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U.S. Small Business Administration                       MP-32




                    Managing and Planning Series





Copyright 1993, Linda Pinson and Jerry Jinnett.  All rights

reserved. No part may be reproduced, transmitted or transcribed

without the permission of the authors.  SBA retains an

irrevocable, worldwide, nonexclusive, royalty-free, unlimited

license to use this copyrighted material.  While we consider the

contents of this publication to be of general merit, its

sponsorship by the U.S. Small Business Administration does not

necessarily constitute an endorsement of the views and opinions

of the authors or the products and services of the companies with

which they are affiliated.


All of SBA's programs and services are extended to the public on

a nondiscriminatory basis.



                         TABLE OF CONTENTS









    Legal Structure     2

    Description of the Business   2

    Products or Services     3

    Location  3

    Management     3

    Personnel 3

    Methods of Record Keeping     3

    Insurance 4

    Security  4

    Summary   5



    Target Market  5

    Competition    5

    Methods of Distribution  5

    Advertising    7

    Pricing   7

    Product Design 7

    Timing of Market Entry   7

    Location  8

    Industry Trends     8



    Summary of Financial Needs    8

    Sources and Uses of Funds Statement     9

    Cash Flow Statement (Budget)  9

    Three-year Income Projection  10

    Break-even Analysis Graph     15

    Actual Performance Statements 16

    Balance Sheet  16

    Summary   21



    Personal Resumes    22

    Personal Financial Statement  22

    Credit Reports 22

    Copies of Leases    22

    Letters of Reference     22

    Contracts 22

    Legal Documents     23

    Miscellaneous Documents  23





    Making Revisions    23

    Implementing Changes     23

    Anticipating Problems    24










There are two main purposes for writing a business plan. The

first, and most important, is to serve as a guide during the life

of your business. It is the blueprint of your business and will

serve to keep you on the right track. To be of value, your plan

must be kept current. If you spend the time to plan ahead, many

pitfalls will be avoided and needless frustrations will be

eliminated. Second, the business plan is a requirement if you are

planning to seek loan funds. It will provide potential lenders

with detailed information on all aspects of the company's past

and current operations and provide future projections.


The text of a business plan must be concise and yet must contain

as much information as possible. This sounds like a

contradiction, but you can solve this dilemma by using the Key

Word approach. Write the following key words on a card and keep

it in front of you while writing:


 Who     What     Where     When     Why     How     How Much


Answer all of the questions asked by the key words in one

paragraph at the beginning of each section of the business plan.

Then expand on that statement by telling more about each item in

the text that follows.

There is no set length to a business plan. The average length

seems to be 30 to 40 pages, including the supporting documents

section. Break the plan down into sections. Set up blocks of time

for work with target dates for completion. You may find it

effective to spend two evenings per week at the library where the

reference materials needed will be close at hand. It takes

discipline, time and privacy to write an effective business plan.


You will save time by compiling your list of supporting documents

while writing the text. For example, while writing about the

legal structure of your business, you will realize the need to

include a copy of your partnership agreement. Write partnership

agreement on your list of supporting documents. When compiling

that section of your plan, you will already have a list of

necessary documents. As you go along, request any information

that you do not have, such as credit reports.


With the previous considerations in mind, you are ready to begin

formulating your plan. Read through this entire publication to

get an overall view of the business planning process.





The first page of your business plan will be the cover sheet. It

serves as the title page of your plan. It should contain the

following information:


    Name of the company

    Company address

    Company phone number (include area code)

    Logo (if you have one)

    Names, titles, addresses, phone numbers (include area code)

       of owners

    Month and year in which the plan is issued

    Name of preparer


 The following example will serve as a guide.


                          ABC CORPORATION

                        372 East Main Street

                          Burke, BY 10071

                          (207) 526-4319


             John Smith, President     (207) 814-0221

                           724 South Street

                        Jamestown, NY 10081


          Mary Blake, Vice President     (207) 764-1213

                           86 West Avenue

                           Burke, NY 10071


           James Lysander, Secretary     (207)842-1648

                         423 Potrero Avenue

                          Jessup, NY 10602


           Tandi Higgins, Treasurer     (207) 816-0201

                          321 Nason Street

                           Adams, NY 10604


                     Plan prepared September 1992

                         by Corporate Officers






The statement of purpose is also called the mission statement or

executive summary. If your lender were to read only this

information, he or she would know the name and nature of your

business, its legal structure, the amount and purpose of your

loan request and your plan for repayment. Use the key word

approach mentioned earlier. Be concise and clear. The statement

of purpose is contained on one page. Although it is positioned

after the cover sheet, it is most effectively written after the

plan has been completed. At that time, all the information and

financial data needed are available.


If you are writing your plan for a lender, be specific about the

use of funds. Support the amount requested with information such

as purchase orders, estimates from suppliers, rate sheets and

marketing results. Include this information in the supporting

documents section. Address the question of loan repayment. You

want to show the lender your company's ability to meet payments

of interest as well as principal. Some investors like to see two

ways out, i.e., two different sources of repayment. When you have

answered the key word questions, you are ready to present that

information in one or two concise paragraphs. A sample statement

of purpose follows.


                     STATEMENT OF PURPOSE


          ABC CORPORATION, an S-Corporation established in 1985,

     is a tool and die company that manufactures specialized

     parts for the aerospace industry and is located at 372 East

     Main Street, Burke, N.Y.  The company is seeking growth

     capital in the amount of $50,000 for the purpose of

     purchasing new and more modern equipment and for training

     existing personnel in the use of that new equipment.


          Funding is needed in time for the equipment to be

     delivered and in place by 11 January 1993. There is a two-

     month period between order placement and delivery date.


          The modernized equipment will result in a 35 percent

     increase in production and a 25 percent decrease in the

     unit cost. Repayment of the loan and interest can begin

     promptly within 30 days of receipt and can be further

     secured by real estate, which is owned by the company

     and which has a 1990 assessed valuation of $185,000.





The first major section of your plan covers the details of your

business. Begin this section with a one-page summary addressing

the key elements of your business. The following text will expand

on each area presented in the summary. Use the key word system to

help you write concisely. Address all of the topics as they

relate to your business in an order that seems logical to you.

Include information about your industry in general, and your

business in particular. Be prepared to back up statements and

justify projections with data in the supporting documents



Legal Structure


State the reasons for your choice of legal structure. If you are

a sole proprietor, you may include a copy of your business

license. If you have formed a partnership, include a copy of your

partnership agreement in the supporting documents section. Your

agreement should include provisions for partners to exit and for

the dissolution of the company. It must spell out the

distribution of the profits and the financial responsibility for

any losses. Explain the reasoning behind the terms of the

agreement. If you have formed a corporation, explain why this

legal form was chosen and how the company will operate within the

corporate structure, and include a copy of the charter and

articles in the supporting document section.


If you plan to change your legal structure in the future, make

projections regarding why you would change, when the change would

take place, who would be involved and how the change would

benefit the company.


Description of the Business


This is the section of the plan in which you go into greater

detail about your business. Answer the key word questions

regarding the business's history and present status, and your

future projections for research and development. Outline your

current business assets and report your inventory in terms of

size, value, rate of turnover and marketability. Include industry

trends. Stress the uniqueness of your product or service and

state how you can benefit the customer. Project a sense of what

you expect to accomplish three to five years into the future.


