = Anything your business owns that has monetary
   Liabilities = Debts owed by the business to any of its
   Net worth (capital) = An amount equal to the owner's

The relationship between these terms is simply illustrated in the
following accounting formula:

                 Assets = Liabilities + Net Worth

Examined as such, it becomes apparent that if a business
possesses more assets than it owes to creditors, its net worth
will be a positive value. Conversely, if a business owes more
money to creditors than it possesses in assets, the net worth
will be a negative value.


The balance sheet also must follow an accepted format. By so
doing, anyone reading the balance sheet can readily interpret it.

All assets are divided under three headings:

   Current assets -- Assets that can be converted into cash
      within one year of the date on the balance sheet.
   Long-term investments -- Stocks, bonds and special savings   
     accounts to be kept for at least one year.
   Fixed assets -- The resources a business owns and does not
      intend for resale (land, buildings, equipment, automobiles,

Liabilities are divided into current and long-term liabilities:

   Current liabilities -- Those obligations payable within one
      operating cycle.
   Long-term liabilities -- Outstanding balance less current
      portion due (e.g., mortgage, vehicle).

Net worth is documented according to the legal structure of the

   Proprietorship or partnership -- Each owner's original
     investment plus earnings after withdrawals.
   Corporation -- The sum of contributions by owners or
     stockholders plus earnings retained after paying dividends.

                         BALANCE SHEET

                         COMPANY NAME

             As of _________________________, 19_____

Assets                             Liabilities

Current assets                     Current Liabilities

 Cash               __________      Accounts Payable   __________

 Petty Cash         __________      Notes Payable      __________

 Accounts Receivable__________      Interest Payable   __________

 Inventory          __________      Taxes Payable
                                     Fed. income tax   __________
 Short-term Invest-                  State income tax  __________
   ments            __________       Self-employment   __________
                                     Sales tax (SBE)   __________
 Prepaid expense    __________       Property tax      __________

Long-term invest-                   Payroll accrual    __________
   ments            __________
                                   Long-term liabil-
Fixed assets                        bilities        

 Land               __________      Notes payable      __________
 Buildings          __________
                                   Total liabilities   __________
 Improvements       __________     ______________________________
 Equipment          __________     Net worth (owner equity)

 Furniture          __________      Proprietorship     __________
                                     or Partnership
 Automobiles/                        (name's) equity   __________
  vehicles          __________       (name's) equity   __________
Other assets                        Corporation
                                      Capital stock    __________
  1.                __________        Surplus paid in  __________

                                      Retained earnings__________
  3.                __________                      _____________

  4.                __________      Total net worth    __________

                 _____________                      _____________
                                    Total liabilities
Total assets        __________       and net worth  _____________
    (Total assets will always equal total liabilities and
     total net worth)

Income Statement

The income (profit and loss) statement shows your business
financial activity over a period of time, usually your tax year.
In contrast to the balance sheet, which shows a picture of your
business at a given moment, this statement can be likened to a
moving picture, which shows what has happened in your business
over a period of time. The income statement is an excellent tool
for assessing your business. You will be able to pick out
weaknesses in your operation and plan ways to run your business
more effectively and thereby increase your profits. For example,
you may find that some heavy advertising you did in March did not
effectively increase your sales. In following years, you may
decide to use your advertising funds more effectively by using
them at a time of increased customer spending. Along the same
vein, you might examine your income statement to see what months
have the heaviest sales volume and plan your inventory
accordingly. Comparison of the income statements from several
years will give you an even better picture of the trends in your
business. Do not underestimate the value of this particular tool
when planning your tactics.


The income statement shows where your money has come from and
where it was spent over a specific period of time. It should be
prepared not only at the end of the fiscal year, but at the close
of each business month. It is one of the two principal financial
statements prepared from the ledgers and records of a business.
All profit and loss statements contain income and expense account
balances. The remaining asset, liability and capital information
provides the figures for the balance sheet.

