For this course, you will be working on one section of your final project each week. For this class, you will be starting a business. You have three choices for how you will do this: you can buy an ex

Business Plan for a Startup Business The business plan consists of a narrative and several financial work sheets. The narrative template is the body of the business plan. It contains more than 150 questions divided into several sections. Work through the sections in any order that you want , except for the Executive Summary , which should be done last. Skip any questions that do not apply to your type of business. When you are finished writing your first draft, you ’ll have a collection of small essays on the various topics of the business plan. Then you ’ll want to edit them into a smooth -flowing narrative. The re al value of creating a business plan is not in having the finished product in hand; rather, the value lies in the process of research ing and thinking about your busi ness in a systematic way. The act of planning helps you to think things through thoroughly, study and research if you are not sure of the facts, and look at your ideas critically. It takes time now, but avoids costly, perhaps disastrous, mistakes later. This business plan is a generic model suitable for all types of businesses. However, you shou ld modify it to suit your particular circumstances. Before you begin, review the section titled Refining the Plan, found at the end. It suggests emphasizing certain areas depending upon your type of business (manufacturing, retail, service, etc.). It also has tips for fine -tuning your plan to make an effective present ation to investors or bankers. If this is why you ’re creating your plan, pay particular attention to your writing style. You will be judged by the quality and appearance of your work as well as by your ideas. It typically takes several weeks to complete a good plan. Most of that time is spent in research and re -thinking your ideas and assumptions. But then, tha t’s the value of the process. So ma ke time to do the job properly. Those wh o do never regret the effort. And finally, be sure to keep detailed notes on your sources of information and on the assumptions underlying your financial data. Page 2 of 28 Business Plan OWNERS Your Business Name Street Address Address 2 City, ST ZIP Code Telephone Fax E-Mail Page 3 of 28 I. Table of C ontents I. Table of Contents ................................ ................................ ................................ ................................ ............. 3 II. Executive Summary ................................ ................................ ................................ ................................ ......... 4 III. General Company Description ................................ ................................ ................................ ..................... 5 IV. Products and Services ................................ ................................ ................................ ................................ ...... 6 V. Marketing Plan ................................ ................................ ................................ ................................ .................. 7 VI. Operational Plan ................................ ................................ ................................ ................................ ............. 15 VII. Management and Organization ................................ ................................ ................................ ................... 19 VIII. Personal Financial Statement ................................ ................................ ................................ ....................... 20 IX. Startup Expenses and Capitalization ................................ ................................ ................................ ......... 21 X. Financial Plan ................................ ................................ ................................ ................................ ................... 22 XI. Appendices ................................ ................................ ................................ ................................ ....................... 25 XII. Refining the Plan ................................ ................................ ................................ ................................ ............ 26 Page 4 of 28 II. Executive Summary Write this section last. We suggest that you make it two pages or fewer . Include everything that you would cover in a five -minute interview. Explain the fundamentals of the proposed business: What will your product be ? Who will your customers be ? Who are the owners ? W hat do you think the future holds for y our business and your industry? Make it enthusiastic, professional, co mplete , and concise. If applying for a loan, state clearly how much you want, precisely how you are going to use it, and how the money will make your business more profitable, thereby ensuring repayment. Page 5 of 28 III. General Company Description Introduction: What busin ess will you be in? What will you do? Mission Statement: Many companies have a brief mission statement, usually in 30 words or