Business Management Guide

Business Plans Part 4 Advanced Business Plan Writing Guide

This guide is provided as a reference. It details what content banks and investors might look for in a business plan for larger companies, such as those with 25+ employees and/or more than 3 million gross sales. Companies of this size should consult with experts to help write such a plan.

TCIA Tree Care Business Guide Advanced Business Plan Writing Guide
Plan Your Work .................................................................................................................. 3 Sample Plan Writing Guide ............................................................................................ 3 1. Introduction............................................................................................................. 9 2. Summary ............................................................................................................... 10 3. Mission, Strategies etc. ......................................................................................... 13 4. Present Status ........................................................................................................ 15 5. Services ................................................................................................................. 17 6. Profiles of Target Markets .................................................................................... 17 6.2 Competition......................................................................................................... 18 6.3 Customers ........................................................................................................... 18 6.4 Market Size, Sales & Share Forecasts ................................................................ 18 7. Marketing Strategies, Sales Plans & Projections.................................................. 19 7.1 Marketing Strategies & Sales Plans.................................................................... 19 8. Operational Plans .................................................................................................. 20 9. Management & Administration ............................................................................ 21 10. Financial Projections........................................................................................... 23 10.1 Key Assumptions .............................................................................................. 24 10.2 Projected Income Statements............................................................................ 24 10.6 Ratio Analyses .................................................................................................. 28 11. Funding Requirements & Proposals ................................................................... 28 12. Implementation ................................................................................................... 29 13. Conclusion .......................................................................................................... 29

Copyright 2005 Tree Care Industry Association. www.treecareindustry.org

Plan Your Work

The importance of a comprehensive, thoughtful business plan cannot be overemphasized. Much hinges on it: outside funding, credit from suppliers, management of your operation and finances, promotion and marketing of your business, and achievement of your goals and objectives. "The business plan is a necessity. If the person who wants to start a small business can't put a business plan together, he or she is in trouble," says Robert Krummer, Jr., chairman of First Business Bank in Los Angeles. Despite the critical importance of a business plan, many entrepreneurs drag their feet when it comes to preparing a written document. They argue that their marketplace changes too fast for a business plan to be useful or that they just don't have enough time. But just as a builder won't begin construction without a blueprint, eager business owners shouldn't rush into new ventures without a business plan.

Before you begin writing your business plan, consider four core questions:
1. What consumer needs does your tree care business fill? 2. Who are the potential customers for your services and why will they purchase them from you? 3. How will you reach and retain your potential customers? 4. Where will you get the financial resources to start and/or grow your business?

Sample Plan Writing Guide

This part of the TCIA Business Plan management guide describes the possible structure and contents of a business plan for a larger company. It is intended as a helpful guide and may or may not be practical for your business. It is divided into two main parts: Front of Plan and Body of Plan with the details spread over about twenty pages that correspond to the main sections of a business plan. It is aimed at new/established businesses, 25+ employees and/or over 3 million gross seeking to expand, raise finance etc. and needing to produce a comprehensive business plan for internal or external use. The company size might be 25+ employees and over 3 million gross sales. A smaller tree care business would not use all aspects of the business 3

plan in this sample guide, however the ideas and issues can be useful to review even when producing more basic plans. This guide may appear intimidating due to its length and detail. However, be mindful that: The process of planning (thinking, exploring, researching, consulting and discussing) should be just as beneficial as the resultant plan. It is far easier to correct errors of judgment or explore new options when writing a plan than when actually operating your business or when trying to implement changes. A sound business plan may not be a sure-fire route to success but it should help anticipate and resolve problems, and point the best way forward. The overall length of a very comprehensive plan for a larger business, as outlined here, could be anything between 27 and 47 pages excluding appendices. When budgeting your plan's length, go for the shortest possible plan consistent with your business's scale, objective of the plan etc. aim for quality rather than quantity! A maximum number of pages is generally accepted at 50 pages. If you cannot detail your business and your plans adequately within 50 pages, bankers and investors may be lead to believe you are simply providing details to show how much you know, rather than to outline your future plans. Bear in mind that the overall length of the plan is likely to increase as writing progresses. If your plan gets too long, do some ruthless editing and redrafting. If it is any consolation, it should be much easier to shorten a long plan than to lengthen a short one! To get started with the Guide: 1. Review the entire guide and think through the most appropriate structure and flow for your own plan. 2. Continue this process by printing out the relevant pages from the Guide. 3. Construct a detailed Contents page incorporating your revised section headings to get the right overall framework for your plan. 4. Review your content's list and the guide's detailed notes to identify key gaps in your preparatory research and analysis. 5. Sort out these gaps before starting to write your plan. In other words, do your main planning before drafting a detailed plan - resist the temptation to start writing before you have done all the preliminary work, or have really decided what you want to say.