At the end of each month, the accounts in the general ledger are
balanced and closed. Balances from the revenue accounts and the
expense accounts must be transferred to your profit and loss


A profit and loss statement must also follow an accepted format
and contain the following categories:

     Net sales (gross sales returns and allowances).
     Cost of goods sold (see IRS Form 1040, Schedule C for
     Gross profit (net sales cost of goods sold).

     Selling expenses (direct, controllable, variable).
     Administrative expenses (indirect, fixed, office overhead).

Total expenses

Income from operations (gross profit total expenses)
   Other income (interest income)
   Other expenses (interest expense)

Net profit (loss) before income taxes
Income taxes (federal, state, self-employment)
Net profit (loss) after income taxes

Two sample income statements are shown for your use. The first is
divided into 12 months. Fill it in monthly after balancing your
ledgers. At the end of the year, this form will provide an
accurate picture of your financial activity. The second form can
be used for your monthly and annual profit and loss statements.

                         INCOME STATEMENT
            (Also known as Profit and Loss Statement)

     For the year ___                J F M A M J J A S O N D


      1. Net Sales                   _ _ _ _ _ _ _ _ _ _ _ _
      2. Cost of Sales               _ _ _ _ _ _ _ _ _ _ _ _
      3. Gross profit (1 minus 2)    _ _ _ _ _ _ _ _ _ _ _ _


      1. Variable exp. (controllable)
         a. Advertising              _ _ _ _ _ _ _ _ _ _ _ _
         b. Freight                  _ _ _ _ _ _ _ _ _ _ _ _
         c. Packaging costs          _ _ _ _ _ _ _ _ _ _ _ _
         d. Parts & supplies         _ _ _ _ _ _ _ _ _ _ _ _
         e. Sales salaries           _ _ _ _ _ _ _ _ _ _ _ _
         f. Misc. direct expenses    _ _ _ _ _ _ _ _ _ _ _ _
         g. Legal fees               _ _ _ _ _ _ _ _ _ _ _ _

      2. Fixed expenses (overhead)
         a. Insurance                _ _ _ _ _ _ _ _ _ _ _ _
         b. Licenses & permits       _ _ _ _ _ _ _ _ _ _ _ _
         c. Office salaries          _ _ _ _ _ _ _ _ _ _ _ _
         d. Rent                     _ _ _ _ _ _ _ _ _ _ _ _
         e. Utilities                _ _ _ _ _ _ _ _ _ _ _ _
         f. Misc. indirect expenses  _ _ _ _ _ _ _ _ _ _ _ _
         g.                          _ _ _ _ _ _ _ _ _ _ _ _

     TOTAL EXPENSES                  _ _ _ _ _ _ _ _ _ _ _ _

       (gross sales minus expenses)  _ _ _ _ _ _ _ _ _ _ _ _

     OTHER INCOMES (interest)        _ _ _ _ _ _ _ _ _ _ _ _

     OTHER EXPENSES (interest)       _ _ _ _ _ _ _ _ _ _ _ _

     INCOME BEFORE TAXES             _ _ _ _ _ _ _ _ _ _ _ _

     INCOME TAXES                    _ _ _ _ _ _ _ _ _ _ _ _

     NET INCOME                      _ _ _ _ _ _ _ _ _ _ _ _

                         INCOME STATEMENT

     For the period beginning _________ and ending _________

       1. Net sales (gross--
          returns @ allowance)                    __________

       2. Cost of Sales
          a. Inventory (Jan. 1)                   __________
          b. Purchases                            __________
          c. Cost of goods available
             for sale [(a)+(b)]                   __________
          d. Deduct inventory (Dec.31)            __________

      3. Gross profit on sales                    __________

      1. Variable expenses (control-         
         a. Advertising                 __________
         b. Freight                     __________
         c. Packaging costs             __________
         d. Parts & supplies            __________
         e. Sales salaries              __________
         f. Misc. direct expenses       __________

