Business Plan for a Startup Business

The business plan consists of a narrative and several

financial worksheets. The narrative template is the body of the
business plan. It contains questions divided into several sections.
Work through the sections in order based on the given format,
except for the Project 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 real value of creating a business plan is not in having the

finished product in hand; rather, the value lies in the process of
researching and thinking about your business 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 should modify it to suit your particular
circumstances. It also has tips for fine-tuning your plan to make
an effective presentation 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, that’s the value of the process. So make
time to do the job properly. Those who 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.

TABLE OF CONTENTS

I Business Project Summary

II Market Study

III Technical
Feasibility…………………………………………………

IV Financial Feasibility …………………………………... …

V Management / Organizational
Study…………………………………

VI Socio –Economic Study

…………………………………………...

Appendices
…………………………………………………

Bibliography

Curriculum
Vitae…………………………………………………….
 Chap
ter I - Business
Project Summary

The Business Project Summary presents the highlights ,

descriptive definition , long range objectives, feasibility criteria,
history and basic conclusions of the project under study. It
provides a capsule view of the whole project.

In outline form, the business project summary is described as

follows:

A. Name of the enterprise

Briefly explain the reason for such choice of name.

B. Location

Pinpoint the location of the company or factory/ office and

give reasons for choosing them. The factors which affect the
choice of location are the sources of raw materials, labor,
and utilities: proximity to the market: ; nature of available
transports ; and cost / rent of land or buildings. The project
must choose a location where maximum efficiency can be
attained at the lowest possible cost.

C. Descriptive definition of the business project:

1. Related national program

Is the project in line with any government- encouraged

undertaking?
 2. Project potential and proponents

Give a conceptual description of the projects potential

worth and importance and the people behind it.
( investors/ capitalist)

3. Project’s long range objectives

What does the project expect to achieve in 5 to 10

years in terms of size, capacity, volume, role in its
industry and the economy.

4. Highlights of the business project plan

1. History

How did the project came about?

2. Project timetable and status

How long will it take before the project goes into

operation? What

stage is the project presently in?

3. Nature of Industry

Briefly describe the industry, its product lines, the

demand-supply

situations, history and growth patterns, problems

and potentials and

role in the economy.

4. Mode of financing
 Briefly discuss the sources of funds, the financing
terms and the

reasons for choosing such sources and terms .

5. Investment costs

How much funds are necessary to make the project

operational?

How are these funds allocated?

F. Major assumptions and summary of findings and

conclusion on the following:

1. Market Feasibility

Discuss the nature of the unsatisfied demand which

the project seeks to meet, its growth and the manner
in which it is met. Her, the supply-demand situation is
examined, the target markets analyzed, and the
marketing programs.

2. Technical Feasibility

Discuss the nature of the product line , the

technology necessary for production, its availability,
the proper mix of production resources, and the
optimum production volume.

3. Financial Feasibility
 Present the overall financial picture in terms of
operating cash requirements , profitability and cash
flow.

4. Socio-Economic Feasibility

What are the effects of the business project on

society and the economy as a whole. Is it generally
beneficial to the people? I it in line with the
economy’s development programs?

5. Management Feasibility

What is the management structure ? Is it appropriate

for the managerial needs of the project ? What is the
salary scale? Is it compatible with industry standards?

Chapter II Market Study

The Market Study is the lifeblood of virtually every business

project study/plan. While profitability is generally the focal point
of a business project, the question of demand is the most basic
issue. Obviously, there can be no discussion of profitability or of
the other aspects of the business project if there is no demand. It
is ,therefore imperative that the market study be given first
consideration.

The market study seeks to determine the following:

1. The size , nature , and growth of total demand for the

product.
 2. The description and price of the product to be sold .

3. The supply situation and the nature of competition

4. The different factors affecting the market of the product.

5. The appropriate marketing program for the product.

Product Description

In describing the product to be marketed, the following are

taken into consideration:

1. Name of the product

2. Properties of the product.

3. Uses of the product

4. Major users of the product

5. Geographical areas off dispersion – where the product is

mostly found.

