Copyright  2019 Ronin Software


"If you don't inherit it, you have to borrow it."
 -- Motto of a junk bond financier, quoted in
    Liar's Poker, by Michael Lewis

"Any business plan won't survive its first encounter
with reality. The reality will always be different.
It will never be the plan." -- Jeff Bezos, founder
of Amazon.com

           Why Have a Business Plan?       

Suggestion: Take the time to read Section 1 and
Section 2 below, to get an overview and perspective, before
you attempt to start creating your business plan, in Section
3, which is a broad outline.  Since using this template
will require you to do a lot of writing, to create your
business plan, we suggest you stop now and copy this entire
file or import it into a good word processor, such as 
Microsoft Word, WordPerfect, or whatever other word 
processor you will use to create a professional-looking
business plan document.  

STOP NOW to turn this business plan outline or worksheet
into a word processing file and save it to disk under a
different file name before you proceed, unless you have 
already done so....


.... Good.  Now that you are reading this in your word
processor program, we suggest you go ahead and read Sections
1 and 2 of this outline. (Sections 3 through 16 contain the 
actual outline you will flesh out.)

At some point, before you print out the completed business
plan with your word processor or desktop publishing software
program, you will want to delete the comments and other
instructional portions of this file that are enclosed in
brackets, such as this paragraph, and you will also want
to delete all of Sections 1 and 2 of this outline, which
are for your guidance only. In addition, each separate
section of this business plan guide is followed by a "Help
Notes" section that you will also want to delete from 
the document file before the business plan document is
finalized and ready to print out.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

SECTION 1:   Why Have a Business Plan?


In practice, most business plans are created, not when
companies need them, but when the owners begin to realize
that they are running out of money and will need to borrow
or raise funds through a sale of stock.  That is usually
the wrong time, and is often too late to be of much
benefit.  As has often been said, "A business owner who
fails to plan, plans to fail."

That doesn't mean you can't succeed in business without a
written business plan -- There are many, many large and
successful businesses that got started on an informal
basis with the only business plan being a set of strongly
held convictions and good ideas in the head of the founder,
with the only written plans being a few numbers scribbled
on a napkin.  But creating a business plan can definitely 
help you improve your odds of success, if you are willing 
to make the additional effort that is required to create
a well thought out business plan.

By treating a business plan as a necessary evil, and as
a document that is merely another tool in the quest for
financing, you will be overlooking the most important
single user of a well-written and thoroughly researched
business plan:  yourself.  There can be enormous benefits
from going through the intellectually rigorous exercise of
creating a business plan before you start a business, or
even after it is in operation, to help you make needed
course corrections.  You may even want to consider your
company's business plan as an ongoing set of blueprints
or an operating manual for your business, showing where 
it has come from, how it works, what its goals are, and a
compass to keep you focused on where it is going, at any
given point in time -- a "living document" that is updated
regularly as conditions change and as goals are either met
or not met, or are revised, expanded, or abandoned.

This business plan worksheet is designed to help you through
the creative process of developing a business plan.  We will 
NOT write the business plan for you, and will not give you a 
boilerplate document in which you merely fill in a few blanks 
and then print out your business plan after an hour's work 
and give it to your friendly banker.

Sorry, but doing a useful business plan is not that simple.

While there are business plan software products that attempt 
to do the foregoing, and consultants who will help you write 
(i.e, "ghost write") a plan for a fee, lenders and venture 
capitalists who read or review hundreds of business plans a 
year will tell you they have learned to easily spot "canned" 
business plans that have been generated by a computer or by 
an outsider (often using such "canned" business plan software 
themselves), with little reflection, insight, or input by the 
owners who will have to make the business go.

Needless to say, bankers and prospective investors are not
overly impressed by such mass-produced business plans, even
if they are expensively printed and contain glossy pictures
and reams of text and data.

So, if you use this worksheet, YOU are going to write this
business plan, not the computer.  However, we will coach
you every step of the way, and will suggest numerous
resources and approaches you may want to use or consider.
(Wherever you are in this worksheet and outline, just
go to the "Help Notes" at the end of each section at any
time, for more detailed advice and suggestions on how to
go about developing the particular section you are working
on at that moment.)

Only you are likely to understand your business well enough
to pull together a plan that shows that:

  . You know the market;

  . You have a product or service that will sell; and

  . You know how to deliver it at a price that earns a
    rate of return on investment that is attractive enough
    to make the business worth going into and,
    incidentally, worth lending to or investing in, from
    the viewpoint of an outsider, if you are seeking
    outside financing.

Even if you never intend to go for outside financing,
going through the process of creating a detailed business
plan can awaken you to the fact that a proposed business
idea may not have any better chance of succeeding than 
a snowball in a hot place.... In which case, you may 
save yourself a great deal of time, money, energy and
disappointment by doing your homework BEFORE you start
the business, or get too deeply into it, rather than

In the past, the rule of thumb for business plans seems 
to have been to have a hefty document of 40 to 50 pages 
in length, with an "executive summary" of about 3 pages.

Unfortunately, most such business plans have tended to
go directly into landfills, rather than being read.  The
current trend reported, among those with expertise in doing
business plans, is to aim for a very short, condensed, and
well-reasoned document, often between 8 and 12 pages in
length, which IS likely to be read, if it makes a compelling
case for why the business will succeed and pay back its
lenders and investors within a short time frame.  At today's
hectic business pace, most lenders simply don't have time to
linger over a novel-length business plan document, when they
have a stack of business plans to consider.

We leave it up to you as to how long a document you want
to create.  We have included a very exhaustive list of
areas you may want to cover in a business plan, so if you
take all our suggestions you may have a fairly lengthy
document, though certain parts of this outline will clearly
not be applicable to your particular business.  

However, keep in mind the foregoing, that most of your 
intended audience will be more favorably impressed with a 
concise, crisp business plan than a lengthy one that throws 
in massive amounts of detail.  At the same time, if there 
are key issues you need to deal with, don't leave them out 
just for the sake of brevity.  But feel free, if you get 
the sense the document is going to be too lengthy, to 
shorten your discussion of any given subject by leaving 
out some of the items we have suggested, if you feel can 
do so without weakening your presentation.

Of course, you may also decide you don't need a business
plan at all, or at least not until you need financing
somewhere down the road.  That is your choice, but we would
urge you to keep a few things in mind when you decide on
whether or not to create a business plan at a very early
or preliminary stage in your business:

  . By going through this undeniably laborious process of
    creating a business plan, you will be exercising the
    kind of self-disciplined approach that is often
    useful in selecting a potentially profitable business
    and then actually make it go.  You will also gain more
    of an understanding of the market environment in which
    you must operate, plus a grasp of the kind of financial
    numbers that your enterprise will need to be able to
    generate if it is to succeed.  This can either give you
    the confidence you need to go ahead, or can disclose
    the danger signs that tell you that the business you
    are considering is unlikely to succeed, before you make
    a major commitment of time, energy, and financial

  . In any type of potentially profitable business, you
    are likely to be up against energetic and sometimes
    sophisticated competitors, some of whom will have done
    their own detailed business planning.  If you don't
    similarly do some careful planning and analysis, they
    are likely to have an edge on you.

  . On the other hand, many of your competitors may not
    have done business plans, and may be simply "flying
    by the seat of their pants," reacting to events on a
    day-to-day basis, with no overall strategic plans.  If
    you have done your homework by thoroughly researching,
    writing, and documenting your business plan, you will
    have a definite edge on less organized competitors.
    In today's extremely competitive marketplace, you
    need every edge you can get.

  . Finally, if you have a good, well-written business
    plan, and keep it relatively up to date, you should
    know well in advance when you will need to begin to
    seek financing, and it will be useful in helping you
    to obtain such financing.

Six months or more before you start your business may
be a much better time to devote yourself to creating a
business plan, which may take 50 to 150 or more hours
to research, write and document.  Once you are in
business and working long hours to keep the business
afloat, meet your payroll, put out fires, and keep
creditors at bay and customers happy, it may be much
harder to find the free time to do your research and
writing of the business plan, once you realize you need
it to get financing.  If you already have written a
plan before you start a business, you will undoubtedly
need to make some changes and update it after you have
been operating for a few months or a year or more,
with the advantage of hindsight.  However, that will
be a much easier task than starting from scratch with
creating your business plan, at a time when you are up
to your neck in alligators.




GENERAL COMMENT.  In most cases, you will have already
decided that this particular business is a "go."  The
business plan is usually done mainly to create evidence to
support that decision, and to project cash needs before
you need to go for financing.  However, if you are not at
that stage yet, we hope you will at least have read through
Section 1 of the Business Plan Worksheet file, which discusses
a number of reasons why you should consider doing a business
plan for your new or existing business, even if you do not
see any near-term need for financing.

DON'T WORK IN A VACUUM.  If you are the person in your
business organization who is preparing the business plan,
don't work alone, if you have business associates.  Get
their input at an early stage, as much as possible.  And
even if you don't have any partners or other business
associates, seek help while developing your business 
plan from someone with business experience, like a SCORE
counselor at your local Small Business Administration
office, or someone at a nearby Small Business Development
Center, which is also there to help small businesses like
yours to get off the ground.  At a bare minimum, at least
run your business plan document past some such person,
after you have done the initial draft, before you
release it in final form.

AVOID NAIVE STATEMENTS.  In writing your business plan,
try to avoid the temptation of using certain trite or
naive sounding terms, like describing what you do as
"unique."  In one sense, of course, every business or
product is unique; but in another sense, almost nothing
is unique.  You might want to tout in a business plan that
your cookie company's chocolate chip cookies are made from
a "secret and unique" recipe.  Well, maybe.  But even
Coca-Cola, which has kept its soft-drink formula more
secret than the Manhattan Project for a century, doesn't
have a totally "unique" product--as any Pepsi drinker, who
may prefer the quite similar taste of the very competitive
Pepsi-Cola, will be quick to point out to you.

Also shy away from using words like "guaranteed profits"
or the like.  There is no such thing as a sure thing in the 
business world, particularly when it comes to predicting
future profits, and the financial people who will be
reading your business plan are painfully aware of that
fact, more so than most other people.  Don't insult their 
intelligence by using such terminology.

Similarly, don't ever refer to your projected financial
results as "conservative estimates."  Bankers and venture
capitalists tend to be hard-nosed realists.  They know
that if you think you can reasonably predict a million
dollar a year profit by Year 3, you are unlikely to do
projections that show only a $200,000 profit in Year 3 and
then label it as a "conservative estimate."  The cynics
know the writer of such a business plan is more likely to
project $1.5 or $2 million profits by year three in that
case, and call THAT number a "conservative estimate" of
profit levels that can support a $10 million loan they are

In short, remember who your audience is when you write a
business plan, if you are going to use it seek financing.
In most cases, people who make decisions to lend to or
invest in a small business are pretty sophisticated -- they
are not the proverbial "widows and orphans" who are likely
to be impressed by razzle-dazzle claims on your part.

In fact, by actually being somewhat understated in tone,
but making your case clearly and simply, you may succeed
in leaving the sophisticated financial person who reads
it with the impression that your projections really are
"conservative estimates," and that there's a good chance
that your profits and cash flow could actually be far
better than you are suggesting.  But you aren't likely 
to get that kind of reaction by trying to beat the reader
over the head with such self-serving language.  In other
words, "walk the walk" and you won't need to "talk 
the talk," in trying to convince lenders or potential
investors that they have discovered a possible diamond
in the rough, one that may even be a better investment
than you, the owner, may realize.

HAVE AN EXIT STRATEGY.  Even if seeking equity investments,
you need to be able to lay out a plausible "exit strategy,"
since everyone, including equity investors, wants to know
how they'll get their money out.  This, of course, means
profits and cash flow will have to be adequate to cash out
equity partners within a reasonable time frame.

COMMON SENSE APPROACH.  Writing a business plan is a highly
creative process and your business plan should reflect
common sense and original thinking on your part, not just
an ability to use a cookie-cutter book or software program
to grind out a boilerplate document, "by the numbers."  The
lenders or investors are considering whether they want to
commit their money into your enterprise are looking for
someone who has good business sense, not just someone who
is technically competent at using business plan software or
copying business plan forms from a book on the subject.

Sound reasoning, plus a clear explanation of how and why
your business is likely to succeed, are the features most
likely to impress the people you need to impress.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -


- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

SECTION 2:  Key Elements of a Business Plan


The key elements your business plan should contain, in
recommended order of their presentation, are as follows.
Note that while the Executive Summary is one of the first
items presented in most business plans, it should actually
be the last part you write, after you have created the
rest of the business plan and carefully honed your message.

Also, the last item shown, Monitoring the Results, will
not be part of the physical business plan document, but is
instead your ongoing follow up analysis of how your business
plan is working, if you choose to actually keep your
business plan updated as a management tool that can greatly
help in keep your company focused on its goals.

Go to the "HELP NOTES" following this section now for a
brief description of what each of the following elements
consists of, if you are unclear on what any element

                     |  COVER PAGE AND |
                     | CONTENTS SECTION|
                     |EXECUTIVE SUMMARY|
                     |(INCLUDES MISSION|
                     |    STATEMENT)   |
                     |    ABOUT THE    |
                     |     COMPANY     |
                     |    ABOUT THE    |
                     | PRODUCT/SERVICE |
          |                                       |
          |                                       |
  -----------------                       -----------------
 | MARKET ANALYSIS |                     |INDUSTRY ANALYSIS|
 |     (DEMAND)    |                     |      (SUPPLY)   |
  -----------------                       -----------------
          |                                       |
          |                                       |
          |                               -----------------
          |                              |       THE       |
          |                              |   COMPETITION   |
          |                               -----------------
          |                                       |
                     |    SALES AND    |
                     |    MARKETING    |
                     |    OPERATIONS   |
                     |  AND PRODUCTION |
                     |    MANAGEMENT   |
                     |    FINANCIAL    |
                     |   PROJECTIONS   |
                     |    APPENDIX     |
                     |   (OPTIONAL)    |
                     |    MONITORING   |
                     |   YOUR RESULTS  |



The contents of each key element of a business plan is
briefly described below.  See the more detailed specific
help for each specific element or section.  Read the
text for any box below for more details.

                     |  COVER PAGE AND  |
                     | CONTENTS SECTION |
The cover sheet should contain the name and address of your
company and contact information for the person who will
handle responses from lenders or possible investors.  A
table of contents, while not an absolute necessity, should
be included, to help the reader quickly find any particular
part of the business plan quickly.  As an optional item,
you may also want to include a Loan Request page immediately
after the cover page or after the Table of Contents.
                     | EXECUTIVE SUMMARY |
                     |(INCLUDES MISSION  |
                     |    STATEMENT)     |
This first segment, the Executive Summary, which is a
short summary of the entire business plan document,
should also encapsulate the "mission statement" or
"statement of objectives" for your company.  While the
Executive Summary should be in the first part of your
finished business plan document, it should usually be
the last part of the document to be written, after all
the other pieces are in place.
                     |    ABOUT THE    |
                     |     COMPANY     |
Describes your company -- a brief history of when it began,
what type of legal entity you have selected (corporation,
LLC, or other), where you are now, and where you are going.
                     |    ABOUT THE    |
                     | PRODUCT/SERVICE |
A detailed description of the product (or service, or both)
that your company sells or will be selling.
          |                                       |
          |                                       |
  -----------------                       ----------------- 
 | MARKET ANALYSIS |                     |INDUSTRY ANALYSIS|
 |     (DEMAND)    |                     |     (SUPPLY)    |
  -----------------                       -----------------  
          |                                       |
          |                                       |
Description and identification       Analysis of the industry
of your customers, their             within which you operate,
geographic location and the          or will be operating.
share of this market you expect                   |
to be able to capture.                            |
          |                                       |
          |                               ----------------- 
          |                              |       THE       |
          |                              |   COMPETITION   |
          |                               ----------------- 
          |                                       |
          |                                       |
          |                    Describe who your competitors
          |                    are, their strengths and
          |                    weaknesses, and what your
          |                    competitive advantages are.
          |                                       |
          |                                       |
                     |    SALES AND    |
                     |    MARKETING    |
Explain and describe how you will go about marketing your
product (or service), how your product or service will be

positioned, whether you will employ an in-house sales
force and why (or why not).  In this segment, also go
through your calculations as to the level of sales your
business will generate, based on your research regarding
market demand, and the amount of the market you expect to
be able to capture with your product and your marketing
                     |    OPERATIONS   |
                     |  AND PRODUCTION |
Discuss the nuts and bolts of how you will go about
producing your product, explain your production strategies,
and give your analysis of what it will cost to produce the
product.                      |  
                     |    MANAGEMENT   |
Discuss and describe the organizational structure of your
company, who fills, or will fill, the management slots
needed to oversee the rank and file employees, with a brief
resume of each of the key members of your management team.
                     |    FINANCIAL    |
                     |   PROJECTIONS   |
Present your projected financial statements and results
here, including projections of profits and losses, cash
flows, and future balance sheets, which should illustrate
how the company will be able to pay off its loans or cash
out its equity (stock) investors within a reasonable time
frame.                        |
                     |    APPENDIX     |
                     |   (OPTIONAL)    |
If you are going to create a thick document, the Appendix
is a good place to put a lot of information that does not
necessarily need to be incorporated into any of the other
parts of the business plan.  You can use this catch-all
segment to include backup data for assertions and statements
made in the main text of the business plan, letters of
recommendation from important people, such as customers,
detailed resumes of your key executives, copies of articles
or excerpts from research reports, significant leases,
contracts, or other legal documents, current financial
statements for your business, and the like.  You can also
insert footnote references into the main text and put
the footnotes or supporting data here, in the Appendix.

While not every business plan needs to have an Appendix, it
can make the rest of your business plan document much shorter
and, therefore, more readable, if you put a lot of the detail
in an appendix, rather than trying to work everything into
the main text.                |  
                     |    MONITORING   |
                     |   YOUR RESULTS  |

This last segment is also an optional part of the process
of creating and using a business plan, but it is not a
written part of a business plan you would submit to an
outside party.  However, if you are serious about using
the business plan as an ongoing management tool for your
firm, and not just a one-shot document to be used as part
of an effort to obtain financing, you will want to monitor
your results on an ongoing basis.  You will be, in effect,
revising the "blueprint" for your business as conditions
change or as results show that your plan is working, not
working, or needs to be modified.

Thus, a regular monitoring and assessment of your results
can be extremely useful to you from both an operational
and a business strategy standpoint.

The remainder of this worksheet file is the actual business
plan worksheet outline.  When you are finished, you should
delete everything up to this point in this file.  The
business plan document you will fill-in and flesh out 
starts in Section 3 below.  You should either remove the
section numbers, or renumber the sections, using your own 
numbering system, if you choose, in creating the final

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

SECTION 3:  Business Plan Outline -- Cover Page


                          [SAMPLE COVER PAGE]

          |                                               |
          |            BUSINESS PLAN FOR:                 |
          |                                               |
          |            ________________ (Name)            |
          |                                               |
          |            ________________ (Address)         |
          |                                               |
          |            ________________                   |
          |                                               |
          |                                               |
          |               E-mail: xxxxxx@xyz.com          |
          |                                               |
          |           JULY 200x                           |
          |                                               |
          |           CONTACT:   Joan Smith, President    |
          |                      Phone: (212) 555-xxxx    |
          |                      E-mail: xxxxxx@xyz.com   |
          |                                               |
          |                                               |
          |                                               |
          |    This business plan contains confidential   |
          |    information that is the property of        |
          |    [NAME].  Reproduction or release of this   |
          |    document is not permissible without the    |
          |    prior written consent of [NAME].           |
          |                                               |



The cover page is the first thing a prospective lender
to or investor in your company will see, so it should be
professional looking, on good quality paper or company
letterhead, ideally with your company logo displayed.

Keep it simple.  The cover page should contain the
following minimum information:

  . The name of your business

  . The fact that the document inside is a business
    plan for your company

  . The address of the company

  . The name of your contact person, and telephone number

  . The date of its release

Other items you may also want to present on the cover page
might include any of the following:

  . A brief promotional blurb about your business and
    its goals or potential.

  . The amount of capital you require (see the sample Loan
    Request page included in this business plan worksheet

  . The name of the party to whom the plan is directed,
    if you are targeting a single specific lender or
    investor for your financing.