      2. Fixed expenses (overhead)
         a. Insurance                   __________
         b. Licenses & permits          __________
         c. Office salaries             __________
         d. Rent expense                __________
         e. Utilities                   __________
         f. Misc. indirect expenses     __________

      Total expenses                    __________

     Income from operations (gross
       profit less expenses)                      __________

     Other income                                 __________
      1. Interest income                          __________

     Other expenses                     __________
      1. Interest expenses              __________

     Net profit (loss) before taxes               __________

     Income taxes                                 _________

     Net profit (loss) after income taxes         __________

Business Financial History

The financial history is the last of the financial statements
required in your business plan. It is a summary of financial
information about your company from its start to the present.

If you are a new business, you will have only projections for
your business. If you are applying for a loan, the lender will
require a personal balance sheet. This will be of benefit in that
it will show the lender the manner in which you have conducted
your personal business and be an indication as to the probability
of succeeding in your new business.

If you are using your business plan to apply for a loan, your
business financial history and the loan application are the same.
This document should be completed last, but placed first in the
financial section of your plan. When you indicate that you are
interested in obtaining a business loan, the institution
considering the loan will supply you with an application. The
format may vary slightly. When you receive your loan application,
be sure to review it and think about how you are going to answer
each item. Answer all questions and, by all means, be certain
that your information is accurate and that it can be verified if
the need should arise.

Information Needed and Sources

As you complete your business financial history or loan
application, it should become immediately evident why this is the
last financial document to be completed. All of the information
needed will have been compiled in earlier parts of your plan and
in the completed financials. To help you with your financial
history, the following is a list of information usually included
and the source you will refer to for that information:

Assets, liabilities and net worth -- You should be able to
recognize these three as balance sheet terms. Go back to your
balance sheet and bring these figures forward.

Contingent liabilities -- These are debts you may come to owe in
the future (e.g., default on cosigned note or settlement of a
pending lawsuit).

Inventory details -- Information about inventory is derived from
your inventory record. Also, the business section should have a
summary of your current policies and methods of evaluation.

Income statement -- This is revenue and expense information.
Depending on the period of time to be covered, you will transfer
the information from your most recent annual profit and loss
statement or from a compilation of several if required by the

Real estate holdings, stocks and bonds -- Refer back to the
business portion of your plan. You may also have to go through
your investment records for more comprehensive information.

Sole proprietorship, partnership or corporation information --
There are generally three separate schedules on the financial
history one for each form of legal structure. You will be
required to fill out the one that is appropriate to yours. In the
business section, you will have covered two areas that will serve
as the source of this information -- legal structure and
management. Your supporting documents may also contain some of
the information that you will need.

Audit information -- Refer back to your business section under
record keeping. You may also be asked questions about other
prospective lenders, whether you are seeking credit, who audits
your books and when they were last audited.

Insurance coverage -- You will be asked to provide detailed
information on the amounts of different types of coverage (i.e.,
merchandise, equipment, public liability, earthquake, automobile,
etc.). Your business section contains coverage information that
can be brought forth to the financial history.


The financial documents covered in this section will probably be
sufficient for both your own use and that of potential lenders.
Some lenders may not require all documents and other lenders may
require additional documents. The important thing to note in
compiling any financial statements is that the information must
be correct and that you must have records to support your

Remember, you can use the information in your business plan not
only to aid you in dealing with a lender, but also to assist you
on an on-going basis. If you have done your homework, the
financial documents you have prepared will be invaluable to you
in the assessment of your operation and may very well be the
determining factor in whether or not you succeed in your


Now that you have completed the main body of your business plan,
you will need to include a separate section for any additional
records that should be included to support your plan. Supporting
documents are the records that back up the statements and
decisions made in the three main parts of your plan. As you are
compiling the first three sections, it is a good idea to keep a
separate list of the supporting documents that you mention or
that come to mind. For instance, discussion of your business
location might indicate a need for demographic studies, location
maps, area studies, leases, etc. If you are considering applying
for a loan to purchase equipment, your supporting documents might
be existing equipment purchase agreements or lease contracts. By
listing these items as you think of them, you will have a fairly
complete list of all of your supporting documents by the time you
reach this part of your task. You will be ready to sort them into
a logical sequence and add any new ones that come to mind.