To help prepare for writing your plan, review this checklist before you begin: Preliminary Tasks 1. Complete market research and analyses 2. List and explain your companys services 3. Form the basis of the management team 4. Prepare a strategic plan as framework for detailed plan 5. Decide the central purpose of the plan and its target audience 6. Locate professional advisers, such as SCORE volunteers, to assist with planning Done

7. Acquire any software tools needed to help prepare the plan 8. Research and compile a list of possible recipients of the plan 9. Ascertain any specific needs of likely key recipients Writing the Plan 1. Create a framework for the plan e.g. table of contents 2. Identify possible appendices, attachments etc. 3. Estimate page lengths for each key section 4. List main issues and topics to be covered within key sections 5. Assign work programs based on the framework and lists 6. Draft all key sections in a logical sequence 7. Check the preliminary draft for completeness and plug gaps 8. Stand back and take a detached overview of the draft 9. Let an outsider or adviser, such as a SCORE volunteer, critique the draft Done

10. Redraft, fine tune and spell check 11. Write the executive summary and plan's conclusion 12. Get an independent assessment of the final draft. Reviewing the Plan 1. Is the plan nicely presented - bound, page numbered etc.? 2. Has the plan been spell checked in its final form? Done

3. Is the plan's length appropriate to its purpose? 4. Have the business's (funding) needs been clearly stated? 5. Does the plan's summary stimulate interest? 6. Have all key questions been anticipated? 7. What likely objections remain unresolved? 8. Will the plan provoke the desired responses?

Cover Page
The cover page at the very front of a securely-bound business plan is an excellent opportunity to create a positive first impression. A business logo with a tasteful drawing or picture could look very attractive. The text and layout of a cover page might appear as follows: Strictly Confidential Date Copy Number: ____ of ____ XXX Business Name Business Plan

Logo here

Picture of product

XXX Business Name XXX Address Tel No.: xxx Fax No.: xxx

Contents Page
The contents list of your plan performs three critical functions: 1. Explains the scope and structure of the finished plan to readers. 2. Provides an index to specific sections of the plan. 3. Serves as a road map and guide during preparation of the plan. 6

The third function is often overlooked but it is critical to the successful compilation of a business plan. Your time will be very well spent drawing up a detailed table of contents for the plan prior to any writing. Build up this table by progressively expanding main sections into sub-sections and even sub-sub-sections to cover all the key issues. This will allow you to: Envisage the scale and scope of the plan. Test the logic of the plan. Determine the flow of text and ideas from one section to another. Define the detailed contents of the plan. Identify shortcoming in research and preparation. You should critically examine and fine tune the contents list and allocate page lengths to each section. This contents list can then be used as the basis for identifying and assigning tasks to be researched, analyzed or discussed prior to drafting. The importance of using the contents list as a guide when writing a business plan cannot be overstated. It is your road map. Try going on a long journey without a good map and see what happens - you take wrong turns, you drive into blind alleys, you get lost, you waste time, you have to double back, you miss short cuts and, in the end, you may never get to your destination. A similar outcome could apply if you try to write a plan without first compiling a detailed contents list. The following is a suggested table of contents based on this Guide. Use appendices at the very back of the plan to hold the more detailed information, analyses, schedules etc. When compiling your plan, be sure to number all pages and index them on the contents page. Cover Page Contents Page Basic Information 1. Introduction 2. Summary 3. Mission, Strategies etc. 3.1 Vision 3.2 Mission 3.3 Values 3.4 Objectives 3.5 SWOTs 3.6 Strategies 3.7 Goals 4. Present Status 4.1 Background 4.2 Recent Progress 5. Services Description

