Creating a Business Plan Narrative

Save this to your computer as a template, and then make your changes to the working file. As you go thru this plan, you’ll replace suggestions with actual content.

There are two primary components to a business plan:
1. What you’re planning to do - The Projected Financials
2. How you’re planning to do it – The Financial Assumptions and the Narrative

Sounds simple huh?
It’s not, but when you go thru the steps to create a detailed financial plan, you will work thru important issues you may not have considered. This is one of the reasons banks and investment bankers like to see Business Plans: They are evidence that you have thought things thru and you have a strategy.

This business plan is designed to be integrated with the financial modeling tool offered at www.ProjectedFinancialStatements.com. This narrative is designed for bank loan requests of $1,000,000 or less. If you are going after Private Equity Financing, or a large bank loan, you’ll need the financial projection plus the detailed business plan narrative.
To integrate this narrative with the financial projection, simply use this table of contents instead of the one offered with the projection.

Read this entire narrative before you begin: Take notes as you read in order to formulate a strategy for preparing a meaningful business plan.

If you need further assistance: There are several ways to get assistance with creating your business plan:
We wish you the best of luck and success with all your business endeavors!

Gruber and Company, Inc.
www.ProjectedFinancialStatements.com



Please note! This narrative is offered free of charge, but you do not have permission to sell it or use it in any way for business consulting purposes without express written permission from Gruber and Company, Inc.



Business Plan
Including
Financial and Cash Projections









Your Business Name
Address
City, ST ZIP Code
Telephone
Fax
E-Mail










Company Name
Business Plan

Table of Contents

Business Summary 2

General Company Description 3

Comparative Summary Financial Statements: 4
Actual Activity thru December 31, 2007
Budgeted & Projected Activity for 2008, 2009 & 2010
Balance Sheets, Income Statements, Statements of Cash Flow, General and Administrative Expenses

Detailed Budgeted Financial Statements: 8
For the 12 months Ended December 31, 2009
Balance Sheets, Income Statements, Statements of Cash Flow, General and Administrative Expenses

Assumptions for the Detailed Budgeted Financial Statements: 13
Detailed assumptions by line item
Budgeted Employee Headcount
Monthly Sales: Calculation and Schedule
Depreciation Schedule







Business Summary


Write this section last.
This should be one page or less.

Explain what you plan to do, and how you plan to do it in a concise and professional manner. Try to elicit enthusiasm from your intended audience. This is the basic information you want to share:
  • The fundamentals of the proposed business
  • The product
  • The potential
  • Who are your customers?
  • Concise outlook for your industry and your business territory.
  • State how your company will distinguish itself, and how you will get the word out to customers? Clearly state how much capital you need, where it’s coming from, and how you intend to use it.







    General Company Description


    This should also be a one page summary. Much of this information will be covered in detail later. If the Exec. Summary is done last, this should be done next to last.

    What industry will you be in? Describe it…Growth industry? etc. Where are you located? What will you do?
    Describe your most important company strengths and core competencies. What factors will make the company succeed?

    Mission Statement:
    Optional: Some companies try to set a corporate tone with a mission statement, and some clients like to read mission statements.

    Company Goals and Objectives:
    You define what the goals are. Are you interested in growing to a certain level? Creating a certain level of profit? Positioning yourself in a certain way?

    Business Philosophy:
    What is important to you in business? What is your basic approach or emphasis regarding making sales, serving customers, employee relations etc..


    Marketing and Advertising Research

    You may need to do some research before you write your general business summary. If so, here are some research tips and some ideas to help you support your marketing and advertising strategy.

    Market research
    There are two kinds of market research - primary and secondary: Secondary research means using published information such as industry profiles, trade journals, newspapers, magazines, census data, 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. Most librarians are pleased to guide you through their business data collection. You will be amazed at what is there. There are more online sources than you could possibly use. Your chamber of commerce has good information on the local 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 competitors, 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.

    Your marketing and advertising efforts are what you will rely on to generate Sales. ‘Projected Sales’ is obviously the most important figure in the entire business plan, so you should be ready to back this number up with research and/or a sound sales and marketing plan.

    Industry Information
    Here are some things you’ll need to know about your industry:

    Customers
    Identify your targeted customers, their characteristics, and their geographic locations, otherwise known as their demographics.
    Your strategy will be completely different depending on whether you plan to sell to other businesses 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 middleman businesses to which you sell.
    You may have more than one customer group. Identify the most important groups. Then, for each customer group, construct what is called a demographic profile:
  • Age
  • Gender
  • Location
  • Income level
  • Social class and occupation
  • Education
  • Other (specific to your industry)
  • Other (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 industry)

    Competition
    List your major competition – Companies as well as competing products.
    How will your products or services compare with the competition? How will your product compare in a good economy v. a bad economy?

    Strategy
    Now that you have systematically analyzed your industry, your product, your customers, and the competition, you should have a clear picture of how your company will distinguish itself.

    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 have for graphic image support? This includes things like logo design, cards and letterhead, brochures, 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 spend 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
    You should have some support for the prices you set. For most small businesses, having the lowest price is not a good policy. It robs you of needed profit margin; customers may not care as much about price as you think; and large competitors can under price you anyway. Usually you will do better to have average prices and compete on quality and service.
    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 purchase decisions mostly on price?
    What will be your customer service and credit policies?

    Distribution Channels
    How do you sell your products or services?
    Retail
    Direct (mail order, Web, catalog)
    Wholesale
    Your own sales force
    Agents
    Independent representatives
    Bid on contracts

    Sales Forecast
    The Sales forecast is the most important number in the entire business plan. Your projection should be based on your historical sales, your listing of repeat customers, existing sales agreements, marketing strategies, your market research, and industry data, if available.

    You may want to do two forecasts: a "best case", which is what you expect based on your research, and a "worst case" based on what you can reach no matter what happens. The numbers used in your projection should approximate the worst-case scenario if possible. This will give the reader room to speculate all the good things that might happen.

    Remember to keep notes on your research and your assumptions as you build this sales forecast and all subsequent spreadsheets in the plan. You will need that research to answer questions from the bank and/or potential investors.