Demand

An analysis of demand is part of the important task of

identifying the needs of consumers and determining whether
they are willing and have the capability to pay for the products
a business is contemplating on producing or selling. In
forecasting demand, one takes into consideration not only
production and importation figures of the past , but also such
factors as credit availability, income distribution, population
growth, price variations, age composition, the degree of
urbanization, tastes, and preferences, money supply, GNP and
others.
 Thus , demand analysis involves analyzing both
macroeconomic variables, economic data that add up the
activities of consumers, firms, government, and the import-
export sectors and microeconomic variables., data on the
level of the individual firm or at least on the level of an
industry grouping. An example of macro- analysis would be to
study the GNP and its components. If GNP is expected to rise
rapidly, businessmen could ordinarily expect good times for
their business. Or if one is planning on selling a product for
mass consumption, he might give more attention to the
growth rate of a GNP component- Personal consumption
expenditure. Or a producer of equipment would be interested
in the Gross Domestic capital formation component. An
exporter would be interested in the exports of goods and
service items.

On the micro level, the demand for the firm’s product is a

function of many variables such as the price of the product,
the price of substitute product, income, population ,etc.

An analysis of income distribution , for example , could

give us an idea on what types of products consumers can
afford.

Price elasticity , which measures the response of quantity

demanded of a particular product to variations in its price, and
income elasticity, which measure the response of quantity
demanded of a particular product to variations in income , are
also important concepts in demand analysis. For example,
income elasticity figures can reflect priorities of consumers by
showing which products and services they spend more on as
their income improve.
 The size and nature , growth of total demand of the
product must be determined in the following manner:

1. Who and where is the market? Segment the market

according to type, manner of use, income classification,
location, age, etc. the manner of segmenting the market
would depend on the type of product being considered.
For instance, the market for automobiles could best be
segmented by using income as the yardstick. On the
other hand, the market for heavy equipments could
better be understood by pinpointing industry
classification.

2. What is the total domestic demand from the historic

point of view?

3. Is there a foreign market? If so, determine the historical

demand.

4. Evaluate the demand growth patterns in the past and the

project future demand by applying appropriate projection
methods.

Supply Analysis

The supply situation maybe determined as follows:

1. Who and where are the direct competitors ? Classify

them according to size, product quality, location,
performance and market segment performance. It is
important to determine the type of competition
existing .Are there only a few big firms producing the
 product considered? Are there small firms with no single
firm controlling the market ? The type of competition in
existence would influence the decisions on production
capacity and marketing strategies.

2. Determine historical domestic supply as comprised by

local production and importations.

3. If there is a foreign market, determine the historical

supply patterns in the targeted countries as comprised
by their local production and importations.

4. Evaluate supply growth patterns and project future

supply by applying appropriate projection method.

Demand- Supply Analysis

It is now essential to combine thee findings on the

demand and supply

situations. The analysis maybe conducted in the following

manner:

1. Compare the demand and supply trends.

2. Determine the amount of demand unsatisfied, especially

in the projections. If demand appears to be fairly satisfy
by supply, it is important to consider either both of the
following:

a. Whether the factors affecting the market may

disrupt the equilibrium so as to cause demand to
grow faster than supply.
 b. Whether the quality of the product is such that it
may create additional demand or redirect part of
existing demand in its favor.

3. Determine the share of the market by establishing the

proposed production

volume as against the total market size.

Price Study

In the economic theory, price is determined mainly by

the demand –supply situation. An increase in demand with
supply constant will hike prices. The reverse would result in
the lowering of prices. There are , however , other factors
which exert some influence on the price. Without any
change in demand or supply , the prices may go up if raw
materials costs rise, or prices may decline if the
government decides to subsidize production. Prices may
also be determined by the simple cost-plus method of
accountants.

Keeping all these in mind, the price study may be best be

conducted as follows:

1. Determine the selling prices of all similar and

substitute products.

2. Look into the history of these prices ( include range of

fluctuations) and establish the factors that mostly
influence their fluctuations over time.
 3. Determine the responsiveness of demand to price
changes. Will there be tremendous, slight, negligible
increase or decrease if prices are lowered or raised?

4. Establish the product’s selling price, taking into

consideration all of the above , the market segment
targeted and the operating costs and expenses .
Estimate also the increases foreseen in subsequent
years.

Factors Affecting the Market

There are certain factors affecting the market that may

or may not be difficult to quantify or predict. This section takes
into consideration and discusses the following:

1. Demand maybe significantly affected by population growth,

income changes, tastes, rural/ urban development, prices
of substitute products and complimentary products and
such marketing tools as advertising , promotions, credit
policies.

2. Supply maybe influenced by the developments of substitute

products , the entry or exit of firms , sources and cost of
production factors, government policies, improved
technology, etc
 3. Prices maybe affected by production costs , price controls
and inflation, etc.