fewer , explaining their reason for being and their guiding principles. If you want to draft a mission statement, this is a good p lace to put it in the plan , followed by : Company Goals and Objectives: Goals are destinations — where you want your business to be. Objectives are progress markers alon g the way to goal achievement. For example, a goal might be to have a healthy, successful company that is a leader in customer service and that has a loyal customer following. Objectives might be annual sales targets and some specific measures of customer satisfaction. Business Philosophy: What is important to you in business? To who m will you market your products? (S tate it briefly here — you will do a more thorough explanation in the Marketing Plan section). Describe your ind ustry. Is it a growth industry ? What changes do you foresee in the industry, short term and long term? How will your company be poised to take advantage of them? Describe y our most important company strengths and core competencies . What factors will make the company succeed? What do you think your major competitive strengths will b e? What background experience, skills, and strengths do you personally bring to this new venture? Business Formation: DO THIS PART IN UNIT 2: LEAVE HIGHLIGHTED TO REMIND YOU TO COME BACK AND COMPLETE IT . Legal form of ownership: Sole proprietor, Partnership, Corporation, Limited liability corporation (LLC)? Why have you selected this form? Page 6 of 28 IV. Products and Services Describe in depth your products or services (technical specifications, drawings, photos, sales brochures, and other bulky items belong in Appendi ces). What factors will give you competitiv e advantages or disadvantages? Example s include level of quality or unique or proprietary features. What are the pricing, fee , or leasing structures of your products or services? Long term: What are your plans for the future of the business? Growth? If so, at what rate and how will you achieve it? Are you developing strategies for continued growth, increased production, diversification, or eventual sale of the business? What are your time frames for these? Page 7 of 28 V. Marketing Plan Provide a brief overview of your marketing plan for purposes of ensuring that you can account for it in your start -up costs, financing, sales projections, and operating expenses. This is not an extensive marketing plan – just a brief overview. You will need to complete the sales projection. You can use your SWOT analysis in this section. The highlighted sections below in V. Marketing Plan are not required but will help you think about your ma rketing process. Delete the highlighted sections when you are done. Why? No matter how good your product and your service, the venture cannot succee d without effective marketing. And this begins wit h careful, systematic research. It is very dangerous to a ssume that you already kn ow about your intended market. You need to do market research t o make sure you’re on track. Use the business planning process as your opportunity to uncover data and to qu estion your marketing efforts. Your time will be well spent. The marketing plan will be the basis, later on, of the all -important sales projection. Market research - How? There are two kinds of market research: primary and secondary. Secondary research means using published information such as industry profiles, tr ade journals, newspapers, magazines, census d ata, and demographic profiles. This type of information is available in public libraries, industry associations, chambers of commerce, from vendors who sell to your industry, and from government agencies . Start with your local library. Most librarians are pleased to guide you through t heir business data collection. You wi ll be amazed at what is there. There are more online source s than you could possibly use. Your chamber of commerce has good information on the l ocal area. Trade associations and trade publications often have excellent industry -specific data. Primary research means gathering your own data. For example, you could do your own traffic count at a proposed location, use the yellow pages to identify comp etitors, and do surveys or focus -group interviews to learn about consumer preferences. Professional market research can be very costly, but there are many books that show small business owners how to do effective research themselves. Page 8 of 28 In your marketing plan, be as specific as possible; give sta tistics , numbers , and sources. The marketing plan will be the basis, later on, of the all -important sales projection. Economics Facts about your industry: • What is the total size of your market? • What percent share of the market will you have? (This is important only if you think you will be a major factor in the market.) • Current demand in target market . • Trends in target market — growth trends, trends in consumer prefe rences, and trends in product development. • Growth potential and opportunity for a business of your size . • What barriers to entry do you face in entering this market wit h your new company? Some typical barriers are: o High capital costs o High production costs o High marketing costs o Consumer