  . A statement that the information in the business plan
    is confidential. (You may want to have a different
    cover page for each individual copy you send to
    each different person or institution.)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

SECTION 4:  Business Plan Outline -- Loan Request Page


                 LOAN REQUEST SUMMARY:
         [Example, if seeking debt financing]

      Borrower:                       XYZ Corporation

      Amount requested:               $100,000

      Interest rate:                  11.25%

      Loan fee:                       1.5% or $1,500

      Type:                           Term loan

      Term of loan:                   48 months level
                                      payments amortization

      Payments:                       $2,596.71

      Prepayment Option:              No penalty for
                                      prepayment at any

      Corporate collateral:           [Specify]

      Stockholder guaranty:           Yes

      Stockholder collateral:         [Specify]

      Sources of Repayment            [Specify]

      Use of Funds:                   [Describe]

      Guarantors:                     [List names, if any]

---------------------------------   equity financing]

      Issuing Corporation:            XYZ Corporation

      Amount requested:               $100,000

      Type of security:               Convertible
                                      preferred stock

      Issue price:                    $25 per share

      Par [or Stated] Value:          $25 per share

      Dividend rate:                  10% of par [or stated]

      Dividend frequency:             Payable quarterly, on
                                      January 1, April 1,
                                      July 1, October 1,

      Cumulative dividends:           Yes

      Convertibility Feature:         Convertible at holder's
                                      option at any time, into
                                      5 common shares for each
                                      share of the convertible
                                      preferred stock

      Dividend and liquidation
      preferences:                    No distributions in
                                      liquidation may be made
                                      to common shareholders
                                      until par value and any
                                      accrued dividends are
                                      paid on preferred; no
                                      dividends may be paid on
                                      common if preferred
                                      dividends are in arrears

      Voting rights                   None, unless dividends in
                                      arrears for 4 quarters,
                                      then each preferred share
                                      votes as 3 common shares

      Redemption:                     Required to be redeemed 
                                      by issuer at par value, 
                                      5 years from the date of
                                      issuance, if not called
                                      earlier or converted by

      Call provisions:                Callable after 2 years
                                      by issuer, at $25 per
                                      share plus all accrued
                                      dividends, upon 30 days'

      Sources of Repayment            [Specify]

      Use of Funds:                   [Describe]

                         LOAN REQUEST PAGE

Immediately after the cover page, or perhaps as the first
page following the Table of Contents, if you prefer, you
may want to have a Loan Request Page.  (Call it an "Equity
Financing Needs" page if you are seeking an equity investor
to provide equity financing, in the form of common or
preferred stock.)

This page might also be inserted at the end of the Financial
Projections segment of the business plan, if you prefer.
However, some people will prefer, as a courtesy, to let the
reader know instantly the amount of funds they are seeking,
since the amount requested may either be too large or too
small for certain institutions to even consider.

We have included a sample outline of a Loan Request Page
in the worksheet, immediately after the cover page, if
you choose to use it.

Alternatively, if you are seeking equity financing, you
might instead have an Equity Financing Request page.  While
we have included an example to give you an idea of what
this might look like, DO NOT USE THIS SAMPLE, as you will
definitely need LEGAL ADVICE and assistance from a business
lawyer with corporate and securities law experience.  As
a practical matter, if you are seeking equity capital, you
will in many cases be dealing with a venture capital firm
that will tend to dictate the terms of the stock, debt, 
or convertible debt that they are willing to acquire from
your company, or equivalent types of interests in an LLC.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

SECTION 5:  Business Plan Outline --  Table of Contents Section


                TABLE OF CONTENTS


LOAN REQUEST SUMMARY [Optional].......................     i

EXECUTIVE SUMMARY.....................................     1

THE COMPANY...........................................    XX

PRODUCT DESCRIPTION...................................    XX

MARKET ANALYSIS.......................................    XX

  DEMAND..............................................    XX
  THE INDUSTRY........................................    XX
  THE COMPETITION.....................................    XX

SALES AND MARKETING STRATEGY..........................    XX

OPERATIONS AND PRODUCTION.............................    XX

MANAGEMENT............................................    XX

FINANCIAL PROJECTIONS.................................    XX

APPENDIX..............................................   A-1

  FOOTNOTES...........................................   A-1
  EXECUTIVE RESUMES...................................   A-xx
  LETTERS OF REFERENCE................................   A-xx
  LEGAL DOCUMENTS.....................................   A-xx
  OTHER...............................................   A-xx

                         TABLE OF CONTENTS

While not absolutely necessary, it is a good idea for 
you to include a table of contents in your business plan
document.  It will not only make your business plan easier
to read and understand, but failing to include a contents
section may give the reader the impression that you have
not done a very professional job of putting together the
document.  Since first impressions are very important, you
want to start off on a good footing, rather than force a
user to page through the entire document to find whichever
portion he or she is most interested in seeing first.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

SECTION 6:  Business Plan Outline -- Executive Summary



[This should be an overview and lead-in to the rest of 
the business plan.  It should emphasize your competence 
in three key areas:  marketing, technical capabilities, 
and financial management.  See the "Help Notes" segment 
that follows this Section 6 for ideas and more assistance 
in developing this Section 6 of your business plan.]

(1) Description of Your Business or Proposed Business.

[Describe below your product or service, and identify
who you are, and the present situation of your business,
such as startup, new business, or an existing business
with several years (or more) of operating history.]

(2)  Mission Statement.  [The following template may be
useful to you in formulating you mission statement.]

"To provide [or other active verb, like "create," "offer,"
or the like] ______ [adjectives, like "high quality" or "low
cost"]  ________[description of the nature of product or
service], ______ which ______ [describe the benefits to
customers derived from using your products or services] ___.


[Use the following workpaper, which you can delete after
you are finished, to refine the concepts you want to
express in your short, preferably one-sentence Mission
Statement or Statement of Objectives.  Read the "Help
Notes" following this Section 6 now for "coaching" advice
that will help you to create your Mission Statement,
which will appear above.]

          |                                               |
          |          MISSION STATEMENT WORKPAPER:         |

          |                                               |
          |  1. What does your business do?  That is,     |
          |     list below the products or services that  |
          |     you will provide:                         |
          |                                               |
          |     --[Left-handed monkey wrenches, sky----   |
          |     ---hooks, hubcap gaskets and muffler---   |
          |     ---bearings, for example]--------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |
          |  2. What are the main features of your        |
          |     product or service that make it           |
          |     different from the rest?                  |
          |                                               |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |
          |  3. What are the key benefits to the consumer |
          |     or user of your product?                  |
          |                                               |
          |    ----------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |
          |  4. Now, try writing your Mission Statement   |
          |     or Statement of Objectives, in the        |
          |     one-sentence format we showed you above,  |
          |     using the facts you've identified in this |
          |     workpaper.                                |
          |                                               |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |

(3)  Business Model or Marketing Strategy.

[Provide a brief description of the market segment you will
be trying to reach.  Then outline the channel(s) you will
use to reach this market, such as direct mail, retail, or
wholesale distributors.  Explain the key points or factors
in your strategy that you believe will give your business
the edge or advantage that makes it successful.]


(4)  Physical Needs of the Business.

[Describe in summary form the physical facilities and
other resources your business will need to acquire to
be able to achieve its goals.  These will include both
tangible assets such as land, buildings, equipment,
vehicles, and inventories, as well as intangible needs,
such as working capital to finance inventories and
receivables, contracts, licenses, franchises, or any
intellectual property rights you will need to obtain,
such as patents or copyrights.]


(5)  Projected Financial Performance.

[State the estimated dollar amount of sales and net
profits that you project for each of the first 3 to 5
years of operations, then set forth the amount of starting
capital you will need.  Where cash flow is negative (as is
usual) in the first few years, it may be helpful to show
your net cash "exposure" or cumulative negative cash flow
for each month or quarter, to show that your initial
starting capital will be more than sufficient to cover
such maximum exposure.  Or, if your cash resources will
not be sufficient at some point in time, you will have 
to make a good case for how you will be able to obtain
second-stage financing at that point to carry you through
until you are able to pay off your initial loans or cash
out your initial investors.]

(6)  Amount of Financing Requested.

[State the amount of financing your business is seeking to
obtain and, if appropriate, tie it to your summary of the
physical needs of the business and your projected cash flow
exposure described in paragraphs (4) and (5) above.]


(7)  Repayment Timetable.  (Or "Exit Strategy)

[Explain how your financial projections above translate in
your ability to repay the loans you are seeking in a timely
and orderly fashion. Or, if you are requesting equity
financing, explain how and when your business will be in a
financial position (in a relatively few years, preferably)
to cash out those equity investors at a large profit to


                         EXECUTIVE SUMMARY


This is usually the most important section of the entire
written business plan.  Many prospective lenders or
investors will read this section first, and if you have
not done a sufficient job of making the case for your
business, and why it will succeed and be able to pay off
its debts or cash out its investors at a large profit,
it will probably be the ONLY part of your business plan
that gets read.

Thus, we cannot overemphasize the importance of your
carefully crafting and polishing the wording of the
Executive Summary, as it is the heart of the business

Remember that, while the executive summary is usually to
be found at the beginning of a business plan document, 
it should be the last part that you write, after you 
have done all the research, analysis, and creative work 
of developing the rest of the plan.

The Executive Summary should ordinarily cover all of the 
following subjects:

  . A brief description of what your company does, or
    proposes to do, and who you are.

  . The "Mission Statement" of your company.  (Or you
    may prefer, as some do, to call it a "Statement of

  . Your business model, or marketing strategy that will
    make your particular business succeed in a competitive

  . A description of your business's physical needs to
    meet its goals, such as land, buildings, machinery,
    inventory, working capital, and other assets.

  . A brief summary of your financial projections for 
    the future.

  . The amount and form of the financing you are requesting.

  . Your repayment timetable for debt financing or your
    "exit strategy" for cashing out equity investors.

Each of the above points is discussed in more detail below:

  . COMPANY DESCRIPTION.  Simply say who you are, what your
    company does, and where you intend to take it, in a
    few sentences, if possible.

    business will deal with a wide range of people,
    including customers with widely varying dispositions,
    tastes, education, and levels of comprehension, as well
    as various suppliers, providers of professional and
    business services to your firm, lenders, employees and
    potential employees, and, in many cases, investors.

    In your dealings with all of these diverse individuals
    and interests, it will be useful if your company's
    objective, or its "mission," can be communicated to
    them in as clear and straightforward a fashion as
    possible.  To do so, we strongly suggest that you
    condense your mission statement down to one sentence,
    if possible.

That sentence should:

  . describe what your business does, by describing
    your product or service;

  . define the main (and most importantly, the
    distinguishing) features of your product or
    service; and

  . describe the benefits of your product.

Remember, in creating your Mission Statement (or "Statement
of Objectives") that:

 - Your company's mission statement might be a very short
   and simple one, like the Boeing Company's avowed goal
   of having the lowest cost per seat of any airliner.

 - Long, flowery, general statements aren't very useful,
   like "We will be all things to all people and create 
   the best products that money can buy."  Be a little 
   more specific than that. A lot more specific, in fact.

 - The mission statement may focus on key features of your
   product or service, like the Boeing mission statement
   mentioned above.  It should also define the benefits 
   of using your product or service from, the customer's
   point of view.  For example, if your firm is in the tax
   consulting business, your mission might be "to maximize
   customers' after-tax income with minimal audit risk

 - A suggested structure for your mission statement is
   a single sentence like the following: "To provide
   [or other active verb, like "create," "offer," or the
   like] ______ [adjectives, like "high quality" or "low
   cost"]  ________[description of the nature of product
   or service], ______ which ______ [describe the benefits
   to customers derived from using your products or
   services] ________."

We suggest you now return to the business plan worksheet
and use the short Mission Statement Workpaper we have
provided, to develop the ideas for your Mission Statement.
Then put the statement into words, preferably in a form
similar to that in the preceding paragraph.

(Reminder:  Once you are happy with the Mission Statement
you have developed for your company, be sure to delete the
Mission Statement Workpaper from the business plan worksheet

 - BUSINESS MODEL OR STRATEGY.  This is the very crux of
   your entire presentation, so make it good, and spend as
   much time as necessary to polish and refine it, until you
   are satisfied that it says what you want to communicate.

   It should explain in summary form the essence of how you
   will market and position your product or service, and
   what selling advantage you will have that will enable
   your business to attain the level of sales that will
   make it a financial success.  This may be anything from
   your invention of a better mousetrap, strong legal or
   intangible rights, such as a patent for the ultimate
   widget, a highly favorable long-term sales or supplier
   contract, or a superior (lower) cost structure that
   will allow you to compete successfully on price, or
   some other special advantage that your firm will have.

 - NEEDS ASSESSMENT.  Describe briefly what items your
   business will need funding for, in order to carry out
   your mission.  These would include land, buildings
   (rented space or purchased); office fixtures and
   equipment, production equipment; working capital 
   to finance your receivables and raw materials or
   finished inventories; executives or individuals with
   certain kinds of technical expertise; and other
   resources you may need, such as money to acquire
   licenses, patents, or trademarks.

 - FINANCIAL PROJECTIONS.  Summarize the bottom line
   projections you have developed in the main part of
   the business plan, focusing on the low points, i.e.,
   the point when your cash flow "exposure" will be
   deepest, and the high point, when your company will
   reach a level of high profitability and substantial
   cash flow.

 - FINANCING NEEDS.  Show how the above projections impact
   on your need for funds and describe the amount of initial
   financing you are requesting.  If you have created a
   LOAN REQUEST SUMMARY, you may want to keep this to a
   minimum description, while referring the reader to the

 - EXIT STRATEGY AND TIMETABLE.  Explain briefly how and
   when your cash flow or ability to refinance will make
   it possible for you to pay off the initial financing
   you are seeking to obtain, whether it be to repay loans
   or cash out equity (stock) investors.

Remember, the foregoing is an Executive SUMMARY, so try
to keep it brief, a page or two in length, if you can do
so and still get your message across.  All of the points
covered in this summary, except the Mission Statement,
should be covered in greater detail in the remainder of
the business plan document, so do not go into needless
detail in the summary.  Just hit the high points, and
state your key facts and arguments that you want most to
impress upon the reader.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

SECTION 7:  Business Plan Outline -- The Company



[This section should tell the reader about your company.
It will be in part a company profile, showing what
exactly your business does, its history, when the company
was formed, and how it is organized, both in terms of
legal entity and structure and operationally.  You should
also include current financial statements (or refer to
them, if included in an Appendix).  Also, if the business
is already a going concern, discuss where the business is
going in the future, in its particular business environment.

Read the "Help Notes" segment that follows this Section 7 now
for more detailed instructions on what should be included
in this Section 7.]

(1)  Company History.  [Briefly and objectively describe
your company's history to date, or, if in the startup stage,
indicate that you have not yet started the business.  Even
in that case, you may have done preliminary work, however,
such as developing a patent, writing a software program,
doing technical or market research, or the like, which you
would describe in a short history of your startup company.]


(2)  Present Situation.  [This section describes your
company's current situation, including its financial
condition and capitalization, the size of your workforce,
how well you have managed to meet your previous goals
to date, the existence of important assets, such as
favorable contracts, government licenses, patents, and
such, and potential threats, such as new competitors,
rising costs charged by suppliers, or harmful government
regulations or legislation that may be pending.]



(3)  Current Financial Statements.  [Include here your
most recent financial statements, if yours is a going
concern.  Alternatively, instead of including your
financial statements here, in the main text of the
business plan, you may want to instead briefly and
clearly characterize your financial situation -- the
company's size, in terms of assets, sales and net worth,
and its level of profitability, while referring the reader
to a set of your financial statements in the Appendix at
the end of the business plan document.]


(4)  Company Direction.  [Describe where the company 
is going, including the existence of any obstacles to
achieving your goals, and how you plan to overcome such


                        THE COMPANY


This section should be a combination of a company profile
and a short history of your business.  Without getting into
too much detail about your product or service, or about the
industry you are in (which are both discussed in more detail
in subsequent sections of the business plan), you should
briefly mention what the company makes or does, and give a
general overview of the state of the industry within which
it operates and any economic trends that are particularly
relevant to your business or industry.  Some of the types
of items you may want to discuss, where relevant in your
situation, will include the following:

 - HISTORY.  In showing where the company has been, to date,
   give an objective description of when and how the company
   was organized, and the type of legal form in which it
   operates.  Ordinarily, in the United States, this would
   be a corporation, limited liability company (LLC), or
   partnership or, if no legal entity of any kind has been
   established, a sole proprietorship.  There are variations
   on some of the types of entities, such as S corporations,
   limited partnerships, and limited liability partnerships
   (LLPs).  You may also want to mention how it obtained its
   initial startup capital, in the case of an existing firm.

 - PRESENT SITUATION.  Describe the current status of your
   company.  If your business is already in existence,
   briefly tell how it is capitalized is capitalized, such
   as the number of shares of voting common stock, any
   preferred stock or hybrid securities such as convertible
   debt, and any long-term indebtedness, such as bank loans,
   and describe the extent to which the assets of the
   business have been pledged or mortgaged as security for
   debts, and the amount of any loans personally guaranteed
   by the stockholders or other owners of the firm.  The
   discussion of capitalization will not ordinarily be
   relevant in the case of a startup company that has not
   yet begun business.

   Also list any exclusive licenses or intellectual property
   rights the company owns.  These may include various
   government licenses or permit approvals that may be
   important to have (or disclose if you have not yet secured
   any such necessary licenses or approvals); intellectual
   property rights such as patents or copyrights; and any
   valuable private intangible rights that are owned, such
   as a McDonald's franchise, or a well-known trademark or
   trade name.

   This is also an appropriate place to discuss any business
   problems that your company is presently facing.  For
   example, low-cost competition from overseas producers
   in a Third World country may be hurting your sales, so
   that you may find your business is in a position where
   it needs to raise capital in order to acquire expensive
   new automated production equipment.  Using such modern
   equipment might enable you to lower your unit costs of
   production, which may actually give you a significant
   cost advantage over the labor-intensive foreign
   competition, and greatly increase your sales and
   profitability, as an example.

 - CURRENT FINANCIAL STATEMENTS.  For an existing business,
   include copies of your most recent financial statements,
   including profit and loss statements, cash flow
   statements, and balance sheets.  (See the explanation of
   these terms in the "Help Notes" segment of Section 15
   of this business plan appendix if you are not familiar
   with what these accounting terms mean.)  If you have
   financial statements that have been audited, reviewed
   or compiled by a CPA firm, they will be more credible,
   generally, than financial statements you have prepared
   yourself without any verification or other involvement
   by an independent accounting firm.

 - FUTURE DIRECTION.  In this section, you should outline
   where the company is going, and specify the outcomes
   that are desired with respect to the existing operations
   and activities of the business.  In effect, this section
   should outline your goals, in tangible, measurable terms,
   such as describing the percentage of market share you
   intend to capture, the level of unit sales, or dollar
   sales, or percentage profit margin you wish to obtain.

   Your goals could also be to attain certain key financial
   ratios, such as a specifically defined high ratio of
   current assets to current liabilities, a strong indicator
   of good financial health, as compared to industry norms.
   You can find industry standard ratios of numerous kinds,
   for almost any kind of business, at your local library,
   from companies such as Robert Morris and Associates or
   Dun & Bradstreet.  Or you may be aiming, in a retail
   business, to generate a certain annual level of sales
   per square foot of retail space.  Sales Management and
   Marketing Magazine publishes detailed information on
   average sales per square foot for a very wide number of
   types of retail establishments, to which you can compare
   your desired results.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

SECTION 8:  Business Plan Outline -- Product Description



(1)  Description of Product.  [Provide a complete technical
description of the product or service to be offered, in
considerable technical detail, including a summary of any
test data if any sort of testing work has been done, or
describe any tests that are currently planned.  Also, show
that you are already anticipating the future by outlining
any further refinements or logical next steps for developing
an improved or different product later (or comparable plans
for further innovations in a service business).  This is
your chance to show that you really have something that 
is a better mousetrap and is also technically feasible.]


(2)  Key Product Features.  [Describe your product's two
or three most important features, which distinguish it
from the competition.]