Marketing Programs

The marketing program should be the end product

of a market study.

After defining market and price targets, the marketing

program comes in

as the implementing arm. It consists of the following

procedures:

1. Determine the types of marketing programs

prevalent in the industry and gauge their
respective effectiveness.

2. Draw up a marketing plan that identifies and

defines the target market, the selling price , the
packaging of the product, the distribution
network, the sales management mechanism and
the advertising and promotions program. The
important components of the marketing program
maybe best be summarized by the four P’s
product , price , place and promotion. Promotions
would be concerned with making the end-users
aware of, and desire, the product.

3. Design the marketing organization which will

implement the plan and determine the costs
involved.
 The sales promotion plan and the channels of
production should be

appropriate to the product and the market. Consumer

buying habits should

be considered in the selection of outlets.

Chapter III - Technical Feasibility

 The technical study is presented by describing and
making the necessary calculations for the following:

1. Product (s)

This portion describes the product(s) to be

manufactured and sold. The description specifies
the product’s physical, mechanical and chemical
properties and identifies their various uses, both as
finished goods and industrial inputs.

2. Manufacturing Process

The selected manufacturing process must be

described simply and clearly, preferably with aid of
flowcharts and diagrams. The alternative process
and the way they compare with the chosen process
must be mentioned. The analysis should further
touch on the manufacturing processes used in
existing plants with the same or similar activit both
domestic and foreign.

Finally, a review of the licensing agreements if there

is one. Should be included here.

3. Plant Size and production Schedule

State the minimum rated capacity of the plant.

The minimum capacity is that level of production
where the resources are not fully used , but are
employed at a minimum economical level. In general
the minimum economical level is that level where the
firm’s fixed cost are least covered by the resulting
revenue. The firm’s fixed cost are determined in the
financial study.

4. Machinery and Equipment

Machinery and equipment required must be

identified and individually listed accordingly to type
and use. Specifications, capacities and costs must be
described in detail. Likewise the origin of the
machinery, whether local or imported, as well as the
manner of and cost of transportation then must be
indicated.

5. Plant Location

A thorough and comparative analysis for each

potential location should be made to determine the
most ideal plant site. It has to consider the following
factors:

a. The accessibility to, and availability of, raw

material resources.

b. The availability of cheap or moderately priced

utilities such as

power, water, fuel, internet connections and

telephones.

c. The combined cost of transporting raw materials

and fuel to the

plant size.

d. The proximity to distributing outlets.

 e. The availability of skilled and unskilled labor.

6. Maps and Charts of proposed plant location must

be included.

6. Plant Lay out

The plant lay out should be clearly depicted

through diagrams and descriptions. A good plant
layout is characterized by minimum material
handling, effective space utilization, smooth
workflow through the plant , safe and conducive
working area for workers , safety and sanitation
facilities, and flexibility of arrangements.

7. Building and Facilities

The site , type and costs of the building and land

as envisioned in the project , should be very
accurately presented. The construction cost of
building and facilities should be presented as
adapted to the machinery and equipment that will be
used in the project. Land improvements such as
road, drainage facilities , et. And their respective
costs should be computed and included.

8. Raw materials and supplies

The required raw materials and supplies should

listed and the basis for their selection must be
presented. Descriptions and specifications on their
physical , mechanical and chemical properties must
 also be given. Current and prospective costs of raw
materials , the availability and continuity of supply
and the current prospective sources should also be
included.

9. Utilities

This portion describes the amount , cost and sources

of electricity, fuel, water / steam required.

10. Waste Disposal

A description of the quantity, manner of disposal

and the cost involved in doing away with expected
waste from production is necessary. The analysis
must be expanded to consider the possibilities of
further using these wastes.

11. Production Cost

Here , the monetary aspect of all production plans

is put into

perspective. How much does it cost to produce one

unit of output? To

arrive at this, the following must be determined: raw

materials costs, labor

cost, overhead cost (fixed cost), operating costs

(variable cost) and other

pertinent costs

12. Labor Requirements

 The various jobs and functions necessary for the
operational stage must

be described. For costing , labor is generally classified

into three ways:

direct, indirect and administrative . The number of

workers to be employed

for each classifications, the pay scales. Employee

development programs,

the organizational set-up and the aggregate labor cost

must be described in

detail.

