Page 1 of 27

Business Plan

Accessorize Me
123 Any Street
Suite# 786
Any City, Any State, 12345
Telephone
Fax
E-Mail
 Page 2 of 27

I. Table of Contents

I.Table of Contents...........................................................................................2

II.Executive Summary......................................................................................3

III.General Company Description......................................................................6

IV.Products and Services..................................................................................7

V.Marketing Analysis Summary........................................................................8

VI.Strategy and Implementation Summary....................................................12

VII.Management Summary.............................................................................15

VIII.Personal Financial Statement...................................................................19

IX.Startup Expenses and Capitalization..........................................................20

X.Financial Plan..............................................................................................21

XI.Appendices................................................................................................ 24

XII.Refining the Plan.......................................................................................25

 Page 3 of 27

II. Executive Summary

Overview

Accessorize Me is an upscale women’s designer & manufacturer of unique accessories and will
be opening in October of 2010. Accessorize Me makes many different designs in the form of
rings, earrings, bracelets, and pendants. All of the products are designed and manufactured by
using the most up-to-date fashion trends. The company’s jewelry selections and exclusive
personal style services will ensure that the customers are well accessorized. In order to grow and
achieve the desired level of market penetration, the company has outlined the following
marketing/production goals over the next three years:

• The expansion of Accessorize Me locations in at least four different cities by 2012.

• Increase the number of items offered by 8% per year.

Jewelry for stylish women

Accessorize Me will carry Ready-to-Wear fashionable and contemporary accessories for women,
and will be the exclusive home of the AMC (Accessorize Me Contemporary) Line, MMC
(Modern Me Contemporary) Line, and UMC (Unique Me Contemporary) Line. In addition to
these fabulous exclusive lines, Accessorize Me will feature many other choice selections. The
Accessorize Me customer is a professional woman who enjoys the boutique fashions and wants a
place where she can go to get services that meet her lifestyle.

Unique & innovative

The jewelry industry is highly fragmented with thousands of artisans competing for distribution
contracts. Some work and distribute locally, while others have national distribution systems set
up. Some artists will design products for larger companies to manufacture, others will design and
make the pieces themselves. Accessorize Me will be focusing on one distinct group of
customers, The End Consumer. The end consumer will be interacting directly with the Style
Concierges at the Accessorize Me locations. Style Concierges are individuals who are highly
trained in the jewelry industry and will be available to customers as needed.
These specialists will provide services such as Style Assessments, Accessory Analysis, Personal
Shopping, and special ordering to customers during store hours and by personal appointments.
Accessorize Me’s innovative Style Assessments and educational emphasis in helping women
develop their personal styles will enhance our reputation as a truly unique boutique.
 Page 4 of 27

Financial Considerations

Accessorize Me will be completely financed by equity capital provided by the owners. The
company will pass the break-even point within the first year of business. Conservative
projections based on sales over the next three years yield an annual revenue of $75,000 by Year
Three. The company expects its cash account to remain healthy.

2.1 Objectives

The objectives for the first three years of operation include:

* To create an upscale women’s designer and manufacturer of jewelry whose primary goal is
to exceed customer's expectations.

* The expansion of Accessorize Me locations in at least four different cities by 2012.

* Increase the number of items offered by 8% per year

* To develop a profitable/sustainable industry-based company.

2.2 Mission
 Page 5 of 27

Accessorize Me’s mission is design and manufacture upscale, unique, and innovative items of
jewelry. The company will be in existence to attract and maintain customers. When the company
adheres to this maxim, everything else will fall in to place and the services will exceed the
expectations of all customers.

2.3 Keys to Success

* Having locations in high-traffic shopping areas

* Quality products and excellent relationships with vendors

* Outstanding customer service

2.4 Objectives

* To maintain profit margins at 25-30% through close attention to expenses and cost of goods
sold

* To drive awareness and build sales through mentions via various advertisement avenues

* To market new items effectively and generate $1000 in sales per square foot
 Page 6 of 27

III. General Company Description

Accessorize Me is an upscale women's jewelry boutique that intends to open in San Diego in
October of this year. Accessorize Me carries beautiful designer jewelry for professional women,
such as the sophisticated and exclusive AMC Line. The company’s unique selections and
exclusive personal style services will ensure that all customers are always well styled.