[The following workpaper may be helpful to you in writing
a product description and in analyzing and selecting the
features of your product you want to emphasize above.]

          |                                               |
          |                                               |
          |  1. What is your product?  Describe the       |
          |     nature of the goods or services that      |
          |     you will provide:                         |
          |                                               |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |
          |  2. How is your product classified?  That     |
          |     is, is it goods or services?  If goods,   |
          |     is it an industrial item or a consumer    |
          |     item?  If services, is it a professional  |
          |     service?  Is it a service to consumers    |
          |     or a business service?  If goods, is it   |
          |     a convenience good, like food, that the   |
          |     consumer purchases frequently and with    |
          |     a minimum of effort?  Or is it a durable  |
          |     goods item, like cars or refrigerators,   |
          |     for which consumers may spend considerable|
          |     effort comparing price and quality of     |
          |     competing products before making their    |
          |     purchase?  Or is it a specialty item      |
          |     with a strong brand or name loyalty,      |
          |     for which certain consumers will not      |
          |     be particularly concerned with either     |
          |     convenience or price?  (Such as a         |
          |     Harley-Davidson motorcycle, designer      |
          |     clothes, or the like.)                    |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |
          |  3. What are the product's features?  Describe|
          |     the weaknesses and strengths of your      |
          |     product, and what features distinguish it |
          |     from other products on the market.  Also, |
          |     discuss any substitute products that may  |
          |     compete with your product.  For example,  |
          |     if you sell lumber for housing            |
          |     construction, substitute products that    |
          |     users would likely consider, if the price |
          |     of lumber becomes too high, would include |
          |     bricks, stucco, or even steel framing.    |
          |                                               |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |
          |  4. How is the product or service used by     |
          |     the consumer, and what key benefits does  |
          |     it confer upon the user?                  |
          |                                               |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |
          |  5. Describe any other possible uses of your  |
          |     product.  Consumers, being the creative   |
          |     creatures they are, often discover their  |
          |     own uses for products for items that were |
          |     designed for a wholly different purpose.  |
          |     Discuss here any such alternate uses that |
          |     you know about, or that you think your    |
          |     product might be put to.                  |
          |                                               |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |
          |  6. How do users purchase your product?       |
          |     Is it purchased in bulk, in single units, |
          |     or along with certain other products?     |
          |     Is it a complementary product?  For       |
          |     example, if you sell bromine test kits    |
          |     for hot tubs, your product will be a      |
          |     complementary product to bromine tablets  |
          |     that are sold to spa owners.              |
          |                                               |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |

[Delete the Product Features workpaper from the business
plan document, after you have completed it and used the
information you have developed to write the text for this
section of your business plan.]

(3)  Product Line.  [If you have several products, such as
a number of different kinds of sweet snacks, like cookies
and candies, then your product line consists of some mix
of those various, related types of products.  If so, you
should discuss the nature of your product line in this part 
of the business plan.  If you have more than one product
line in your product mix, describe the nature of each such
product line and its relative importance in the overall
product mix for the company.]


(4)  Test Results and Approvals.  [If your product has
undergone testing or you have secured any required 
approvals from federal, state, or local governments 
with regard to the product or service, discuss the test 
results or approvals here.  You may want to attach any 
certificates or other evidence of such test results or 
approvals in the appendix, referring the reader to 
such documents in this text segment.]


                         PRODUCT DESCRIPTION


This section will describe your product in some detail. We
will use the term "product" in this discussion to refer to
whatever it is that your business sells, or plans to sell,
to its customers, whether that be some kind of tangible
goods, or a service.  In short, your "product" is either
some kind of goods you create and sell, or buy for resale,
or some kind of service you provide, either by itself, or
in connection with some kind of goods.  The focus here is
on whatever it is that your customer pays you for -- that
is your "product."

   description, if appropriate, of what your product is,
   what it does, and what it accomplishes for the user or

 - PRODUCT FEATURES.  Every product has at least one or
   more key features that will be your selling points.
   Explain to the reader what the 2 or 3 key features of
   your product are, focusing only on the most important
   features.  The worksheet contains a detailed and
   useful Product or Service Features Workpaper you
   should fill out now, before you write the text for
   this segment of the business plan.  (After you have
   completed the Workpaper and have written the text for
   this segment, you can delete the Workpaper from the
   business plan worksheet.)

 - PRODUCT LINE.  Many businesses have multiple products,
   similar in function and use, such as the various types
   of beverages sold by a soft drink company like Coca
   Cola, including other carbonated beverages, fruit
   juices, wines, and other beverages.  If your business
   has a group of such similar products that are closely
   enough related to consist of a product line (such
   as building materials, or farm supplies, as examples),
   discuss what items your product line consists of.

 - TESTS AND APPROVALS.  In some industries, safety or
   efficacy, or even basic workability of the product
   may need to be demonstrated before your product becomes
   viable, or even before you will be able to get financial
   backing, in many cases.  Thus, if you have had product
   testing done to demonstrate that the product does what
   you want it to, or if you have obtained any sort of
   required approvals from government agencies (such as
   U.S. Food and Drug Administration approvals that are
   required in order to legally market a prescription drug
   or certain food additives), discuss the results of any
   such tests or approvals.  If there are evidentiary
   materials supporting such test results or approvals,
   attach them in the appendix to the business plan

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

SECTION 9:  Business Plan Outline -- Market Analysis



(1)  DEMAND. [Discuss in this section  your analysis of
customer demand for your product.  You can use the following
workpaper to help you to think through some of the issues
you need to research and focus upon, then use the parts
of the outline following the workpaper that are relevant in
your situation, to structure your discussion of the market
for your product or service.  Or, you may want to organize
your discussion in a totally different way than we have
outlined it below, just using our outlined items as a sort
of checklist of items that you should cover or at least
consider in putting together your market demand analysis.]

          |                                               |
          |       MARKET DEMAND ANALYSIS WORKPAPER:       |
          |                                               |
          |  1. Identify the customers for whatever is it |
          |     that your business sells.  Who are they?  |
          |                                               |
          |     --[Businesses, nonprofits, governments,   |
          |     individual consumers?]-----------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |
          |  2. Where are your customers located?  Is     |
          |     the market for your product or service    |
          |     local, regional, nationwide, or without   |
          |     any geographic boundaries?                \
          |                                               |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |
          |  3. How many customers (whether they be       |
          |     individuals, businesses, schools, etc.)   |
          |     are there in the market into which you    |
          |     will be selling?                          |
          |                                               |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |
          |  4. How frequently (in a one-year time        |
          |     frame, for example) will your customers   |
          |     use your product, on average?             |
          |                                               |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |
          |  5. What is the average price per unit your   |
          |     customers will typically pay for your     |
          |     product or service?                       |
          |                                               |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |
          |  6. What are the characteristics of your      |
          |     potential customer base?                  |
          |                                               |
          |     --[Demographic characteristics, such as   |
          |     ---age, sex, income levels, social ----   |
          |     ---and cultural factors]---------------   |
          |                                               |
          |  7. What market, economic, social and         |
          |     government trends will affect the buying  |
          |     habits and tendencies of your potential   |
          |     customers?                                |
          |                                               |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |
          |  8. Where is your product, in terms of its    |
          |     "product life cycle," if this is a        |
          |     relevant factor?                          |
          |                                               |
          |     [ ]  Introductory or developmental        |
          |           stage                               |
          |     [ ]  Maturity stage                       |
          |     [ ]  Saturation stage                     |
          |     [ ]  Declining stage                      |
          |                                               |

[NOTE:  After you fill out the above workpaper, use the
information you have developed in completing it, and
have finished writing the section on market demand, you
should delete the workpaper from this text file.]

(a)  CUSTOMER IDENTIFICATION.  [Identify who the customers
for your business are, or will be.  Read the "Help Notes"
in the segment that follows this Section 9 now to view
suggestions on developing this part of the discussion.]

Geographic Area. [Identify and describe geographic scope
of your market.]


Age or sex groupings.  [Identify and quantify the age or
sex groupings, if any, to whom you will be marketing the


Income levels.  [Give a breakdown of consumers in your
primary market area by income level, and indicate which
groups, if any, you will mainly draw from as your potential

         -- Under $15,000 a year household income
         -- $15,000 - $25,000 a year
         -- $25,000 - $35,000 a year
         -- $35,000 - $50,000 a year
         -- $50,000 - $75,000 a year
         -- $75,000 - $100,000 a year
         -- Over $100,000 a year


Social, cultural, ethnic factors.  [Describe how your
product will be applicable to certain segments of the
population based on these factors.]


Business demographics.  [If selling to government or
business markets, categorize and quantify the potential
customers in that market.]


(b)  PRODUCT LIFE CYCLE.  [Identify, if applicable, where
in the product life cycle your product's market is, at
present:  introductory (rapid expansion) stage; maturity;
saturation; or decline.  Or, you may prefer to cover this
in the "INDUSTRY LIFE CYCLE" portion of this business
plan, under "THE INDUSTRY" segment, rather than here.]


(c)  MARKET BREADTH OR DEPTH.  [This means the number of
customers in a particular market.  You will also want to
attempt to quantify and discuss market size (how many units
are bought within a given market or the number of users
who will buy); frequency of use (how many units of the
product or service a typical customer will consume in a
year, for instance); and market potential.  (Based on the
number of customers times frequency of use times average
selling price per unit, what is the total potential size
of the market, in dollars, per year?)]


(c)  TRENDS.  [Discuss market trends that will affect
the demand for your product or service, such as changes
in demographics (age, birth rates, disposable income
levels, etc.); alternative or substitute products which
may affect demand for your product; social trends (such
as demands by society for non-polluting, safer, or
recyclable products); and government and economic trends
like tax rates, regulations, economic growth rates of
the larger economy, inflation, and other such macroeconomic


                         MARKET ANALYSIS


You need to look at the market for your product from both
sides -- an analysis of the demand for it and the main
factors affecting that demand, as well as the "supply
side" of the equation, including a review of the industry
and who your main competitors are.  This segment focuses
on the demand side.

DEMAND ANALYSIS.  The market or market demand for your
product or service consists of all the people who might be
interested in buying it. The following discussion outlines
some of the key areas you may want to touch upon, where
they are relevant to your business or product, and some
suggestions on how to go about researching and writing up
this section of the business plan.

 - CUSTOMER IDENTIFICATION.  Not everyone is a potential
   customer--certain age groups, income levels, geographic
   areas, ethnic groups and educational levels will be more
   likely to be your customers.  You need to focus on who
   will need your product and be most likely to buy it.
   Identify, as clearly as you can, who your customers are
   most likely to be.  As part of this discussion, describe
   the market scope and market segmentation by specifically
   analyzing each of the following (if relevant):

    (a)  Geographic area -- Where you will draw most of
         your customers from, plus any other areas from
         which you expect to also be able to draw some
         customers.  Obviously, if you are marketing your
         business entirely through the Internet, this
         discussion will be very different than for, say,
         a dry cleaning business, as an Internet-marketed
         product may well be marketed in all geographic
         areas, or perhaps in all English-speaking regions
         of the world, depending on the nature of the
         product and the scope of your marketing program.
         Accordingly, the geographic scope of your market
         may be local, regional, national, or worldwide.

    (b)  Ages or sex group - If your product is primarily
         of interest to individuals of a particular age
         group or gender, such as toys for children,
         describe and quantify this potential market. Or,
         if there are certain age or sex groups to whom
         your product will definitely not appeal, be sure
         you define the size of your market by excluding
         members of those groupings.

    (c)  Income levels - If yours is a consumer product,
         describe the income levels in your target audience
         to whom the product will primarily appeal.  You
         may want to summarize your market research by
         breaking down the targeted groups by income
         strata, such as:

         -- Under $15,000 a year household income
         -- $15,000 - $25,000 a year
         -- $25,000 - $35,000 a year
         -- $35,000 - $50,000 a year
         -- $50,000 - $75,000 a year
         -- $75,000 - $100,000 a year
         -- Over $100,000 a year

    (d)  Social, cultural, ethnic factors - Describe how your
         product will be likely to appeal more to people in
         certain social, cultural and ethnic groups than
         others, if that is the case.

    (e)  Business demographics - Other types of market data
         that may help you further segment your market,
         especially if selling primarily to businesses or
         government entities, would include categorized
         information on local, regional, state and federal
         government agencies, and breakdowns of companies
         by their size, types of ownership and geographical
         location.  You won't need to discuss these market
         segments, generally, if you are offering a consumer
         product or service that is not normally purchased
         by such government or business organizations.

   To help develop the above information, you may have to
   use a number of different sources for your research.  It
   may be helpful to get to know the business specialist at
   your local public library, who can often be extremely
   helpful in guiding you to useful library publications,
   such as U.S. Census data, market research data published
   by such organizations as Sales and Marketing Management
   Magazine, Predicasts, Inc., trade magazines, trade
   organizations, U.S. Department of Commerce publications,
   information put out by your state's Chamber of Commerce

   and the state office of economic development, and similar
   sources.  You may also want to do some primary research,
   by contacting some potential customers and conducting
   your own market research - ask them how they buy products
   or services such as yours, what price they think such a
   product or service should sell for, and how they would
   want to see your product, or existing similar products,

   If you are trying to project population growth and
   income data in your local area, many local governments
   have planning departments which can often provide you
   with extremely useful information on such trends, as
   well as other key factors such as projected numbers 
   of new homes or highways to be built.  Expansions or
   improvements to the local or regional transportation
   system, such as new freeways or rapid transit lines,
   may have a major favorable or unfavorable effect on the
   potential profitability of your business, especially if
   you will be opening a retail business of some kind.

 - PRODUCT LIFE CYCLE.  The market for most products or
   services usually has a life cycle, beginning with very
   rapid growth in the introductory or developmental stage,
   which slows to a more moderate growth rate in the
   maturity stage, flattens out in the saturation stage,
   and finally begins shrinking in the declining stage.
   If you believe your product or service is one which has
   such a life cycle, try to determine and explain to the
   reader where the market for your product is at present,
   in terms of where it stands in its product life cycle.
   (The product life cycle for your industry can either
   be discussed here, or, if you prefer, can instead be
   covered in the next segment, on the industry.)

 - MARKET BREADTH OR DEPTH.  This refers to the number of
   customers in a particular market.  You will also want
   to quantify and discuss:

   (a)  Market size - How many units of the product are
        bought within a particular market?

   (b)  Frequency - How many units of the product or
        service will the typical consumer use in a given
        time period, such as a year?  For example, if
        are selling hamburgers, you are interested not
        only in how may customers you may have, but in
        how many times a year they are likely to buy
        your hamburgers.

   (c)  Potential - What is the market potential?  That
        is, based on the number of consumers in the
        market you have defined, how many dollars a year
        will they spend?  Determine this by multiplying
        the number of customers in the defined market
        times the frequency of purchases of the average
        customer, times the average selling price per
        unit of the product.  For example, if you have
        a dental practice in a city of 20,000 potential
        patients, who go to a dentist an average of 1.25
        times a year, at an average cost per visit of
        $100, you would multiply out those numbers and
        get a market potential of $2,500,000 a year for
        your particular market.  Then identify the share
        of that market which you feel your business should
        be able to capture, and explain your reasoning that
        backs up your assertions as to what you expect your
        market share will be.

 - TRENDS.  Discuss various market trends that will affect
   the demand for your product or service.  These can
   include things such as:

   . Demographic changes, such as increasing numbers of
     babies being born, due to the age distribution of
     the population in the relevant market area, or
     increasing income levels, or sociological changes
     in tastes and preferences of consumers.

   . Alternative products, such as substitute products
     that may undercut the demand for your product at
     current price levels, if cheaper substitutes are

   . Social trends, such as pressures by consumers to have
     ecologically friendly products, increased safety, and
     the like, as well as consideration of any factors
     such as any rapid technological changes that may be
     affecting the market or distribution methods for your
     product category.

   . Government and economic trends, such as rising tax
     rates, increasing levels of disposable after tax
     incomes of consumers, inflation, interest rate levels,
     government spending levels, new government regulations
     that may either crimp or expand the demand for your
     product, and similar macroeconomic factors.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

SECTION 10:  Business Plan Outline -- The Industry


(2)  THE INDUSTRY.  [Discuss, in this section of your
market analysis, the characteristics of the industry you
are in.  Is it fragmented or concentrated, wide open, with
no dominant market leaders, or is it an industry that is
dominated by one or a few large companies?  Read the "Help
Notes" segment following this Section 10 now for an outline
of discussion points you may want to cover in your
discussion of your industry.]

(a)  SIZE.  [Describe how large the industry is, in terms
of annual industry sales or revenues, plus description of
any subcategories.]


(b)  MARKET STRUCTURE.  [Discuss the structure of the
industry, in terms of ease of entry, number of firms,
and the like.  Read the "Help Notes" segment following
this Section 10 for further hints on what to discuss in
Section 10.]


(c)  OVERVIEW OF COMPETITION.  [Give an overview of how
firms in the industry compete, either in terms of price,
quality, or other means of product differentiation.]


(d)  INDUSTRY LIFE CYCLE.  [Discuss the state of the
industry, in terms of the industry life cycle.  If you
have already covered this, under the "PRODUCT LIFE CYCLE" 
segment of this business plan, don't repeat it here, 
except possibly to briefly summarize your conclusions 
from the "PRODUCT LIFE CYCLE" section of this worksheet.]


(e)  INDUSTRY TRENDS.  [Discuss industry trends here,
such as growing profitability, capacity expansions,
major new entrants into the industry, new governmental
regulations or taxes, and any other factors affecting
supply or output of whatever your industry sells or


                          THE INDUSTRY

THE INDUSTRY.  This section also looks at the market
environment for your product or service, but from a more
qualitative standpoint, rather than attempting to quantify
the size of the market demand.  Some of the points you may
want to analyze and address in this segment would include
the following:

 - SIZE.  Indicate in your description how large the industry
   is, in terms of sales.  You should be able to determine
   this information from trade associations or trade
   publications, which exist for most industries.  Also
   discuss the major categories within the industry, such
   as a particular category in which you will compete, and
   the relative size of the various categories, if known.

 - MARKET STRUCTURE.  Briefly address the structure of 
   the industry, noting whether it is an industry (like
   consulting or housecleaning services) with considerable
   ease of entry, or if it is one (like the auto industry)
   that has high barriers to entry by new firms.  Also
   discuss whether the industry is dominated by one or a
   few large firms, or is one characterized by large numbers
   of small firms, or whatever other characteristics exist
   in your particular industry.

 - OVERVIEW OF COMPETITION.  Analyze whether there is
   significant product differentiation in the industry.
   That is, are most of the participants in the industry
   selling virtually the same, standardized product, like
   gasoline or milk, or are the products significantly
   differentiated to meet the needs and tastes of different
   markets, such as wrist watches?  Obviously, if product
   differentiation is not significant in your industry,
   this will shape your marketing strategy, since marketing
   costs that would ordinarily go towards creating a brand
   identity, based on perceived superior quality of your
   product, may be misdirected if you are selling something
   like milk or are running a gasoline station, where price
   may be of paramount importance.

   In general, this section should analyze how firms in
   the industry compete, such as based on price, product
   quality, brand name, or by other means.

 - INDUSTRY LIFE CYCLE.  Where in its "life cycle" is your
   industry?  In the developmental (growth) stage, maturity,
   saturation, or decline?  Note that this is essentially
   the same as the discussion of your product's life cycle,
   which you may have chosen to discuss in the earlier
   segment of this business plan, as part of the description
   of your product.  It's up to you whether you prefer to
   work that discussion into the section on "PRODUCT LIFE
   CYCLE" or here, in this section on the industry.  We
   suggest you don't duplicate the discussion in both
   parts of this business plan, however, although you may
   want to briefly refer, in this section, to where the
   industry is in its life cycle, summarizing what you
   previously discussed in the section on "PRODUCT LIFE

 - INDUSTRY TRENDS.  After you have done your research
   homework on the background of the industry, you should
   also develop an understanding of current and future
   trends in the industry, discussing them here.  These
   would include subjects like the fact that, due to excess
   competition (perhaps from abroad) or outside influences,
   firms in the industry may be experiencing hard times and
   many may be withdrawing or even going bankrupt.  Or, on
   the other hand, perhaps the industry is experiencing
   very high profit margins, which may be attracting major
   expansions in capacity, or entry into a small industry
   by large new competitors, such as the entry of software
   giant Microsoft into the "browser" segment of the
   software industry, which until then consisted only of
   small firms like Netscape.  Other trends would include
   new governmental regulations, new taxes, and other
   governmental actions, such as new trade agreements
   allowing duty-free imports from foreign countries.

