Business Plan Outline Guide - The Management Plan

Managing a business, requires more than just the desire to be your own boss. It demands dedication, persistence, the ability to make decisions and the ability to manage both employees and finances. Your management plan, along with your marketing and financial management plans, sets the foundation for and facilitates the success of your business.

Like plants and equipment, people are resources -- they are the most valuable asset a business has. You will soon discover that employees and staff will play an important role in the total operation of your business. Consequently, it's imperative that you know what skills you possess and those you lack since you will have to hire personnel to supply the skills that you lack. Additionally, it is imperative that you know how to manage and treat your employees. Make them a part of the team. Keep them informed of, and get their feedback regarding, changes. Employees oftentimes have excellent ideas that can lead to new market areas, innovations to existing products or services or new product lines or services which can improve your overall competitiveness.

Your management plan should answer questions such as:

How does your background/business experience help you in this business?

What are your weaknesses and how can you compensate for them?

Who will be on the management team?

What are their strengths/weaknesses?

What are their duties?

Are these duties clearly defined?

What are your current personnel needs?

What are your plans for hiring and training personnel?

What salaries, benefits, vacations, holidays will you offer?

What benefits, if any, can you afford at this point?

The Financial Management Plan

Sound financial management is one of the best ways for your business to remain profitable and solvent. How well you manage the finances of your business is the cornerstone of every successful business venture. Each year thousands of potentially successful businesses fail because of poor financial management. As a business owner, you will need to identify and implement policies that will lead to and ensure that you will meet your financial obligations.

To effectively manage your finances, plan a sound, realistic budget by determining the actual amount of money needed to open your business (start-up costs) and the amount needed to keep it open (operating costs). The first step to building a sound financial plan is to devise a start-up budget. Your start-up budget will usually include such one-time-only costs as major equipment, utility deposits, down payments, etc.

The start-up budget should allow for these expenses.

Start-up Budget

personnel (costs prior to opening)

legal/professional fees

occupancy

equipment

supplies

salaries/wages

income

utilities

payroll expenses

licenses/permits

insurance

advertising/promotions

accounting

An operating budget is prepared when you are actually ready to open for business. The operating budget will reflect your priorities in terms of how your spend your money, the expenses you will incur and how you will meet those expenses (income). Your operating budget also should include money to cover the first three to six months of operation. It should allow for the following expenses.

Operating Budget

personnel

rent

loan payments

legal/accounting

supplies

salaries/wages

dues/subscriptions/fees

repairs/maintenance

insurance

advertising/promotions

depreciation

payroll expenses

taxes

miscellaneous expenses

The financial section of your business plan should include any loan applications you've filed, a capital equipment and supply list, balance sheet, break-even analysis, pro-forma income projections (profit and loss statement) and pro-forma cash flow. The income statement and cash flow projections should include a three-year summary, detail by month for the first year, and detail by quarter for the second and third years.

The accounting system and the inventory control system that you will be using is generally addressed in this section of the business plan also. Whether you develop the accounting and inventory systems yourself, have an outside financial advisor develop the systems, you will need to acquire a thorough understanding of each and how it operates. Your financial advisor can assist you in developing this section of your business plan.

The following questions should help you determine the amount of start-up capital you will need to purchase and open your business.

How much money do you have?

How much money will you need for start-up?

How much money will you need to stay in business?Other questions that you will need to consider are:

What type of accounting system will your use? Is it a single entry or dual entry system?

What will your sales goals and profit goals for the coming year be?

What financial projections will you need to include in your business plan?

What kind of inventory control system will you use?

Your plan should include an explanation of all projections. Unless you are thoroughly familiar with financial statements, get help in preparing your cash flow and income statements and your balance sheet. Your aim is not to become a financial wizard, but to understand the financial tools well enough to gain their benefits. Your accountant or financial advisor can help you accomplish this goal.

 

 

Finding the Cash Needed to Starting a New Small Business. Now that You have calculated your initial capital requirements, where
will you receive the money? The primary source is your personal savings. Subsequently relatives, friends, or other individuals may
be found who are willing to"venture" their savings in your company. Before obtaining too large a share of cash from external
sources, remember that you ought to have private control of enough to assure yourself ownership.