6. Profiles of Target Markets 6.1 Market Analyses 6.2 Competition 6.3 Customers 6.4 Market Size, Sales & Share Forecasts 7. Marketing Strategies, Sales Plans & Projections 7.1 Marketing Strategies & Sales Plans 7.2 Sales Projections 8. Operational Plans 9. Management & Administration 9.1 Management 9.2 Administration 10. Financial Projections 10.1 Key Assumptions 10.2 Projected Income Statements 10.3 Cash flow Projections 10.4 Projected Balance Sheets 10.5 Sensitivity Analyses 10.6 Ratio Analyses 11. Funding Requirements & Proposals 12. Implementation 13. Conclusion

Basic Information
Create a page-length table near the very front of the plan, ideally immediately after the contents page, to list all the basic particulars about your business - contact details, regulatory items, names of advisers, principal financiers etc. - as per the example below. Basic Information about XXX Legal name and status of business: Directors/partners/proprietor: Address of main office: Addresses of other offices: Address of registered office: Main telephone: Main fax: Main e-mail Website: Name and address of parent company: 8 List and indicate positions. Distinguish between exec and non-exec directors.

Business incorporation/registration date: Business incorporation/registration number: Business tax reference number(s): Insert any other regulatory/license items here Insert any other regulatory/license items here Main shareholders: Stock market & symbol (if applicable)

Professional Advisers: - Auditors - Legal advisers - Bankers - Patent (IPR) attorneys - Financial/tax advisers - Any other key advisers Insert any other key items here Insert any other key items here

Give contact names (and positions), full addresses and other details for each below

1.

Introduction
1. Use this section to introduce the plan. Do not summarize the plan here - write this in the summary section once the entire plan has been finalized.

2. Briefly introduce your businesses entity (company, partnership, sole trader etc.). Use a maximum of two sentences to explain what the business does or plans to do. 3. Explain the purpose of or reason for the plan (e.g. guide management, raise funds etc.). 4. Indicate who wrote the plan and when. Mention any key external help secured from researchers, consultants etc. 5. Outline the scope and general structure of the plan by setting out the sequence of main sections as short bullet points like: a. Section 2: Summary of the plan b. Sections 3 and 4: Review the background the development of the business and its current product service/offerings respectively. c. And so on ..... 6. Indicate that the plan is confidential etc. For example, include a paragraph like the following: This document is confidential and has been made available to the individual to whom it is addressed strictly on the understanding that its contents will not be disclosed or discussed with any third parties except for the individual's own professional advisers. Investment in new and small businesses carries high risks as well as the possibility of high rewards. It is highly speculative and potential investors should be aware that no established market exists for the trading of shares in private companies. Prospective investors are advised to verify all material facts and to take advice from a professional adviser before entering into any commitments. This plan is strictly for information only and does not constitute a prospectus or an invitation to subscribe for shares. Forward-looking projections and statements in the plan have been compiled by the promoters for illustrative purposes and do not constitute profit forecasts. The eventual outcome may be more or less favorable than that portrayed. Get professional legal advice on more appropriate wording for your state or region of the country. If confidentiality is important, add a 'slot' for numbering all copies of the plan to its Cover and maintain a distribution register. 7. Give contact details (name, position, address, phone, fax and e-mail) for the key person dealing with the plan.