acceptance and brand recognition o Training and skills o Unique technology and patents o Unions o Shipping costs o Tariff barriers and quotas • And of course, how will you overcome the barriers? • How could the following affect your company? o Change in technology o Change in g overnment regulations o Chang e in the economy o Change in your industry Product In the Products and Services section, you described your products and services as you see the m. Now describe them from your customers’ point of vie w. Page 9 of 28 Features and Benefits List all of yo ur major products or services. For each product or service: • Describe the most important features. What is special about it? • Describe the benefits . That is, what will the product do for the customer? Note the difference between features and b enefits, and think about them. For example, a house that gives shelter and lasts a long time is made with certain materials and to a certain d esign; those are its features. Its benefits include pride of ownership, financial security, providing for the family , and inclusion in a neighborhood. You build features into your product so that you can sell the benefits. What after -sale services will you give? Some examples are delivery, warranty, service contracts, support, follow -up , and refund policy. Customers Identify your targeted customers, their characteristics, and their geographic locations , otherwise known as their demographics. The description will be completely different depending on whether you plan to sell to o ther busine sses or directly to consumers. If you sell a consumer product, but sell it through a channel of distributors, wholesalers , and retailers, you must carefully analyze both the end consumer and the middlem an businesses to which you sell. You may ha ve more than one customer group. Identify the most important groups. Then, for each c usto mer group, construct what is called a demographic profile: • Age • Gender • Location • Income level • Social class and occupation • Education • Other (specific to your industry) Page 10 of 28 • Ot her (specific to your industry) For business customers, the demographic factors might be: • Industry (or portion of an industry) • Location • Size of firm • Quality , technology , and price preferences • Other (specific to your industry) • Other (specific to your indust ry) Competition What products and companies will compete with you? List your major competitors: (Names and addresses ) Will they compete with you across the board, or just for certain products, certain customers, or in certain locations? Will you have i mportant indirect competitors? (For example, video rental stores compete with theaters, although they are different types of business es.) How will your products or services compare with the competition? Use the Competitive Analysis table below to compare y our company with your t wo most important competitors. In the first colum n are key competitive factors. Since these vary from one industry to another, you may want to customize the list of factors. In the c olumn labeled Me , state h ow you honestly think you will stack up in customers' minds. Then check whether you think this factor will be a strength o r a weakness for you. Sometimes it is hard to analyze our own weaknesses . Try to be very honest here. Better yet, get some disinter est ed strangers to assess you. This can be a real eye -opener. And remember that you canno t be all things to all people. In fact, trying to be causes many business failures because efforts become scattered and diluted. You wan t an honest assessment of your firm's strong and weak points. Now analyze each major competitor. In a few words, state how you think they compare. Page 11 of 28 In the final column, estimate the importance of each competitive factor t o the customer. 1 = critical; 5 = not very important. You are welcome to use the table below but be sure you also have a complete SWOT analysis. Table 1: Competitive Analysis FACTOR Me Strength Weakness Competitor A Competitor B Importance to Customer Products Price Quality Selection Service Reliability Stability Expertise Company Reputation Location Appearance Sales Method Credit Policies Advertising Image Now , wri te a short paragraph stating your competitive advantages and disadvantages. Page 12 of 28 Niche Now that you have systematically analyzed your industry, your product, your customers , and the competition, you should have a clear picture o f where your company fits i nto the world. In one short paragraph, define your niche, your unique corner of the market. Strategy Now outline a marketing strategy that is consistent with your niche. Promotion How will you get the word out to customers? Advertising: What media, why, and how often? Why this mix and not some other? Have you identified low -cost methods to get the most out of your promotional budget? Will you use methods other than paid advertising, such as trade shows, catalogs, dealer incentives, word of mouth (how will you stimulate it?) , and network of friends or professionals? What image do you want to project? How do you want customers to see you? In addition to advertising, what plans do you h ave for graphic