3.1 Start-up Summary

This business plan will be used for three purposes:

* To map out all the necessary components to create a successful and well-run boutique
* To provide management with a blueprint to follow
* To secure financing through private investors

Start-up Funding will consist primarily of owner investment. The Start-up Period for this plan
runs from March through October. Accessorize Me will open on October 15, 2010, and project
real sales beginning in November of Year 1.

3.2 Company Ownership

Accessorize Me has been established as a Limited Liability Partnership due to the ease of
formation, simplicity of the structure and tax record keeping. In the future, the company will
look at forming an S Corporation when other locations are opened.
 Page 7 of 27

IV. Products and Services

Accessorize Me will carry Ready-to-Wear fashionable and contemporary accessories for all
women. The company will carry three main Ready-to-Wear lines (AMC - Accessorize Me
Contemporary Line, MMC - Modern Me Contemporary Line, and UMC - Unique Me
Contemporary Line. Accessorize Me will also carry many other choice selections.

4.1 Exclusive Style Assessment

Personality Style Assessment

The Style Assessment is a one-page quiz that helps women determine the appropriate styles for
their personalities. The assessment helps a customer define her personality by providing her style
words (e.g. engaging, romantic, modern) to choose from along with tips on what jewelry works
well for her style personality. Style Icons are also provided to help her visualize the appropriate
look. After each customer completes the quiz in the studio section of the boutique, she will
receive a laminated Accessorize Me wallet card to carry around as a shopping reminder that lists
her style personality type, style words, style icons and clothing styles appropriate for her.

Full and Self-Service

* "What's New" Bulletin - Beside the coffee bar area there will be a bulletin board that is
frequently updated and displays the following details:

- Featured Item - This will show a profile of one of the items

- How to Wear - This will show how to wear a particular item for work, weekend and
going out

- Coming Soon - This will feature items coming into the boutique soon

- Services - This will list all the additional style services that Accessorize Me has to offer

* Jewelry Tags - Each jewelry tag will have the corresponding Style Personality numbers
listed to help customers determine which pieces are best for them

* Style Concierges – Accessorize Me believes in bringing the best service to all customers.
As such, all sales specialists are called Style Concierges. All Style Concierges will be highly
trained and educated in the jewelry industry. They will be available to assist customers with their
Style Assessments, wardrobe planning, special orders and personal shopping. If a customer is
pressed for time, a simple phone call is needed to set up an appointment and there will be
someone there to assist beyond normal business hours.
 Page 8 of 27

V. Marketing Analysis Summary

There are various economic forces that affect retailers. Consumer confidence is the most
important; people don't shop when they are not feeling good. Unemployment also has an
effect, in that fewer women out in the workforce means less disposable income for high-end
quality jewelry. Thus, the large discounters (Target, Sears and Wal-Mart) are now working with
top designers to bring jewelry to the masses. Although they can't compete on quality, their
continued development of the trend could have a direct impact on retailers who sell designer
jewelry during tough economic times.

Fortunately, the luxury goods market, of which Accessorize Me is a part of, due to the high-end
brands it will carry, has remained recession-proof, as clearly indicated by the successful 2009
results for Coach, Tiffany and Saks. According to Women's Wear Daily, luxury firms forecast a
strong 2011, particularly for accessories and footwear. However, the strong Euro and slowdown
in wealth creation are big concerns and managing a balanced quality-price ratio is the key to
success for luxury retailers.

"Fashion is a requirement for those who are high in their success." - Luxury Consumer

5.1 Market Segmentation

Accessorize Me has targeted only one distinct group of customers, The End Consumer.

The End User- These buyers are familiar with Accessorize Me either from stumbling across the
website, word of mouth, or some other avenue. The individual would then view the different
available items at the store or on the website and place the order via the Web, phone, fax, in
person, or mail. The margins for individual sales are greater because there is not a distribution
layer involved, it is direct from Accessorize Me to the end consumer. The individuals that are
typically attracted to this type of high end items are women with exquisite styles.

5.2 Target Market Segment Strategy

San Diego is rated amongst the top U.S. markets in economic and educational achievements. At
an average age of 40, the San Diego professional is highly affluent, with an average family
household income of $180,903 and a median home value of $622,170. Close to 50% have a
bachelor's degree and 40% of these professionals hold a postgraduate degree.