   This segment would also consider other indirect effects
   on the industry, such as trends in related industries
   with complementary products.  Thus, if you sell drapes
   and blinds for houses, and much of your business comes
   from purchasers of new houses, you would want to pay
   a lot of attention to the trends in housing starts in
   your market area, which will greatly influence your
   level of sales.  Or, if you are starting up an airline,
   changes in the price of fuel, a major cost component,
   will affect the entire airline industry, as any attempt
   by airlines in the past to pass along major fuel price
   increases by raising fares has generally tended to
   reduce the demand for airline travel.

   In short, you need to know enough about your industry
   to intelligently and clearly describe the major industry
   currents that would be of concern or of interest to 
   any potential investor in or lender to your firm. If
   there are negative trends at work, assume that your
   reader will know about them -- in which case you had
   better mention them and show, in the strategy portions
   of the business plan, how you tend to deal with, or
   even take advantage of, such trends.  If you do not
   mention the problem, a sophisticated investor or
   lender, who is aware of a negative industry trend
   that you have failed to mention, is likely to quickly
   send your business plan document to the local landfill,
   without reading any further.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

SECTION 11:  Business Plan Outline -- The Competition


(3)  THE COMPETITION.  [In this important section of your
business plan, you need to spell out the following major

  . Who are your main competitors?

  . What is their basis of competition?  (Price, quality,
    better distribution, reputation, etc.)

  . What is your firm's competitive advantage that will
    allow you to compete effectively with in your industry?

Read the "Help Notes" segment following this Section 11 for
suggestions on how to go about preparing Section 11 of the
business plan.  Before writing this section, you will first
need to do any necessary research on your competitors, and
then use the workpapers below to assist in compiling and
organizing the data you will need to write this section.

The following sample workpaper may be helpful to you in
organizing the relevant facts about each of your competitors.
You can make several copies of this form as is, or with any
modifications you wish to make to it, and fill out one for
each competitor.  Obtain as much of the information listed
as possible; however, you will find that some or much of
the information items on your competitors that is listed in
the workpaper will be private and difficult or impossible
for you, as a potential competitor, to obtain from them.]

          |                                               |
          |        INDIVIDUAL COMPETITOR PROFILE          |
          |             (SAMPLE WORKPAPER)                |
          |                                               |
          |  Name of Company __________________________   |
          |                                               |
          |  Location  ________________________________   |
          |                                               |
          |  Type of business _________________________   |
          |                                               |
          |     _______________________________________   |
          |                                               |
          |                                               |
          |  Number of employees: _____________________   |
          |                                               |
          |  Sales per employee:  _____________________   |
          |                                               |
          |  Sales by fiscal year:                        |
          |                                               |
          |         Year    Revenues   Market share %     |
          |        ------  ----------  --------------     |
          |                                               |
          |        19___                                  |
          |                                               |
          |        20___                                  |
          |                                               |
          |        20___                                  |
          |                                               |
          |        20___                                  |
          |                                               |
          |        20___                                  |
          |                                               |
          |  Strategy:  (The message this competitor is   |
          |  sending to customers and the general public) |
          |                                               |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |
          |  Strengths? _______________________________   |
          |                                               |
          |  __________________________________________   |
          |                                               |
          |  Weaknesses? ______________________________   |
          |                                               |
          |  __________________________________________   |
          |                                               |
          |  Other comments:                              |
          |                                               |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |

[Once you have completed a workpaper like the above sample
for each of your main competitors, use that information to
complete the summary workpaper below.]

          |                                               |
          |                                               |
          |  Identify your major competitors:             |
          |                                               |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |
          |  What are the factors that make these         |
          |  companies competitors?  (Such as price,      |
          |  quality, personnel, reputation, good         |
          |  distribution, or other factors)              |
          |                                               |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |
          |  Summarize the weaknesses or vulnerabilities  |
          |  of your major competitors:                   |
          |                                               |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |
          |  Compare your business to the competition,    |
          |  feature by feature:                          |
          |                                               |
          |                                               |
          | -------    ----------------- ---------------  |
          | Quality                                       |
          |             ---------------- ---------------  |
          | Technology                                    |
          |             ---------------- ---------------  |
          | Price                                         |
          |             ---------------- ---------------  |
          | Reputation                                    |
          |             ---------------- ---------------  |
          | Location                                      |
          |             ---------------- ---------------  |
          | Selection                                     |
          |             ---------------- ---------------  |
          | Knowhow                                       |
          |             ---------------- ---------------  |
          | Selection                                     |
          |             ---------------- ---------------  |
          | Availability                                  |
          |             ---------------- ---------------  |
          | Convenience                                   |
          |             ---------------- ---------------  |
          | Delivery                                      |
          |   Time                                        |
          |             ---------------- ---------------  |
          | Financing                                     |
          |             ---------------- ---------------  |
          | Service                                       |
          |             ---------------- ---------------  |
          | Warranty                                      |
          |             ---------------- ---------------  |
          | Reliability                                   |
          |             ---------------- ---------------  |
          | Other                                         |
          |             ---------------- ---------------  |
          |                                               |
          |  Describe what you feel is your firm's        |
          |  competitive advantage, which will make your  |
          |  business successful:                         |
          |                                               |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |     ---------------------------------------   |
          |                                               |

[Once you have completed the above workpapers on your
competition, and have finished writing your "competition"
section of the business plan below, you should delete the
above worksheets from this outline.]

(a)  MAIN COMPETITORS.  [Identify in this section who your
main competitors are, and give some information about



(b)  BASIS OF COMPETITION.  [This is the main part of your
discussion of the competition, where you analyze the key
competitive factors, such as pricing or quality, in your
industry.  Drawing on the information you have developed,
mention the strengths and perceived weaknesses of the
competitive positions of your main competitors.]


(c)  COMPETITIVE ADVANTAGE.  [Summarize your conclusions
as to the competitive advantage your firm will enjoy, or
how it will successfully meet the competition.]


                          THE COMPETITION

THE COMPETITION.   Who is the competition?  This section of
the business plan should identify the main competitors that
your company will face in its market area.  However, you
will need to do more than simply identify who they are --
you should do a comparison of the major features of your
business versus the competition, and demonstrate how you
will meet the competition effectively.  That is, you need
to be able to convincingly show the reader of your business
plan what your company's "competitive advantage" is, which
will be one of the key selling points in your entire
presentation.  Accordingly, you need to put a great deal
of thought into developing this part of the plan, not only
for the purpose of creating an impressive business plan,
but for creating a business strategy that will actually
improve your odds of making the business a success.

We suggest you attack this part of your business plan by
taking the following steps (after doing the necessary
research to find out what your competitors are doing):

 - IDENTIFY THE COMPETITION.  Determine who the main
   companies are that will comprise the competition for
   your business, and briefly mention who they are.  At
   this point, you are still gathering information, and
   are not yet ready to begin writing the "competition"
   section of the business plan yet.  Once you do begin
   writing this section, you may or may not want to spell
   out the situation of each such competitor in detail.
   Or, you may want to include "competitor profiles" for
   each competitor, summarizing your research into their
   operations, but provide this detailed information in an
   appendix, not in the main text of the business plan.

 - INDIVIDUAL COMPETITOR PROFILES.  In doing your research,
   it may be helpful to create individual competitor profile
   workpapers for each such competitor, using a workpaper
   like the sample one we have provided in the business plan
   outline.  Note that the workpaper is designed to help you
   organize the relevant information about your competitors,
   and need not be included in the final business plan
   (except, as noted above, in the event you want to include
   such profiles in an appendix to the business plan).  Once
   you have completed the individual competitor profiles,
   proceed to the next step, which is to create a summary
   workpaper describing your competitors and your response
   to such competition.

 - SUMMARY WORKPAPER -- COMPETITION.  Based on the data you
   have compiled on your individual competitors, using the
   individual competitor profile workpapers described in
   the preceding paragraph, create a summary workpaper
   that outlines the basic information on your competitors
   and describing how they compete (pricing, reputation,
   convenience, quality, or other features).  Then you should
   identify and spell out the features of your product or
   service, or in the way your business operates, that will
   give your firm a competitive advantage that will allow
   it to succeed.  You can use the second workpaper we have
   provided in this segment on "the competition," making any
   additions or modifications to the workpaper that you feel
   are useful in your situation.

   Now, finally, you are ready to begin writing the
   "competition" section of your business plan, using the
   information you have developed from the two workpapers
   described above.

   ready to begin writing an analysis of the competition in
   your industry, use the information you have developed
   so far from your research and through using the sample
   workpapers we have provided in the business plan
   worksheet outline, to develop this section of text.

   A suggested outline of this discussion would be as

   (a)  Identify the competitors.  List the names of your
        main competitors, and provide some background
        information on them, and how they operate.

   (b)  Basis of competition.  Discuss the factors that make
        your competitors effective, and also cite any
        weaknesses or vulnerabilities that they may have,
        which your company may be able to exploit.  This
        will be the heart of your discussion, mentioning
        the competitive factors that you perceive as most
        important to customers of the industry, such as
        pricing, quality, etc.

   (c)  Competitive advantage.  Summarize this section by
        describing the competitive advantage (or advantages)
        that your business will have, which you feel will
        enable you to succeed in this particular competitive
        environment.  Make it good, as this is one of the
        key fulcrum points of your entire presentation.  If
        you cannot make a good case here for your company's
        ability to successfully meet the competition, your
        business plan will not be very persuasive, as a

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

SECTION 12:  Business Plan Outline -- Sales and Marketing


D.  SALES AND MARKETING.  [Based on your analysis of the
market demand and your assessment of the competition and
your company's strengths and weaknesses, develop your sales
forecast for the business in this segment.  This section
should also include a concise summary of your marketing
plan and strategies that will enable you to reach the
level of sales you are projecting.  Read the "Help Notes"
segment following this Section 12 for a detailed discussion
of various points you may want to consider as you develop
your sales projections and create your marketing strategy,
both for the purpose of writing up this section of the
business plan document, and for your own actual business
strategy and planning purposes.

Discuss here your marketing plan or strategy.  This will
include identifying the market segment you are seeking to
reach, and the various means through which you intend to
reach it, such as door-to-door sales, retail sales, direct
mail, media advertising, selling through sales reps,
jobbers, Amway-type multi-level distributorships, or
whatever else you plan to do to market your product.
Mention also the degree of market penetration and market
share you expect to achieve, year-by-year, for the period
for which the business plan is making projections.

Also discuss in this segment how you plan to create an
awareness of the product among its ultimate consumers,
through advertising, seminars, publicity or otherwise,
even if most of your sales may, perhaps, be made to
intermediaries such as wholesalers or retailers.  Cover
all methods you will employ, such as telemarketing,
advertising circulars, print or electronic media
advertising, direct mail, catalogs, the Internet, or
other means.  Here it can be helpful to include photocopies
of dummy ads, brochures or other promotional materials
that you may have already prepared, if you feel they will
be effective in selling your business plan -- or refer to
such items here, but include them in the appendix.

You may prefer to write up your marketing plan and then
follow it with the sales projections, or vice versa; or,
depending on your writing style, you may find that the
two subjects are so intertwined that you will find it
more persuasive to weave your sales projections into the
discussion of your marketing plan, rather than trying to
separate the two subjects.  There is no "best" way to
present these two interrelated areas of discussion, so
we suggest you structure and sequence these portions of
business plan document in the way that seems most natural
and readable to you.  Thus, while we may have given you a
number of ideas and suggestions above and in the "Help
Notes" segment for this item, we have purposefully not
given you a structured outline below for the order in
which the component segments of the sales and marketing
sections should be written, as they will necessarily be
somewhat freeform, in an order that should be determined
by you.]


[Your sales projections should be summarized in a format
somewhat similar to the following:]


                       (In Thousands)

                YEAR1   YEAR2   YEAR3   YEAR4   YEAR5
               ------- ------- ------- ------- -------
Units Sold        500     550     600     720     900

Sales ($)         800     880     980    1250    1700

Less Cost
  of Sales:
  -Returns         25      27      30      40      50
  -Discounts        0       0       0       0       0
  -Bad debts       16      18      20      25      34
  -Commissions      0       0       0       0       0

Net Sales         759     835     930    1185    1616

                          SALES AND MARKETING

SALES AND MARKETING.  This part of the business plan deals
with two different sides of the same coin, a sales forecast
and the marketing strategy that is your company's plan for
creating the level of sales that you are projecting.

As you will note in the outline of the business plan
worksheet, we have not tried to tell you which of these
two subject areas you should discuss first, since they are
closely intertwined.  You may prefer to give your sales
projections first, and then explain the marketing strategy
by which you will achieve that level of sales; or you may
find it more logical to discuss your marketing strategy
or plan first, before summarizing your projections.  Or
you may even find it simpler to discuss the two subjects
together, weaving your projections and marketing plan
together in a single segment, if that approach to writing
this segment of the business plan works better for you.

In any case, the discussion below will alert you to a
number of points to consider as you create your marketing
plan and sales projections, not all of which will be
pertinent or relevant to your business.

 - MARKETING STRATEGY.  Most businesses that fail tend to
   do so because of poor marketing of a good product.  In
   fact, even a business with a mediocre product (or in
   some cases even a poor product) will often survive or
   prosper if it does a good job of marketing its product.
   Like the Sony Betamax technology for VCR's demonstrated,
   the best product does not always prevail over a competing
   product that is technically weaker but better marketed.
   Similarly, many people would agree that for most of the
   time since its introduction, the Apple MacIntosh user
   interface has been far superior to any DOS or Windows
   in most respects, yet, due to some unfortunate decisions
   in marketing strategy by Apple, it has been greatly
   outsold by DOS and Windows products in recent years.

   Think of a well-thought out marketing program, with
   sufficient time, energy and financial resources devoted
   to developing and implementing it, as a life preserver
   for your business -- and don't go near the water without

   Marketing is an overall strategy, composed of a variety
   of complementary tactics, all aimed at getting your
   product into the minds of targeted customers and then,
   ultimately, into their hands, as a completed sale.
   These tactics should or may include:

   .  Advertising and Promotion.  We don't need to explain
      to you what advertising is, as you are bombarded
      with it from every direction, every day, as endless
      commercial messages directed at you seek "mind share."
      Advertising is often a major component of a company's
      marketing program, and typically involves the purchase
      of space in newspapers, magazines, technical or trade
      publications, or purchase of time on radio or TV
      stations to get out the message about your product or
      your company.  Other common forms of advertising you
      might use would include advertising circulars (handed
      out on the street, distributed door-to-door, or placed
      on car windshields), inserts in the local newspaper,
      direct mail, or a post card included in "card decks"
      distributed by advertising firms, leased billboards
      in prominent locations along major streets and
      highways, and listings in the Yellow Pages or in
      trade or professional directories for your industry.

      Advertising messages may take many forms -- they can
      consist of little more than a notice to the consumers
      in your market area or target market segment that your
      firm or product exists, and that you are conveniently
      located or otherwise easily accessible to the consumer.
      This might be appropriate, for example, in a newly

      developing community, where yours is the first
      restaurant, first laundromat, first tax preparation
      service, or other such business in that area, thus
      offering a new level of convenience to consumers in
      the area.  Or, your advertising may be more product
      oriented, explaining in simple terms the advantages
      in features, price, convenience, or quality that your
      product offers, or may be less rational and designed
      more to evoke an emotional response in consumers --
      for example, that by using your breath mints they
      will improve their sex lives, or by using a certain
      athletic shoe brand they will run in and win the
      100-meter dash in the Olympics.

      Promotion is a close cousin to advertising, in the
      arsenal of marketing.  Properly done, it can often
      be very effective.  While some forms of promotion
      can be quite expensive, such as putting on free
      seminars to explain and to publicize your product,
      or renting space and setting up a booth at a trade
      show, they can provide you an opportunity to get your
      product message across in depth, which can be very
      profitable if you have a compelling story to tell.
      Or, some of the best kinds of promotion, publicity
      in the print or electronic media, can sometimes give
      you great exposure at little or no cost.  If you can
      write an interesting press release about your company
      or product that a radio producer or newspaper editor
      may decide is of sufficient interest to merit a news
      story on their station or an article in their paper,
      the benefits can often far exceed those of a paid
      advertisement.  Most people have learned to "tune
      out" most advertisements in the media, but are likely
      to pay attention to a newspaper article about your
      sushi bar or matchmaking service, etc., since it
      comes from an unbiased news report, and is not
      merely another advertisement.

      Promotional activities can include all manner of
      other ways of getting information about your product,
      or the name of your business, before the public.
      These may include things such as gift certificates,
      involvement in community organizations, contests,
      sponsorship of special events, speeches to service
      clubs like Rotary, Lions, or Kiwanis, publication of
      books or articles by you or members of your firm, or
      anything else you can do, limited only by your own
      creativity, that gets your name or product information
      out to consumers in a positive context.

   .  Merchandising.  In retailing, another aspect of
      marketing is merchandising, which can range from the
      package design for your product, to displays in a
      shop window or in-store product displays, to various
      other gimmicks for making sales, such as store signs,
      brand names, special discount offers, or creating a
      particular atmosphere or ambiance to appeal to certain
      market segments.  Other forms of merchandising tactics
      would include shelf space strategies and positions,
      point of sale displays at the checkout counter (selling
      "impulse" items like chocolate candy, for instance),
      or promotions like "2-for-1" free meal offers, as a
      way to get people to try out your restaurant.

   .  Selling.   The most intense and direct form of
      marketing is one-on-one sales contacts with your
      customers.  This may be aggressive, door-to-door
      sales or telemarketing, or lower-key sales techniques
      taught to your retail floor clerks in a store context,
      where they are taught how to best deal with questions
      from shoppers, helping them to close sales or to
      stimulate purchases of add-on items or accessories to
      go along with items the consumer has already decided
      to purchase.  Or sales may be relatively passive
      order-taking by a staff of people answering 800 number
      calls from people whom you have solicited by direct
      mail or media advertising, as examples.  In some cases,
      you may want to have your own in-house sales force,
      while in others you may choose to outsource your sales
      activities, such as to independent manufacturers'
      representatives, if you are manufacturing a product
      for sale.  There is no single, best sales approach.
      However, if you are selling a product that requires
      a great deal of technical understanding on the part
      of the sales people, and are selling to sophisticated
      customers, you may need to have an in-house sales
      force, thoroughly trained and kept up to date on your
      product's specifications and capabilities, or else
      provide such training to any independent sales reps,
      if you do not have your own sales force.

      There are a great many other ways to get people to
      sell your product for you other than by hiring your
      own sales people or dealing with manufacturers' reps,
      including multi-level marketing, franchises, network
      sales, license agreements, tie-ins with other
      businesses or products, distributorship arrangements,
      and other similar approaches.

   While you should consider all the possible ways of
   marketing your product or service, you will probably
   rely on only a few that seem most suited to your industry
   and to your product and capabilities.  You do not need
   to cover all of the possibilities in writing this part
   of the business plan, however.  Instead, you should 
   be able to summarize your marketing strategy and any
   marketing theme (perhaps expressed as a slogan) that you
   may decide to adopt, in a few short paragraphs, at most.
   Note, if you adopt a clear marketing theme:  Will it
   mesh with your company's mission statement?  It may not,
   necessarily, but at the very least, it definitely should
   not be in conflict with your mission statement!

 - SALES FORECAST.  This key section of the business plan
   should take the results of your market research and
   make numerical projections, in both dollars and unit
   sales, of:

   .  The total sales expected to be generated by your
      firm and all its competitors in your particular
      market, whether this be on a large scale (national
      or regional, for example), or in a relatively small
      geographical area for a business such as a carwash
      or small retail operation, which will draw most of
      its customers from one locality; and

   .  The share of the relevant market, as you have
      defined it, that you expect that your product or
      business should reasonably be able to capture.

   The forecast should ordinarily be for at least the next
   3 to 5 years, and perhaps longer in some cases.  You
   will need to integrate your sales forecast, in terms
   of both the periods covered and the amounts of your
   expected sales, with your overall financial projections
   for the business.