Products or Services


Give a detailed description of your product from raw materials to

finished item. What raw materials are used, how much do they

cost, who are your suppliers, where are they located and why did

you choose them? Include cost breakdowns and rate sheets to back

up your statements. Although you may order from one main

supplier, include information on alternate suppliers. Address how

you could handle a sudden increase of orders or a loss of a major



You may hear a lender refer to the worst case scenario. This

means that the lender wants you to be able to anticipate and

solve potential problems. It is also to your advantage to think

in terms of alternatives and to prepare for the unexpected so

that your business can continue to run smoothly. Some businesses

fail because they become too successful too soon. Therefore, it

is also good to plan for the best case scenario. If you are

inundated with orders, your business plan should contain

information needed to hire staff and contact additional



If you are providing a service, tell what your service is, why

you are able to provide it, how it is provided, who will be doing

the work and where the service will be performed. Tell why your

business is unique and what you have that is special to offer to

your customers. If you have both a product and a service that

work together to benefit your customer (such as warranty service

for the products you sell) be sure to mention this in your plan.

Again the key words come into use. List future services you plan

to add to your business. Also, anticipate any potential problem

areas and work out a plan for action.


You should state any proprietary rights, such as copyrights,

patents or trademarks, in this section.




If location is important to your marketing plan, you may focus on

it in the marketing section. For example, if you are opening a

retail shop, your choice of location will be determined by your

target market. If you are a manufacturer and ship by common

carrier, your location is not directly tied to your target market

so you can discuss location in the business section. You may

begin this topic with a sentence such as "ABC Corporation is

housed in 25,000 square feet of warehouse space located at 372

East Main Street, Burke, NY. This site was chosen because of

accessibility to shipping facilities, good security provisions,

low square footage costs and proximity to sources of supplies."


Now expand on each reason for choosing that location and back up

your statements with a physical description of the site and a

copy of the lease agreement. Give background information on your

site choice and list other possible locations. You may want to

include copies of pictures, layouts or drawings of the location

in the supporting document section.


Use the worksheet on page 4 as a guideline for writing a location

(site) analysis. Cover only those topics that are relevant to

your business. If you need assistance, contact the SBA resource

center nearest you (see Information Resources).






    1.  Address:


    2.  Name of realtor/contact person:


    3.  Square footage/cost:


    4.  History of location:


    5.  Location in relation to target market:


    6.  Traffic patterns for customers:


    7.  Traffic patterns for suppliers:


    8.  Availability of parking: (include diagram)


    9.  Crime rate for area:


   10.  Quality of public services (e.g. police, fire protection)


   11.  Notes on walking tour of area:


   12.  Neighboring shops and local business climate:


   13.  Zoning regulations:


   14.  Adequacy of utilities (get information from utility

        company representatives):


   15.  Availability of raw materials/supplies:


   16.  Availability of labor force;


   17.  Labor rate of pay for the area:


   18.  Housing availability for employees:


   19.  Tax rates (state, county, income, payroll, special



   20.  Evaluation of site in relation to competition:





This section describes who is behind the business. If you are a

sole proprietor, tell about your abilities and include your

resume. Be honest about areas in which you will need help and

state how you will get that help. Will you take a marketing

seminar, work with an accountant or seek the advice of someone in



If you have formed a partnership, explain why the partners were

chosen, what they bring to the company and how their abilities

complement each others. Experience, background and qualifications

will be covered in their resumes in the supporting documents



If your business is incorporated, give detailed information on

the corporate structure and officers. Include a resume for each

officer and describe each one by answering the following

questions: Who are they? What are their skills? Why were they

chosen? What will they bring to the organization?




Who will be doing the work? Why are they qualified? How will they

be hired? What is their wage? What will they be doing? Outline

the duties and job descriptions for all personnel. Explain any

employee benefits. If you are inundated with orders for your

product or items to be serviced, do you have a plan for

increasing personnel?


Methods of Record Keeping


Tell what accounting system will be used and why the system was

chosen. What portion of your record keeping will be done

internally? Who will be responsible for keeping those records?

Will you be using an outside accountant to maximize your profits?

If so, who within your company will be skilled at reading and

analyzing financial statements provided by the accountant? It is

important not only to show that your accounting will be taken

care of, but that you will have some means of using your

financial statements to implement changes to make your company

more profitable. After reading this section, the lender should

have confidence in your company's ability to keep and interpret a

complete set of financial records.




Insurance is an important consideration for every business.

Product liability is a major consideration, especially in certain

industries. Service businesses are concerned with personal

liability, insuring customers' goods while on the premises or

during the transporting of those goods. If a vehicle is used for

business purposes, your insurance must reflect that use. If you

own your business location, you will need property insurance.

Some types of businesses require bonding. Partners may want life

insurance naming each other as the beneficiary. Consider the

types of coverage appropriate to your business. Tell what

coverage you have, why you chose it, what time period it covers

and who the carrier is. Keep your insurance information current.




According to the U.S. Chamber of Commerce, more than 30 percent

of business failures result from employee dishonesty. This

concerns not only theft of merchandise, but also theft of



Address the issue of security as it relates to your business. For

example, if you are disposing of computer printout data, a small

paper shredder may be cost-effective. Anticipate problem areas in

your business, identify security measures you will put into

practice, tell why you chose them and what you project they will

accomplish. Discuss this area with your insurance agent. By

installing security devices you may be able to lower certain

insurance costs along with protecting your business.




You have now covered all the areas which should be addressed in

the business section. Use the key words, be thorough, anticipate

any problem areas and be prepared with solutions, and analyze

industry trends and be ready to project your business into the

future. When you have completed the business section, you are

ready to begin developing the marketing section.





The second major section of your business plan covers the details

of your marketing plan. A good marketing plan is essential to

your business development and success. Include information about

the total market with emphasis on your target market. You must

take the time to identify your customers and find the means to

make your product or service available to them. The key here is

time. It takes time to research and develop a marketing plan, but

it is time well spent. Most of the information you need will be

found in your public library and in the publications of the U.S.

Department of Commerce, the U.S. Small Business Administration

(SBA) and the U.S. Census Bureau. Remember that you need a clear

understanding of who will purchase your product, who will make

use of your service, why they will choose your company and how

they will find out about it.


Begin this section with a one-page summary covering the key

elements of your marketing plan. The following text will expand

on each area presented in the summary. Back up statements and

justify projections with data in the supporting documents

section. Again, the key word approach will help you to thoroughly

cover each area. The topics may be covered in any order that

seems logical to you.


Target Market


The target market has been defined as that group of customers

with a set of common characteristics that distinguish them from

other customers. You want to identify that set of common

characteristics that will make those customers yours. Tell how

you did your market research. What were your resources and your

results? What are the demographics of your target market? Where

do your customers live, work and shop? Do they shop where they

live or where they work? If you are in the business of video

cassette recorder (VCR) repair, how many VCRs are owned within a

certain radius of your shop? Would in-home service be

cost-effective and a benefit to your customers? Back up your

findings with U.S. Census Bureau reports, questionnaires and test

marketing results. State how you feel you can serve this market

in terms of your resources, strengths and weaknesses. Focus on

reasonable, believable and obtainable projections regarding the

size of your potential market. (See Information Resources.)