image support? This includes things like logo design, cards and letterhead, b rochures, signage, and interior design (if customers come to your place of business). Should you have a system to identify repeat customers and then systematically contact them? Promotional Budget How much will you sp end on the items listed above? Before startup? (These numbers will go into your startup budget.) Ongoing? (These numbers will go into your operating plan budget.) Pricing Explain your method or methods of setting pr ices . F or most small businesses, having the lowe st price is not a good p olicy. It robs you of needed profit margin; customers may not care as much about price as you think; and large competitors can u nder price you anyway. Usually you will do better to have average prices and compete on quality and se rvice. Page 13 of 28 Does your pricing strategy fit with what was revealed in your competitive analysis? Compare your prices with those of the competition. Are they higher, lower, the same? Why? How important is price as a competitive factor ? Do your intended customers really make their purchas e decisions mostly on price? What will be your customer service and credit policies? Proposed Location Probably you do not have a precise location picke d out yet. This is the time to think about what you want and need in a location. Many startups run succe ssfully from home for a while. You will describe your physical needs later, in the Operational Plan section . Here, analyze your location criteria as they will affect your customers. Is your locatio n important to your customers? If yes, how? If customers co me to your place of business: Is it convenient? Parking? Interior spaces? Not out of the way? Is it consistent with your image? Is it what customers want and expect? Whe re is the competition located? Is it better for you to be near them (like car dealers o r fast -food restaurants) or distant (like convenience -food stores)? Distribution Channels How do you sell your products or services? Retail Direct (mail order, Web, catalog ) Wholesale Your own sales force Agents Page 14 of 28 Independent rep resentative s Bid on contracts Sales Forecast Now that you have described your products, services, customers, markets, and marketing plans in detail, it ’s time to attach some numbers to your plan. Use a sales forecast spreadsheet to prepare a month -by -month projection. The for ecast should be based on your historical sales, the marketing strategies that you have just described, your market research, and industry data, if available. You may w ant to do two forecasts: 1) a "best guess", which is what you really expect, and 2) a "wo rst case" low estimate that you are confident you can reach no matter what happens. Remember to keep notes on your research and your assumptions a s you build this sales forecast and all subseq uent spreadsheets in the plan. This is critical if you are going to present it to funding sources. Page 15 of 28 VI. Operational Plan Explain the daily operation of the business, its location, equipment, people, processes, and surrounding environment. Production How and where are your products or services produced? Explain your methods of: • Pro duction techniques and costs • Quality control • Customer service • Inventory control • Product development Location What qualit ies do you need in a location? Describe the type of location you ’ll have. Physical requirements: • Amount of space • Type of building • Zoning • Power and other utilities Access: Is it important that your location be convenient to transportation or to suppliers ? Do you need easy walk -in access? What are your requirements for parking and proximity to freeway, airports, railroads, and shippin g centers? Include a drawing or layout of your proposed facility if it is important, as it might be for a manufacturer. Page 16 of 28 Construction? Most new companies should not sink capital into construction, but if you are planning to build, costs and specifications will be a big part of your plan. Cost: Estimate your occupation expenses, inclu ding rent, but also including maintenance, utilities, i nsurance, and initial remodeling cos ts to make the space suit your needs. These numbers will become part of your financial plan. What will be your business hours ? Legal Environment Describe the following : • Licensing and bonding requirements • Permits • Health, workplace , or environmental regulations • Special regulations covering your industry or profession • Zoning or building code requirements • Insurance coverage • Trademarks, copyrights, or patents (pending, existing, or purchased) Personnel • Number of employees • Type of labor (skilled, unskilled, and professional) • Where and how will you find the right employees? • Quality of existing staff • Pay structure • Training methods and requirements • Who does which tasks ? • Do you have schedules and written procedures prepared? • Have you drafted job descriptions for emplo yees? If not, take time to write some. They really help internal communications with employees. Page 17 of 28 • For certain functions, will you use contract workers in addition to employees? Wait to complete the full de tails on your rate