Start-up Business Plan

Start-up Business Plan

A start-up business plan provides a view of the future. A brand-new company makes a business plan to get its bearings and often uses the plan to get funding.

Having a great business idea and having the attributes and skills needed to successfully start your own business are two of the three things needed to make sure your business succeeds, but without the third thing, your business will surely fail. You need to be sure that the business you plan to start is right for you. Before you go too far, make an inventory of the key things that you are looking for in a business. These may include working hours that suit your lifestyle; the opportunity to meet new people; minimal paperwork; a chance to travel. Then match those up with the proposition you are considering.

An idea, however exciting, unique, revolutionary, and necessary is not a business. It’s a great starting point, and an essential one, but there is a good deal more work to be done before you can sidle up to your boss and tell him or her exactly what you think of them.

You must have a business plan setting out your company’s future and describing:

  • What your industry will look like

  • What markets you’ll compete in

  • What competition you’ll be up against

  • What products and services you’ll offer

  • What value you’ll provide customers

  • What long-term advantages you’ll have

  • How big and profitable your company will become

The real value of doing a Start-Up Business Plan is not having the finished product in hand; rather, the value lies in the process of research and thinking about your business in a systematic way. The act of planning helps you to think things through thoroughly, study and research when you are not sure of the facts, and look at your ideas critically. It takes time now, but avoids costly, perhaps disastrous, mistakes later.

Table of contents

  1. Table of contents

  2. Executive summary

  3. General Company Description

  4. Products and services

  5. Marketing plan

  6. Operational Plan

  7. Management and organization

  8. Personal financial statement

  9. Startup Expenses and Capitalization

  10. Financial plan

  11. Appendices

Start-up Business Plan - Executive Summary

Write this section last!

We suggest you make it 2 pages or less.

Include everything that you would cover in a 5-minute interview.

Explain the fundamentals of the proposed business: what will your product be, who will be your customers, who are the owners, what do you think the future holds for your business and your industry?

Make it enthusiastic, professional, complete and concise.

If applying for a loan, state clearly how much you want, precisely how you are going to use it, and how the money will make your business more profitable, thereby ensuring repayment.

What business will you be in? What will you do?

Mission Statement: Many companies have a brief mission statement, usually in thirty words or less, explaining their reason for being and their guiding principles. If you want to draft a mission statement, this is a good place to put it in the plan. Followed by:

Company goals and objectives: Goals are destinations -- where you want your business to be. Objectives are progress markers along the way to goal achievement. For example, a goal might be to have a healthy, successful company that is a leader in customer service and has a loyal customer following. Objectives might be annual sales targets and some specific measures of customer satisfaction.

Business philosophy: What is important to you in business?

  • To whom will you market your products? Your target market? (State it briefly here - you will do a more thorough explanation in the Marketing section).

  • Describe your industry. Is it a growth industry? What changes do you foresee in your industry, short term and long term? How will your company be poised to take advantage of them?

  • Your most important company strengths and core competencies:

  • What factors will make the company succeed?

  • What do you think your major competitive strengths will be?

  • What background experience, skills, and strengths do you personally bring to this new venture?

  • Legal form of ownership: Sole Proprietor, Partnership, Corporation, Limited Liability Corporation (LLC)?

  • Why have you selected this form of business?

  • Describe in depth your products and/or services (technical specifications, drawings, photos, sales brochures, and other bulky items belong in the Appendix).

  • What factors will give you competitive advantages or disadvantages? For example, level of quality or unique or proprietary features.

  • What are the pricing, fee or leasing structures of your products and/or services?

Funding Your Startup

Small Business Fundamentals

Start-up Marketing Plan

Market research - Why?

No matter how good your product and your service, the venture cannot succeed without effective marketing. And this begins with careful, systematic research. It is very dangerous to simply assume that you already know about your intended market. You need to do market research to make sure they are on track. Use the business planning process as your opportunity to uncover data and question your marketing efforts. Your time will be well spent.

Market research - How?

There are 2 kinds of market research: primary and secondary.

Secondary research means using published information such as industry profiles, trade journals, newspapers, magazines, census data, and demographic profiles. This type of information is available in public libraries, industry associations, chambers of commerce, vendors who sell to your industry, government agencies (Commerce Dept. and state and local development agencies), and the SBA Business Information Centers and One Stop Capital Shops.