Chapter IV Financial Feasibility

Since all projects are considered viable only when

they are expected to be profitable to meet short-term
obligations , to be liquid and to remain liquid during
adversities, to grow in their ability to fiancé their
operations mostly from net worth sources rather than
credit applications, and to be able to service their
financing charges , the financial aspect is a very important
part of every project feasibility.

As such , this portion should show in specified terms

whether the project will be profitable even with existing
competition and unfavorable economic conditions and
present detailed figure to show improvement of the
project’s financial condition.

These maybe shown by the preparation of statements

and schedules on the profits expected to be realized, the
modes of financing needed to optimize the project’s
performance, the manner and period of repaying
creditors, and other financial considerations which are
vital to the success of the venture.

A. Major Assumptions

In the formulation of our financial projections,

assumptions play a major role because they serve as
the foundation for estimating the future
expenditures, expenses and revenues of the project
as accurately as possible. These assumptions
therefore, must be based on well-considered, realistic
and workable facts.

In formulating assumptions, one must consider the

following guidelines:
1. Existing business practices in the industry where
the project belongs may provide some valuable
information and insights on.

a. Credit terms

b. Credit extensions

c. Bad Debts Allocations

d. Bad Debts Write-off

e. Quality Control Cost

f. Dividend Policies

g. Sales Returns, allowances and discounts

h. Labor and management compensation

i. Overhead accounts

j. Inventory costing

k. Operating accounts

l. Fixed –Asset requirements

m. Method of Depreciation and amortization

n. Intangible-asset pre-requisites

2. Computations for :

a. selling price
 b. sales forecasts

c. Unforeseen costs

d. Production volume

e. Product Mix

3. Govermental regulations and incentives directly or

indirectly affecting the project, such as :

a. Import policies

b. Export policies

c. Tax rates

d. Tax exemptions

e. Price ceilings

B. Total Project Cost

The estimation of the project’s total cost or initial

asset requirements. Based on the materials, supplies,
equipments, physical plant, and manpower needs of the
project specified in the technical portion. The total
project cost is composed of planned fixed-asset
acquisitions and current –asset level.

1. Fixed Assets – in projecting the project’ s fixed-

asset requirements, the most approximate
acquisition cost of the following accounts should
be taken into consideration:

a. Land and land improvements

 b. Buildings, including electric and water
utilities, furniture and fixtures

c. Equipment, plus installation costs

d. Purchase and installation of machinery

e. Trial-run associated with electric utilities,

equipment and machinery

2. Current assets

Classified into:

a. Inventory investments include purchases of

materials and supplies and the
corresponding freight expenses.

b. Classified under inventory-related costs are

such accounts as direct and indirect labor
with corresponding fringe benefits, heat ,
light and power, maintenance and
warehousing expense related to raw
materials, materials in process and finished
goods.

c. Cash credits are itemized into pre-paid

expenses and intangible assets, operating
salaries, wages, and fringe benefits,
engineering costs, operating taxes, office
supplies, communication facilities, office
facilities, billing costs, transportation costs,
expenses for advertising, borrowing costs
and provisions for unforeseen costs.
 Intangible assets are itemized as follows:
patents, licenses, goodwill, reproduction
rights and organization and pre-operating
expenses.

Pre-operating expenses include costs of initial

investigations, pre-feasibility studies,
research and technical studies, economic
studies etc.

C. Sources of Financing

In deciding on the financing scheme to support the

project , one should take the following steps:

1. The alternative sources of financing to be

considered listed.

2. The sources selected or proposed for both long-

term and short-term financing are determined as
a function of maximum profitability.

3. The amount and terms for each source selected

should be finalized.

4. The status of releasing from each source should

be properly documented and taken into account.

5. Further considerations involved in the financing

of contingencies and fluctuations in working
capital are specified so that the project’s
liquidity and cash solvency are clarified within
each operating year of the project’s early stages.
 6. The alternative sources of financing are
pinpointed in order of priority, incase variances
from expected outcome result due to conditions
which influence the project but are external to it
in nature.

D. Preparations of Financial Statements

Financial statements present in an orderly and

understandable form the cash budget , the operating
performance and the financial condition of a business
enterprise. These should cover at least three
consecutive years.

1. Income Statement

2. Cash Flow Statement

3. Balance Sheet

E. Financial analysis

This gauges the project’s profitability, liquidity, cash

solvency and growth over time.