of turnover until Unit 4. Then you will come back and complete this section and remove the highlighted instructions . Inventory • What kin d of inventory will you keep: raw materials, supplies, finished goods? • Average value in stock (i.e., w hat is your inventory investment)? • Rate of turnover and how this compare s to the industry averages? • Seasonal buildups? • Lead -time for ordering? Suppliers Identify key suppliers : • Names and addresses • Type and amount of inventory furnished • Credit and delivery policies • History and reliability Should you have more than one supplier for critical items (as a backup)? Do you expect shortages or short -term delivery problems? Are supply costs steady or fluctuating? If fluctuating, how would you deal with changing costs? Credit Policies • Do you plan to sell on credit? • Do you really need to sell on credit? Is it customary in your industry and expected by your clientele? • If yes, what policies will you have about who gets c redit and how much? • How will you check the creditworthiness of new applicants? Page 18 of 28 • What terms will you offer your customers; that is , how much credit and when is payment due? • Will you offer p rompt payment discounts ? (Hint: Do this only if it is usual and custo mary in your industry .) • Do you know what it will cost you to extend credit? Have you built the costs into your prices? Ma naging Your Accounts Receivable If you do extend credit, you should do an aging at least monthly to track how much of your money is tied up in credit given to customers and to alert you to slow payment problems. A receivables aging looks like th e following table : Total Current 30 Days 60 Days 90 Days Over 90 Days Accounts Receivable Aging You will need a policy for dealing with slow -paying custom ers : • When do you make a phone call? • When do you send a letter? • When do you get your attorney to threaten? Managing Your Accounts Pay able You should also age your accounts payable, what you owe to your suppliers. This helps yo u plan who m to pay and when. Paying too early depletes your cash, but paying late can cost you valuable dis counts and can damage your credit. (Hint: If you know you will be late making a payment, call the creditor before the due date. ) Do your proposed ven dors offer prompt payment discounts? A payables aging looks like th e following table. Total Current 30 Days 60 Days 90 Days Over 90 Days Accounts Payable Aging Page 19 of 28 VII. Management and O rganization Who will manage the business on a day -to-day basis ? What experience does that person bring to the business? What special or distinctive competencies ? Is there a plan for continuation of the business if this person is lost or incapacitated? If you ’ll have mo re than 10 employees, create an organizational chart showing the management hierarchy and who is responsible for key functions. Include position d escriptions for key employees. If you are seeking loans or investors, include resumes of owners and key employees. Profe ssional and Advisory Support List the following: • Board of directors • Management advisory board • Attorney • Accountant • Insurance agent • Banker • Consultant or consultants • Mentors and key advisors Page 20 of 28 VIII. Personal Financial Statement This section is not required for purposes of this class but you are welcome to enter information if you so desire. Include personal financial statements for each owner and major stockholder, showing assets and liabilities held outside the business and personal net worth. Owners will often have to draw on personal assets to finance the business, and these statements will show what is available. Bankers and investors usually want this information as well. Page 21 of 28 IX. Startup Expenses and Capitalization You will have many expenses before you even begin o perating your business. It’s important to estimate these expenses accurately and then to plan where y ou will get sufficient capital. This is a research project, and the more thorough your research efforts , the less chance that you will leave out important expenses or underestimate them. Even with the best of research, however, opening a new business has a way of cos ting more than you anticipate. There are two ways to make all owances for surprise expenses. The first is to add a little “paddin g” to each item in the budget. The problem with that approach, however, is that it destroys the accuracy o f your carefully wrought plan. The second approach is to add a separate line item, call ed contingencies, to account for the unforeseeable. This is the approach we rec ommend . Talk to others who have started similar businesses to get a good idea of how mu ch to allow for contingencies. If you cannot get good information, we recommend a rule of thumb that contingencies should equal at least 20 percent of the total of all o ther start -up expenses. Explain your research and how you arrived at your forecasts of expenses. Give sources, amounts, and terms of proposed lo ans. Also explain in detail how much will be contributed by each investor and what percent ownership each will h ave. Explain how you intend to obtain financing. Explain how you will payback any loans you take out. Page 22 of 28 X. Financial Plan You will use the spreadsheets provided by SCORE.org and attach them to your business plan. The financial plan consists of a 12 -month profit and loss projection, a four -year profit and loss projection (optional), a cash -flow projection, a projected balance sheet , and a break -even calculation. Together they constitute a reasonable estimate of yo ur company's financial future. More important, the process of thinking through the financial plan will improve your insight into the inner financial workings of your company. 