Direct competition is a business offering the same product or

service to the same market. Indirect competition is a company

with the same product or service but with a different target

market. Evaluate both types of competitors. You want to determine

the competitors' images. To what part of the market are they

trying to appeal? Can you appeal to the same market in a better

way? Or can you find an untapped market?


Use the worksheet to compile, organize and evaluate information

on your competition. Your analysis of this information will help

you plan your market entry. What is the competition's current

market share (what percent of the total customer base is theirs)?

Can you tap into this share or will you need to carve out your

own market niche?






            Item                            1   2   3


     1.  Name of Competitor(s):


     2.  Location:


     3.  Products or services offered:


     4.  Methods of distribution

         (wholesale, retail, marketing

         reps, personal selling,

         corporate sales):


     5.  Image


             Promotional materials:

             Methods of advertising:

             Positioning (customers'

             perception of quality of

             product or service):


     6.  Pricing structure:


     7.  Performance (past and present):


     8.  Market share (by number, type

         and location of customers):


     9.  Strengths (The strengths of the

         competition become your strengths):


     10. Weaknesses (Looking at the

         weaknesses of the competition can

         help you find ways of being unique

         and of benefiting the customer.):



After completing this section you or your lender will know who

your competitors are, where they are located, what products or

services they offer, how you plan to compete, how your customers

can access your business and why you can provide a unique and

beneficial service or product.


Methods of Distribution


Distribution is the manner in which products are physically

transported to the consumer or the way services are made

available to the customer. Distribution is closely related to

your target market.


Establish the purchasing patterns of your customers. If you are

selling a product, do your customers purchase by direct mail, buy

through catalogues or make in-store purchases? Will you sell

directly or through a manufacturer's representative? If you are

shipping the product, who will absorb the shipping costs and what

carrier will be used? Use the key words to answer questions

regarding your distribution plan. Back up your decisions with

statistical reports, rate sheets from shippers, contracts with

manufacturer's representatives or any other supporting documents.

If you are involved in a service business, will you provide

in-shop service? Will you make service calls, and, if so, how

will mileage costs be handled? What is your planned response time

to fill your customers' needs?


List the pros and cons of the various methods of distribution and

give reasons for your choices. Keep in mind the worst case

scenarios mentioned above. Present alternatives. For example, if

United Parcel Service, your major shipper, were to go on strike,

how would you distribute your products? If your mobile service

van were to break down, do you have a vehicle which could be used

as backup? Provide for a smooth business flow.




Advertising presents the message to your customer that your

product or service is good and desirable. Tailor your advertising

to your target market. Your marketing research will have spelled

out which television and radio stations and which publications

are of interest to your target market. Those are the ones you

will use. Analyze your competitors' advertising in these

publications. Be ready to back up your decisions. Include copies

of your promotional materials, such as brochures, direct mail

advertisements and flyers. Tell the lender where you will put

your advertising dollars, why you chose those methods, how your

message will reach your target market, when your advertising

campaign will begin, how much your plan will cost and what format

your advertising will take.




Your pricing structure is critical to the success of your

business and is determined through market research and analysis

of financial considerations. Basic marketing strategy is to price

within the range between the price ceiling and the price floor.

The price ceiling is determined by the market; it is the highest

cost a consumer will pay for a product or service and is based on

perceived value. What is the competition charging? What is the

quality of the product or service you are offering? What is the

nature of the demand and what is the image you are projecting?

The price floor is the lowest amount at which you can offer a

product or service, meet all your costs and still make your

desired profit. Consider all costs -- raw materials, office


shipping, vehicle expense, taxes, loan and interest payments and

owner draws are a few. The profitable business operates between

the price ceiling and the price floor. The difference allows for

discounts, bad debt and returns. Be specific about how you

arrived at your pricing structure and leave room for some



Positioning -- predetermining the perceived value in the eyes of

the consumer -- can be accomplished through promotional

activities. To be successful, you must decide what your product

or service offers that your competitor's does not and promote it

as the unique benefit. Very few items on the market have

universal appeal your product or service cannot be all things to

all people. However, if you position your product or service

properly, prospective purchasers or users will immediately

recognize its benefits to them.


Product Design


Packaging and product design can play a major role in the success

of your business. It's what first catches the customer's eye.

Consider the tastes of your target market in the ultimate design

of your product and your package design. Decide what will be most

appealing in terms of size, shape, color, material and wording.

Packaging attracts a great deal of public attention. Be advised

of the Fair Packaging and Labeling Act, which established

mandatory labeling requirements. The U.S. Food and Drug

Administration (FDA) has strict procedures for the labeling of

items falling within its jurisdiction. The packaging guidelines

can be obtained from the FDA or found in the library.


Use key words to answer questions regarding your product design

and packaging. Include sketches or photographs. Also include

information on any proprietary rights, such as copyrights,

trademarks or patents.


Timing of Market Entry


The timing of your entry into the marketplace is critical and

takes careful planning and research. Having your products and

services available at the right time and the right place depends

more on understanding consumer readiness than on your

organizational schedule. The manner in which a new product is

received by the consumer can be affected by the season, the

weather and holidays. Early January and September are the best

times to mail flyers and catalogs, as consumers seem to be more

receptive to mail order purchasing in those months. The major

gift shows are held in the summer months (June, July, August) and

again in January and February. Most wholesale buying takes place

at these shows. November and December are not good months for

introducing new service businesses unless they relate in some way

to the holiday season. Spring is a better time to introduce a

service. Trade journals and trade associations in your field can

provide the information you need on the timing patterns of your

industry. Tell the lender when you plan to enter the market and

how you arrived at your decision.




If your choice of location is related to your target market,

cover it in this section of your business plan. List the reasons

for your choice. What is the character of the neighborhood? Does

the site project your business image? Where is the competition in

the area? What is the traffic pattern? What are the terms of the

lease? What services, if any, does the landlord provide? What is

the occupancy history of your location? Did any companies in the

area go out of business within the past few months? If so, try to

find out if it was related to location. Is the area in which you

plan to locate supported by a strong economic base? What

alternate sites were considered?


These are some of the questions to be considered. Refer to

Location in the business section for additional information.


Industry Trends


Be alert for changes in your industry. New technology may bring

new products into the marketplace that will generate new service

businesses. Read trade journals and industry reports in your

field. Project how your market may change and what you plan to do

to keep up.





You are now ready to develop the third area of your plan.

Financial records are used to show past, current and projected

finances. In this section we will cover the major documents you

will want to include in your business plan. They will consist of

both pro forma (projected) and actual financial statements. Your

work will be easier if these are done in the order presented.


  Summary of Financial Needs

  Application of Loan Funds

  Cash Flow Statement (Budget)

  Three-year Projection

  Break-even Analysis

  Actual Performance Statements:

     Balance Sheet

     Income (Profit and Loss) Statement

     Loan Application/Financial History


Summary of Financial Needs


If you are applying for a loan, your lenders and investors will

analyze the needs of your business. They will distinguish among

the three types of capital to be used as follows:


Working capital -- Used to meet fluctuating needs that are to be

repaid through cash during the business's next full operating

cycle, generally one year.