Accessorize Me customers will learn about the boutique through the following sources:
 Page 9 of 27

* San Diego Storefronts

* Friends & Customers (word of mouth and email)
* Personal shoppers and stylists
* Women's Fashion Magazines articles and reviews
* Local press mentions & ads
* Travel and shopping books and websites

The Primary Customer

The primary Accessorize Me customer is a professional woman with a household income over
$100K. Her main characteristics are listed below:

Demographics

* Professional woman (ages 30-55)

* Household income over $100,000
* College-educated
* Lives in a higher-income LA neighborhood

Psychographics

* Looks for bargains (seasonal fashion) but willing to spend money on quality, core items
* Would like more time or help in understanding what jewelry is right for her
* She wants to look her best because she wants to feel good about herself as well as make a
good impression at her job

Shopping Behaviors

* Spends over $3,500 for clothes each year

* Shops at Boutiques and various high-end stores
* She cares about how she presents herself, enjoys fashion, and looks for quality over
quantity

Customer needs, expectations and buying patterns

The Accessorize Me customer loves to shop and enjoys going to boutiques. She is
knowledgeable about designer fashions and tends to shop for seasonal wardrobes twice a year
plus picks up various fashion and basic pieces throughout the year. Many times she shops to
"browse." By offering fashionable jewelry, Accessorize Me will be able to grab a larger share of
her wardrobe budget. She is used to coming into the store and browsing through the items and
trying on what interests her. She enjoys being left alone but also enjoys the special touches of
personal shopping assistance and having the ability to special order items. She wants fun and
catered shopping events in the evening and also enjoys receiving special notices on sales and
participating in trunk shows to garner more savings.
 Page 10 of 27

5.3 Service Business Analysis

Accessorize Me is considered a luxury boutique within the Women's Clothing & Jewelry
Industry.

The retail sector is the second-largest industry in the United States, both in number of
establishments and number of employees. It is also one of the largest industries worldwide. The
retail sector employs over 23 million Americans and generates more than $3 trillion in retail
sales annually.

The Clothing & Accessories Stores subsector of Retail has seen sales growth of 19% over the
last five years. Businesses in the Clothing and Accessories Stores subsector sell new clothing and
accessories merchandise from fixed point-of-sale locations. Establishments in this subsector have
similar display equipment and staff that is knowledgeable regarding fashion trends and the
proper match of styles, colors, and combinations of clothing and accessories to the characteristics
and tastes of the customer.

Economic, Cultural, and Environmental Conditions

Weather, seasonal events, holiday shopping, competitor marketing, California tourism, and the strength of
the dollar can all affect the performance of Accessorize Me. On a macro-economic level, consumer
confidence, interest rates and inflation rates all have an effect. Rising unemployment, political concerns
and deflation also pose risks.

5.3.1 Competition and Buying Patterns

As previously stated, the jewelry industry is composed of thousand upon thousands of people.
Some work and distribute locally, others have national distribution systems set up. Some artists
will design products for larger companies to manufacture, others will design and make the pieces
themselves.

Accessorize Me has stiff local and online competition with the many boutiques in the California
area. Direct competitors include those boutiques that carry some of the brands that Accessorize
Me plans on carrying or could move easily into carrying. Indirect competitors are those
boutiques in the California area that focus on a different target market or do not carry lines that
Accessorize Me will carry.

The buying patterns of consumers fall into typically two types: gifts and impulse purchases. A
gift purchase occurs when the buyer is looking for a gift for someone, sees the jewelry piece, and
then purchases it. In this case the plan is to make a purchase, it is just not known what or where
 Page 11 of 27

that purchase will be made. The other buying pattern is an impulse purchase. Someone will be
shopping and they are not in need of anything, will see the item and want it, buying it on the
spot. One last pattern that occurs less frequently is if someone was looking for an "accessory"
that would match an outfit and happens to come across the piece of jewelry and buys it.

Accessorize Me’s own comparative analysis of the boutiques reveals that very few are successful
in delivering high-quality customer service, as browsers are routinely ignored. It appears that if
you don't look a certain way or show that you have money when you walk in, you are
immediately disregarded. There are some retailers who do get it right - they have strong
customer relationships, carry the right mix of merchandise, are knowledgeable in fashion - and
the plan. This is critical if you are going to present it to funding sources.
 Page 12 of 27

VI. Strategy and Implementation Summary

Based on extensive research conducted on women's shopping behaviors, the following marketing
strategies will be employed:

• Develop strong relationships with customers by utilizing Style Assessment

and offering services to help each woman determine the right accessories for
her.
• Build awareness of brand and services to exemplify strong store reputation.
• Provide customers with a sense of access to "inside information" and harness
the power of a woman's personal network by leveraging marketing collateral
designed for sharing and encouraging referrals.
• Utilize personal referrals and stylists to build traffic.

