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Bulletin #3005, Your Business Plan

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A Fact Sheet for Small-Scale Business Owners

Your Business Plan

Developed by James C. McConnon, Extension business & economics specialist, and Forest M. French, Extension educator emeritus.
Reviewed by Louis V. Bassano, Extension educator

For information about UMaine Extension programs and resources, visit extension.umaine.edu.
Find more of our publications and books at extensionpubs.umext.maine.edu.

A business plan is your most important tool if you’re considering starting a new business or expanding an existing one. Why is the business plan so important? The business plan is a comprehensive document that communicates to others the production and marketing intentions of the business operator, as well as the projected financial assumptions and facts, and provides the initial feasibility analysis—both physical and financial—of your proposed business. Business plans are used primarily as planning documents for operators, but financial institutions also use them for specific information to support loan applications.

Key Elements of a Business Plan

There are many acceptable formats for a business plan. The following outline describes a business plan format that has been used successfully in Maine.

Outline for Developing a Business Plan1

I. Cover Letter (if the business plan is submitted as part of an application for a loan or credit)

A. Applicant name and address
B. Amount and purpose of loan
C. Term and source of repayment
D. Collateral offered

II. Table of Contents

A. Executive Summary
B. Description of Business
C. Market Analysis
D. Competition
E. Market Strategy
F. Management Plan
G. Sources and Uses of Funds
H. Manufacturing Plan
I. Financial Data

III. Executive Summary

A. Mission statement and goals (short-term and long-term)

(1) Financial goals
(2) Nonfinancial goals

B. Description of your proposed business

(1) Describe your product or service.
(2) Support with diagrams, illustrations, or pictures (if available).

C. Summary of your proposed marketing method

(1) Describe the market segment (or submarket) you are aiming to reach.
(2) Outline the channel you plan to use to reach this market segment (retail, wholesale, distributors, mail order, other).

D. Summary of your financial estimates

(1) State the dollars in sales you aim for in each of the first three years.
(2) State the estimated profit for each of the first three years.
(3) State the estimated starting capital you will need.

IV. Description of Business

A. Include your mission statement and goals.
B. State the type and form of your business.
C. Describe the location and plant description.
D. Describe the product(s) or service(s).
E. Develop a timetable for your business plan implementation.

V. Market Analysis

A. Describe your market.
B. State your market size.
C. Estimate your market’s growth potential.
D. Estimate industry trends.
E. Describe pricing of your product(s) or service(s).
F. Develop a customer profile.

VI. Competition

A. Identify your nearest competitors.
B. Assess their strengths and weaknesses.
C. Describe the advantages your business will have.
D. Describe how you will remain competitive.

VII. Marketing Strategy

A. Identify your methods of selling products: direct, through distributors, retail chains, mail order, Internet, etc.
B. Describe how your products will be serviced.
C. Estimate the kind of advertising anticipated. Identify and estimate costs.

VIII. Management Plan

A. Include personal histories of your business’s owners (resumes).
B. Include your organizational chart.
C. List your duties and responsibilities and those of your employees.
D. List your staffing plan—include the number of employees, and their salaries, fringe benefits, training needs, etc.

IX. Sources and Uses of Funds

A. List the items to be purchased, such as real estate, equipment, franchise, etc.
B. Include current contractor and supplier estimates, including installation, freight, and contingency costs.
C. List proposed sources of funds, including owner’s cash injection, proposed bank financing, and funds from any other sources.
D. Include working capital needs, if applicable.

X. Manufacturing Plan (if applicable)

A. Production and operating functions

(1) How will your production scheduling be accomplished?
(2) How will your product line and product inventory be accomplished?
(3) How will your resource acquisition be scheduled?
(4) Will you need to have a capital budgeting plan for equipment?

XI. Financial Data

A. Historical Balance Sheets (three years, if available)
B. Current Balance Sheet (less than 90 days old)
C. Historical Profit and Loss Statements (three years, if available)
D. Personal Financial Statements of principals with more than 20 percent ownership in the business
E. Cash Flow for one year, month-by-month, for first year after receipt of loan or start of business (provide annual cash projections for three years and include assumptions)
F. Projected Balance Sheets for three years (include assumptions)
G. Projected Profit and Loss Statements for three years (include assumptions)
H. Deviation Analysis for price increases or decreases (three previous years if available)
I. Tax return forms:

  • Profit or Loss From Business (Sole Proprietorship) Schedule C (Form 1040C)
  • U.S. Corporation Short-Form Income Tax Return (Form 1120-A)
  • U.S. Income Tax Return (Form 1120)
  • U.S. Income Tax Return for an S Corporation (Form 1120S)
  • U.S. Partnership Return of Income (Form 1065)
  • Partner’s Share of Income, Credits, Deductions, etc.
  • Schedule K-1 (Form 1065)

J. Capital equipment list

A business plan is an outstanding opportunity for you to present your business ideas, skills, abilities, and opportunities in the most positive and enthusiastic manner.

1 Adapted from Business Answers, Maine Department of Economic and Community Development (2005 For a copy of Business Answers, write or call: Maine Department of Economic and Community Development. State House Station #59, Augusta, ME 04333, 1-800-872-3838.