   The sales forecast will also, to a considerable extent,
   be a function of the amount of resources you plan to
   devote to the various aspects of marketing -- to
   advertising, promotion, merchandising, and selling.

   Many businesses tend to mistakenly look upon their
   marketing costs as a percentage of sales, like overhead.
   More realistically, it should be viewed the other way
   around, with sales seen as a multiple of marketing
   costs, but with some point of saturation or diminishing
   returns.  Of course, there are no guarantees, so your
   firm may spend $100,000 on advertising to generate a
   projected $5 million in sales -- but sales may only
   turn out to be $3 million.  Nevertheless, there will 
   be SOME degree of correlation between marketing efforts 
   and sales generated, unless your marketing efforts are
   completely ineffective or even counter-productive.
   (Examples of counter-productive marketing would be
   themes such as GM's ill-fated attempts to market its
   "Nova" automobile in Latin America -- with a product
   name that meant "no go" in Spanish; or Kentucky Fried
   Chicken's "Finger-licking good" slogan that allegedly
   was translated into a Japanese slogan that meant
   "You'll chew your fingers off"; or another American
   company's Japanese TV commercial that showed happy
   Japanese consumers frolicking at a picnic, all dressed
   in white, which was very offensive, as white is the
   color worn for mourning in Japan.)

   Many factors may go into your success at achieving a
   given level of sales.  While not all of the following
   will necessarily apply in your case, these are some of
   the factors that you might consider and bring to bear
   in your analysis and explanation of how your firm will
   achieve a certain projected level of revenues:

   .  Pricing strategy.  This covers a number of issues,
      including a determination of optimal pricing that
      will generate the most profit (price too high, and
      you make more per unit sold, but don't make enough
      sales to cover your overhead costs; price too low
      and you sell a lot of units, but your profit margins
      are so low that you make little, if any, money,
      after figuring in overhead).

   .  Market share.  In some industries, especially those
      that are still growing rapidly, you may want to
      sacrifice profitability for a few years to attempt
      to achieve a larger market share, in order to realize
      certain economies of scale that will allow you to
      eventually achieve a production cost advantage over
      your competitors.  This is inherently risky, of
      course, as you may have a hard time generating the
      capital you need to expand rapidly, if you are pricing
      your product so aggressively that you are foregoing
      profits and positive cash flows.  You may be out of
      business before you ever achieve the desired market
      share you are seeking, which would enable you to
      "cash in" on your strong market position.

    . Reverse psychology.  In some markets, especially for
      prestige items, or personal or professional services,
      you may find that you attract more business by
      pricing your product or service somewhat HIGHER than
      the competition, creating an image of superior quality
      in the consumer's mind, by virtue of the higher price.

    . Market penetration.  If you are a new company, trying
      to break into a market controlled by other firms, you
      may need to take special measures to get consumers to
      try what you are selling.  This may take the form of
      giving away samples (like the little packages of new
      household products from Procter & Gamble or other
      such manufacturers, which all of us receive from time
      to time in our mailboxes), or introductory coupons or
      deep discounts from the list price to encourage the
      consumer to try your product at least once and compare
      it to competing products.

In developing and writing the above sections on marketing
strategy and sales projections, keep one overriding thought
in mind:  Properly done, your market analysis and research,
put together with a carefully thought out marketing strategy,
should cause the sales forecast numbers to "fall out" of
your analyses, rather than simply act as a supporting
rationale for a set of sales forecast numbers you have
already decided on.  If you ignore this advice, and instead
work backward from an assumed level of sales that you have
"picked out of the air," you may not only be misleading
the reader of your business plan, but you may also be
badly misleading yourself as to how feasible your business
really is, with potentially dire consequences, since you
will probably be the person with the most to lose if the
business fails.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

SECTION 13:  Business Plan Outline -- Operations and Production


E.  OPERATIONS AND PRODUCTION.  [Include in this section
an operational plan, describing in detail the type, and,
if known, location of facilities that will be required,
and equipment that must be obtained.  Also discuss what
portions of any production work will be done by outside
subcontractors, and what parts will actually be done by
your people.  Read the "Help Notes" segment following this
Section 13 now for suggestions on other areas to cover when
you write this Section 13 of your business plan.]

(1)  Production strategy and requirements.  [See the "Help
Notes" following this Section 13 for assistance in writing
this Section 13 of the business plan.]


(2)  Distribution strategy.  [See "Help Notes" following
this Section 13 for assistance in writing this Section 13.]


(3)  Warranties and Refund Guarantees. [Explain what your
policies will be with regard to product warranties --
whether you will offer them and, if so, whether you will
charge for warranty protection.  Also describe any refund
policy, if you plan to offer your product or service with
any kind of "satisfaction guaranteed" refund policy.]


(4)  Other Supporting Data.

  .  Technical Drawings of Product.
  .  Detailed Description of Services To Be Offered.

[Delete one of the two above items, unless both apply.]


  .  Itemization of Capital Equipment Required & Cost.


  .  Pricing Schedule.

[Detailed list of prices for products or services to be
offered, in their different configurations.]


  .  Plant Layout.

[Include floor plans or layout of a proposed manufacturing
plant, if any.  Consider including a manufacturing flowchart
and costing estimates for producing the product, broken
down into cost accounting detail.  You may want to only
refer to such items, placing the detailed information in
the appendix to the business plan, rather than here.]


  .  Tooling Required for Production.

[Describe here all tooling that will be required, and the
estimated costs thereof.  Obviously, this will only apply
to certain kinds of businesses.]


                          OPERATIONS AND PRODUCTION

OPERATIONS AND PRODUCTION.  This part of the business plan
is where you explain the nature of your operation -- what
is needed, how you will operate, and what it all will cost.
Businesses generally require some combination of land,
labor, and capital to create whatever valuable commodity
or service they wish to sell.  You have already analyzed
the sales you expect to be able to generate, and the number
of units of the product (or man-hours or a similar measure
of your output, if you are selling a service) that you
will be able to sell.

For example, you may have concluded that you will be able
to sell 100,000 units a year of your new Super-Widgets at
$32 each, wholesale.  Now you need to explain to the reader,
in sufficient detail to make it clear that you understand
all the steps required to get the business running properly,
what the cost side of the equation will be, and how you
will go about actually producing those 100,000 widgets and
getting them delivered to wholesale distributors on a
timely business.

Some of the types of things you may need to discuss in this
segment would include the following:

 - What facilities, equipment, and staffing you will need
   to produce, store, and distribute your product?  (Not
   all of which will be relevant to all products, or if
   you are selling a service, rather than a tangible

 - What will it cost for each of the above factors of
   production, and when will you need the financing to pay
   for any large purchases, such as for land, buildings,
   equipment, initial inventories of raw materials or
   components, and working capital?

 - If your business plan is based upon sale of some product
   that you will be creating, you will probably need to
   create a prototype of the product, a test version of it.
   Or, if you already have a prototype, it will almost always
   require a number of modifications before you have a
   finished version that can be mass-produced and marketed.
   If you already have a prototype, consider including a
   picture of it at this point in the business plan.  Some
   of the questions you should answer about a prototype
   would include the following:

   . How much time and money, and what special skills,
     equipment and other resources will be needed to create
     a prototype?  (Unless you have already created one.)

   . Once a prototype is ready, what kind of testing will
     be required, over what period of time and at what
     cost, before the prototype can be turned into a
     suitable finished product, ready for the market?

 - What is your production strategy going to be?  (If your
   business will involve manufacturing a product of some
   kind.)  Will you be:

   . Expanding an existing operation?

   . Creating a new operation from scratch?

   . Investing in new technology to upgrade and improve
     the efficiency of an existing operation?

   . "Downsizing" an existing operation, making it more
     functional and cost-efficient by closing unproductive
     or obsolete facilities, or by selling off unused

   . Improving or redesigning an existing product?

   . Working on improving your distribution system, such
     as by improvements in warehousing operations and in
     transporting the product?

 - Will your firm lease or buy its production facilities?
   Or will you outsource some or all of the production,
   rather than attempting to manufacture the product

 - What will your unit cost of production be?  This will
   be comprised of both a variable cost per unit, other
   than overhead, plus an overhead factor, spread over
   the total number of units produced.  Since a greater
   number of units produced (and sold), with a given
   level of fixed overhead costs, such as factory rental
   or building depreciation, will mean the overhead cost
   per unit is lower, your total production cost per unit
   will vary at different levels of production.

   Thus, you should also do a calculation of the "breakeven
   point," which is the number of units you must produce
   and sell at a given price in order to cover your costs
   of production plus selling and general administrative
   costs of the business, so as to break even financially.
   This figure will be of particular interest to most
   readers of your business plan, since it tells them how
   large a "margin of error" in your sales projections can
   occur without the business operating at a loss.

 - What will your variable costs be?  You will need to
   carefully analyze and then summarize in written form
   what the costs of labor and raw materials will be to
   produce each unit of your product.

 - What will your fixed costs be?  These will include a
   number of labor-related costs, some of the more common
   of which will be:

   . Salaries of managers, accounting staff, marketing
     people, and others not involved directly in production.

   . Payroll taxes (state and federal unemployment taxes
     and federal FICA taxes) and workers' compensation
     insurance costs.  You can look up FICA and federal
     and state unemployment tax rates, which are based on
     wages paid per employee, elsewhere in this program.
     You will need to contact a workers' compensation
     insurance carrier or an insurance broker to get
     quotes on what workers' compensation insurance will
     cost you, based on your projected workforce.

   . Employee fringe benefit costs, such as for medical
     or life insurance, or any retirement plan benefits.
     These costs are generally optional, although you may
     find it difficult to attract good employees without
     providing some or all of such benefits, depending
     upon the common practice of other companies in your

   . Overtime pay for employees who work over 40 hours
     a week (generally), except for exempt executive and
     administrative employees.  Overtime pay is generally
     at 1.5 times the regular hourly wage rate.  You may
     also choose to pay overtime to some exempt employees,
     as well, although not necessarily at 1.5 times their
     regular hourly rate of compensation.

   . Facility expenses, such as janitorial and maintenance,
     property taxes, fire and liability insurance, trash
     pickup and any waste recycling costs, heating, gas
     and electricity costs (other than those directly
     consumed in the production process).

   . Telephone charges and Internet access expenses.  Since
     more and more business communication now occurs over
     the Internet, you will probably need an Internet
     service provider for e-mail, at a minimum, and may need
     a more significant outlay if, like more and more firms
     are doing, your company sets up a Web site to facilitate
     contact with customers or suppliers, or both.

   . Computer network costs.  For any but the smallest of
     firms, you will probably need some kind of network to
     tie all the company's computers and work stations
     together in a workable manner.  This costs money to
     set up, and you will probably need a full- or part-time
     network administrator to keep it functioning properly,
     afterwards.  Many firms are now moving towards an
     "intranet" type of setup, which can be much simpler
     and sometimes less costly than the traditional types
     of networks.  An intranet uses the same time-tested
     and widely familiar technology as the Internet, tying
     together all the computers in your company like a
     small-scale version of the Internet.

   . Automobile and truck expenses, if any.

   . Interest expense on indebtedness the company will

   Note that, while you may spend a great deal of time
   gathering the information to calculate each of the
   above cost items, so that the numbers you arrive at
   are defensible, you don't need to go to great lengths
   in the business plan document, explaining how you
   arrived at each such number.  But you should keep
   copious background notes to show how you arrived at
   the numbers, and be familiar with them, in case a
   prospective investor or lender questions how a certain
   number in your business plan was arrived at.  However,
   in most cases, if you have done your homework and
   calculations of expenses properly, you probably won't
   get many such questions, since such readers are usually
   sophisticated enough to know when such numbers for,
   say, payroll taxes, appear to be reasonable, or look
   to be questionable.

 - What is your distribution strategy?  Will you have one
   centralized warehouse, or regional warehouses?  Will
   you ship directly to customers, or to wholesalers or
   to sales reps?  If shipping directly to customers, will
   you have your own delivery trucks, or will you rely on
   common carriers like UPS or Federal Express to deliver
   the product to customers?

 - How many days of inventory will you need to keep in
   stock?  Remember that you have incurred all of the
   cost of production when an item is added to inventory,
   but you don't recover your cost until it has been sold
   and payment received from a customer, so that large
   inventories can soak up your available cash like a
   sponge.  On the other hand, if you keep your inventory
   too lean, you may not be able to respond to orders
   quickly enough, and may lose some business as a result.
   The inability to keep inventories under control is a
   major reason many businesses, small and large, fail.
   Remember to factor in the amount of capital you will
   need to carry X days of inventory, into the calculations
   of how much working capital you will need, along with
   an allowance for the average number of days it will
   take you to collect receivables once a sale from
   inventory is made.

 - Will you offer product warranties, or make refund
   guarantees to dissatisfied customers who return your
   product within, say, 30 days?  If you do offer product
   warranties, will the cost of providing the warranties
   be built into the price of the product, or will you
   offer a warranty as an optional additional cost item
   to the customer?

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

SECTION 14:  Business Plan Outline -- Management


F.  MANAGEMENT.  [Here it is important to spell out in a
convincing way your plans for structuring the organization,
including a description of the key positions and the people
who you have lined up to fill them, with their (hopefully
impressive) qualifications.   For the 5 or more key people
in the company (including each top person in the sales,
finance and technical departments), include their resumes
at this point, or place them in an appendix at the end
of the business plan, but refer to them here.  A suggested
outline for this section appears below.]

(1)  Management Team and Qualifications.  [Name your key
people, and give a description of their qualifications to
run this particular business, citing education, overall
business experience, and particularly any successful
experience in a closely-related type of business operation.

Refer the reader to the appendix, if you are including
more detailed resumes of your management team members
in the appendix.]


(2)  Organizational Structure.  [Describe the management
or organizational structure for your firm, and consider
including an organizational chart, similar to the sample
provided below.]



                    |BOARD OF DIRECTORS |
                    |  (If applicable)  |
                    | PRESIDENT / OWNER |
       |               |               |               |
       |               |               |               |
 --------------  --------------  --------------  --------------
|Vice President||Vice President||Vice President||Vice President|
 --------------  --------------  --------------  --------------
         |             |               |               |
         |             |               |               |
         |       --------------  --------------  --------------
         |      |   Managers   ||   Managers   ||   Managers   |
         |       --------------  --------------  --------------
         |             |               |               |
         |             |               |               |
         |       --------------  --------------  --------------
         |      |     Staff    ||     Staff    ||     Staff    |
         |       --------------  --------------  --------------
       |              |              |              |
       |              |              |              |
  -----------    -----------    -----------    -----------
 |  Manager  |  |  Manager  |  |  Manager  |  |  Manager  |
 |A/C Receiv.|  |A/C Payable|  |Gen. Acctng|  |  Payroll  |
  -----------    -----------    -----------    -----------
       |              |              |              |
       |              |              |              |
  -----------    -----------    -----------    -----------
 |   Staff   |  |   Staff   |  |   Staff    | |   Staff    |
  -----------    -----------    ------------   ------------

[If appropriate, you may also want to extend the detail
of the chart for major departments such as Marketing, Human
Resources and Operations or Production, as the sample chart
has done for the Finance department.]

(3)  Management Responsibilities.  [List the management
responsibilities for each of the key people on your team

President      ______________________________________

Vice President ______________________________________

Controller or
  V-P Finance  ______________________________________

V-P, Marketing ______________________________________

V-P, Operations______________________________________

Human Resources
Director or V-P______________________________________

Other          ______________________________________


(4)  People/Talent To Be Hired. [Give a description of
any management positions or specific talents your firm
needs to acquire, or positions you will need to fill in
the future, as the company grows.  Give your best estimate
as to the number of employees and positions that are needed
in order to effectively operate the business.]


(5)  Outside Services.  [List here any outside professionals
who provide support to your management team, such as CPAs,
attorneys, management or marketing consultants, EDP experts,
pension or financial consultants.]


(6)  Compensation Summary.  [For each member of the management
team, list salary histories and proposed compensation levels.]




[Describe, in this section, your management team, including
the members of your board of directors, if your business 
is organized as a corporation. If your firm is not a
corporation, you will not have a board of directors.  If it
is a partnership or a limited liability company (LLC), you
may want to describe who some of your partners or LLC
members are, other than members of the management team, if
some of them are key backers of your business, who provide
needed expertise as well as financial backing.

A key part of this management segment will be to set forth
the experience, background, and qualifications of each of
the key members of your management group.  If you prefer,
you may choose to include resumes for each key manager in
the appendix, at the end of the business plan document, and
give only a thumbnail sketch here, while referring the reader
to the appendix.

This section should also include an organizational chart
for the company, showing the organizational groupings and
lines of authority.  A sample organizational chart is
included in the worksheet document, which you may work
from as an example.

After displaying an organizational chart, give a brief
summary of the responsibilities for each of the top 5 or
6 management functions.

Then outline a needs assessment, if there are gaps in
your management team that you need to fill, and indicate
what steps you have taken to acquire such talent, such as
hiring an executive search firm, candidates whom you have
already located or to whom you plan to make job offers, 
or other steps you plan to take to find the required key
personnel.  Also look ahead to the future.  For example,
if you will be outsourcing your production for the first
two years, but then will begin doing your own in-house
manufacturing at that point, you may need to discuss the
necessity of hiring a production manager at that time.

Not all the skills your firm will need will necessarily
have to come from the ranks of your management team.  Most
small or new firms, in particular, rely to a considerable
extent on outside advisers, such as law firms, certified
public accountants, employee benefit consultants, and 
a wide range of other types of business and financial
consultants.  If you have developed relationships with
such outside talent, such as reputable or prestigious
law firms or accounting firms, this is where you should
emphasize those connections and the availability of such
outside expertise as support for your management team.

Finally, give past (or current) and projected compensation
information for each key person in management.  Include
not only basic salaries, but incentive compensation such
as bonus or profit sharing plans, stock options, phantom
stock, or other types of supplementary compensation and
fringe benefit packages.  Note that if these numbers are
unrealistically high or low, you will raise troubling
questions in the minds of any readers of the business plan.]

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

SECTION 15:  Business Plan Outline -- Financial Projections and
             Line-by-Line Overview of How Financial Statements Work


G.  FINANCIAL PROJECTIONS.  [Include here the financial
projections, and any historical financial statements, if
you are already in operation, for the business.]

(1) Profit and Loss Projections.

[These should be on a monthly basis for the first year or
two, and quarterly for subsequent years, in most cases.  A
basic outline of annual profit and loss statements would 
be as set forth in the samples below.  Click on "Help" for 
a description of each of the accounting terms used below.
Unless you have substantial training and experience as 
an accountant, you will need the assistance of a CPA to
develop the financial forecasts and put them in a proper
format for your type of business.  For example, the
sample financial statements in the outline below would 
NOT be in the appropriate format for a service business.]

                    XYZ CORPORATION
               Income Statement Forecast   [Sample]
             For the Years Ended December 31, ____ through ____

                     (In thousands)

                        YEAR1   YEAR2   YEAR3   YEAR4  YEAR5
                       ------  ------  ------  ------ ------
Units Sold               500     550     600     720    900
[If applicable]

Income from Operations:
  Sales Revenue
    Gross Sales          800     880     980    1250   1700
     Returns              25      27      30      40     50
     Bad Debts            16      18      20      25     34
     Discounts given       0       0       0       0      0
  Net Revenue            759     835     930    1185   1616

  Cost of Goods Sold     384     422     470     600    816
  [If applicable]

  Gross Profit:          375     413     460     585    800

  Operating Expenses
    Sales/Marketing       40      45      50      63     85
    Operations            48      53      60      75    102
    General & Admin.      32      35      40      50     68
    Depreciation          40      44      46      47     49
    Amortization          13       3       3       3      3
  Total Operating Exp.:  173     180     199     238    307

Net Operating Earnings
Before Interest & Taxes: 202     233     261     347    493

Non-Operating Income
And Expenses:
  Interest Income         10      12      11      10     13
  Less: Interest Exp.   (167)   (167)   (160)   (153)  (146)
  Less: Loan Fee Amort.   (2)     (2)     (2)     (1)    (2)
Net Pretax Income:        43      76     110     203    358

Income Taxes              10      19      32      74    143
[Assumes 9% state taxes
 and fed. corp. rates]
Net Income After Taxes:   33      57      78     129    215

[The next two lines would
 not be needed, unless, as
 this example, the company
 is paying dividends on an
 issue of preferred stock.]