6.1 Sales Strategy

Product/Service Selection
To overcome seasonality concerns, Accessorize Me will carry various merchandise in fashion
and wardrobe accessories. Additionally, the company will provide personal shopping services
and special ordering for all customers. Special Orders are a huge benefit as Accessorize Me
obtains full-price sell-through and there is no floor space needed to sell the article.

Pricing
Accessorize Me is committed to bringing high quality accessories to women and will cater to all
budgets. To maintain profit margins of 25-30%, the company will negotiate and focus on
obtaining an average 61% retail markup for all merchandise classifications.

Location
Accessorize Me will be located in an upscale neighborhood in the San Diego area. A significant
proportion of the target market lives in this area. The company will work with the local
merchants association as well as local publications to generate PR and shopping in the
neighborhood. Accessorize Me will also attract women from throughout other neighborhoods as
well as the customers who come from out of town to shop.

Accessorize Me will launch in October 2010 and have a website presence where fashionable
customers throughout the country can go to learn more about the boutique, the Style Assessment,
how to wear certain items for day, evening and weekend, and make personal shopping
appointments.

Style Concierges
Most women are intimidated by upscale fashion boutiques, as many sales associates can come
across rude. Additionally, the sales pressure from an associate can be a huge turn-off to a
potential customer as it doesn't allow a customer to browse and get to know the store's products
at their own pace. Accessorize Me will have two specialists, or "style concierges" at all times
during the business hours.
 Page 13 of 27

6.2 Competitive Edge

Although Accessorize Me will bring high-quality accessories and value to all women, the most
significant competitive advantage the company will have over all competitors is dedication to
providing an approachable retail atmosphere with top-notch customer service. Accessorize Me’s
unique selling proposition is the integrated concept of personal style services: from events and
bios that educate shoppers on new designs, to personalized Style Assessments, to our very own
unique Style Concierges.

6.3 Marketing Strategy

Positioning Statement
Accessorize Me provides women with upscale accessories and exclusive personal services. Our
main competitive advantage is the unique Style Assessment and education emphasis in helping
women develop their personal style.

BRAND PERSONALITY

Innovative | Stylish | Contemporary | Modern | Fresh | Approachable | Elegant

The overall brand personality of Accessorize Me aspires to be fashionable, customer-oriented,

innovative, refreshing, stylish and educational. The boutique is a place where women can go to
transform themselves with beautiful accessories and take advantage of the Style Assessment and
other services that help them determine the right items for their unique selves. We are a shop that
educates. We help women learn about the designers, gather with their friends, and have fun
during the process.

Promotion
The following promotional tactics for generating buzz and awareness about Accessorize Me will
be implemented:

• Personal selling and word of mouth via networks of friends, stylists and customers
• Unique visual displays in storefront on a weekly basis
• PR (local and national)
• Direct mail such as postcard notices that are targeted specifically to the customer
• Sales Promotion such as store events and bi-annual sales
• Web Site

Other important marketing strategies, such as developing strong customer relationships

(retention), will utilize a different mix of marketing programs.
 Page 14 of 27

6.4 Milestones

Marketing Calendar:

Date and Tactic

• August - October -- PR Media Kits and Local/National PR outreach

• October 14 -- Launch Party and Event
• October 15 -- Grand Opening
• November 5 -- Fashion Show
• November 7 -- Style Assessment Workshop
• December 4 -- Mother-Daughter Night; Style Assessment Workshop
• December 10 -- Holiday Hair Workshop; Style Assessment Workshop
 Page 15 of 27

VII. Management Summary

Management Expertise

Vrootje Magen | Owner

Vrootje Magen has 20 years of work experience that is directly relevant to managing and
operating a successful clothing boutique. The first eight years of her professional work
experience were spent in retail sales and banking, and the last 12 years have been dedicated to a
professional career in marketing. The sum of these experiences truly integrates the key
disciplines for running a successful business: sales, finance, and management.