Start with your local library. Most librarians are pleased to guide you through their business data collection. You will be amazed at what is there. There are more online sources than you could possibly use. A good way to start is at the SBA site, click the Outside Resources button for a great collection of resource links. Your Chamber of Commerce will have good information on the local area. Trade associations and trade publications often have excellent industry specific data.

Primary market research means gathering your own data. For example, you could do your own traffic count at a proposed location, use the yellow pages to identify competitors, and do surveys or focus group interviews to learn about consumer preferences. Professional market research can be very costly, but there are many books out that show small business owners how to do effective research by themselves.

In your marketing plan, be as specific as possible; give statistics & numbers and sources. The marketing plan will be the basis, later on, of the all-important sales projection.

The Marketing Plan

Economics Facts about your industry:

  • What is the total size of your market?

  • What percent share of the market will you have? (This is important only if you think you will be a major factor in the market.)

  • Current demand in target market

  • Trends in target market - growth trends, trends in consumer preferences, and trends in product development.

  • Growth potential and opportunity for a business of your size

What barriers to entry do you face in entering this market with your new company? Some typical ones are:

  • High capital costs

  • High production costs

  • High marketing costs

  • Consumer acceptance/brand recognition

  • Training/skills

  • Unique technology/patents

  • Unions

  • Shipping costs

  • Tariff barriers/quotas

And of course, how will you overcome the barriers?

How could the following affect your company?

  • Change in technology

  • Government regulations

  • Changing economy

  • Change in your industry

In the Products/Services section, you described your products and services as YOU see them. Now describe them from your CUSTOMER'S point of view.

Features and Benefits

List all your major products or services.

For each product / service:

Describe the most important features. That is, what will the product do for the customer? What is special about it?

Now, for each produce/service, describe its benefits. That is, what will the product do for the customer?

Note the difference between features and benefits, and think about them. For example, a house gives shelter and lasts a long time, is made with certain materials and to a certain design; those are its features. Its benefits include pride of ownership, financial security, providing for the family, inclusion in a neighborhood. You build features into your product so you can sell the benefits.

What after-sale services will be given?

For example:

  • delivery,

  • warranty,

  • service contracts,

  • support,

  • follow up, or

  • refund policy.


Identify your targeted customers, their characteristics, and their geographic locations; i.e., demographics.

The description will be completely different depending on whether you plan to sell to other businesses or directly to consumers. If you sell a consumer product, but sell it through a channel of distributors, wholesalers and retailers, then you must carefully analyze both the end consumer and the middlemen businesses to whom you sell.

You may well have more than one customer group. Identify the most important groups. Then, for each consumer group, construct what is called a demographic profile:

  • Age

  • Gender

  • Location

  • Income level

  • Social class/occupation

  • Education

  • Other (specific to your industry)

  • Other (specific to your industry)

For business customers, the demographic factors might be:

  • Industry (or portion of an industry)

  • Location

  • Size of firm

  • Quality/technology/price preferences

  • Other (specific to your industry)

  • Other (specific to your industry)

What products and companies will compete with you?

  • List your major competitors:

  • Names & addresses

  • Will they compete with you in across the board, or just for certain products, certain customers, or in certain locations?

Will you have important indirect competitors? (For example, video rental stores compete with theaters, though they are different types of business.)

How will your products and/or services compare with the competition?

Now that you have systematically analyzed your industry, your product, your customers and the competition, you should have a clear picture or where your company fits into the world.

In one short paragraph, define your niche, your unique corner of the market.

You will have many expenses before you even begin operating your business. It is important to estimate these expenses accurately, and then to plan where you will get sufficient capital. This is a research project and, the more thorough you are with your research, the less chance you will leave out important expenses or underestimate them.

Even with the best of research, however, opening a new business has a way of costing more than you anticipate. There are two ways to make allowances for surprise expenses. The first is to add a little “padding” to each item in the budget. The problem with that approach, however, is that it destroys the accuracy of your carefully wrought plan. The second approach is to add a separate line item, which we call contingencies, to account for the unforeseeable.

Talk to others who have started similar businesses to get a good idea of how much to allow for contingencies. If you cannot get good information, we recommend a rule of thumb that contingencies should equal at least 20% of the total of all other startup expenses.

Nearly everyone who has ever started a business has underestimated the costs, and then faced the danger of running with inadequate capital reserves. The key to avoiding this pitfall is to adopt a rigorous approach to your research and planning.