Less: Preferred Stock
      Dividends Paid      10      10      10      10     10
Net Income to Common
    Shareholders          23      47      68     119    205

[You will probably need to attach supporting schedules to
give more details of some of the line items above.  For
example, a supporting statement for Cost of Goods Sold,
showing components such as labor, materials, depreciation,
and other factory overhead, as in the following sample

                    XYZ CORPORATION
             Schedule of Cost of Goods Sold  [Sample]
             For the Year Ended December 31

                        YEAR1   YEAR2   YEAR3   YEAR4   YEAR5
                       ------  ------  ------  ------  ------
  Beginning Inventory      0      85      98     110     130
  Add: Direct Labor      214     193     230     290     401
  Add: Materials         170     156     160     228     325
  Add: Depreciation       31      30      33      37      42
  Add: Factory Overhead   54      56      59      65      72
  Total Costs Incurred   469     520     580     730     970

  Less: Ending Inventory  85      98     110     130     154
  Cost of Goods Sold     384     422     470     600     816

[Insert similar detail schedules here for other income and
expense categories, if you wish to show such details in the
business plan.  Even if you do not include them, you should
work through and prepare detail schedules for your own use,
to assure that the numbers on your income statement have
been well thought out, and not simply plucked from the air.]


(2) Pro-Forma Balance Sheets.

[These should show your projected ending financial picture
for each of the periods covered by the P & Ls.]

                  [Sample balance sheet]

                    XYZ CORPORATION
         Statement of Financial Position Forecast
             For the Year Ended December 31

                       (In thousands)

                        YEAR1   YEAR2   YEAR3   YEAR4  YEAR5
                       ------  ------  ------  ------ -------

  Current Assets
    Cash                 604     658     734     869    831

    Accts. Receivable    408     418     429     470    510
    Less:  Reserve for
           bad debts (2%) -8      -8      -9      -9    -10
    Net Accts. Receiv.   400     410     420     461    500
    Inventories           85      98     110     130    154
    Prepaid Expenses      15      17      18      20     23
    Deposits              10      10      12      12     14
    Other                  0       5       5       5      7
  Total Current assets  1114    1198    1299    1497   1529

  Fixed Assets
    Machinery & Equip.   220     230     250     275    310
    Furniture and
      Fixtures           155     160     168     180    196
    Buildings            700     700     700     700    700
    Less:  Accum. Dep.   -71    -145    -224    -308   -399
    Land                 100     100     100     100    100
  Total Fixed Assets    1104    1045     994     947    907

  Other Assets
    Loan Fees             25      25      25      25     25
    Less: Amortization    -2      -4      -6      -7     -9
    Startup/Org. Costs    55      55      55      55     55
    Less:  Amortization  -13     -16     -19     -22    -25
    Miscellaneous Assets  10      27      10      10     10
  Total Other Assets      75      87      65      61     56

Total Assets:           2293    2330    2358    2505   2492

Liabilities and Stockholders Equity:

  Current Liabilities
    Accounts Payable     427     378     399     468    531
    Current Portion of
      Long-term Debt      60      60      60      60     60
    Lines of Credit      100     200     200     220      0
    Accrued Interest Pay. 13      12      11      10      9
  Total Current
    Liabilities          600     650     670     758    600

  Long Term Debt
    Mortgage Payable     290     280     270     260    250
    SBA Fixed Loan       900     850     800     750    700
  Total Long Term Debt  1190    1130    1070    1010    950
  Total Liabilities:    1790    1780    1740    1768   1550

  Stockholders' Equity:
    Common Stock         300     300     300     300    300
    Preferred Stock      100     100     100     100    100
    Paid in Capital in
      Excess of Stated    80      80      80      80     80
      Value (or Par)
    Retained Earnings     23      70     138     257    462
  Total Stockholders'    503     550     618     737    942
Total Liabilities and
  Stockholders' Equity: 2293    2330    2358    2505   2492

[Note that the above balance sheet shows a retained
earnings number that increases by the amount of the
company's net income each year, computed after a $10,000
payment of preferred stock dividends to the holders of
preferred stock. No dividends are paid on the common
stock in this example.]

[You may want to attach supporting schedules to provide
detail on certain of the above numbers, as well as
footnotes regarding the terms and payment schedules of
loans, and other assumptions you are making in creating
these projected financial statements.]


(3) Cash Flow Projections.

[Show monthly or quarterly and CUMULATIVE pro-forma cash
flows, which should tie into the P & L and balance sheets
for each period covered.  You will definitely need some
professional accounting assistance to prepare the statements
of forecasted cash flows, which are somewhat technical and
complex, compared to profit and loss statements and balance
sheets.  However, for your guidance, we have included a
statement of cash flows that ties in to the income and
balance sheet statements above.]

                [Sample cash flow statement]

                       XYZ CORPORATION
     Statement of Changes in Financial Position Forecast
                For the Year Ended December 31

                       (In thousands)

                        YEAR1   YEAR2   YEAR3   YEAR4  YEAR5
                       ------  ------  ------  ------ -------
Operating Activities:
Net Income (Loss)         33      57      78     129    215

Add:  Depreciation
  Operations              40      44      46      47     49
  Cost of Goods Sold      31      30      33      37     42
Add:  Amortization        15       5       5       4      5

Changes in Operating
Assets and Liabilities
  Accounts Receivable   (400)    (10)    (10)    (41)   (39)
  Inventories            (85)    (13)    (12)    (20)   (24)
  Prepaid Expenses       (15)     (2)     (1)     (2)    (3)
  Deposits               (10)      0      (2)      0     (2)
  Other Assets             0      (5)      0       0     (2)
  Accounts Payable       427     (49)     21      69     63
  Accrued Interest Pay.   13      (1)     (1)     (1)    (1)
Cash Flow from (Used in)
  Operating Activities    49      56     157     222    303

Investing Activities:

  Purchases-Intangibles  (80)      0       0       0      0
  Purchases-Real Estate (800)      0       0       0      0
  Purchases-Equipment   (375)    (15)    (28)    (37)   (51)
  Purchases-Other Assets (10)    (17)      0       0      0
  Sales of Assets          0       0      17       0      0
Net Cash from (Used in)
  Investing Activities (1265)    (32)    (11)    (37)   (51)

Financing Activities:
  Proceeds from Line
   of Credit             100     100       0      20      0
  Payments on Line
   of Credit               0       0       0       0   (220)
  Proceeds from
   Mortgage              300       0       0       0      0
  Payments on
   Mortgage                0     (10)    (10)    (10)   (10)
  Proceeds from
   SBA Loan              950       0       0       0      0
  Payments on
   SBA Loan                0     (50)    (50)    (50)   (50)
  Proceeds from Issuance
   of Common Stock       380       0       0       0      0
  Proceeds from Issuance
   of Preferred Stock    100       0       0       0      0
  Dividends              (10)    (10)    (10)    (10)   (10)
Net Cash from (Used in)
 Financing Activities   1820      30     (70)    (50)  (290)
Net Increase in Cash     604      54      76     135    (38)

Beginning Cash             0     604     658     734    869
Ending Cash              604     658     734     869    831
Minimum Cash Required    525     550     550     575    600
Excess (Shortage) of
 Cash Balance Needed      79     108     184     294    231

Borrowings Required        0       0       0       0      0

[Include any detail schedules or explanations below,
including any footnotes to this statement you need to
include to clarify any of the information it contains.]


(4) Break-Even Analysis.

[In chart form or otherwise, show the level of sales you
will need each year in order to break even for that


(5) Acquisition Schedule for Fixed Assets.  [Spell out
when you will acquire fixed assets, such as building,
land, machinery and equipment, transportation equipment,
and furniture and fixtures, and the anticipated dates by
which you plan to acquire each significant item.  Also
include the date the items will be placed in service, if
later, which is the date that depreciation begins, for
income tax purposes.

This is an optional item, which you may choose not to
include, in the interests of brevity.  A sample of such
a schedule is provided below.]

                     XYZ CORPORATION
           Acquisition Schedule for Fixed Assets [Sample]

   ------------  ---------------   ---------  ------------
   10/01/1999    FACTORY BUILDING   400,000    11/01/1999

   ____________  _______________   _________  ____________

   ____________  _______________   _________  ____________

   ____________  _______________   _________  ____________

   ____________  _______________   _________  ____________

                          FINANCIAL PROJECTIONS AND
                          LINE-BY-LINE OVERVIEW OF
                          HOW FINANCIAL STATEMENTS WORK

FINANCIAL PROJECTIONS.  This is the "bottom line" portion
of your business plan, and is thus of key importance.
Unlike most of the other portions of the document you are
creating, you will probably not be able to prepare this
part alone, without professional help from your CPA or
another person with significant "hands-on" experience in
accounting.  However, you will need to be closely involved
with developing the forecast numbers, and will rely on
your accountant primarily to help you put the numbers in a
format that is proper and appropriate for your particular
type of business.  There is no one standard form of any
financial statement that can be used for all kinds of
businesses.  Every business, whether it be retail,
manufacturing, service, or other, will have a slightly
different financial statement format, which your CPA or
other accounting expert will have to help tailor for you.

Accounting is a very technical field, and while you don't
need to be an accountant to run a successful small business,
you will definitely need to become familiar with basic
accounting concepts and how to read and understand financial
statements.  While preparing financial statements on a
regular (say monthly) basis may seem like an unnecessary
and burdensome exercise when you are trying to keep the
business afloat and creditors at bay, the truth is that you
will not get very far "flying blind"--which is how you will
be running your business if you don't generate and analyze
financial statements for your own use on a frequent basis.

Flying by the seat of your pants and assuming that all is
well, so long as you have a certain amount in your bank
account, is a recipe for disaster.  Going through the regular
discipline of preparing financial statements will give you
an understanding of how the business is doing, what things
are out of line financially and need to be fixed, and how
to plan for next month and next year and beyond.

As in politics, money, or cash flow, is the "mother's milk"
of business, and you must always keep a particularly good
handle on how your cash flows are going.  If you are able
to project a cash flow shortfall well in advance, you may
be able to either make changes to avert it, or take steps
to obtain financing to cover it, if it is just a temporary
crunch.  On the other hand, if you let it blind side you,
it will probably be too late to do anything about it when
you wake up one day and find the bank account is down to
zero and you have payroll to make, and suppliers insisting
on payment of outstanding balances before they will ship
any more goods to you--which is the point at which many
businesses have to close their doors, and belly up.

Doing and carefully analyzing your financial statements
will also show you where there are problems or opportunities
that need to be addressed.  For example, if you have a
line of bank credit and are borrowing at 10%, but see that
you are building up much more working capital than you need
for the foreseeable future, and are only earning 4% or so
on short-term investments with the excess cash, that may
prompt you to pay down a good portion of the line of credit
temporarily and save the 6% spread you are paying on the
unneeded borrowing.  Or you might see from your income
statements that some expense item, such as for raw materials,
has suddenly gotten out of proportion, which may alert you
to the fact that your new production manager is doing a poor
job of running the machinery, so that an unacceptably high
percentage of the raw materials you are buying is going  
out the back door as waste or scrap -- or is simply

In short, doing frequent financial statements, perhaps even
on a weekly or daily basis, if you have a good computerized
accounting system, is an absolute necessity, if you want
to understand what is going on in your business.  As a
business owner or manager, it is, therefore, going to be
important for you to learn about the basics of business
accounting, so you can get the most out of the financial
statements you or your accounting people will prepare.
Some things you might want to consider to improve your
knowledge of accounting would include the following:

  . Take a few management accounting courses at night
    school, at a local community college.

  . Spend some time with your accounting advisor, such as
    a CPA, asking for help in understanding accounting
    concepts and interpreting financial statements.  Don't
    be afraid to pick up the phone and call your accountant
    if there is something you don't understand.  Talking
    to your accountant may cost you a few dollars, but not
    understanding what is going on may cost you far more.

  . Buy one or two reference books on financial and cost
    accounting from a bookstore, or check them out from
    a nearby library.  You may also want to spend some time
    in the business section of a bookstore, looking at some
    of the trade paperbacks on business accounting, which
    may be easier to read and put to use than the standard
    accounting textbooks.

Note that you will probably be most interested first in
financial accounting, which deals with the basic financial
statements that are mentioned in this business plan, and 
is concerned with presenting overall financial results.  
Cost accounting is much more complex, almost like a cross
between accounting and engineering, and is usually most
important in a large manufacturing operation, where a
great deal of time and effort is put into "capturing" the
actual costs of every step and detail of the production
process, where finding a way to save a penny or two on
some small procedure may result in huge dollar savings.
Many small companies get along quite well for years without
a formal cost accounting system, although even the smallest
manufacturer will need to at least use some kind of
informal costing system to determine how it will manage
production and how to price its product.

In preparing the projected (and possibly historical)
financial statements for inclusion in this business plan,
the following discussion should help you to understand
the purpose of each statement and some of the basic
accounting terminology.

 - TYPES OF FINANCIAL STATEMENTS.  The primary financial
   statements you will need to include in any business
   plan are the three main ones:

   . Income statement  (or profit and loss statement)

   . Statement of financial position (balance sheet)

   . Statement of changes in financial position or cash
     flows (cash flow statement)

   Other, less critical statements you may also want to
   include would be a schedule of costs of goods sold, a
   breakeven analysis and, optionally, an acquisition
   schedule for fixed assets.

   Note that the sample income and balance sheet statements
   we have provided in the business plan worksheet outline
   are FORECASTS of expected results, as opposed to examples
   of actual historical statements.  This is a critical
   part of any business plan, as the forecasts shown in
   these two statements and in the cash flow statements
   (the latter of which we have not included in the outline) 
   are the key numbers that should tell how well your 
   company will do, and whether and when it will be able to 
   pay off loans or to cash out investors.

   However, if yours is an existing business, which has an
   operating history, you will also need to include copies
   of the actual financial statements for your company 
   up to the present time.  Preferably, these should be
   statements that have either been compiled, reviewed, or
   audited by an independent CPA firm, rather than financial
   statements you have simply done by yourself, without any
   type of attestation by a certified public accounting
   firm.  Since you may not be familiar with "compiled,"
   "reviewed," or "audited" financial statements, these
   three levels of verification or attestation by auditors
   plus a new fourth level, "assembly" statements (which
   you may not use with your business plan) are described, 
   in non-technical terms, as follows:

   . "Audited" financial statements are the most credible,
     as they require extensive testing and verification 
     by the CPA before they will issue an auditor's 
     opinion that your financial statements fairly reflect 
     your firm's operations and financial condition, 
     in accordance with generally accepted accounting
     principles ("GAAP") and generally accepted auditing
     standards.  This does not mean that the CPA has
     "audited" or checked all the details behind every
     single number. It merely means that they have done a
     statistically acceptable amount of random testing of
     your accounts, and an examination of the efficacy of
     your internal financial controls to satisfy themselves
     that the numbers as a whole are substantially correct.
     However, most small firms do not ask their accounting
     firm to help them issue audited statements, since the 
     accounting fees for audits are often prohibitively 

   . "Compilation" statements are the least expensive
     kind of statements a CPA firm will sign its name to.
     In the case of a compilation, the attached opinion by
     the CPA firm will indicate that it has NOT audited
     the statements and does not vouch for their accuracy,
     but has merely compiled the statements in a proper
     accounting format from information provided by the
     company, and that the CPA has not become aware of 
     any incorrect or misleading information contained in 
     the statements.  In short, the auditors are saying 
     that they haven't done any audit or testing of the
     financial records, and are giving only a half-hearted
     blessing to the FORM of the statements, not their

     Thus, compilation statements provide the least amount
     of assurance to a reader of the financial statements,
     but are still likely to be given more respect than
     statements you have prepared on your own, with no kind
     of certification by an outside CPA firm.  However, in
     many cases, compilation statements are often quite 
     adequate, as a practical matter, for a small firm.

   . "Review" statements provide an intermediate level of
     assurance.  They involve more analytical work by the
     CPA firm than compilation statements, but come nowhere
     near the level of investigation that is involved in a
     full-blown audit.  As such, a review usually costs
     less to perform than an audit, but more than a mere

   . "Assembly" statements, which are also sometimes called 
     "management use only" or "plain paper" financial 
     statements, are a new level of service, introduced in 
     the accounting profession after the year 2000 by SSARS 8.
     While each of the other levels of service includes a 
     report signed by the accountant, describing the level 
     of service provided, this level of service permits the 
     accountant to submit financial statements without an 
     attached report, if third parties (lenders, investors, 
     etc.) are not reasonably expected to use the financial 

     Assembly statements are basically statements that your 
     accountant prepares for your use only, within your 
     company, and thus do not involve any auditing or other 
     verification of the accounting data you submit to the 
     accountant. The accountant merely takes your information 
     and puts it in a useful financial statement format for 
     you, and gives you the statements.  SSARS 8 requires the 
     accountant who provides this level of service to obtain 
     a signed engagement letter from you, the client, which
     specifies the nature and limitations of the services to 
     be performed, noting that the financial statements may 
     make material departures from GAAP, and must include your 
     acknowledgement and agreement that the financial statements 
     they have prepared for you are never to be used by or 
     presented to third parties outside your firm. (Thus, you
     cannot use "assembly" statements as an attachment to
     your business plan document, since such statements are
     not to be presented to third parties.)

   Your accountant or financial consultant will probably
   be the best person to consult as to the level of
   assurance -- audit, review, or compilation -- you 
   are likely to need for financial statements for your
   particular company, in connection with preparing the
   business plan.  Note that in each case, the financial
   statements are prepared by you, and, in theory at
   least, the auditor is merely expressing (or not
   expressing) an opinion on their correctness.  Also
   remember that audit, review, and compilation statements
   have to do only with actual financial statements for a
   going concern.  These concepts do not have anything to
   do with the projected or forecasted statements you will
   include in your business plan.  While you will very
   likely need the help of a CPA in preparing forecasted
   statements in a proper format, the CPA will not attach
   an audit, review, or compilation opinion to the
   forecasts, only to your historical financial statements,
   if any.

   Each of the several forecasted financial statements
   that you should include in the business plan is
   discussed individually below.

 - INCOME STATEMENT.  The income, or profit and loss,
   statement, tells the reader what sales the business
   has generated (or in the case of these forecasted
   statements, what sales are projected to be) for each
   financial period.  It also shows what expenses are
   expected to be incurred, and the amount of the
   resulting net income or loss before taxes, the amount
   of any taxes, and the resulting net income after taxes.
   While our example shows yearly numbers, you may want
   to provide more detailed monthly projections, at least
   for the first one or two years of the period you are
   covering, and perhaps quarterly statements after that.
   Our example also shows a projection of units sold,
   which is not dollar amount, but an estimate of the
   number of units of whatever you make that you expect
   to sell, at the prices you have calculated previously
   in this business plan.  You may not include the units
   sold number if it is not a relevant item, such as for
   a service business, or a retail store that sells a
   wide range of items at widely varying prices.  The
   "units sold" line item would usually be shown only if
   you are essentially selling one kind of item, such as
   an auto dealership, selling Ferraris.

   . Gross sales (or gross revenues).  This is the total
     dollar amount of revenues your company will generate
     for each period, before any reductions, such as
     for returned merchandise or refunds, or early payment
     discounts earned by customers.  (Companies will
     sometimes offer customers a prompt payment discount
     of 1% or 2% if the customer pays their invoice quickly,
     such as within 10 days.)

     Some companies may have revenues from sales of goods,
     as well as service income, such as an appliance dealer
     that sells appliances, but also has a repair and
     service department.  In such a case, you would
     ordinarily break out the two income categories as
     separate line items, as those represent different
     kinds of income.  You will need to consult your CPA
     or other financial professional as to the best way
     to present such other types of income, if you are in
     different lines of business.

   . Returns.  This would be any type of refund to customers
     for damaged goods, or if you refund an unhappy buyer's
     money, or if you accept returns of unsold items from
     your wholesale or retail distributors.

   . Bad debts.  When you ship goods to a customer, you will
     generally "book" a sale at that time, even if the sale
     is made on credit, and you do not expect to be paid for
     some time, such as 30 days or more.  Occasionally, you
     will find that some customers don't pay at all, and 
     you may be unable to collect.  These bad debts are an
     expense that is often offset against gross sales.