Once you can show that you have carefully exercised your fiscal Requirements and can demonstrate experience and integrity, a
financing institution might be willing to finance part of your working requirements. This may be done on a short term basis of
from 60 days to as much as one year. Any institution which has money to give is mainly concerned with safety. The security might
be a business asset, but if you are just starting the best safety is usually your house or some other personal advantage.

The second thing the lender will want to see is some sort of Business program. If you complete a business strategy - which
includes a cash flow forecast - the lender will observe that you have done some realistic and serious thinking about your business
and be more likely to think about your request.

Become acquainted with your banker. In picking a banker consider Progressiveness, attitude toward your business, credit services
provided, and the size and management policies of the lender. Is the lender innovative? The physical look of the bank may give you
some indication. When the employees are pretty youthful, interested in your issues and active in civic affairs that the bank is
likely to be progressive. The nature of the bank's advertising may also be an indicator for its progressiveness.

To be effective the banker Ought to Be interested in helping you to Become a better manager, and build a lasting relationship
which will mean rewarding business for you and the lender over the years.

Will the bank give you the kind of credit you need? By Way of Example, If seasonal accumulations of inventory become an issue will
the lender create a loan against field or public warehouse receipts? If your capital is tied up in accounts receivable during your
heavy selling year, will the lender take these receivables as collateral for a loan? Will the bank consider a term loan?

Finally, know the dimensions and management policies of the bank. Will Your maximum requirements fall nicely inside the
bank's"legal limit"? If you plan to do some export business, does it have a foreign exchange department? In the event that you or
your dealers sell on installment terms does the bank have facilities for handling installment paper? How profoundly is the lender
concerned with the growth and prosperity of the local community?

When you handle your banker, sell yourself. Whether or not you Need a bank loan, make it a practice to visit your banker at least
once a year. Openly discuss your strategies and problems. It's the bank's business to not betray a confidence. If you require
financial aid carefully prepare, in written form, complete information that will present a thorough understanding of your whole
proposal. Many business-people or prospective small business operators ruin their chances of getting financial help by failing to
present their proposal properly.

Trade creditor or gear maker, Companies from which you Purchase equipment or merchandise may also provide capital for you in the
form of extended credit. Manufacturers of store fixtures, cash registersindustrial machines frequently have funding plans under
which you may buy in an installation basis and pay out of future earnings. You need not cover the goods simultaneously. If
products are for resale, then no security aside from repossession rights of these unsold merchandise is involved. But too extended
a use of credit may prove expensive. Usually money discounts are offered when a bill is paid within 10, 30, or 60 days. For
example, a term of sale quoted because"2-10; net 30 days" means a cash discount of two percent will be awarded if the invoice is
paid within 10 days. If not paid in 10 days, the whole amount is due in 30 days. If you don't take advantage of the money
discount, you are paying 2% to use money for 20 days, or 36 percent each year. This can be high interest. Avoid it.

Among the principal causes of failures among companies is Inadequate funding. If you do enter company, remember it is your
obligation to provide, or obtain from others, sufficient money to provide a firm foundation for your business.

Sharing Ownership With Other People. Now that you have determined what Business to start and about how much funds will be
required, you might find it necessary to join with a couple of partners to establish the enterprise.

If you lack certain technical or management skills that are of Major importance to your chosen company a partner with these
abilities may prove a satisfactory means to pay the deficiency. If you are extremely skilled in your special area but lack
management training and abilities, you may search for a partner with a background in direction. If you might want more start-up
money, sharing the ownership of this business is 1 way to obtain it. Fantastic care ought to be taken in deciding upon a partner.
Personality and temperament, in addition to ability to render technical or financial assistance, affect the success of a
pa333ship.

A partnership can be a mixed blessing. A spouse who puts in time Or money has a right to expect a share in conducting the
business.

In a partnership the accountability for the debts of the firm is Infinite, just as it's in a single proprietorship. This means the
owners are Personally accountable for the company's debts, even in excess of the amount they Have invested in the business. In a
corporation the liability of the proprietor is Limited To the amount they pay for their shares of stock. A partnership, like one
proprietorship, lacks continuity. Thus, the Company terminates upon the Death of the owner or a spouse, or on the withdrawal of a
spouse.
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