2. Summary
Write this summary once your plan is at its very final draft stage. Hit the highlights and key issues. Avoid detail - focus on matters of strategic importance to the business. If desired, cross reference the reader to the sections containing detailed text. Address the needs and interest of the reader - what information does the reader want to get orientated or to become interested in the business? You can create slightly different summaries for different types of readers. Consider allocating one paragraph to summarize the contents of each main section. Make use of bullet points instead of continuously flowing text. 10

Start the summary on a new page immediately after the Introduction. Keep the length of this section below three pages. Give this section plenty of thought and time as it may be the most important part of your entire plan. Many readers will decide whether to look at the rest of your plan based on a quick read of its summary. Do not include any material in this summary not covered elsewhere in the plan. Use a chart or two to highlight key issues - a picture can be worth a thousand words as the following chart illustrates.

Body of Business Plan

The body of your plan should be spread over a series of sections. This Guide uses the following main sections: 3. Mission, Strategies etc. 4. Present Status 5. Services 6. Profiles of Target Markets 7. Marketing Strategies & Sales Plans 8. Operational Plans 9. Management & Administration 10. Financial Projections 11. Funding Requirements & Proposals 12. Implementation 13. Conclusion These follow the Introduction and Summary. The order and scope of the sections within your plan should be decided when compiling the Contents page of the plan. 11

Consider starting each main section on a new page even though this might appear to increase the length of your plan. Detailed material relevant to a particular section should be placed in an appendix at the very back of the plan. This ensures that the flow of your plan is not disrupted by too much detail.

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3. Mission, Strategies etc.

Limit this section to about two pages by focusing on major, longer term issues. Use succinct, affirmative statements and make every noun, adjective and verb important. After the Summary, this is probably the most important section in your entire plan as it sets out the direction, tone and framework for all the detail that follows. If the proposed strategies and their rationale are flawed then the whole orientation of the business may be wrong. To compile this section, considerable research may be needed on your markets, competition and sales potential. The sub-sections below are for general guidance only. They could result in some undesirable duplication or overlapping of proposals and ideas. You probably can amalgamate some of them (e.g. Vision & Mission or Values & Objectives) or even dispense entirely with headings and cover all the relevant matters in a series of short paragraphs. 3.1 Vision Describe what your business will look like in, say, five years time (size and the nature, location, breadth and depth of its operations/resources etc.). A few sentences should suffice. For example, start your vision with the following: By 20xx, xxx will be engaged in xxx (activities). It will be offering xxx services to a customer base comprising xxx. It expects to have staff of xxx mainly engaged in xxx (activities) and located at xxx. Sales could be xxx and net income could reach xxx. A key feature of xxx will be its emphasis on xxx to maintain its competitive advantage. And so on ..... 3.2 Mission In one succinct paragraph, describe the central purposes and activities ("mission") of your business. In a nutshell, explain what the business is about - along the lines of a so-called "elevator pitch". For example: Newco provides xxx services to meet the xxx needs of xxx customer groups in xxx geographic areas. It is expanding/developing new/additional services by means of xxx. 3.3 Values Describe the values and the standards that the business will apply in all its dealings with stakeholders, customers, suppliers etc. You can reference TCIA Code of Ethics, ANSI A300 standards here. 13

3.4 Objectives What are your underlying long-term objectives? Get rich? Build a big business? Provide quality service to local community? Develop a new/additional service? Create a pension fund? Create employment? Exploit an invention? Diversify or integrate? 3.5 SWOT Analysis What are the real SWOTs (Strengths, Weaknesses, Opportunities and Threats) of the business? SWOTs are mentioned here to highlight the importance of addressing them within your plan. They should help you answer any questions or challenges to your plan and prompt strategic thinking on internal and external issues as indicated in the table below. Be very honest about identifying any major weaknesses and threats and then explain how your plan will deal with them. Internal ... build on strengths ... resolve weaknesses External ... exploit opportunities ... avoid threats

It is usually not appropriate to present a detailed list of SWOTs within the final version of your plan. One approach is to add a closing sub-section to this main section to serve as a wrap-up statement (or an overall assessment) that describes how the proposed strategies/plans will: build on the business's key strengths (name them); resolve its internal weaknesses (name the areas); fully exploit its external opportunities (identify them); and, avoid major external threats (explain). Alternatively, an item along these lines could be included as part of the Conclusion towards the back of the plan. 3.6 Strategies Use bullets to highlight up to ten (or so) key strategies (actions, operating methods etc.) in relation to major functional areas - markets, sales, products/services, technology, finance, management, operations etc. Be sure you present medium-term strategies and not short-term tactics. 3.7 Goals Quantify prime goals/targets in relation to sales, profits, market shares, employment etc.