Growth capital -- Used to meet needs that are to be repaid with

profits over a period of a few years. If you seek growth capital,

you will be expected to show how the capital will be used to

increase your profits enough to be able to repay the loan within

several years (usually not more than seven).


Equity capital -- Used to meet permanent needs. If you seek

equity capital, it must be raised from investors who will take

the risk in return for some combination of dividend returns,

capital gains or a specific share of the business.


Keeping the above in mind, you must now prepare a summary of

financial needs. This document is an outline telling why you are

applying for a loan and how much you need.



                    SUMMARY OF FINANCIAL NEEDS


          I.  ABC Corporation is seeking a loan to increase

              its growth capital in the following areas of


              A.  Equipment (new and more modern)

              B.  Training of personnel in operation of above.


          II. Funds needed to accomplish above goal will be


              A.  See "Use of Funds" for distribution of

                  funds and backup statement.



Uses of Funds Statement


The potential lender will require a statement of how the money

you intend to borrow will be used. It will be necessary for you

to tell how you intend to disperse the loan funds. Back up your

statement with supporting data.


You must be sure that your supporting data can be easily found by

the loan officer who is examining your application. If you do not

have your information well organized and retrievable, your

application may be refused for the simple reason that the

material cannot be found. It will be necessary to have a well

written table of contents.



                         USES OF FUNDS




         ABC Corporation will use anticipated loan funds in

         the amount of $50,000 to modernize its production

         equipment. This will necessitate the purchase of

         two new pieces of equipment and the training of

         present personnel in the operation of this equipment.




         a.  The equipment needed is as follows:

             (1) High-speed F-34 Atlas Press

                 (purchase price -- $32,900)

             (2) S71 Jaworski Ebber (purchase

                 price -- $2,800)


         b. The training is available from the manufacturer

            as a three-week intensive program (cost: 10

            employees @ $1,200 = $12,000).


         c. The remaining $2,300 will be used for the first

            monthly installment on loan repayment -- a

            period of low production due to employee



         d. The equipment will result in a 35 percent

            increase in production, a 25 percent decrease in

            unit cost, and a net profit increase sufficient

            to repay the loan and interest within three years

            with a profit margin of 15 percent.


     Note: Refer to page 17* of the production plan of ABC

     Corporation.  See pages 27 and 28* of the marketing

     section for market research and projected trends in

     the industry.



     When writing your business plan be sure that your

     production plan includes a description of the equipment,

     how the work will be done, by whom and at what cost.


     The market research will show projected needs for your

     product, and thus show how increased production will

     results in increased sales and ultimately in the

     capability to enable you to repay the loan.


     (*The page numbers are hypothetical and do not refer

      to page numbers in this book.)



Cash Flow Statement (Budget)


Cash flow statements are the documents that project what your

business plan means in terms of dollars. They show cash inflow

and outflow over a period of time and are used for internal

planning. If you have been in business for some time, worksheets

can be put together from the actual figures of income and

expenses of previous years combined with projected changes for

the next period. If you are starting a new business, you will

have to project your financial needs and disbursements. Your

profit at the end of the year will depend on the proper balance

between cash inflow and outflow. The cash flow statement



    *   When cash is expected to be received.

    *   How much cash will be received.

    *   When cash must be spent to pay bills and debts.

    *   How much cash will be needed to pay expenses.


It also allows the manager to identify the source of necessary

cash, i.e., will it come from sales and services rendered or must

it be borrowed? Be sure that your projections take into account

receivables and how long it will take your customer to pay. The

cash flow statement deals only with actual cash transactions and

not with depreciation and amortization of goodwill or other

noncash expense items.


A cash flow statement can be prepared for any period of time. It

is recommended that you match the fiscal year of your business.

It should be prepared on a monthly basis for the next year and

revised not less than quarterly to reflect actual performance in

the preceding three months of operations.


In preparing your cash flow statement, it might be useful to

compile several individual budgets. They could be as follows:


   1. Cost of sales budget.

   2. Fixed expenses budget.

   3. Variable expenses budget.


Two worksheets can be used in developing a cash flow statement:


     Sources of cash worksheet -- Contains all the financing

     sources for the business.


     Cash to be paid out worksheet -- Identifies how much cash is

     expected to be spent to pay expenses and obligations.


Note: Projections in the two worksheets must be made for the same

time period (monthly, quarterly or annually).


Once you have completed the two worksheets, you are ready to

transfer the information into your cash flow statement. You will

need to think your way through each month, projecting what amount

from each category of the worksheets will be appropriate to what

month. For example, if your total sales amount to $100,000, you

will have to project the individual amounts that will probably

occur in each month.




              (Cash Flowing Into Your Business)


      Cash on Hand                            $ __________



        Sales                                   __________

        Service Income                          __________

        Deposits on sales or services           __________

        Collections on accounts receivable      __________


      Miscellaneous income

        Interest income                         __________


      Sale of long-term assets                  __________



         Loans (banks, finance companies,

           SBA, etc)                            __________



         Owner investments (sole proprietor

           or partnership)                      __________


         Contributed capital (corporation)      __________

         Venture capital                        __________


               Total Cash Available             __________







              (Cash Flowing Out of Your Business)


      Start-up costs

         Business license (annual expense)      ___________

         DBA filing fee (one time cost)         ___________

         Other start-up costs

         ___________________                    ___________

         ___________________                    ___________

         ___________________                    ___________


      Inventory purchases

          Cash out for items for resale

              or services                       ___________


      Variable expenses (controllable)

         Advertising               __________

         Freight                   __________

         Packaging costs           __________

         Parts and supplies        __________

         Sales salaries            __________

         Misc. direct expenses     __________

       Total direct expenses                    ___________


      Fixed expenses (overhead)

         Insurance                 __________

         Licenses & permits        __________

         Office salaries           __________

         Rent expense              __________

         Utilities                 __________

         Misc. indirect expenses   __________

       Total indirect expenses                   __________


      Assets (long-term purchases)

        Cash to be paid in current period        __________


      Owner equity

        Cash to be withdrawn by owner            __________


                Total cash to be paid out       $__________



Completing Your Cash Flow Statement


The vertical columns of a cash flow statement represent the

twelve months, preceded by a total column. Horizontal rows on the

statement contain figures for the sources of cash and cash to be

paid out copied from the two previous worksheets and from

individual budgets.


The figures are projected for each month, reflecting the flow of

cash in and out of your business for a one-year period. Begin

with the first month of the business cycle and proceed as



  1. Project the beginning cash balance. Enter under the first

     month of the business cycle.

  2. Project the cash receipts for the first month.

  3. Add beginning cash balance and cash receipts to determine

     total cash available.

  4. Project the direct, indirect and interest expenses for the

     first month.

  5. Project monies due on taxes, long-term assets and loan

     repayments. Also project any amounts to be drawn by owners.

  6. Total all expenses and draws. This is total cash paid out.

  7. Subtract total cash paid out from total cash available.

     Enter the result under cash balance/deficiency. If the

     result is negative, be sure to bracket this figure.

  8. Project loans to be received and equity deposits to be made.

     Add to cash balance/ deficiency to get ending cash balance.

  9. Carry forward the ending cash balance for January as

     February's beginning cash balance.