SAMPLE FORMAT
BALANCE SHEET
Your Company
December 31, 20XX

ASSETS LIABILITIES AND NET WORTH
Current Assets:
Cash $________
Accounts Receivable (net) ________
Merchandise Inventory ________
Supplies ________
Prepaid Expenses ________
Total Current Assets $________
Fixed Assets:
Land $________
Fixtures & Leasehold Improvements ________
Building (Freezer) ________
Equipment ________
Trucks ________
Less: Accumulated Depreciation (________)
Total Net Fixed Assets $________
TOTAL ASSETS $________
Current Liabilities:
Accounts Payable $________
Current Portion Long-Term Debt ________
Total Current Liabilities $________

Long-Term Liabilities:
Notes Payable $________
Bank Loan Payable ________
Other Loan Payable ________
Total Long-Term Liabilities $________
Total Liabilities $________
Net Worth: Owner’s Equity
$________
TOTAL LIABILITIES & NET WORTH $________

SAMPLE FORMAT
ANNUAL PRO FORMA OR HISTORICAL INCOME STATEMENT
Your Company
January 1, 20XX – December 31, 20XX

NET SALES $____________
Less: COST OF GOODS SOLD ____________
GROSS MARGIN $____________
OPERATING EXPENSE:
Salaries & Wages $____________
Payroll Taxes & Benefits ____________
Rent ____________
Utilities ____________
Maintenance ____________
Office Supplies ____________
Postage ____________
Automobile & Truck ____________
Insurance ____________
Advertising ____________
Interest ____________
Legal & Accounting ____________
Depreciation ____________
Other ____________
TOTAL OPERATING EXPENSE $____________
PRE-TAX PROFIT (LOSS) $____________
LESS: TAXES ____________
NET PROFIT (LOSS) $____________

SAMPLE FORMAT
Monthly or Annual Pro Forma or Historical
CASH FLOW
Your Company


Pre-Start-Up Month _______ Month _______ Annual
Actual Projected Actual Projected Actual Projected Actual

CASH RECEIPTS
Cash Sales 1 _______ _______ _______ _______ _______ _______ _______
Cash Sales 2 _______ _______ _______ _______ _______ _______ _______
Proceeds from Loan _______ _______ _______ _______ _______ _______ _______
Other Cash Receipts _______ _______ _______ _______ _______ _______ _______
TOTAL CASH RECEIPTS _______ _______ _______ _______ _______ _______ _______

CASH PAYMENT
Advertising _______ _______ _______ _______ _______ _______ _______
Material Purchases _______ _______ _______ _______ _______ _______ _______
Bank Service Charges _______ _______ _______ _______ _______ _______ _______
Car & Truck Expenses _______ _______ _______ _______ _______ _______ _______
Commissions _______ _______ _______ _______ _______ _______ _______
Dues & Publications _______ _______ _______ _______ _______ _______ _______
Employee Benefits _______ _______ _______ _______ _______ _______ _______
Freight _______ _______ _______ _______ _______ _______ _______
Insurance _______ _______ _______ _______ _______ _______ _______
Principal Payment _______ _______ _______ _______ _______ _______ _______
Interest Payment _______ _______ _______ _______ _______ _______ _______
Laundry & Cleaning _______ _______ _______ _______ _______ _______ _______
Legal & Professional Fees _______ _______ _______ _______ _______ _______ _______
Office Expenses _______ _______ _______ _______ _______ _______ _______
Maintenance _______ _______ _______ _______ _______ _______ _______
Rent on Business Property _______ _______ _______ _______ _______ _______ _______
Supplies _______ _______ _______ _______ _______ _______ _______
Travel _______ _______ _______ _______ _______ _______ _______
Meals and Entertainment _______ _______ _______ _______ _______ _______ _______
Utilities:
Water _______ _______ _______ _______ _______ _______ _______
Telephone _______ _______ _______ _______ _______ _______ _______
Power _______ _______ _______ _______ _______ _______ _______
Salaries and Wages _______ _______ _______ _______ _______ _______ _______
Other Payments _______ _______ _______ _______ _______ _______ _______
Draw _______ _______ _______ _______ _______ _______ _______
Taxes _______ _______ _______ _______ _______ _______ _______
TOTAL CASH PAYMENTS _______ _______ _______ _______ _______ _______ _______

SUMMARY
Starting Balance _______ _______ _______ _______ _______ _______ _______
Plus: Total Cash Receipts _______ _______ _______ _______ _______ _______ _______
Less: Total Cash Payments _______ _______ _______ _______ _______ _______ _______
Equals: Ending Balance _______ _______ _______ _______ _______ _______ _______

Information in this publication is provided purely for educational purposes. No responsibility is assumed for any problems associated with the use of products or services mentioned. No endorsement of products or companies is intended, nor is criticism of unnamed products or companies implied.

© 1996, 2005
Published and distributed in furtherance of Cooperative Extension work, Acts of Congress of May 8 and June 30, 1914, by the University of Maine and the U.S. Department of Agriculture cooperating. Cooperative Extension and other agencies of the USDA provide equal opportunities in programs and employment.

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