1. Test of liquidity – these measure to determine a

firm’s ability to meet short-term obligations and
to remain solvent in the event of adversities.

a. Current Ratio

b. Quick Acid –Test Ratio

c. Liquidity of Inventories
2. Test of Profitability

a. Return on Equity

b. Return on Assets

3. Test of Operating Leverage

a. Breakeven Volume

b. Breakeven Selling Price

 Chapter V –Management Study

After setting the objectives and the ways and means

of attaining them, the overall implementation plan is
discussed in the organization and management plan.
Described in this study are the following :

1. Basic considerations in forming the organization

2. Forms of ownership

3. Organizational chart

4. officers and Key personnel

5. Project schedule

Form of Ownership

Here the form of ownership under which the project

will materialized is defined. The choices will be from the
following Business entities in Bahrain:

1. Joint Stock Company (Closed)

2. Single Person Company

3. Holding Company

4. General Partnership Company

5. Simple Commandite Partnership

 6. Public Joint Stock Company

Organizational Chart

All personnel – from the management staff to the rank-

and-file employees are situated in a diagram which shows
their relationships and the flow of authority.

Officers and Key Personnel

The recommendation of specific individuals for certain

key positions is made in this portion. The educational
background, work experience and training , and net worth
of each recommendee must be described.

Project Schedule

Enumerate the different activities involved in the

preparatory stage of the project and present them in the
Gantt Chart to exhibit the duration of each activity .
 Chap
ter VI - Socio-Economic
Study

A project to be worthy of financing, especially from the

government institutions , should be geared toward not only profit
generation but also social and economic benefits. This portion of
the study will serve as an aid in determining the socio-economic
contributions the project can offer.

It will therefore briefly explain how the project will affect:

1. Employment and income ,considering the improvement in

the standards of living of families and individuals.

2. Supply o of commodities, observing the different

possibilities of influencing prices, and foreign exchange
balances.

3. Demand for materials , specifying the use of local

materials to aid local producers.

By generating employment and income, the project

directly benefits individuals and families. Indirectly, the
entire economy may be benefited. More income in the
hands of the people would mean greater demand for other
goods. This additional demand, may in turn, stimulate the
production of more of the other goods, thereby generating
further employment and income.
 In an over crowded industry, the project may improve
product quality and/or decrease prices if it is highly
competitive in its entry.

At the same time, the production activity exerts

additional demand for raw materials and other industrial
inputs. This stimulates the production of the latter items
and helps promote industry linkages.
 V Management / Organization
Plan

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 more than 10 employees, create an organizational chart showing the
management hierarchy and who is responsible for key functions.

Include position descriptions for key employees. If you are seeking loans or
investors, include resumes of owners and key employees.

Form of Business Organization

Is it Sole Proprietorship / Partnership or a Corporation? Why did you choose it?

Profile of the owners/ Partners

Personnel
• Number of employees needed and projections.

• Type of labor (skilled, unskilled, and professional)

• Where and how will you find the right employees?

• Quality of existing staff

• Pay structure table. ( Include all employees salaries and Social Security
contributions to be paid and projected yearly increase in pay scale.)

• Training methods and requirements

• Who does which tasks?

• Do you have schedules and written procedures prepared?

• Prepare the following:

.- Job Description- detail the duties and responsibilities of all employees/

staff.
 - Job Specification – qualifications expected for the proposed employees /
staff.

- Prepare an Organizational Chart

V FINANCIAL PLAN

Financial Assumptions.

Financial Projections
Five –Year Cash Flow

Five- Year Projected Income Statement

Five- Year Projected Balance Sheet

Financial Analysis
Test of Liquidity

a. Return-On-Assets

b. Current Ratio

Debt Analysis

a. Debt Ratio

b. Current Liabilities Ratio

Profitability Analysis

a. Return-On-Investment

b. Asset Turnover

c. Return-On-Equity

d. Break-Even Analysis

Sources of Financing
Where you got your capital – savings, loan etc.

Break down of capital contribution among owners/partners.

Supporting Schedules
a.Sales projections
b. Table of Supplies/Materials used

c. Depreciation Table for machineries/equipment

d. Salaries/ Wages Breakdown

Initial Capital Requirements

Discuss the initial capital requirements

Total Project Cost Breakdown

 VI Socio-Economic Plan

Discuss the following :

a. Contributions to the government/ community /society.

1. Taxes

2. Employment

3. Product / Service Availability

4. Support Government programs

5. Protection of the environment

 I. Appendices

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 loan

• Curriculum Vitae