 10. Repeat the process through the last month of the business



To complete the total column, proceed as follows:


  1. Enter the beginning cash balance for the first month in the

     first space of the total column.

  2. Add the monthly figures for each category horizontally and

     enter the result in the corresponding total category.

  3. Compute the total column in the same manner as each of the

     individual months. If you have been accurate in your

     computations, the December ending cash balance will be

     exactly the same as the total ending cash balance.


Note: If your business is new, you will have to base your

projections solely on market research and industry trends. If you

have an established business, you will also use your financial

statements from the previous tax years.


A quarterly budget analysis should be used as a record to compare

your cash flow statement (or budget) with your business's actual

performance. Its purpose is to let you know whether or not you

are operating within your projections and to help you maintain

control of all phases of your business operations. If your

analysis shows that you have gone over budget in some areas you

will have to compensate by adjusting your cash flow statement

with future cuts in those or other areas. If properly used, a

cash flow statement can prove to be an invaluable tool to help

you reach your financial goals.


Your cash flow statement can be compiled on a month-by-month

basis and then compared with actual monthly performance. The

SBA's Form 1100 (4-82) is very useful in this regard; for a free

copy, contact your local SBA office. Prepared in this manner,

your statement can provide an annual projection for your next

fiscal year.


Three-year Income Projection


The three-year income projection is a pro forma income statement

(profit and loss statement for more information, see Income

Statement, page 18). The difference is that the three-year

projection only includes income and deductible expenses while the

cash flow statement includes all sources of cash and cash to be

paid out.


There are various opinions as to what period of time should be

covered in estimating income and expenses, i.e., whether it

should be on an annual or monthly basis. If this income

projection is for the purpose of obtaining a loan, talk to the

lender about his or her specific requirements. If the projections

are for your own use, a three-year projection is suggested with

annual rather than monthly projections.


Sources of Information


Information for a three-year income projection can be found in

your cash flow statement, sales forecast and individual budgets,

and your business and marketing analyses if you are new in

business. Again, if you are an established business, you will

also be able to use past financial statements to help determine

future projections for your business. Be sure to take into

account fluctuations anticipated in costs, efficiency of

operation, changes in the market and any other factors. Increases

and decreases in income and expenses are only realistic. These

changes should be reflected in any projections. Remember, too,

that industry trends can cause decreases in both income and

expenses. An example of this might be the computer industry,

where competition has increased greatly and standardization of

components has caused a decrease in both the cost and the sales

price of certain items.


Break-even Analysis


The break-even point is the point at which a company's expenses

exactly match its sales or service volume. It is the point at

which the business will neither make a profit nor incur a loss.

The break-even point can be calculated in either mathematical or

graph form. It can be expressed in total dollars or revenue

exactly offset by total expenses or in total units of production

(cost of which equals exactly the income derived by sales).


To apply a break-even analysis to a business operation, two types

of expenses must first be projected: fixed costs and variable

costs. Fixed costs do not vary with sales or output. Variable

costs vary in direct proportion to the output. The greater the

volume of sales, the higher the cost. For purposes of the

break-even analysis, make sure to include cost of sales in your

variable costs figure.


Sources of Information for a Break-even Analysis


All of your figures can be derived from your three-year

projection. In fact, by now you should be able to see that each

financial document in your business plan builds on the ones done

previously. It should be a simple matter to retrieve the figures

to plug into the following formula.




An example of calculating the break-even point using a

mathematical formula is shown below.


     B-E point sales (at break-even point) = fixed costs 

     + [1 - variable costs expressed as % of total sales]


   Terms used:

     B-E point sales = volume of sales at break-even point

     Fixed costs = fixed expenses, depreciation, interest

     Variable costs = cost of sales and variable expenses

     Sales revenues = income from sales of goods/services

       over a specified period


   Values used:

     B-E point sales (S) = ?

     Fixed costs = $25,000

     Variable costs = $45,000

     Sales revenues = $90,000




    S (at break-even point) =     1-($45,000/90,000


    S = __$25,000__



    S = __$25,000__



    .50S = $25,000


    S = $50,000 (break-even point in terms of revenue exactly

                offset by total expenses)




A firm's sales at break-even point can be plotted as in the

following break-even analysis graph.


Using the same figures as in the above formula, draw three lines

in the graph: horizontal line at point representing fixed costs

(25); total expenses (TC = FC + VC) line from left end of fixed

cost line sloping upward to point where total (fixed plus

variable) costs on vertical scale (7) meet total sales revenues

on the horizontal scale (9); total revenues (sales) line from

zero through a point describing total revenues (sales) on both

scales (9).


The point on the graph where the total expenses line intersects

the total sales revenues line is the break-even point. This

business estimates that it will break even when sales volume

reaches $50,000. The triangular area below that point represents

company losses. The triangular area above and to the right of the

point represents potential profit.


Actual Performance Statements


Actual performance statements are those financial statements

reflecting the activity of your business in the past. If you are

a new business owner, you have no business history. Your

financial section will end with the projected statements and a

personal financial history. If you are an established business,

you will include the following actual performance statements:


     Balance sheet

     Profit and loss (income) statement

     Business financial history or loan application


Balance Sheet


The balance sheet is a financial statement, usually prepared at

the close of an accounting period, that shows the financial

position of the business as of a fixed date. It is a picture of

your firm's financial condition at a particular moment. By

regularly preparing this statement, you will be able to identify

and analyze trends in the financial strength of your business and

thus implement timely modifications.




All balance sheets must contain three categories -- assets,

liabilities and net worth -- that have been established by a

system known as generally accepted accounting principles. The

three are related in that at any given time a business's assets

equal the total contributions by its creditors and owners.


   Assets = Anything your business owns that has monetary


   Liabilities = Debts owed by the business to any of its


   Net worth (capital) = An amount equal to the owner's



The relationship between these terms is simply illustrated in the

following accounting formula:


                 Assets = Liabilities + Net Worth


Examined as such, it becomes apparent that if a business

possesses more assets than it owes to creditors, its net worth

will be a positive value. Conversely, if a business owes more

money to creditors than it possesses in assets, the net worth

will be a negative value.




The balance sheet also must follow an accepted format. By so

doing, anyone reading the balance sheet can readily interpret it.


All assets are divided under three headings:


   Current assets -- Assets that can be converted into cash

      within one year of the date on the balance sheet.

   Long-term investments -- Stocks, bonds and special savings    

     accounts to be kept for at least one year.

   Fixed assets -- The resources a business owns and does not

      intend for resale (land, buildings, equipment, automobiles,



Liabilities are divided into current and long-term liabilities:


   Current liabilities -- Those obligations payable within one

      operating cycle.

   Long-term liabilities -- Outstanding balance less current

      portion due (e.g., mortgage, vehicle).


Net worth is documented according to the legal structure of the



   Proprietorship or partnership -- Each owner's original

     investment plus earnings after withdrawals.

   Corporation -- The sum of contributions by owners or

     stockholders plus earnings retained after paying dividends.