Ms. Magen's initial experiences in retail and business sales were formative insofar as they helped
her early on to understand how to best work with all types of personalities, meet individual needs
through listening, and develop strong creative problem-solving skills. Much of this experience
was spent "in the trenches," developing practical skills on the floor at retailers including
JCPenney, Gottshchalks and Ann's Boutique. She has an understanding of what it takes to work
in a retail environment, from stocking the sales floor and utilizing loss prevention skills, to
ringing up a sale and counting back cash, and most importantly, reading a customer. Her five
years as a Financial Service Representative at two banks directly benefit the day-to-day
operations of the boutique.

With a successful and award-winning career in corporate marketing for the last 12 years,
Ms. Magen understands how to create successful communications and marketing strategies and
have experience marketing fashion for top retailers, such as Levi Strauss and Gap Inc. Much of
this work involved developing and maintaining high profile campaigns that were structured
around generating increased customer sales within the store environment and through sales
associate training. She has led successful teams, which involved qualified and thoughtful
selection of employees and consultants to help ensure the success of a project.

Her current efforts toward opening De Kliek Style Studio have heavily depended on all the skills
and abilities that she has developed in her past professional lives. Her combined skills and
knowledge of the right types of clothing a woman should wear based on her body type and
personality are enhanced by her retail experience, and her current training within the Association
of Image Consultants International for the last two years has solidified her expertise.

Ms. Magen is extremely dedicated and motivated to creating a thriving clothing boutique and
feels confident in succeeding based on her well-rounded experience, established sound vendor
and customer relationships, and strong work ethic.

Team of Advisors

Lisa Bakke, Certified Image Professional

As a personal stylist, Lisa Bakke has helped people look and feel great for fifteen years. Known
as the Shopping Sherpa, she is dedicated to leading people to their style destination. Lisa was
 Page 16 of 27

born with a remarkable, discerning "eye" for beauty and detail and started winning national art
awards at age twelve.

Lisa graduated from Colorado College in 1979 with a bachelor's degree in art and education. By
1989, Lisa played a key role in launching a women's ready-to-wear line by designing, marketing
and selling it via hugely successful trunk shows. It was then that she recognized women wanted
one-on-one attention in helping them determine their optimal clothing designs and colors. In
2000-2001, Lisa served as president of a prestigious international organization for image
consultants. She is also the editor of a 12-page publication for image consultants. Today, Lisa
regularly shops for clients in Paris.

Rilke Szanku, Creative Director & Principal, Blue42

Throughout her 15 years of experience in the design industry, Rilke Szanku has found that her
best work has harnessed the power of striking visuals grounded in solid strategy to meet client
objectives. She founded Blue42 to provide cutting edge print and web design. Prior to founding
Blue42, Rilke was the Creative Director at COmpany X. Her work for top clients has been
widely acclaimed.

Nicco Q. Smore, Architecture & Design

Nicco Smore received his B.A. from Florida State University in 1991 and his Masters in
Architecture from the University of Florida in 1997. Since 1998 he has worked for Big
Architecture in California and has been involved in the design and construction of diverse project
types, including educational, civic, and religious facilities, as well as several residential projects.
Much of his current work includes design and construction administration of renovation, and
modernization of existing secondary educational facilities.

Schulden F. Kopff, CPA

Schulden Kopff has been a CPA for more than ten years and is certified in two states (California
& Missouri). [Private information removed for confidentiality.] Mr. Kopff currently operates his
own tax practice in Los Angeles.

Fanny Packer, Attorney

Fanny Packer, J.D., M.B.A., C.P.A., is an attorney in independent practice who provides
business law counseling and transactional support to entrepreneurs and growing business
organizations. Fanny is an experienced professional who has worked in the legal profession since
1998, and has been heavily involved in sophisticated business transactions and major business
contract negotiations in various roles for over 20 years. Her core legal competencies are in
corporate, contracts, intellectual property, and commercial real estate law.

Gordon Grido, VP Merchandising Analyst, RMSA

De Kliek is working with Merchandising Analyst Gordon Grido to develop a specific plan that
will guide the company through making purchasing decisions, as well as planning and inventory
management. Gordon has been with Retail Merchandising Service Automation (RMSA) for 17
years, working with LA Area retailers similar to De Kliek. His focus is to enable merchants to
make merchandising decisions that keep a healthy cash flow with maximum profitability as the
main goal of business operations.
 Page 17 of 27

RMSA has maintained its status as the leading provider of inventory management and
forecasting tools for retail businesses nationwide. RMSA Forecasting is a merchandise planning
service that combines information from a retailer's sales and inventory with RMSA's
extraordinary retail database to help retailers forecast and improve the performance of their retail
operations.