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4. Present Status
Use this section to summarize achievements and performance (financial, sales, technical etc.) to date. For a start-up, this section could be covered in one-two pages. Allow up to five or so pages for an established business and relegate detailed material to appendices. 4.1 Background Start by introducing the principals/shareholders in the business and then describe in broad terms what the business did in the past and what it does now. Review the history of the business (or origins of the idea if a start-up). Describe how it has evolved in terms of products/services, customers/markets, funding, management, etc. Use appendices or footnotes to discuss key issues and major events in greater detail without disrupting the flow of the main text. Footnotes can be very useful for giving short explanations or briefly expanding on specific matters as they arise within the text. 4.2 Recent Progress Discuss the recent progress of the business from sales/marketing, operational and financial perspectives using subheadings if desired. 4.2.1 Sales & Marketing Use simple tables (like the following) to help summarize sales growth, customer/service segmentation, market shares, key service sales volumes, prices achieved etc.

Table xx - Sales Analysis (1999-2002) Years to Dec. Service xxx 1999 2000 2001 2002* ($000) ($000) ($000) ($000) 200 259 302 350 300 230 880 +17%

Service xxx 280 270 290 Service xxx 0 89 158 Total 480 618 750 Growth rate (% p.a.) n/a +29% +21% * Actuals for first six months and estimates for the last six. Also, charts can be very effective at summarizing complex data:

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Chart xxx - Sales Analysis (1996-99) $000

Review key marketing/sales strategies and tactics. Describe major events in relation to marketing, sales, promotion, sales management, agencies/partners and so on. Place details in appendices. Make reference to the general economic climate and the performance of competitors during the review period if possible. Indicate the current sales book in value/volume terms and/or relative to capacity, and offer a view on the immediate outlook for the business and its main markets. 4.2.2 Operations Review the operations of the business in terms of its processes, activities and investment. Include a short discussion and high-level tables covering employment, production levels, capacity growth & utilization etc. Describe key capital investments and review developments in management and systems. 4.2.3. Finances Present a high-level synopsis of historical financial performance covering income statements, balance sheets etc. Again, use very simple tables or charts and offer the detail in appendices or accompanying audited accounts. Indicate and explain key events. Give information about shareholdings and any options outstanding - list shareholders, dividend policies and any other key issues relevant to a prospective investor. Use an appendix to cover the detail. Review the budget and year-to-date performance for current year and summarize them in a simple table. Indicate the expected outcome for the current year and highlight any key underlying assumptions.

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5. Services
Keep descriptions of services relatively short and confine them to broad groups. Explain briefly what they are and who takes advantage of them. Indicate the main advantages/benefits they offer or the needs they meet. Avoid getting into technical terms and details - put this in appendices. Summarize any quality standards. Introduce competing services and explain what makes yours' better. Append any brochures or price lists to the plan. Try to add a few pictures to the text. If you need to really impress and know that such material will be well-received, consider augmenting this section with a good-quality video or computer-based slide presentation. Two or three pages should suffice for this section.

6. Profiles of Target Markets

Use this section to profile target markets based on market sizes, segments, trends, competition and customer profiles. Allow about three-six pages for this important part of your plan. In most cases, it is very desirable that all detailed market research (field and/or desk) and analysis be completed before this section is written. If research reports or detailed findings are available, refer to their detailed findings in appendices. This is a very difficult section to prepare especially for start-ups or established businesses diversifying in new markets. These difficulties will be compounded, due to an absence of any reliable data or evidence of likely demand, for businesses entering completely new markets or launching new services in the market area. Nonetheless, this section is critical as it underpins the business plan and demonstrates that the promoters have done their homework and know their marketplaces (at least as well as the incumbent players or other new entrants). If this section is unclear, vague or superficial, it begs the question as to whether there might be any real, sustainable demand for the proposed services. 6.1 Market Analyses Describe the tree care markets. Explain how these markets have evolved and are segmented (in terms of price, service, quality etc.). Indicate how and why the markets and key segments will develop over the life of your plan, or even longer. Use simple tables and charts to illustrate key points and to drill down into the appropriate detail. Place detailed analyses in an appendix. Here is an example of a simple table projecting the size of key segments within an overall market: 20xx 20xx 20xx 20xx Key Segments ($000) ($000) ($000) ($000) Segment A 17