   . Discounts given.  As noted above, your company may
     offer early payment discounts to customers who pay
     quickly.  In our example, this number is zero, because
     we are assuming that the company policy is not to
     offer any such discounts.  Some companies do, others
     do not.

   . Net revenue (or net sales).  This number simply
     represents the gross sales of the business, less
     certain items like the above -- returns, bad debts,
     and discounts given.

   . Cost of goods sold.  This number will only appear
     if you are selling some type of goods, ordinarily,
     either as a manufacturer or as a wholesaler or
     retailer.  However, some service businesses will
     use a similar concept, perhaps called "cost of
     sales," or the like.  This will have to be tailored
     to reflect the type of business you are in, to be
     in line with accounting practices in your particular
     industry.  Consult your accountant on this item.

     We have listed cost of goods sold as a single line
     item.  You may want to have several sub-categories
     as additional line items that make up the total
     of cost of goods sold, or else refer to an attached
     schedule which summarizes the details of the cost 
     of goods sold number for each period.  The basic
     components of cost of goods sold, in a typical
     manufacturing operation, might be as follows:

     - Beginning inventory.  This is a starting number,
       the value (at lower of cost or market value,
       generally) of the inventory of goods you had on
       had at the start of the year (or other period
       which the income statement covers, such as a
       quarter or month).  To this will be added the
       costs incurred during the year, such as raw
       materials, labor and overhead, as listed below.

     - Raw materials cost.  This would include all of the
       materials you buy that go into the process of making
       your product.  "Freight in" will either be part of
       this cost or broken out as a separate line item, to
       reflect the shipping costs you pay to bring such
       materials in to your factory.

     - Direct labor costs.  This includes the amount of
       labor costs that are directly related to each
       unit of production, such as salaries and fringe
       benefits of assembly line workers.

     - Fixed overhead.  This includes expenses of
       production that are relatively fixed, such as
       building rent for a factory building, and which
       don't vary in proportion to how many units you
       produce.  (In the short run, at least -- in 
       the long run, if your production level needs to
       increase beyond a certain level, you will need
       to either expand your facilities or build a new 
       factory, for example.  But in the short run, 
       your factory rent will usually stay about the 
       same, even if your production drops off from 
       running at full capacity to near zero.)  Other 
       overhead items would include indirect labor, such 
       as the salaries of production managers, and items 
       such as property taxes, facility maintenance costs,
       depreciation of factory buildings and production
       equipment, and fire and casualty insurance, all
       of which will also tend to be relatively fixed,
       without regard to how many units are produced in
       the factory during a particular month or year.

     - Ending inventory.  After adding together the cost
       of your beginning inventory and all the above
       production costs, you must back out (subtract) the
       value of the ending inventory, to arrive at your
       net cost of goods sold.  The reason for this is
       that, assuming for simplicity that your beginning
       inventory is zero and you have incurred $500,000
       of costs to create product during the year, your
       cost of goods sold will only be $400,000 if you
       still have $100,000 of unsold goods in inventory
       at the end of the year.  Since those are valuable
       assets, which you should be able to sell in the
       following year, only the $400,000 of costs that
       are associated with the goods you have actually
       sold this past year should be considered an expense,
       or cost of goods sold.

   . Gross profit (or gross margin).  This number is the
     difference between your net sales, and what it cost
     you to produce the goods you sold, i.e., the cost of
     goods sold.  This will always be a positive number,
     unless your company is in dire condition and on 
     its way to instant bankruptcy, because the gross 
     profit is your profit calculated BEFORE any other,
     non-production, costs of the business, such as
     selling expenses, general and administrative costs,
     interest expense on indebtedness and the like.

     Next, we consider those other operating (and
     non-operating) expenses.

   . Operating expenses.  These would include expenses
     that don't directly relate to the production of your
     product, but which are still necessary to the operation
     of your business.  These cover a wide range of expenses
     such as sales and marketing costs, and general and
     administrative costs.  These will typically range
     from executive salaries to accounting and finance
     department costs, office expenses not related to
     production, human resources department costs, outside
     services such as law and accounting fees, miscellaneous
     business licenses and taxes, depreciation costs of
     office buildings and office equipment, and amortization
     of certain intangible costs, such as capitalized
     startup costs.  In our sample income statements, we
     show startup costs as being $55,000, or which $5,000
     are costs of incorporating. These organization costs
     and startup costs are both deducted and/or amortized in
     accordance with new 2004 tax legislation. See Chapter 
     13, Section 13.3 of this book for details on how such 
     costs are allowed to be written off after the 2004 act.
     Interest on loans may sometimes be categorized here 
     as an operating cost, or may be partly shown as an 
     item of non-operating expense, depending on what the 
     interest expense relates to.

   . Net operating income.  This number is the net amount
     derived by subtracting the total operating expenses
     from the gross profit number.  It may well be a loss,
     rather than a profit, even though it is usually
     computed before taking into account interest expense
     (or interest income).

   . Non-operating income (and expenses).  This section of
     the income statement has to do with expenses that are
     associated more with the way the business is financed,
     rather than its day-to-day operations, and any income
     that is not earned by the business operations, but
     from passive investments, such as interest or dividends
     earned on investments.  Interest expense on debts is
     often the main non-operating expense item on the
     income statement.

   . Net pretax income.  This is the figure arrived at by
     adding the net operating income (or loss) to the net
     non-operating income (or loss).  In short, this is
     the almost-bottom-line number that takes into account
     all income and expenses, except income taxes.

   . Income taxes.  Self-explanatory.  This is the total
     state, local and federal income tax liability that
     applies to the net pretax income.  We have used a
     simple example, assuming a flat 9% state income tax
     rate, reducing the pretax income tax by that amount,
     and then calculating federal corporation income tax
     on the balance at current year tax rates.  While
     this may be good enough for financial projections in
     a business plan, you should be aware that in creating
     real financial statements for actual historical
     results for your company, the computation of the
     income tax number is horrifically complex.  For
     example, the tax may be a negative number, if your
     company has a tax loss and can carry the loss to
     another tax year and offset the other year tax
     liability.  Or your firm may be taking accelerated
     depreciation and other rapid write-offs for tax
     purposes, but not on your financial statements, so
     that you may show a profit on your income statement
     but a loss for the year on your tax returns.  In that
     case, no actual tax payment is required, but your CPA
     will still require you to compute a "tax provision,"
     as though you had to pay tax on the "book income" 
     rather than on the "taxable income."  Tomes have been 
     written on this subject, so suffice it to say that 
     the income tax calculation is not nearly as simple as 
     we have shown it in our sample income statement.  To
     do real financial statements, you will definitely 
     need a good CPA to compute the proper "tax provision"
     each year, although you may be able to get away with 
     taking the simpler approach in your projected income 

   . Net income after taxes.  This is ordinarily the
     bottom line, the company's net income after
     subtracting out (or even adding back, in the case
     of a pretax loss, in some instances) an income tax
     expense provision.  However, in our example, we
     have shown a somewhat atypical situation, one in
     which the company has issued $100,000 par value of
     10% preferred stock, so that it pays out a $10,000 a
     year dividend to the preferred stockholders.  Thus
     we have added a "bottom-bottom" line in our example,
     as noted below.

   . Net income to common shareholders.  Ordinarily, this
     line item would not appear, as it would be the same
     as net income after taxes, the item described in the
     preceding paragraph.  However, for illustrative
     purposes, we have assumed in our example that the
     company has raised or will raise $100,000 of capital
     by issuance of preferred stock, in addition to its
     issuance of common stock, and that it will be paying
     $10,000 a year in cash dividends to the holders of
     the preferred stock.  This amount is not really an
     "expense" of the corporation, but it still represents
     money that must be paid out, and which doesn't go
     into retained earnings of the company for the benefit
     of the common shareholders, so we have included a
     separate line item for the net-net income that is
     accumulated on behalf of the common shareholders,
     after payment of the preferred stock dividends.

     "Preferred stock" is a kind of stock that a company
     may issue, in addition to its common stock.  Preferred
     stock can have a great variety of forms, and may even
     be convertible into common stock, at the holder's option.
     However, its usual key features are that it pays a
     fixed dividend to shareholders, somewhat like a bond or
     debt security, and that the preferred shareholders get
     first call on the company's earnings for this dividend,
     before any dividends can be paid out to the common
     stockholders.  Thus, if the preferred stock dividend
     takes all of the year's net income of the corporation,
     there may be no income that can be paid out as dividends
     on the common stock.  Also, when a corporation is
     liquidated, the preferred stock is "senior" to the
     common stock, but is limited to the amount of the
     "par value" of the preferred stock.  Assuming in our
     example that the preferred stock has a par value of
     $100,000, and that is what it was issued for, then,
     if the corporation is liquidated, and has only $120,000
     remaining after paying off all its debts, the preferred
     stockholders would get their $100,000 first, and the
     common stockholders would get only what was left.  Or,
     if the net assets had grown to $10 million, the preferred
     stock owners would still only get their $100,000 back,
     while the common stockholders would get the rest, or
     $9.9 million in that example.

     Again, you aren't likely to see the final two line
     items we have included on our sample of a projected
     income statement, in most financial statements.
     However, since preferred stock is being used more and
     more in venture capital settings, it does appear from
     time to time, and this is how you would reflect that
     fact if you were planning to issue preferred stock as
     part of your corporation's financing.  Thus, for a
     typical company with no preferred stock, you would
     not need the last two line items shown on our sample
     income statement.

 - BALANCE SHEET.  This statement, now generally called a
   statement of financial position, can be thought of as a
   summary of what your company owns and what it owes.
   While the income statement measures the income and
   outflows and the resulting net income or loss over a
   period of time, the balance sheet is like a snapshot
   that measures where the company stands at the end of
   that same period.  Thus, our sample forecasted balance
   sheets are for each of the same five years covered by
   the sample income statement forecasts, and each shows
   the projected financial condition of the company at the
   end of each such income period.

   The following paragraphs discuss in layman's terms what
   each of the line items on the sample balance sheet is
   intended to represent, as well as an overview of the
   nature of balance sheets, and what you can learn from
   looking at a company's balance sheet.

   . Overview.  Generally, a balance sheet has two main
     parts:  the assets section, and the liabilities and
     stockholders' equity section.  The sum of all the
     assets must always be equal to the sum of all the
     liabilities and the stockholders' equity section.
     That is, these two sides of the balance sheet must
     always "balance," hence the name given to this
     financial statement.  Note that unincorporated
     businesses will not have a "stockholders' equity"
     section, but will have a similar section, which may
     be titled "proprietor's equity" for a sole proprietor,
     "partners' equity" for a partnership, or "members'
     equity" for a limited liability company, or somewhat
     similar descriptions.  Each of these terms refers,
     essentially, to the "equity" or residual capital of a
     company, corporate or otherwise -- that is, to the
     "residue" that is theoretically left over if all the
     liabilities are paid off from the total assets of the
     business.  The "equity" capital is what is left.

     Another way of looking at the balance sheet is

         Assets - Liabilities = Stockholders' Equity.

     That is, the stockholders' equity is whatever is
     left after subtracting the liabilities from the
     assets.  And if liabilities are greater than assets,
     then the stockholders' equity number will then be a
     negative number, which usually, but not always, means
     the company is in deep financial trouble.

     Remember, however, that the way accounting is done,
     the numbers on a balance sheet represent historical
     costs, in general, rather than actual values.  For
     example, if a company has only two assets, a fully
     depreciated building that cost $100,000 and now has
     a net cost of zero, after depreciation, plus land that
     cost $10,000 originally, and owes a $200,000 mortgage,
     as its only liability, it will have total assets of
     $10,000 and a liability of $200,000, so that its
     balance sheet would show a negative stockholders'
     equity of some $190,000, as in this simple balance
     sheet summary:

     Assets:                    Liabilities and Equity:
     -------                    -----------------------
     Building         100,000   Liabilities:
     Less:  Deprec.  -100,000   Mortgage Payable    200,000
     Land              10,000   Stockholders'
                                   Equity          -190,000
                      --------                      --------
     Total Assets:     10,000   Total Liab. & Eq.:   10,000
                      ========                      ========

     Looks terrible, does it not?  $200,000 of debt, and
     only a pitiful $10,000 of assets?  But remember, those
     are HISTORICAL COST numbers, not what the building or
     land is necessarily worth today.  Suppose the building
     and land were purchased for $100,000 and $10,000,
     respectively in 1950.  Thus, they might be worth a
     million dollars in total today.  With a mortgage of
     only $200,000, this company would have a very healthy
     balance sheet, if you knew the real values of its
     assets, despite the ugly numbers that show it has
     a deficit in net worth of $190,000.  Its REAL net
     worth, ignoring the strict accounting conventions that
     don't let you "write-up" the value of appreciated,
     assets (in most cases), would be more like $800,000,
     wouldn't it?

     Thus, in learning to read balance sheets, one key
     thing to always keep in mind is that the numbers in
     them represent historical costs of assets, NOT their
     current fair market values, generally speaking.

     The actual values of those assets may bear little
     resemblance to the balance sheet amounts, except for
     current assets.  (However, liabilities, if a balance
     sheet has been prepared by reputable accountants,
     usually should closely reflect the actual amount of
     the company's liabilities.  Most of the "play" in the
     numbers is usually on the assets side of the ledger.)

     Accordingly, just because a balance sheet seems to
     indicate a company has deficit in net worth (in its
     stockholders' equity), that is not necessarily a
     problem, if the assets are worth a lot more than
     they are "on the books" for, as in our illustration
     in the preceding paragraphs.  However, a deficit in
     stockholders' equity is definitely a warning light
     that you should not ignore, an indication that the
     company may be in precarious financial condition.

     By the same token, if you are looking at a balance
     sheet that shows a company has a large amount of
     stockholders' equity (net worth), that can also be
     misleading, if the company has assets on its books
     that are not worth nearly as much as they are listed
     at, at cost, on the balance sheet.  However, if you
     are looking at an audited balance sheet, many kinds of
     items, like questionable receivables or hard-to-sell
     inventory, should have already been "written down" to
     their approximate actual values.  Accounting principles
     often require that assets that decline in value be
     written down to their real values, but rarely allow
     you to "write-up" (upwardly adjust) the values of any
     assets that have increased in value.  However, like
     any set of exceptionally complex rules, accounting
     rules are full of loopholes, and people, even good
     accountants, make honest mistakes, so an apparently
     strong balance sheet may nevertheless conceal some
     badly overvalued assets.

     With those general concepts in mind, let's now look
     at the individual line items on our sample forecasted
     balance sheets, to see what they mean.

   . Assets.  The first half of the balance sheet equation
     is the listing of all of a company's assets, at their
     historical costs, in most cases.  (Inventory is usually
     written down to the lower of its cost or fair market
     value, however, and receivables will usually be offset
     in part by a reserve for bad debts.)  Where an asset,
     like a building or equipment, is subject to depreciation,
     the cost is written off in small increments over a
     number of years, over its expected useful life.  Thus,
     when you buy a building for $390,000, you do not write
     off its $390,000 cost as an expense in the year you
     buy it, but may instead write it off ("depreciate" it)
     at $10,000 a year for 39 years, for tax purposes.  You
     may depreciate it at the same rate for financial
     purposes, or at a faster or slower rate, which can
     lead to much more complicated accounting for the
     book/tax differences.

     On the balance sheet, the usual way to show depreciable
     items is at their original cost, with a separate line
     item for "accumulated depreciation," which is a negative
     number that shows all the depreciation deductions you
     have taken over the years, to date, on the depreciable
     assets.  Certain "amortizable" assets, which are
     intangible assets, such as organization costs or startup
     costs of a business, or assets like trademarks or
     copyrights, are usually, but not always, shown in a
     similar fashion, like depreciable assets.  That is, you
     may list the original cost of the "amortizable" asset,
     with another line item below it (a negative number),
     showing the total accumulated "amortization" that has
     been written off to date.

   . Current assets.  The first part of the "assets" side
     of the balance sheet is always the "current assets"
     section.  In this section of the balance sheet you
     should list all of the current, or liquid, assets of
     the business, such as cash or assets that can be
     expected to quickly be turned into cash, in the next
     year.  These include:

     - Cash.  Actual cash on hand, plus bank account

     - Accounts receivable.  These are amounts owed to you
       by customers, for sales you have made to them on
       credit, which are supposed to be paid immediately
       or within one year.  If you are selling something
       like houses or lots, and taking back long-term
       installment notes, those would be considered as
       long-term notes, appearing elsewhere than under
       the accounts receivable section.

     - Reserve for bad debts.  When you sell goods or
       services on credit, not all of your customers will
       pay you all they owe you.  Thus, it is usually
       necessary to set up a "reserve" for bad debts,
       which is simply an estimate of what percentage of
       the accounts receivable that are owed to you at
       the end of the year are likely to go uncollected,
       based on historical experience of your business,
       or your industry, and other factors.  In our
       sample balance sheet, we have assumed that 2% of
       the ending accounts receivable balance for each
       year will go uncollected.  (Notice that these
       numbers are not the same as the bad debt expense
       in the income statements.  That is because the
       income statements show actual bad debt expenses
       for each year, and since accounts receivable
       may turn over several times a year, the total
       expense may be much more than the year-end

     - Net accounts receivable.  This line item is the total
       accounts receivable amount, reduced by the amount of
       the reserve for bad debts (also known as a reserve
       for uncollectible accounts).

     - Inventories.  This would include the ending value
       of your products held in inventory, based on the
       lower of their actual costs or market value.  This
       section might also include other types of inventories
       than your finished goods inventories.  For example,
       if you are a manufacturer, you might also have
       raw materials inventories of raw materials that you
       have acquired but not yet used in the manufacturing
       process, or work-in-process inventories, for goods
       that are only partially processed or partially
       completed.  Retailers would usually just have
       inventories of the goods purchased for resale, by
       contrast, and service firms usually do not have

     - Prepaid expenses.  These are simply expenses that
       have been prepaid, for a period beyond the end of
       the balance sheet date.  For example, if you pay
       your annual fire insurance on July 1, and the
       balance sheet is for a year ended December 31, only
       half of the July insurance premium payment will
       have been taken as an expense for the current year.
       The other half is a prepayment for the first six
       months of the following year, so you "capitalize"
       the part that hasn't been expensed this year, by
       putting it on the balance sheet as a current asset.

     - Deposits.  These would be items like utility deposits,
       or deposits required in connection with a lease or
       purchase of property, which represents money you will
       be entitled to get back at some time in the future,
       or can be used to offset some future expense, like
       a purchase of a building, when you have made a
       deposit in escrow, but haven't closed the deal yet.

     - Other.  This would include miscellaneous other kinds
       of current assets which could be turned into cash
       within the next year, such as investments in marketable
       securities, which you could easily sell on short

     - Total current assets.  This is the sum of all the
       above categories of current assets.

   . Fixed assets.  This section of the assets side of the
     balance sheet is where you list the long term productive
     assets of the business, such as land, buildings,
     machinery and equipment, and office furniture and
     fixtures.  Most of these assets, except land, are
     usually depreciable assets, written off bit by bit,
     year by year, in the form of annual depreciation
     deductions, so they are usually shown at their
     original cost, with a separate line item (a negative
     amount) showing the amount of accumulated depreciation
     expenses that have been taken against the original
     cost from the time of purchase until the present.

     Land is not depreciated or expensed, so it usually
     stays on the balance sheet at the same value, year
     after year, with few exceptions, until it is sold.
     However, certain land improvements may occasionally
     be treated as having a limited useful life, and thus
     be depreciated over a number of years.  This might
     include costs for grading, bulkheads, or similar
     expense outlays.

   . Other assets.  This is a catch-all category, where
     you would list all other assets that are not either
     "current" or "fixed" assets.  These might include:

     - Loan fees.  In our example, we have assumed the firm
       had to pay loan fees of about $25,000 on roughly
       $1.25 million of loans it took out in the first
       year.  Since these costs are expensed by amortizing
       or spreading them over the period of years the
       loans are outstanding, the loan fee is set up on
       the books as an asset and written off over the loan
       term.  Thus the balance declines each year.