Hugh Enmity, Fashion & Merchandising Instructor, Academy of Art

Mr. Enmity has spent over 20 years in retail as an executive with a leading traditional department
store (Macy's), off-price chain (Ross Stores) and mall-based chain store (Footlocker). His
background is primarily in Menswear with extensive experience in tailored clothing, shoes,
sportswear, activewear, dress furnishings and basic furnishings.

Astrix Komma, Copywriter/Creative Consultant

With nearly 20 years of solid direct response, advertising and Web experience for agency
powerhouses up and down the West Coast, Astrix Komma has been a lead creator on high profile
marketing campaigns. Her creative work has won numerous industry awards including a Clio
and Communication Arts award and a host of direct marketing accolades, including multiple
John Caples awards.

Read more:
http://www.bplans.com/womens_clothing_boutique_business_plan/management_summary_fc.cf
m#ixzz0nqw03AFL
.

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.

Professional and Advisory Support

List the following:

• Board of directors

• Management advisory board

• Attorney
 Page 18 of 27

• Accountant

• Insurance agent

• Banker

• Consultant or consultants

• Mentors and key advisors

 Page 19 of 27

VIII. Personal Financial Statement

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 20 of 27

IX. Startup Expenses and Capitalization

You will have many expenses before you even begin operating your business. It’s important to estimate
these expenses accurately and then to plan where you 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 costing more than you
anticipate. There are two ways to make allowances for surprise expenses. The first is to add a little
“padding” to each item in the budget. The problem with that approach, however, is that it destroys the
accuracy of your carefully wrought plan. The second approach is to add a separate line item, called
contingencies, to account for the unforeseeable. This is the approach we recommend.

Talk to others who have started similar businesses to get a good idea of how much 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 other start-up expenses.

Explain your research and how you arrived at your forecasts of expenses. Give sources, amounts, and
terms of proposed loans. Also explain in detail how much will be contributed by each investor and what
percent ownership each will have.
 Page 21 of 27

X. Financial 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 your 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 the 12-month profit and loss projection as the centerpiece 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,
expenses, and profit month-by-month for one year.

Profit projections should be accompanied by a narrative explaining the major assumptions used to
estimate 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 Projection (Optional)

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 and using it afterward. It will enable you to
foresee shortages in time to do something about them—perhaps cut expenses, or perhaps negotiate a loan.
But foremost, 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 actually
have to write a check (for expense items).
 Page 22 of 27

You should track essential operating data, which is not necessarily part of cash flow but allows you to
track items that have a heavy impact on cash flow, such as sales and inventory purchases.

You should also 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 borrow.

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 advance, upon delivery, or much later? How will this affect
cash flow?

Are some 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 but definitely 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
what 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.

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-Even Analysis
A break-even analysis predicts the sales volume, at a given price, required to recover 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.)
 Page 23 of 27

Include all assumptions upon which your break-even calculation is based.

 Page 24 of 27

XI. 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

 Page 25 of 27

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 intend 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 (buyback, 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

 Page 26 of 27

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

• Gross profit margin, overall and for each product line

• Production/capacity limits 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. They are usually more flexible than other types of
businesses, 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

• Quality control procedures. Standard or accepted industry quality standards.

• How will you measure labor productivity?

• Percent of work subcontracted 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 information systems in place to manage rapidly changing prices, costs,
and markets?

• Will you be on the cutting edge with your products and services?
 Page 27 of 27

• 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 Avoid technological obsolescence?

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 your 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
profit take-off is expected to occur. And your assumptions must be well documented and well argued.

Retail Business
• Company image

• Pricing:

o Explain markup policies.

o Prices should be profitable, competitive, and in accordance with company image.

• Inventory:

o Selection and price should be consistent with company image.

o Inventory level: Find industry average numbers for annual inventory 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 first year's cost of
goods sold. If it is not, you may not have enough budgeted for 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 you extend credit to customers? If yes, do you really need to, and do you factor the
cost into prices?