Segment B Segment C Other segments Overall market Highlight the segments you are targeting. Explain the promotional methods used and expenditure levels. Discuss technology trends. Review any regulatory restrictions. Indicate the likely impact of any possible changes in anticipated economic conditions. Finally, explain why the target markets are attractive to your business. 6.2 Competition Introduce the main competitors (or near-competitors if a new market area) and profile them - highlight their evolution, scale and activities. Assess their SWOTs. Place detailed information in appendices. Show how competitors' market shares may have evolved and indicate their current standing in the market. 6.3 Customers Segment possible customers based on their demographics/needs. Review their buying habits and consider the impact of broad economic issues on the frequency and levels of their purchasing. Profile customers and explain how/why they will buy your services in preference to those of competitors. Discuss price, quality, promotional issues etc. and how your services will be positioned. Quantify the number of prospective customers and assess their likely purchase rates (e.g. amount/year, amount/service purchase, service purchases/year and so on) for your services and the competition. 6.4 Market Size, Sales & Share Forecasts Create simple tables to show how market sizes, segments and shares are likely to move in the future after your entry/growth. If possible, base the forecasts on volume and price projections rather than on revenues. Incorporate your business's high-level sales projections in these tables but hold back on detailed projections until the next section: Marketing Strategies, Sales Plans & Projections. Try to avoid generalized statements like "we aim to achieve xx% of the xx market within three years". Instead, build up your projections from sound analysis/research and detailed assumptions (number of customers, sales and so on). You can then explain that the projections, if realized, could result in specified market shares. Consider providing 18

alternative projections based on "best" and "worst" case scenarios which might reflect alternative views of future economic, competitive conditions and rates of growth.

7. Marketing Strategies, Sales Plans & Projections

This section follows on from Profiles of Target Markets and presents your proposed marketing strategies and detailed sales plans and projections. Devote up to three-six pages for this section. In simple terms, you need to cover the 4Ps product (service), price, place and promotion - and compile detailed revenue and marketing cost projections for inclusion in the Financial Projections section. 7.1 Marketing Strategies & Sales Plans How will your business market its products/services and sell them to customers? What are the key market entry/development strategies? Indicate plans and forecast costs for marketing, selling, promotion, advertising, representation etc. Address how your services will be presented to customers. Discuss sales support and forecast the related costs. Explain pricing policies and credit terms (be realistic!). What discounts will apply and to whom? Will there be bad debts and what provisions should be made? What will be the prices? Assess the competitiveness of your business's offerings in terms of price, quality, features etc. at the level of customer base. How will you deal with the competitors? How will they respond? What are the contingency plans in the event of sales targets not being met? 7.2. Sales Projections Based on the market projections in Profiles of Target Markets and marketing strategies described above, set out detailed sales (volumes and prices) projections for your various segments and services. These projections should be monthly (for at least one year ahead especially for seasonal businesses) and either quarterly (much better) or annual thereafter. Use simple tables and charts to present key data - relegate the detail in appendices.

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Finally, review your marketing and sales plans and ask how confident are you that the projected sales levels and market shares will be achieved. If in doubt, develop and (briefly) present alternative scenarios and approaches.

8. Operational Plans
Cover all aspects of service providing, support, and operations within this section. Depending on the scale of your business, sub-sections could be used to handle key topics. This section may need two-five pages. Indicate the locations of the main office/facility. Describe office/facilities and indicate sizes, service capacities & utilization (past, present and future). Review recent significant capital expenditure and outline future plans. Distinguish between mandatory and discretionary planned expenditure and summarize justifications (in terms of ROI, payback periods, etc.) where appropriate. Include or append maps, charts, pictures etc. Indicate the organization structure, human resources - headcounts, grades, skills, training etc.