The following are several documents that you will want to

Personal Resumes

If you are a sole proprietor, include your own resume. If your
business is a partnership, there should be a resume for each
partner. If you are a corporation, include resumes for all
officers of the corporation. A resume need not and should not be
a lengthy document. Preferably, it should be contained on one
page for easy reading. Include the following categories and

Work history -- Name of employers or businesses with dates of
employment. Begin with most recent. Include duties and

Educational background -- Names of schools and dates you attended
them, degrees earned, fields of concentration.

Professional affiliations and honors

Special skills -- e.g., relate well to others, able to organize,
willing to take risks, etc.

Personal Financial Statement

The owner(s) should include a statement of personal assets and
liabilities. This information can be compiled in the same manner
as a balance sheet. Use the same format and list all assets and
liabilities to determine net worth. If you are a new business
owner, your personal financial statement will be a part of the
financial document and may be a standard form supplied by the
potential lender.

Credit Reports

Credit ratings are of two types, business and personal. You can
ask your suppliers or wholesalers to supply you with letters of
credit. Personal credit ratings can be obtained through credit
bureaus, banks and companies with whom you have dealt on a basis
other than cash.

Copies of Leases

Include all lease agreements currently in force between your
company and a leasing agency. Some examples are the lease
agreement for your business premises, equipment, automobiles,

Letters of Reference

These are letters recommending you as a reputable and reliable
business person worthy of being considered a good risk. There are
two types of letters of reference: business references, or those
written by business associates, suppliers and customers; and
personal references, or those written by nonbusiness associates
who can assess your business skills (not friends or relatives).


Include all business contracts, both completed and currently in
force. Some examples are current loan contracts, papers on prior
business loans, purchase agreements on large equipment, vehicle
purchase contracts, service contracts and maintenance agreements.

Legal Documents

Include all legal documents pertaining to your business. Some of
these are articles of incorporation, partnership agreements,
copyrights, trademark registrations, patents, insurance policies,
property and vehicle titles, etc.

Miscellaneous Documents

These are all the documents (other than the above) that are
referred to, but not included, in the business and marketing
sections of your business plan. A good example would be those
records related to selecting your location that may have been
finalized as the result of developing a location plan. A
potential lender who may be particularly interested in your
location information will be able to find the location plan in
your supporting documents and examine your demographic studies,
maps, area studies on crime rate, income, etc.

Please note: All supporting documents need not be included in
every copy of your business plan. You need to include only that
information you think will be needed by the potential lender. The
rest of the information should be kept with your copy of the plan
and be easily accessible should it be requested by the lender.


Your plan should be put together in a professional manner. To
create a favorable impression, it should be as follows:

Appearance -- Use a plastic spiral binding or covers purchased
from your local stationery store. Use blue, brown or black
covers. Bankers are usually conservative.

Length -- Be concise! Usually, you should have no more than 30 to
40 pages, including your supporting documents. When you are
writing each section, think of it as being a summary. Include as
much information as you can in a brief statement. A potential
lender does not want to have to wade through volumes of words to
get the information needed.

Presentation -- Do your best to make your plan look presentable.
However, do not go to the unnecessary expense of paying for
typesetting and high-powered computer graphics. These might be
considered frivolous by some lenders a first impression that
indicate you would not use their loan wisely.

Table of contents -- Be sure to include a table of contents in
your business plan. It will follow the statement of purpose. Make
it detailed enough so the lender can locate any of the areas
addressed in the plan. It must also list the supporting

Number of copies -- Make copies for yourself and each lender you
wish to approach. Keep track of each copy. Do not try to work
with too many potential lenders at one time. If your loan is
refused, be sure to retrieve your business plan.