     - Startup costs.  We have lumped together two items
       here, although you might want to show them separately:
       the organization costs for the corporation, such as
       legal fees and incorporation filing fees, as well as
       business startup (pre-opening) costs.  The IRS tax
       rules allow up to $5,000 each of these two cost 
       categories to be expensed in the year the business
       starts (assuming neither such category exceeds $50,000),
       and the balance to be capitalized and amortized over 
       15 years. In our example, the full $55,000 is shown as
       a capitalized asset, but all $5,000 of the organization
       costs and $5,000 of the $50,000 of startup costs are
       written off in the first year.  In addition, of the 
       $45,000 of startup costs that must be amortized over
       15 years, we show amortization of $3,000 a year. 
       Treating the first year write-off as additional 
       amortization, the first-year amortization total for
       both cost categories is $13,000, and each subsequent
       year shows a $3,000 amortization. (We are assuming 
       that the first year was a full year of 12 months of 
       doing business).  Note that this ties to the 
       amortization expense shown each year under the 
       "operating expenses" section of our income statement 
       example. On the cash flow statement, the line item
       for amortization includes this amount plus loan fee

     - Miscellaneous assets.  This would include any other
       assets that do not fall into any other category,
       such as long term investments in stocks or bonds,
       which are not intended to be sold in the next year.

   . Liabilities and stockholders' equity.  This is the
     "right-hand" side of the balance sheet, in traditional
     accounting parlance (or the "side towards the window"
     as some bookkeepers used to try to remember it).  It
     consists of two main parts--the liabilities section,
     and the residual or stockholders' equity section.
     (As noted above, the stockholders' equity section will
     be called something else for a non-corporate business,
     such as "partners' equity" for a partnership.)

   . Liabilities section.  This section is usually broken
     down into two sub-sections, one for current liabilities
     and one for long term debt.

     - Current liabilities.  This section should list all
       debts which the company currently owes and which it
       must pay in the next year.  These include accounts
       payable owed to trade creditors, any short-term
       debts, such as a line of credit that may called in
       for payment by the bank on demand, and the short
       term portion of any long term debts -- that is, the
       principal payments on a long term debt that must be
       paid during the next year.  Other current liabilities
       would include accrued interest on debts, which we
       have listed as an example, and other types of accrued
       expenses, which we have not listed, such as income
       taxes that the company owes, but will not pay until
       the following year.

     - Long term debt.  This category includes any kinds of
       debts that will be paid off at some date more than a
       year in the future, such as a long term bank or SBA
       loan, or a mortgage on a building.

     - Total liabilities.  This line item is merely the sum
       of the two above categories, and represents the total
       of all claims or indebtedness against the company.
       Some obligations, like potential damages that might
       be owed in a lawsuit, may have to be estimated, or
       perhaps just mentioned in a footnote without listing
       them, in formal financial statements, and a certain
       amount of guesswork will be involved in deciding, if
       they are listed as liabilities, whether they are
       current or long term liabilities.

   . Stockholders' equity section.  This section represents
     the residual ownership of the corporate assets, after
     all liabilities have been deducted from total assets.
     In theory, at least, since, as previously noted, the
     accounting numbers for assets do not usually reflect
     actual values, only the historical costs of the assets.
     Thus, if the stockholders' equity on the balance sheet
     is $2.473 million, as shown at the end of five years
     in our sample balance sheet, that does not mean that
     their ownership interest in the company will actually
     be worth that amount.  The actual value of their stock
     might be worth much more, or much less.

     The stockholders' equity section is usually divided
     into at least two or three segments, including the
     common stock, usually "paid-in capital in excess of
     par," and retained earnings (which may be a negative
     number).  If there is also preferred stock, or more
     than one class of common stock, there will be a
     separate line item for each class of stock usually.
     There may even be other odd equity securities, such
     as stock warrants, which the company has issued, which
     would also show up as line items in this part of the
     balance sheet.  Let's look at the line items in the
     stockholders' equity section of our sample balance

     - Common stock.  This is simply an amount showing how
       much money or property was paid in by common stock
       owners when the company issued its common stock.
       Depending on state law for the state of incorporation,
       stock will usually have either a "par value" or a
       "stated value" per share when it is issued.  These
       par value and stated value concepts don't have much
       meaning in the modern world, except that some states
       base their corporation franchise taxes on the amount
       of a corporations par value or stated value of stock
       issued.  From a business standpoint, par and stated
       value are largely meaningless otherwise, however,
       except that it is usually illegal for a corporation
       to issue stock for less than its stated or par value.
       (Which may be a penny a share, so that is usually
       not much of a concern.)  Par value may also be 
       a limit on the ability of a company to pay out
       dividends, if there are no retained earnings from
       which dividends can be paid or, in some cases,
       no excess paid in capital.  Again, par values are
       usually set so low that this is rarely a real-world

       Common stock is the residual ownership of the
       corporation.  That is, common stock owners have the
       right to all the upside if the corporation does
       well (creditors and preferred stockholders usually
       only earn a fixed rate of interest or preferred
       stock dividend payments).  On the other hand, the
       common stockholder is last in line in bankruptcy
       court, or even if the corporation is solvent, last
       in line if the corporation is liquidated.  Creditors
       will have first claim on the assets in liquidation
       or in bankruptcy.  If any assets are left after all
       the debts are paid, the preferred stockholders may
       then receive up to the par value of their preferred
       stock.  Then, and only then, if there are still
       any remaining assets, do the common stockholders
       get whatever is left, which may either be nothing,
       a little, or a lot.

       When looking at company balance sheets, you may
       occasionally see a negative amount under common
       stock in this section, usually under a separate
       line item called "treasury stock."  All that means
       is, that at some point in its past, the company
       has repurchased some of its common stock, and
       instead of "retiring" the stock, has decided to
       keep it as "treasury stock" which it may resell
       to some other investor in the future.  Thus, instead
       of simply reducing the amount of its common stock
       account when it bought back its own stock, and
       showing that as a net number, the original common
       stock number is left unchanged, but after subtracting
       the separate account balance for the "treasury
       stock," the net amount of common stock is still the
       same.  As a practical matter, treasury stock is
       very nearly a meaningless concept, much like par
       value, so it is not something that you need more
       than a passing acquaintance with.  It is more of
       an accounting convention, or method of presentation,
       than anything else, although there can be some
       occasional benefits to a company of treating its
       stock it buys back as "treasury stock" instead of
       treating it as retired or canceled, due to certain
       nuances in some states' corporation laws.  But in
       most cases a company can issue all the new stock it
       can and wants to sell, so there is seldom any need
       for it to recycle old shares it has bought back.

     - Preferred stock. Most corporations do not issue
       preferred stock. As we discussed above, preferred
       stock is simply another class of stock, which may
       take many different forms, but usually has a first
       call on dividends, and a right to be paid off at
       par value, if the corporation is liquidated, after
       all creditors have been paid, but before anything
       is distributed to holders of the common stock.
       Like common stock, preferred stock usually has a
       par value.  However, par value is usually much more
       important in the case of preferred stock, since such
       stock is usually issued at a price equal to, or close
       to, par value, and because the holder is usually
       entitled to receive par value for his or her shares
       if the corporation liquidates, assuming there are
       enough assets left after creditors have all been

       In our example, we have assumed that the company
       will issue $100,000 par value of preferred stock,
       paying a 10% dividend, and that it pays the $10,000
       dividend in cash each year for the five years
       covered by the financial projections.

     - Paid in capital in excess of par value (or stated
       value).  Stock is often issued at a price that is
       well in excess of its par or stated value.  For
       example, it may issue stock that has a par value of
       $1 per share, selling it to investors at $20 a share.
       If so, the $19 difference is categorized as "paid in
       capital" or "paid in surplus," rather than as part
       of the par value of the common stock, for accounting
       purposes.  Again, this usually has little practical
       significance, but there may be instances when a
       corporation can legally pay out dividends that are
       deemed to come from its paid in capital, when it
       could not pay such a dividend that "impaired" the
       par value account.  Thus, companies often issue
       stock at a price that is well in excess of par or
       stated value, so that most of the issue price will
       be considered excess paid in capital.

       This account will also increase if, for example, the
       sole stockholder of a company puts more money into
       the company, as capital, rather than as a loan, and
       does not bother to take back any additional stock
       for it.  (Why issue yourself more stock when you
       already own 100% of the corporation?  Actually, there
       is a good TAX reason why you should usually go to
       the trouble of issuing yourself more stock when you
       need to put additional capital into your wholly
       owned corporation, rather than simply putting in 
       the money as additional paid in capital.  See the
       discussion of "Section 1244 stock," in Chapter 14,
       Section 14.9 of this book, for an explanation of
       why it can be very important to issue more shares
       each time you add capital to your corporation.)

     - Retained earnings.  This is a cumulative number that
       shows the amount of earnings the corporation has
       generated, but has retained in the corporation.  Thus
       each year's net income will be added to the retained
       earnings account, or a loss for the year will reduce
       retained earnings.  Also, any dividends that are paid
       by the corporation will first come out of any retained
       earnings, thus reducing the amount in that account.
       Accordingly, the preferred stock dividends of $10,000
       a year paid by the company in our sample projections
       are taken into account in computing the annual net
       changes in retained earnings for the company.

       Note that if a company has financial losses, its
       retained earnings may become a negative figure.
       While, as previously noted, this can sometimes be a
       misleading figure, a negative or deficit number in its
       retained earnings account usually sets off warning
       bells in the heads of anyone planning to invest in,
       or lend money to, such a company.  Thus if, in your
       projections, you are showing negative or minimal
       retained earnings after several years, you had better
       have some persuasive arguments elsewhere in your
       business plan, showing investors or lenders why
       the company will be creating substantial value, even
       if its retained earnings and profits numbers do not
       look healthy.

       Retained earnings sometimes goes by other names, for
       accounting purposes, such as "undivided profits" or
       "earned surplus," in case you ever come across those
       terms in a balance sheet.

     - Total stockholders' equity.  This is simply the sum,
       positive or negative, of the above components of
       stockholders' equity in a corporation.  As we have
       noted, it will be called something different for a       
       business entity that is not a corporation.

 - CASH FLOW STATEMENT.  We have included a sample of a
   cash flow statement, now often called a "statement of
   changes in financial position."  However, while our
   sample may give you some guidance, we do not recommend
   that you try to do this statement on your own, unless
   you have considerable familiarity with accounting

   Instead, we suggest you do the basic work to create the
   projected income statements and balance sheets--albeit
   with a good bit of help or at least oversight from your
   CPA.  But once those statements are done, you may want
   to delegate the preparation of the statement of cash
   flows to your CPA, for the most part, since all the
   numbers in it will basically fall out of the income
   statement and balance sheet, and since cash flow
   statements involve some fairly complex calculations,
   which must be done right if you want your business
   plan financial projections to have any credibility
   with their prospective audience.

   The parts of this statement you will want to tinker
   with, once your CPA has all three of the major financial
   statements on a computer, are the financing assumptions.
   After the first initial cut at doing the financial
   projections, review the cash flow statements and
   determine where, if at all, you are going to run into
   a low point in your cash resources that will necessitate
   either more initial financing, or supplemental or   
   "mezzanine" financing, at the point of maximum cash flow
   exposure.  Ideally, you should have monthly, or at least
   quarterly, projections for the first year or two, so you
   can better identify the precise point in time when you
   expect your cash position to be at its lowest, or any
   projected cash flow deficit to be at its largest.  If
   you have completed the startup cash flow worksheets in
   Chapter 1 of this book, those can be used to determine
   when your projected monthly cash deficit is likely to
   be at its largest, and to quantify it.

   Once you have identified that point, then reassess the
   amount and timing of your financing, and perhaps modify
   some other assumptions and objectives in your business
   plan, if the amount of financing you appear to need is
   more than anyone is likely to be willing to lend or
   invest in your firm.

   . Overview of cash flow statement.  The statement of
   cash flows is usually a source of confusion to business
   managers, but it is of critical importance if you wish
   to understand where your business's cash resources are
   coming from and going to.  On first impression, you
   might think that cash flow is simply the net profit that
   your business generates, and that if you have profits,
   you will have positive cash flow.  Or, if you are a bit
   more sophisticated in accounting matters, you might
   realize that a quick approximation of cash flow is to
   simply take net income (or loss) and add back depreciation
   and amortization expenses, which are non-cash expense

   That, admittedly, will give you a good idea of whether
   a company is generating a significant amount of cash
   flow, but it does not take into account a number of
   other things that will be going on in your operations,
   or any investing and financing activities, which will
   also either provide or absorb cash.

   The three main portions of a cash flow statement are
   each described below.

   . Cash flow from operations.  This part of the cash
     flow statement starts with net income (before
     dividend payments), and adds back depreciation and
     amortization expenses, since those expenses do not
     involve any cash outlay.  Various changes in operating
     accounts are also reflected in this section.

     Increases in accounts receivable, inventories, prepaid
     expenses, and other such operating assets "absorb" cash.
     Decreases in any of these assets are a source of cash.
     For example, in the first year of operation, in 
     the sample financial statements we have provided,
     inventories increase from zero at the start of the
     year to $85,000 by the end of the year.  This means
     that the company has spent $85,000 to create inventory
     that is still on hand.  That is, since the inventory
     has not been turned back into cash (i.e., sold),
     that asset category has "absorbed" $85,000 of the
     company's cash.

     Similarly, increases in liabilities, such as accounts
     payable, are a source of cash, and any decreases are a
     use of cash.  For example, if you incur accountants'
     fees in December, those are expenses in the current
     year, on an accrual basis.  However, since the fees
     were not yet paid at December 31, such an increase in
     payables is a source of cash.  The next year, when the
     payable is paid (reducing the amount of the payable),
     that would be a use of cash, since cash is being
     absorbed for something that is not an expense in that
     year, having been expensed during the previous year.

     Notice that no adjustment is made for any income that
     is both earned and received in the same year, or for
     any expenses that are both incurred and paid in the
     same year.  All those sources and uses of cash have
     already gone into the calculation of net income, which
     is the starting point for the cash flow statements.
     Thus, all the additions or subtractions for changes in
     various accrued (but unpaid) income or expense items
     are adjustments to that net income -- in effect looking
     at the company's operations on a "cash basis" rather
     than on an "accrual basis."  (Financial statements
     that are prepared in accordance with Generally Accepted
     Accounting Principles are, in almost all cases,
     required to be presented on an "accrual basis," even
     if the company keeps its books on a "cash basis" for
     income tax purposes.)

   . Cash flow from investment activities.  This category
     reflects investments in non-current, or long-term
     assets, such as buildings, land, equipment, and in
     intangible expenses such as loan fees or startup
     expenses.  All such purchases soak up cash.  Or,
     if any such assets are sold, they are a source of
     cash.  In our sample financial statements, there is
     only one small sale of an asset in one year, so that
     investing activities mainly are shown as using cash,
     not generating it.  Note that if an asset is sold 
     at a gain, only its cost, as shown on the books, is
     shown as proceeds of sale for purposes of these
     adjustments.  Any profit on the sale would have already
     been included in net income, so to count the entire
     sales proceeds in the cash flow adjustments would be
     to double-count the gain on the sale (and vice versa
     if a loss was incurred on the sale).

   . Cash flow from financing activities.  The final part
     of the cash flow statement deals with all debt or
     equity financing activities, showing all borrowings
     or issuance of stock as sources of cash, and repayments
     on loans as uses of cash.

   The final part of the sample statement includes a cash
   flow reconciliation, and also compares the ending cash
   balances for each period with what is assumed to be
   a minimum amount of cash needed as working capital.  In
   our example, it appears that with the debt and equity
   financing already built into the projections, there will
   be no need for any additional financing during the five
   year period covered by the forecasted statements.

   However, if the business is a seasonal one, it is quite
   possible that if you did such projections on a monthly
   or quarterly basis, you might find that at some point
   in one or more of the years covered, there might well
   be a serious cash shortfall, such as shortly before
   Christmas season, if a large amount of capital has to
   be committed to building inventory at that time.  Thus,
   it is highly advisable to do your projected financial
   statements on a monthly or quarterly basis, rather
   than in the simpler annual format shown in our sample
   statements -- particularly if significant seasonal
   fluctuations in business activity are a characteristic
   of your business.

   For your business, you will probably need advice from a
   CPA or other financial professional to help you arrive
   at what appears to be a minimum amount of cash the
   company will need to maintain, in order to have adequate
   working capital at all times.  This will depend on a
   number of factors, including seasonality, the size of
   the operation, the amount of inventories needed to
   operate effectively, how long you can "float" your
   accounts payable, what percentage of your sales will be
   made on credit (versus cash sales), and how fast you
   can expect to collect accounts receivable.

   Note also that you will probably need a CPA's help if
   you want to properly reflect income tax expense in the
   cash flow statement.  Our example ignores income tax
   expense, as we have assumed that the income tax expense
   shown on the income statement is the actual income tax
   paid for the year.  However, as we previously suggested,
   the "tax provision" calculation, particularly where it
   involves "deferred tax" items, can be extraordinarily
   complex, and the actual (cash) amount of tax will usually
   be more or less than the amount shown as tax expense,
   so that an adjustment would also be required to reflect
   this difference on the cash flow statements, if they are
   to be done correctly.  "Deferred tax" items would arise
   if, for example, you used a different depreciation period
   or method for "book" (financial statement) purposes than
   for tax purposes, on certain depreciable assets.

 - BREAK-EVEN ANALYSIS.  Some of your costs, in operating
   a business, are relatively fixed.  That is, these costs,
   such as electric bills to run your administrative office,
   continue to accrue whether or not you are selling a lot
   or a little of your product.  If you (or your CPA) have
   put your financial projections on a computer spreadsheet,
   it will not be difficult, after you have prepared the
   forecasted financial statements, to do a little bit
   of "what-if" tinkering.  Go into your statements and
   try reducing sales by a certain amount, and reducing
   only your variable expenses, such as direct labor and
   materials used in manufacturing inventory (since you
   will need less inventory to fill a lower level of
   sales).  Once you determine the "worst case" level of
   sales at which the company "breaks even" (i.e., has no
   net income or loss), that is your break-even level of
   sales, which you should show in this section of your
   business plan financial projections.

   schedule, for your own purposes, even if you choose
   not to include it in the business plan document.  This
   schedule will simply be a list in which you describe each
   planned purchase of fixed assets, such as land, building,
   trucks, equipment, machinery, furniture and fixtures.
   You will need this detail information to create your
   forecasted financial statements, as it will reflect 
   when certain major expenditures must be made, and when
   depreciation expenses will begin.  (Depreciation begins
   when an item is placed in service, generally.)  You can
   use a format like one we have set forth in the worksheet

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

SECTION 16:  Business Plan Outline -- Appendix


APPENDIX.  [Include here any items you want to include in
the business plan, which you have referred to in the main
text, such as management resumes, legal documents, technical
drawings, letters of reference from customers, or other
information or documentation that will support and add
value to your business plan presentation.]

FOOTNOTES.  [Include numbered footnotes that explain
statements made in the text of the business plan.]

EXECUTIVE RESUMES.  [Include individual resumes here for
each of the key executives on your management team.]

LETTERS OF REFERENCE.  [Sometimes letters of recommendation
from business people you have dealt with, customers or
others, can add a great deal to your credibility, if from
an unbiased source.  If you have any such letters, you may
want to include them here.]

LEGAL DOCUMENTS.  [Where certain legal documents are key
to the viability and success of your operation, and are
described in some detail in the business plan, you may wish
to include a photocopy of such documents in the appendix.]

OTHER.  [Include any other documents, technical drawings
or blueprints, articles or clippings on your company or
product, or other types of information that will provide
persuasive documentation for any assertions you have made
in the business plan.]


APPENDIX.  Throughout this business plan worksheet, we have
suggested that a number of items be placed in an appendix
at the end of the business plan document, rather than in
the main text of the document.  Insert any of those items
or documents here, at the end of the document.  Don't
unnecessarily clutter up the business plan by including
too many items here, but consider including:

 . technical drawings

 . photographs of your product or facilities

 . letters of recommendation

 . articles from authoritative publications

 . certifications of product testing results

 . executive resumes

 . current and prior year financial statements,
   if yours is an existing business

 . competitor profiles

 . copies of key legal documents

 . samples of product promotional materials or dummy ads
or anything else that gives strong support and credence to
any claims or assertions you have made in the text of the
business plan document.

At this point, if you have already gone back and written
your "executive summary," you are done, except for
polishing and carefully reviewing your business plan