                         BALANCE SHEET


                         COMPANY NAME


             As of _________________________, 19_____


Assets                             Liabilities


Current assets                     Current Liabilities


 Cash               __________      Accounts Payable   __________


 Petty Cash         __________      Notes Payable      __________


 Accounts Receivable__________      Interest Payable   __________


 Inventory          __________      Taxes Payable

                                     Fed. income tax   __________

 Short-term Invest-                  State income tax  __________

   ments            __________       Self-employment   __________

                                     Sales tax (SBE)   __________

 Prepaid expense    __________       Property tax      __________


Long-term invest-                   Payroll accrual    __________

   ments            __________

                                   Long-term liabil-

Fixed assets                        bilities         


 Land               __________      Notes payable      __________


 Buildings          __________

                                   Total liabilities   __________

 Improvements       __________     ______________________________


 Equipment          __________     Net worth (owner equity)


 Furniture          __________      Proprietorship     __________

                                     or Partnership

 Automobiles/                        (name's) equity   __________

  vehicles          __________       (name's) equity   __________


Other assets                        Corporation

                                      Capital stock    __________

  1.                __________        Surplus paid in  __________


                                      Retained earnings__________

  3.                __________                      _____________


  4.                __________      Total net worth    __________


                 _____________                      _____________

                                    Total liabilities

Total assets        __________       and net worth  _____________

    (Total assets will always equal total liabilities and

     total net worth)



Income Statement


The income (profit and loss) statement shows your business

financial activity over a period of time, usually your tax year.

In contrast to the balance sheet, which shows a picture of your

business at a given moment, this statement can be likened to a

moving picture, which shows what has happened in your business

over a period of time. The income statement is an excellent tool

for assessing your business. You will be able to pick out

weaknesses in your operation and plan ways to run your business

more effectively and thereby increase your profits. For example,

you may find that some heavy advertising you did in March did not

effectively increase your sales. In following years, you may

decide to use your advertising funds more effectively by using

them at a time of increased customer spending. Along the same

vein, you might examine your income statement to see what months

have the heaviest sales volume and plan your inventory

accordingly. Comparison of the income statements from several

years will give you an even better picture of the trends in your

business. Do not underestimate the value of this particular tool

when planning your tactics.




The income statement shows where your money has come from and

where it was spent over a specific period of time. It should be

prepared not only at the end of the fiscal year, but at the close

of each business month. It is one of the two principal financial

statements prepared from the ledgers and records of a business.

All profit and loss statements contain income and expense account

balances. The remaining asset, liability and capital information

provides the figures for the balance sheet.


At the end of each month, the accounts in the general ledger are

balanced and closed. Balances from the revenue accounts and the

expense accounts must be transferred to your profit and loss





A profit and loss statement must also follow an accepted format

and contain the following categories:



     Net sales (gross sales returns and allowances).

     Cost of goods sold (see IRS Form 1040, Schedule C for


     Gross profit (net sales cost of goods sold).



     Selling expenses (direct, controllable, variable).

     Administrative expenses (indirect, fixed, office overhead).


Total expenses


Income from operations (gross profit total expenses)

   Other income (interest income)

   Other expenses (interest expense)


Net profit (loss) before income taxes

Income taxes (federal, state, self-employment)

Net profit (loss) after income taxes


Two sample income statements are shown for your use. The first is

divided into 12 months. Fill it in monthly after balancing your

ledgers. At the end of the year, this form will provide an

accurate picture of your financial activity. The second form can

be used for your monthly and annual profit and loss statements.



                         INCOME STATEMENT

            (Also known as Profit and Loss Statement)


     For the year ___                J F M A M J J A S O N D




      1. Net Sales                   _ _ _ _ _ _ _ _ _ _ _ _

      2. Cost of Sales               _ _ _ _ _ _ _ _ _ _ _ _

      3. Gross profit (1 minus 2)    _ _ _ _ _ _ _ _ _ _ _ _




      1. Variable exp. (controllable)

         a. Advertising              _ _ _ _ _ _ _ _ _ _ _ _

         b. Freight                  _ _ _ _ _ _ _ _ _ _ _ _

         c. Packaging costs          _ _ _ _ _ _ _ _ _ _ _ _

         d. Parts & supplies         _ _ _ _ _ _ _ _ _ _ _ _

         e. Sales salaries           _ _ _ _ _ _ _ _ _ _ _ _

         f. Misc. direct expenses    _ _ _ _ _ _ _ _ _ _ _ _

         g. Legal fees               _ _ _ _ _ _ _ _ _ _ _ _


      2. Fixed expenses (overhead)

         a. Insurance                _ _ _ _ _ _ _ _ _ _ _ _

         b. Licenses & permits       _ _ _ _ _ _ _ _ _ _ _ _

         c. Office salaries          _ _ _ _ _ _ _ _ _ _ _ _

         d. Rent                     _ _ _ _ _ _ _ _ _ _ _ _

         e. Utilities                _ _ _ _ _ _ _ _ _ _ _ _

         f. Misc. indirect expenses  _ _ _ _ _ _ _ _ _ _ _ _

         g.                          _ _ _ _ _ _ _ _ _ _ _ _


     TOTAL EXPENSES                  _ _ _ _ _ _ _ _ _ _ _ _



       (gross sales minus expenses)  _ _ _ _ _ _ _ _ _ _ _ _


     OTHER INCOMES (interest)        _ _ _ _ _ _ _ _ _ _ _ _


     OTHER EXPENSES (interest)       _ _ _ _ _ _ _ _ _ _ _ _


     INCOME BEFORE TAXES             _ _ _ _ _ _ _ _ _ _ _ _


     INCOME TAXES                    _ _ _ _ _ _ _ _ _ _ _ _


     NET INCOME                      _ _ _ _ _ _ _ _ _ _ _ _




                         INCOME STATEMENT


     For the period beginning _________ and ending _________



       1. Net sales (gross--

          returns @ allowance)                    __________


       2. Cost of Sales

          a. Inventory (Jan. 1)                   __________

          b. Purchases                            __________

          c. Cost of goods available

             for sale [(a)+(b)]                   __________

          d. Deduct inventory (Dec.31)            __________


      3. Gross profit on sales                    __________



      1. Variable expenses (control-          


         a. Advertising                 __________

         b. Freight                     __________

         c. Packaging costs             __________

         d. Parts & supplies            __________

         e. Sales salaries              __________

         f. Misc. direct expenses       __________


      2. Fixed expenses (overhead)


         a. Insurance                   __________

         b. Licenses & permits          __________

         c. Office salaries             __________

         d. Rent expense                __________

         e. Utilities                   __________

         f. Misc. indirect expenses     __________


      Total expenses                    __________


     Income from operations (gross

       profit less expenses)                      __________


     Other income                                 __________

      1. Interest income                          __________


     Other expenses                     __________

      1. Interest expenses              __________


     Net profit (loss) before taxes               __________


     Income taxes                                 _________


     Net profit (loss) after income taxes         __________



Business Financial History


The financial history is the last of the financial statements

required in your business plan. It is a summary of financial

information about your company from its start to the present.


If you are a new business, you will have only projections for

your business. If you are applying for a loan, the lender will

require a personal balance sheet. This will be of benefit in that

it will show the lender the manner in which you have conducted

your personal business and be an indication as to the probability

of succeeding in your new business.


If you are using your business plan to apply for a loan, your

business financial history and the loan application are the same.