Expenses - Begin by estimating expenses. What will it cost you to get your business up and running? The key to accuracy here is attention to detail. For each category of expense, draw up a list of everything you will need to purchase.

This will include both tangible assets (for example, equipment, inventory) and services (for example, remodeling, insurance). Then determine where you might purchase these goods or services. Research more than one vendor; i.e.: comparison shop. Do not look at price alone; terms of payment, delivery, reliability, and service are also important.

Contingencies - Add a reserve for contingencies. Be sure to explain in your narrative how you decided on the amount you are putting into this reserve. If you cannot get good information, we recommend a rule of thumb that contingencies should equal at least 20% of the total of all other startup expenses.

Working capital - You cannot open with an empty bank account. You need a cash cushion to meet expenses while the business gets going. Eventually you should do a 12-month cash flow projection. This is where you will work out your estimate of working capital needs. For now, either leave this line blank or put in your best rough guess. After you have done your cash flow, you can come back and enter the carefully researched figure.

Sources - Now that you have estimated how much capital will be needed to start, you should turn your attention to the top part of this worksheet. Enter the amounts you will put in yourself, how much will be injected by partners or investors, and how much will be supplied by borrowing.

Collateral - If you will be using this plan to support a bank loan request, use the section near the bottom to show what assets are offered as collateral to secure the loan, and give your estimate of the value of these items. Be prepared to offer some proof of your estimates of collateral values.

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

Start-up Financial Plan

  • a twelve-month profit and loss projection,

  • a three-year profit and loss projection,

  • a cash flow projection,

  • a three-year cash flow projection

  • projected balance sheets, and

  • a breakeven calculation.

Together they constitute a reasonable estimate of your company's financial future. More importantly, however, the process of thinking through the financial plan will improve your insight into the inner financial workings of your company.

Twelve Month Profit and Loss Projection

Many business owners think of this as the centerpiece of their plan. This is where you put it all together in numbers and get an idea of what it will take to make a profit and be successful.

Forecast sales, cost of goods sold, expenses, and profit month by month for one year. Your sales projections will come from the Sales Forecast – 12 Months you did in the Marketing Plan section.

Cost of Sales (also called Cost of Goods Sold or COGS)

Cost of Sales are those expenses directly related to producing or buying your products or services. For example, purchases of inventory or raw materials, as well as the wages (and payroll taxes) of employees directly involved in producing your products / services, are included in Cost of Sales. These expenses usually go up and down along with the volume of production or sales. Study your records to determine Cost of Sales for each sales category. Control of Cost of Sales is the key to profitability for most businesses, so approach this part of your forecast with great care. For each product or service, analyze the elements of Cost of Sales:

  • how much for labor,

  • for materials,

  • for packing,

  • for shipping,

  • for sales commissions,

  • etc.?

Underestimating Cost of Sales can lead to under pricing, which can destroy your ability to earn a profit. Research carefully and be realistic. Enter the Cost of Sales for each category of sales for each month.

Gross Profit

Gross Profit is Total Sales minus Total Cost of Sales.

Expenses (also called Overhead)

These are necessary expenses which, however, are not directly related to making or buying your products/services.

  • Rent,

  • utilities,

  • telephone,

  • interest, and

  • the salaries (and payroll taxes) of office and management employees

are examples.

Most operating expenses should remain reasonably fixed regardless of changes in sales volume although some, like sales commissions, may vary with sales. It may also be that telephone services, marketing and advertising will change with sales volume and you may choose to increase before a change in sales volume to reflect greater selling activity to increase sales.

Some, like utilities, may vary with the time of year. Your projections should reflect these fluctuations. The only rule is that the projections should simulate your financial reality as nearly as possible.

Net profit

Subtract Total Operating Expenses from Gross Profit to calculate Net Profit.

Profit projections should be accompanied by a narrative explaining the major assumptions used to estimate company income & expenses.

Research Notes: In addition, keep careful notes on your research and assumptions, so you can explain them later if necessary, and also so you can go back to your sources when it is time to revise your plan later on.

Of course, keep notes of your key assumptions, especially about things you expect to change dramatically after the first year.

Start-up Business Plan - Cash-Flow

If the profit projection is the heart of your business plan, then cash flow is the blood. Businesses fail because at some point they cannot pay their bills. Every part of your business plan is important, but none of it means a thing if you run out of cash.