12 -Month Profit and Loss Projection Many business owners think of th e 12 -month profit and loss projection as the cen terpiece of their plan. This is where you put it all together in numbers and get an idea of what it will take to make a profit and be successful. Your sales projections will come from a sales forecast in which you forecast sales, cost of goods sold, expens es, and profi t month -by-month for one year. Profit projections should be accompanied by a narrative explaining the major assumptions used to estim ate company income and expenses. Research Notes: Keep careful notes on your research and assumptions, so that you can explain them later if necessary, and also so that you can go back to your sources when it ’s time to revise your plan. Four -Year Profit Pro jection ( O ptional) The 12 -month projection is the heart of your financial plan. This section is for those who want to carry their forecasts beyond the first year . Of course, keep notes of your key assumptions, especially about things that you expect will change dramatically after the first year. Projected Cash Flow If the profit projection is the heart of your business plan , cash flow is the blood. Businesses fail because they cannot pay their bills. Every part of your business plan is important, but none of it means a thing if you run out of cash. The point of this worksheet is to plan how much you need before startup, for preliminary expenses, operating expenses, and reserves. You should keep updating it an d using it afterward. It will enable you to foresee Page 23 of 28 shortages in time to do something about them — perhaps cut expenses, o r perhaps negotiate a loan. But forem ost , you shouldn’t be taken by surprise. There is no great trick to preparing it: The cash -flow projection is just a forward look at your checking account . For each item, determine when you actually expect to receive cash (for sales) or when you will actu ally have to write a check (for expense items) . You should track essential operating data, which is not necessarily part of cash flow but allow s you to track items that have a heavy impact on cash flow, such as sales and inventory purchases. You should als o track cash outlays prior to opening in a pre -startup column . You should have already researched those for your startup expenses plan. Your cash flow will show you whether your working capital is adequate. Clearly, if your projected cash balance ever goes negative, you will need more start -up capital. This plan will also predict just when and how much you will need to borr ow. Explain your major assumptions , especially those that make the cash flow differ from the Profit and Loss Projection . For example , if you make a sale in month one, when do you actually collect the cash ? When you buy inventory or materials , do you pay in advanc e, upon delivery, or much later ? How will this affect cash flow? Are s ome expenses payable in advance ? When? Are there irregular expenses , such as quarterly tax payments, maintenance and repairs, or seasonal inventory buildup , that should be budgeted ? Loan payments, equipment purchases, and owner's draws usually do not show on profit and loss statements bu t definitel y do take cash out. Be sure to include them. And of course, depreciation does not appear in the cash flow at all because you never write a check for it. Opening Day Balance Sheet A balance sheet is one of the fundamental financial reports that any business needs for reporting and financial management. A balance sheet shows what items of value are held by the company ( assets), and wha t its debts are ( liabilities). When liabilities are subtracted from assets, the remainder is owners’ equity. Use a startup expenses and capitalization spreadsheet as a guide to preparing a balance sheet as of opening day. Then detail how you calculated the account balances on your opening day balance sheet . Page 24 of 28 Optional : Some people want to add a projected balance sheet showing the estimated financial position of the company at the end of the first year. This is especially useful when selling your proposal to investors . Break -E ven Analysis A break -even analysis predicts the sales volume, at a given price, required to reco ver total costs. In other words, it’s the sales level that is the dividing line between operating at a loss and operating at a profit. Expressed as a formula, break -even is: Breakeven Sales = Fixed Costs 1- Variable Costs (Where fixed costs are expressed in dollars, but variable costs are expressed as a percent of total sales.) Include all assumptions upon which your break -even calculation