This document should be completed last, but placed first in the

financial section of your plan. When you indicate that you are

interested in obtaining a business loan, the institution

considering the loan will supply you with an application. The

format may vary slightly. When you receive your loan application,

be sure to review it and think about how you are going to answer

each item. Answer all questions and, by all means, be certain

that your information is accurate and that it can be verified if

the need should arise.


Information Needed and Sources


As you complete your business financial history or loan

application, it should become immediately evident why this is the

last financial document to be completed. All of the information

needed will have been compiled in earlier parts of your plan and

in the completed financials. To help you with your financial

history, the following is a list of information usually included

and the source you will refer to for that information:


Assets, liabilities and net worth -- You should be able to

recognize these three as balance sheet terms. Go back to your

balance sheet and bring these figures forward.


Contingent liabilities -- These are debts you may come to owe in

the future (e.g., default on cosigned note or settlement of a

pending lawsuit).


Inventory details -- Information about inventory is derived from

your inventory record. Also, the business section should have a

summary of your current policies and methods of evaluation.


Income statement -- This is revenue and expense information.

Depending on the period of time to be covered, you will transfer

the information from your most recent annual profit and loss

statement or from a compilation of several if required by the



Real estate holdings, stocks and bonds -- Refer back to the

business portion of your plan. You may also have to go through

your investment records for more comprehensive information.


Sole proprietorship, partnership or corporation information --

There are generally three separate schedules on the financial

history one for each form of legal structure. You will be

required to fill out the one that is appropriate to yours. In the

business section, you will have covered two areas that will serve

as the source of this information -- legal structure and

management. Your supporting documents may also contain some of

the information that you will need.


Audit information -- Refer back to your business section under

record keeping. You may also be asked questions about other

prospective lenders, whether you are seeking credit, who audits

your books and when they were last audited.


Insurance coverage -- You will be asked to provide detailed

information on the amounts of different types of coverage (i.e.,

merchandise, equipment, public liability, earthquake, automobile,

etc.). Your business section contains coverage information that

can be brought forth to the financial history.




The financial documents covered in this section will probably be

sufficient for both your own use and that of potential lenders.

Some lenders may not require all documents and other lenders may

require additional documents. The important thing to note in

compiling any financial statements is that the information must

be correct and that you must have records to support your



Remember, you can use the information in your business plan not

only to aid you in dealing with a lender, but also to assist you

on an on-going basis. If you have done your homework, the

financial documents you have prepared will be invaluable to you

in the assessment of your operation and may very well be the

determining factor in whether or not you succeed in your






Now that you have completed the main body of your business plan,

you will need to include a separate section for any additional

records that should be included to support your plan. Supporting

documents are the records that back up the statements and

decisions made in the three main parts of your plan. As you are

compiling the first three sections, it is a good idea to keep a

separate list of the supporting documents that you mention or

that come to mind. For instance, discussion of your business

location might indicate a need for demographic studies, location

maps, area studies, leases, etc. If you are considering applying

for a loan to purchase equipment, your supporting documents might

be existing equipment purchase agreements or lease contracts. By

listing these items as you think of them, you will have a fairly

complete list of all of your supporting documents by the time you

reach this part of your task. You will be ready to sort them into

a logical sequence and add any new ones that come to mind.


The following are several documents that you will want to



Personal Resumes


If you are a sole proprietor, include your own resume. If your

business is a partnership, there should be a resume for each

partner. If you are a corporation, include resumes for all

officers of the corporation. A resume need not and should not be

a lengthy document. Preferably, it should be contained on one

page for easy reading. Include the following categories and



Work history -- Name of employers or businesses with dates of

employment. Begin with most recent. Include duties and



Educational background -- Names of schools and dates you attended

them, degrees earned, fields of concentration.


Professional affiliations and honors


Special skills -- e.g., relate well to others, able to organize,

willing to take risks, etc.


Personal Financial Statement


The owner(s) should include a statement of personal assets and

liabilities. This information can be compiled in the same manner

as a balance sheet. Use the same format and list all assets and

liabilities to determine net worth. If you are a new business

owner, your personal financial statement will be a part of the

financial document and may be a standard form supplied by the

potential lender.


Credit Reports


Credit ratings are of two types, business and personal. You can

ask your suppliers or wholesalers to supply you with letters of

credit. Personal credit ratings can be obtained through credit

bureaus, banks and companies with whom you have dealt on a basis

other than cash.


Copies of Leases


Include all lease agreements currently in force between your

company and a leasing agency. Some examples are the lease

agreement for your business premises, equipment, automobiles,



Letters of Reference


These are letters recommending you as a reputable and reliable

business person worthy of being considered a good risk. There are

two types of letters of reference: business references, or those

written by business associates, suppliers and customers; and

personal references, or those written by nonbusiness associates

who can assess your business skills (not friends or relatives).




Include all business contracts, both completed and currently in

force. Some examples are current loan contracts, papers on prior

business loans, purchase agreements on large equipment, vehicle

purchase contracts, service contracts and maintenance agreements.


Legal Documents


Include all legal documents pertaining to your business. Some of

these are articles of incorporation, partnership agreements,

copyrights, trademark registrations, patents, insurance policies,

property and vehicle titles, etc.


Miscellaneous Documents


These are all the documents (other than the above) that are

referred to, but not included, in the business and marketing

sections of your business plan. A good example would be those

records related to selecting your location that may have been

finalized as the result of developing a location plan. A

potential lender who may be particularly interested in your

location information will be able to find the location plan in

your supporting documents and examine your demographic studies,

maps, area studies on crime rate, income, etc.


Please note: All supporting documents need not be included in

every copy of your business plan. You need to include only that

information you think will be needed by the potential lender. The

rest of the information should be kept with your copy of the plan

and be easily accessible should it be requested by the lender.





Your plan should be put together in a professional manner. To

create a favorable impression, it should be as follows:


Appearance -- Use a plastic spiral binding or covers purchased

from your local stationery store. Use blue, brown or black

covers. Bankers are usually conservative.


Length -- Be concise! Usually, you should have no more than 30 to

40 pages, including your supporting documents. When you are

writing each section, think of it as being a summary. Include as

much information as you can in a brief statement. A potential

lender does not want to have to wade through volumes of words to

get the information needed.


Presentation -- Do your best to make your plan look presentable.

However, do not go to the unnecessary expense of paying for

typesetting and high-powered computer graphics. These might be

considered frivolous by some lenders a first impression that


indicate you would not use their loan wisely.


Table of contents -- Be sure to include a table of contents in

your business plan. It will follow the statement of purpose. Make

it detailed enough so the lender can locate any of the areas

addressed in the plan. It must also list the supporting



Number of copies -- Make copies for yourself and each lender you

wish to approach. Keep track of each copy. Do not try to work

with too many potential lenders at one time. If your loan is

refused, be sure to retrieve your business plan.


When you are finished, your business plan should look

professional, but the lender should know that it was done by you.

It will be the best indication a lender will have to judge your

potential for success. Be sure that your business plan represents

your best efforts.





Making Revisions


If your business plan is going to be effective either to the

business or to a potential lender, it will be necessary for you

to update it on a regular basis. Changes necessitating revisions

can be attributed to three sources: changes within the company,

changes originating with the customer and technological changes.

Neglecting to allow for these changes will doom your operation to

decreased profits and probable failure.