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Highlight major elements of operations. Use simple diagrams to illustrate processes or complex relationships. Briefly describe systems for quality control, production management, customer support etc. Use simple tables to summarize and place any important detail in an appendix. If appropriate, specify unit costs for key inputs such as labor, payroll, power, communications, environmental services etc. and forecast how these might move in the future due to inflation, etc. Where relevant, forecast consumption rates for key items and use these to project their total costs (e.g. headcount multiplied by labor cost rate equals total labor cost). Identify materials or goods to be purchased for resale (e.g. fertilizer, pesticides, cables and braces, etc.). For key items, indicate specifications, prices, taxes/duties, purchasing arrangements, inventory policies and credit terms. Discuss likely future price trends.

For overhead costs, include detailed projections in an appendix and summarize them here. Segment costs as variable, semi-variable and fixed. Indicate costings for key services and specify individual gross margins (see table below). Discuss breakeven points at corporate, operating unit and service provided levels.

9. Management & Administration

Allow two-three pages to cover managerial and administrative matters within this section.

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9.1 Management Introduce the management team and their roles. Include short profiles but relegate the details to an appendix. Use a simple organization chart to illustrate the managerial structure. If significant changes are planned, show a further post-change chart.

Indicate any gaps in the management team and explain measures to recruit. If necessary, present job specs in an appendix. Summarize management remuneration and forecast these costs. Introduce the board of directors (and any sub-committees) and profile nonexecutive directors (existing/proposed). Place significant details in an appendix. Outline the board's role in the management of the business. 9.2 Administration Indicate facilities and outline the key administrative functions. Describe key operational, communications and IT, accounting and related management systems. Indicate the main components of overhead costs and present 'high-level' projections (if not already covered in the Operational Plans section.

Charts can be much easier to follow than tables.

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If appropriate, use a simple table to show the projected annual build-up of management and administrative staff.

10. Financial Projections

At a minimum, produce monthly projections for the first year covered by your plan plus quarterly (or annual) projections for the next two years. For seasonal businesses, it can be a good idea to provide monthly projections for 2+ years with less detailed projections for subsequent years. Projections for each forecasting interval should comprise fully integrated income statements, cash flows, balance sheets and key ratios. Keep this section within four-eight pages by ensuring that only high-level financial projections are included in summary tables. Place all detailed schedules in appendices. Financial projections must not be prepared in isolation from the rest of the plan. For example, the results of market research should flow into your sales projections which, in turn, should drive the revenue forecasts. Under no circumstances should you do the detailed financial projections and then write a plan to suit. By all means, do some highlevel financial planning at an early stage to get a feel for the basic figures and sensitivities but don't let the plan become a financially-driven document without any strong market basis. The presentation of financial projections is covered in five sub-sections as follows: 23

1. 2. 3. 4. 5. 6.

Key Assumptions Income Statements Cash flow Projections Projected Balance Sheets Sensitivity Analysis Ratio Analyses

10.1 Key Assumptions Use this section to review and pull together the key assumptions used in the financial projections. Relate your assumptions for sales, costs, manpower etc. back to the plans/schedules described in preceding sections. Also, specify the assumptions used for capital expenditure, external funding and working capital. The following table indicates the diversity of assumption variables that may need to be considered in order to produce projected P&Ls, cash flows and balance sheets for a tree care business. Sales volumes Fixed asset values Selling prices Intangible assets Selling costs Material costs Tax rates for inputs Accumulated depreciation Interest rates Prepayments/accruals Management/administration Material inventories Changes in loans/debt Capital expenditure Bad debt provisions Share issues General overheads Direct manpower levels Operating leases & HP Capital & revenue grants Depreciation rates Dividends Current year debtors/creditors Wage rates Opening balance sheet Fixed asset disposals Finance leases Corporation tax Phasing of opening balances Other direct costs Operational overheads Place the details relating to assumptions in an appendix. 10.2 Projected Income Statements Introduce the projected income statements (profit & loss accounts) using a short paragraph or bullet points highlighting the key expected outcomes for sales and income. Use simple tables to summarize the key figures and place all detailed analyses in appendices. As shown below, simple charts can show trends and patterns very clearly.