When you are finished, your business plan should look
professional, but the lender should know that it was done by you.
It will be the best indication a lender will have to judge your
potential for success. Be sure that your business plan represents
your best efforts.


Making Revisions

If your business plan is going to be effective either to the
business or to a potential lender, it will be necessary for you
to update it on a regular basis. Changes necessitating revisions
can be attributed to three sources: changes within the company,
changes originating with the customer and technological changes.
Neglecting to allow for these changes will doom your operation to
decreased profits and probable failure.

Implementing Changes

As the owner, you must be aware of changes in your industry,
market and community. First you must determine what revisions are
needed. You will have to compare your plan with the changes
discussed above. You can use your employees to help keep track of
business trends applicable to their expertise. However, the final
judgment as to revisions will rest with you, the owner. You may
make errors, but with experience, your percentage of correct
decisions will increase and your reward will be higher profits.

Anticipating Problems

Try to see ahead and determine what possible problems may plague
you. For example, you may have to deal with costs that exceed
your projections. At the same time, you may experience a sharp
decline in sales. These two factors occurring simultaneously can
portend disaster if you are not ready for them. Also, be cautious
when things are too good. The increased profits may only be
temporary. A product or service that is in demand this year may
not be popular next year. You might think about developing an
alternate budget based on possible problems. Awareness of changes
in your industry and revision according to those changes will
benefit you greatly.


Bobrow, Edwin E. Pioneering New Products: A Market Survival
Guide. Homewood, IL: Dow Jones-Irwin, 1987.

Breen, George, and A. B. Blankenship. Do-It-Yourself Marketing
Research. New York: McGraw-Hill, 1982.

Clifford, Denis, and Ralph Warner. The Partnership Book.
Berkeley: Nolo Press, 1989.

Goldstein, Harvey. Up Your Cash Flow. Los Angeles: Granville
Publications, 1986.

Husch, Tony, and Linda Foust. That's a Great Idea. Oakland, CA:
Gravity Press, 1986.

Lavin, Michael R. Business Information: How to Find it, How to
Use it. Phoenix, AZ: Oryx Press, 1987.

Levinson, Jay Conrad. Guerilla Marketing: Secrets for Making Big
Profits from Your Small Business. Boston: Houghton-Mifflin, 1984.

Ogilvy, David. Ogilvy on Advertising. New York: Vintage Books,

Pinson, Linda, and Jerry Jinnett. Anatomy of a Business Plan.
Tustin, CA: Out of Your Mind...and Into the Marketplace, 1989.
Also available with a software package, Automate Your Business
Plan, that applies principles of the text.

Pinson, Linda, and Jerry Jinnett. Marketing: Researching &
Reaching your Target Market. Tustin, CA: Out of Your Mind...and
Into the Marketplace, 1988.

Pinson, Linda, and Jerry Jinnett. Out of Your Mind...and Into the
Marketplace. Tustin, CA: Out of Your Mind...and Into the
Marketplace, 1988.

Pinson, Linda, and Jerry Jinnett. Recordkeeping: the Secret to
Growth & Profit. Tustin, CA: Out of Your Mind...and Into the
Marketplace, 1989.

Schmenner, Roger W. Making Business Location Decisions. Englewood
Cliffs, NJ: Prentice-Hall, 1982.

Worthington, Anita, and Robert E. Worthington. Staffing a Small
Business: Hiring, Compensating, and Evaluating. Denver, CO: Oasis
Books, 1987.


U.S. Small Business Administration (SBA)

The SBA offers an extensive selection of information on most
business management topics, from how to start a business to
exporting your products.

SBA has offices throughout the country. Consult the U.S.
Government section in your telephone directory for the office
nearest you. SBA offers a number of programs and services,
including training and educational programs, counseling services,
financial programs and contract assistance. Ask about

     *     SCORE: Counselors to America’s Small Business, a
           national organization sponsored by SBA of over 11,000
           volunteer business executives who provide free
           counseling, workshops and seminars to prospective and
           existing small business people.  Free online counseling
           and training at

     *     Small Business Development Centers (SBDCs), sponsored
           by the SBA in partnership with state governments, the
           educational community and the private sector. They
           provide assistance, counseling and training to
           prospective and existing business people.