is based. Business Valuation Analysis While this is not generally included in a business plan, it is required for this class. Using a positive forecast, if your plans go well and your business succeeds, calculate what you believe the business valuation will be at the end of five (5) years. Page 25 of 28 XI. Ap pendices Include details and studies used in your business plan; for example: • Brochures and advertising materials • Industry studies • Blueprints and plans • Maps and photos of location • Magazine or other articles • Detailed lists of equipment owned or to be purchased • Copies of leases and contracts • Letters of support from future customers • Any other materials needed to support the assumptions in this plan • Market research studies • List of assets available as collateral for a loa n Page 26 of 28 XII. Refining the Plan The generic business plan presented above should be modified to suit your specific type of business and the audience for which the plan is written. For Raising Capital For Bankers • Bankers want assurance of orderly repayment. If you inte nd using this plan to present to lenders, include: o Amount of loan o How the funds will be used o What this will accomplish — how will it make the business stronger? o Requested repayment terms (number of years to repay). You will probably not have much negotiating room on interest rate but may be able to negotiate a longer repayment term, which will help cash flow. o Collateral offered, and a list of all existing liens against collateral For Investors • Investors have a different perspective. They are looking for dramatic growth, and they expect to share in the rewards : o Funds needed short -term o Funds needed in two to five years o How the company will use the funds, and what this will accomplish for growth. o Estimated return on investment o Exit strategy for investors (bu yback, sale, or IPO) o Percent of ownership that you will give up to investors o Milestones or conditions that you will accept o Financial reporting to be provided o Involvement of investors on the board or in management For Type of Business Manufacturing • Planned production levels • Anticipated levels of direct production costs and indirect (overhead) costs — how do these compare to industry averages (if available) ? • Prices per product line Page 27 of 28 • Gross profit margin, overall and for each product line • Production /capacity limit s of planned physical plant • Production/ capacity limits of equipment • Purchasing and inventory management procedures • New products under development or anticipated to come online after startup Service Businesses • Service businesses sell intangible products. Th ey are usually more flexible than other types of business es, but they also have higher labor costs and generally very little in fixed assets. • What are the key competitive factors in this industry? • Your prices • Methods used to set prices • System of production management • Quali ty control procedures. Standard or accepted industry quality standards . • How will you measure labor productivity? • Percent of work subcontr acted to other firms. Will you make a profit on subcontracting ? • Credit, payment, and collections policies and procedures • Strategy for keeping client base High Technology Companies • Economic outlook for the industry • Will the company have info rmation systems in place to manage rapidly changing prices, costs, and markets ? • Will you be on the cutting edge with your products and services ? • What is the status of research and development? And what is required to: o Bring product/service to market ? o Keep the company competitive ? • How does the company: o Protect intellectual property ? o Av oid technological obsolesce nce ? Page 28 of 28 o Supply necessary capital ? o Retain key personnel ? High -tech companies sometimes have to operate for a long time without profits and sometimes even without sales. If this fits you r situation , a banker probably will not want to lend to you. Venture capitalists may invest, but your story must be very good. You must do longer -term financial forecasts to show when prof it take -off is expected to occur. And your assumptions must be well documented and well argued . Retail Business • Comp any image • Pricing: o Explain markup policies. o Prices should be profitable, competitive , and i n accord ance with company image. • Inventory: o Selection and price should be consistent with company image. o Inventory level: Find industry average numbers for annual in ventory turnover rate (available in RMA book). Multiply your initial inventory investment by the average turnover rate. The result should be at least equal to your projected fi rst year's cost of goods sold. If it is not, you may not have enough budgeted fo r startup inventory. • Customer service policies: These should be competitive and in accord with company image. • Location: Does it give the exposure that you need? Is it convenient for customers? Is it consistent with company image? • Promotion: Methods used, cost. Does it project a consistent company image? • Credit: Do y ou extend credit to customers? If yes, do you really need to, and do you factor the cost into prices?