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More detailed projections can be placed in an appendix for finance. 10.3 Cash flow Projections You should present monthly cash flow projections for the first year, or longer depending on the importance of cash flow and time needed for your business to become cash flow positive. Many readers of your plan - bankers, venture capitalists and other investors will pay far more attention to the cash flow projections than to the income statements. They will seek to establish that the business will not run out of cash before it reaches profitability - more businesses fail for lack of cash than for want of profit.

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Less detailed projections (quarterly or annual) may suffice for subsequent years as per the specimen table below.

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Use text and bullets to highlight and explain any key values or trends shown in tables or charts. Place the detail in an appendix for finance. 10.4 Projected Balance Sheets When presenting projected balance sheets, you will need an opening balance sheet which is based on audited figures (for last year) or estimated data (for current year). The projected balance sheets must link into the projected income statements and cash flow projections.

10.5 Sensitivity Analyses Present the key results of 'what-if' analyses based on "best" and "worst" case scenarios. As a general guide, be conservative even when presenting the "best" case. When planning scenarios, take account of possible project start-up delays, sales volume shortfalls, lower price levels and higher costs. For example, what would be the financial outcome if sales volumes and prices are both 90% of targets but direct and overhead costs are each 110% of planned? Indicate breakeven points and explore the consequences of incrementing volumes, prices and costs (e.g. by 10%, 15%, 20% etc.). Only present high-level summaries - relegate the details to an appendix for finance or retain them in your working papers.

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10.6 Ratio Analyses Highlight the key financial ratios and their trends over time. Compare your projected ratios with industry norms and justify any significant deviations.

11. Funding Requirements & Proposals

Look to finance the "most likely" case, or even "worst" case, rather than for the "best" case as revealed by sensitivity analysis. Summarize and tabulate funding requirements. Indicate planned uses, possible sources and forms (equity, loans, grants, credit etc.), likely timing, security offered and desired terms. Mention any conditional or firm funding commitments already secured. For the benefit of prospective investors, indicate the likely equity funding required; range of the equity stakes on offer; exit routes (trade sale, buy-back etc.); board representation; and make a stab at the projected returns on their investment. If presenting funding proposals, bear in mind the golden rule - he who has the gold makes all the rules. If valuing your business, be realistic and base it on more than one method of valuation e.g. net asset value, price/earnings ratio, capitalization/revenue ratio, industry yardsticks and so on. Take account of market sentiment/conditions, "going rates", maturity of the business and degree of risk associated with its plans. You may wish to withhold specific funding offers until you have met possible investors or lenders face-to-face and heard their initial reactions. In this case, this section would be confined to a description of funding needs and possible uses, sources and forms. This section need not exceed a page or so.

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12. Implementation
This is a critically important section - use it to translate all your proposals into clear, realistic tasks. Outline the major decision points, time scales, milestones and actions required by management and others to progress the plan. Be realistic about the likely rate of progress and make provision for slippages. Describe contingency plans to cover shortfalls. Summarize the key elements in a Gantt chart or table like the following: Month Task 1 Task 2 Task 3 Task 4 Task 5 Task 6 ...... ...... ...... 1 2 3 4 5 6 7 8 9

Allocate a maximum of two-three pages to this section.

13. Conclusion
Use this section to wrap up your plan and to leave the reader with a warm and positive view of the business and its plans. Review what the business does and expects to achieve. Indicate why it will succeed and why it should be supported by investors etc. Be very positive and confident to encourage favorable reactions. Maybe, you could draw on some of the strengths and opportunities described in 3. Mission, Strategies etc. Confine this section to a few carefully-drafted paragraphs and write it once the plan is almost complete.

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