Implementing Changes


As the owner, you must be aware of changes in your industry,

market and community. First you must determine what revisions are

needed. You will have to compare your plan with the changes

discussed above. You can use your employees to help keep track of

business trends applicable to their expertise. However, the final

judgment as to revisions will rest with you, the owner. You may

make errors, but with experience, your percentage of correct

decisions will increase and your reward will be higher profits.


Anticipating Problems


Try to see ahead and determine what possible problems may plague

you. For example, you may have to deal with costs that exceed

your projections. At the same time, you may experience a sharp

decline in sales. These two factors occurring simultaneously can

portend disaster if you are not ready for them. Also, be cautious

when things are too good. The increased profits may only be

temporary. A product or service that is in demand this year may

not be popular next year. You might think about developing an

alternate budget based on possible problems. Awareness of changes

in your industry and revision according to those changes will

benefit you greatly.





Bobrow, Edwin E. Pioneering New Products: A Market Survival

Guide. Homewood, IL: Dow Jones-Irwin, 1987.


Breen, George, and A. B. Blankenship. Do-It-Yourself Marketing

Research. New York: McGraw-Hill, 1982.


Clifford, Denis, and Ralph Warner. The Partnership Book.

Berkeley: Nolo Press, 1989.


Goldstein, Harvey. Up Your Cash Flow. Los Angeles: Granville

Publications, 1986.


Husch, Tony, and Linda Foust. That's a Great Idea. Oakland, CA:

Gravity Press, 1986.


Lavin, Michael R. Business Information: How to Find it, How to

Use it. Phoenix, AZ: Oryx Press, 1987.


Levinson, Jay Conrad. Guerilla Marketing: Secrets for Making Big

Profits from Your Small Business. Boston: Houghton-Mifflin, 1984.


Ogilvy, David. Ogilvy on Advertising. New York: Vintage Books,



Pinson, Linda, and Jerry Jinnett. Anatomy of a Business Plan.

Tustin, CA: Out of Your Mind...and Into the Marketplace, 1989.

Also available with a software package, Automate Your Business

Plan, that applies principles of the text.


Pinson, Linda, and Jerry Jinnett. Marketing: Researching &

Reaching your Target Market. Tustin, CA: Out of Your Mind...and

Into the Marketplace, 1988.


Pinson, Linda, and Jerry Jinnett. Out of Your Mind...and Into the

Marketplace. Tustin, CA: Out of Your Mind...and Into the

Marketplace, 1988.


Pinson, Linda, and Jerry Jinnett. Recordkeeping: the Secret to

Growth & Profit. Tustin, CA: Out of Your Mind...and Into the

Marketplace, 1989.


Schmenner, Roger W. Making Business Location Decisions. Englewood

Cliffs, NJ: Prentice-Hall, 1982.


Worthington, Anita, and Robert E. Worthington. Staffing a Small

Business: Hiring, Compensating, and Evaluating. Denver, CO: Oasis

Books, 1987.





U.S. Small Business Administration (SBA)


The SBA offers an extensive selection of information on most

business management topics, from how to start a business to

exporting your products.


SBA has offices throughout the country. Consult the U.S.

Government section in your telephone directory for the office

nearest you. SBA offers a number of programs and services,

including training and educational programs, counseling services,

financial programs and contract assistance. Ask about


     *     SCORE: Counselors to America’s Small Business, a

           national organization sponsored by SBA of over 11,000

           volunteer business executives who provide free

           counseling, workshops and seminars to prospective and

           existing small business people.  Free online counseling

           and training at


     *     Small Business Development Centers (SBDCs), sponsored

           by the SBA in partnership with state governments, the

           educational community and the private sector. They

           provide assistance, counseling and training to

           prospective and existing business people.


     *     Women’s Business Centers (WBCs), sponsored by the SBA 

           in partnership with local non-government organizations

           across the nation. Centers are geared specifically to

           provide training for women in finance, management,

           marketing, procurement and the Internet.


For more information about SBA business development programs and

services call the SBA Small Business Answer Desk at 1-800-U-ASK-

SBA (827-5722) or visit our website,


Other U.S. Government Resources


Many publications on business management and other related topics

are available from the Government Printing Office (GPO). GPO

bookstores are located in 24 major cities and are listed in the

Yellow Pages under the bookstore heading. Find a “Catalog of

Government Publications at


Many federal agencies offer Websites and publications of interest

to small businesses. There is a nominal fee for some, but most

are free. Below is a selected list of government agencies that

provide publications and other services targeted to small

businesses. To get their publications, contact the regional

offices listed in the telephone directory or write to the

addresses below:


Federal Citizen Information Center (FCIC)



The CIO offers a consumer information catalog of federal



Consumer Product Safety Commission (CPSC)

Publications Request

Washington, DC 20207

The CPSC offers guidelines for product safety requirements.


U.S. Department of Agriculture (USDA)

12th Street and Independence Avenue, SW

Washington, DC 20250

The USDA offers publications on selling to the USDA. Publications

and programs on entrepreneurship are also available through

county extension offices nationwide.


U.S. Department of Commerce (DOC)

Office of Business Liaison

14th Street and Constitution Avenue, NW

Washington, DC 20230

DOC's Business Liaison Center provides listings of business

opportunities available in the federal government. This service

also will refer businesses to different programs and services in

the DOC and other federal agencies.


U.S. Department of Health and Human Services (HHS)

Substance Abuse and Mental Health Services Administration

1 Choke Cherry Road

Rockville, MD 20857

Helpline: 1-800-workplace. Provides information on Employee

Assistance Programs Drug, Alcohol and other Substance Abuse.


U.S. Department of Labor (DOL)

Employment Standards Administration

200 Constitution Avenue, NW

Washington, DC 20210

The DOL offers publications on compliance with labor laws.


U.S. Department of Treasury

Internal Revenue Service (IRS)

1500 Pennsylvania Avenue NW

Washington DC 20230

The IRS offers information on tax requirements for small



U.S. Environmental Protection Agency (EPA)

Small Business Ombudsman

1200 Pennsylvania Avenue NW

Washington, DC 20480

Hotline: 1-800-368-5888

The EPA offers more than 100 publications designed to help small

businesses understand how they can comply with EPA regulations.


U.S. Food and Drug Administration (FDA)

5600 Fishers Lane

Rockville MD 20857-0001

Hotline: 1-888-463-6332

The FDA offers information on packaging and labeling requirements

for food and food-related products.


For More Information


A librarian can help you locate the specific information you need

in reference books. Most libraries have a variety of directories,

indexes and encyclopedias that cover many business topics. They

also have other resources, such as


     *     Trade association information

           Ask the librarian to show you a directory of trade

           associations. Associations provide a valuable network

           of resources to their members through publications

           and services such as newsletters, conferences and



     *     Books

           Many guidebooks, textbooks and manuals on small

           business are published annually. To find the names of

           books not in your local library check Books In Print,

           a directory of books currently available from



     *     Magazine and newspaper articles

           Business and professional magazines provide

           information that is more current than that found in

           books and textbooks. There are a number of indexes to

           help you find specific articles in periodicals.


      *    Internet Search Engines


In addition to books and magazines, many libraries offer free

workshops, free access to computers and the Internet, lend

skill-building tapes and have catalogues and brochures

describing continuing education opportunities.

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