     *     Women’s Business Centers (WBCs), sponsored by the SBA
           in partnership with local non-government organizations
           across the nation. Centers are geared specifically to
           provide training for women in finance, management,
           marketing, procurement and the Internet.

For more information about SBA business development programs and
services call the SBA Small Business Answer Desk at 1-800-U-ASK-
SBA (827-5722) or visit our website,

Other U.S. Government Resources

Many publications on business management and other related topics
are available from the Government Printing Office (GPO). GPO
bookstores are located in 24 major cities and are listed in the
Yellow Pages under the bookstore heading. Find a “Catalog of
Government Publications at

Many federal agencies offer Websites and publications of interest
to small businesses. There is a nominal fee for some, but most
are free. Below is a selected list of government agencies that
provide publications and other services targeted to small
businesses. To get their publications, contact the regional
offices listed in the telephone directory or write to the
addresses below:

Federal Citizen Information Center (FCIC)
The CIO offers a consumer information catalog of federal

Consumer Product Safety Commission (CPSC)
Publications Request
Washington, DC 20207
The CPSC offers guidelines for product safety requirements.

U.S. Department of Agriculture (USDA)
12th Street and Independence Avenue, SW
Washington, DC 20250
The USDA offers publications on selling to the USDA. Publications
and programs on entrepreneurship are also available through
county extension offices nationwide.

U.S. Department of Commerce (DOC)
Office of Business Liaison
14th Street and Constitution Avenue, NW
Washington, DC 20230
DOC's Business Liaison Center provides listings of business
opportunities available in the federal government. This service
also will refer businesses to different programs and services in
the DOC and other federal agencies.

U.S. Department of Health and Human Services (HHS)
Substance Abuse and Mental Health Services Administration
1 Choke Cherry Road
Rockville, MD 20857
Helpline: 1-800-workplace. Provides information on Employee
Assistance Programs Drug, Alcohol and other Substance Abuse.

U.S. Department of Labor (DOL)
Employment Standards Administration
200 Constitution Avenue, NW
Washington, DC 20210
The DOL offers publications on compliance with labor laws.

U.S. Department of Treasury
Internal Revenue Service (IRS)
1500 Pennsylvania Avenue NW
Washington DC 20230
The IRS offers information on tax requirements for small

U.S. Environmental Protection Agency (EPA)
Small Business Ombudsman
1200 Pennsylvania Avenue NW
Washington, DC 20480
Hotline: 1-800-368-5888
The EPA offers more than 100 publications designed to help small
businesses understand how they can comply with EPA regulations.

U.S. Food and Drug Administration (FDA)
5600 Fishers Lane
Rockville MD 20857-0001
Hotline: 1-888-463-6332
The FDA offers information on packaging and labeling requirements
for food and food-related products.

For More Information

A librarian can help you locate the specific information you need
in reference books. Most libraries have a variety of directories,
indexes and encyclopedias that cover many business topics. They
also have other resources, such as

     *     Trade association information
           Ask the librarian to show you a directory of trade
           associations. Associations provide a valuable network
           of resources to their members through publications
           and services such as newsletters, conferences and

     *     Books
           Many guidebooks, textbooks and manuals on small
           business are published annually. To find the names of
           books not in your local library check Books In Print,
           a directory of books currently available from

     *     Magazine and newspaper articles
           Business and professional magazines provide
           information that is more current than that found in
           books and textbooks. There are a number of indexes to
           help you find specific articles in periodicals.

      *    Internet Search Engines

In addition to books and magazines, many libraries offer free
workshops, free access to computers and the Internet, lend
skill-building tapes and have catalogues and brochures
describing continuing education opportunities

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