There is no great trick to preparing it: the cash flow projection is just a forward look at your checking account.

Ask yourself when you should expect cash to come and go. You have already done a sales projection, now you must predict when you will actually collect from customers.

On the expense side, you have previously projected expenses; now predict when you will actually have to write the check to pay those bills. Some items will be the same as on the Profit & Loss Projection. Rent and utility bills, for instance, are usually paid in the month they are incurred. Other items will differ from the Profit & Loss as, for example, insurance and some types of taxes, for example, may actually be payable quarterly or semi-annually, even though you recognize them as monthly expenses.

Explain your major assumptions; especially, those which make the cash flow differ from the Profit and Loss Projection.

For example:

  • If you make a sale in month one, when do you actually collect the cash?

  • When you buy inventory or materials do you pay in advance, upon delivery, or much later?

  • How will this affect cash flow?

  • Are some expenses payable in advance? When?

  • Are there irregular expenses such as quarterly tax payments, maintenance and repairs, or seasonal inventory buildup which should be budgeted?

  • Loan payments, equipment purchases, and owner's draws usually do not show on profit and loss statements, but definitely do take cash out. Be sure to include them.

  • And of course, depreciation does not appear in the cash flow at all because you never write a check for it.

Projecting your balance sheet can be quite a complex accounting problem, but that does not mean you need to be a professional accountant to do it or to benefit from the exercise. The desired result is not a perfect forecast, but rather a thoughtful plan detailing what additional resources will be needed by the company, where they will be needed, and how they will be financed.


Inventory and Accounts Receivable will have to grow. New equipment may be needed for increased production. You may draw down on cash to finance some of this.

Now, since a balance must balance, you need to consider the effects on the other half of the statement.

Liabilities & equity

Some of the growth may be financed by profits retained in the business as Retained Earnings. Your Profit & Loss Projection will tell you how much might be available from that source. Funds may be contributed by the owners through contributions of more Invested Capital or loans to the company (Notes Payable to Stockholders). Suppliers may provide some of the financing via increased Accounts Payable. The rest will have to be financed by borrowing, which can be: Short term loans (due within 12 months) such as a line of credit. Or by Long Term Debt (maturity greater than 12 months).

A breakeven predicts the sales volume, at a given price, required to recover total costs. In other words, it’s the sales level that is the dividing line between operating at a loss and operating at a profit .

Expressed as a formula, breakeven is:

Breakeven Sales = Fixed Costs divided by 1- Variable Costs (Where fixed costs are expressed in dollars, but variable costs are expressed as a percent of total sales.)

For Bankers

Bankers want assurance of orderly repayment. If you intend using this plan to present to lenders, include:

  • Amount of loan

  • How the funds will be used

  • What will this accomplish (how will it make the business stronger?)

  • Requested repayment terms (number of years to repay). You will probably not have much negotiating room on interest rate, but may be able to negotiate a longer repayment term, which will help cash flow.

  • Collateral offered, and list of all existing liens against collateral

For Investors

Investors have a different perspective. They are looking for dramatic growth, and they expect to share in the rewards.

  • Funds needed short term

  • Funds needed in 2 to 5 years

  • How company will use funds, and what this will accomplish for growth.

  • Estimated return on investment

  • Exit strategy for investors (buyback, sale, or IPO)

  • Percent of ownership you will give up to investors

  • Milestones or conditions you will accept

  • Financial reporting to be provided

  • Involvement of investors on the Board or in management

Do you have sufficient financial reserves?

Commonly, start-ups are under funded. There is simply insufficient reserve to survive the development period. Here we see the new owner opting for the "I'll be right" seat of the pants approach to business - not a sensible strategy.

Of course occasionally we hear of an under-capitalised business that launches and succeeds effortlessly. But ever wondered why it's so newsworthy?

Imagine trying to promote, market and network your business when you're anxious about whether you'll meet the next rent payment. Not only is it very personally draining, it becomes very apparent to others that you are in difficulties.

It is a harsh reality, but few want to give custom to a business that appears to be failing. Make sure you have the funds to ride out the storm.

In conclusion, much is spoken of the high percentage of small businesses that fail.

Plan to make sure your business does not become a statistic!

A strong Business Plan may not guarantee success; but it could certainly prevent failure!

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About Us
Business Plans Index
Before You Start
Starting A Business
The Right Business Name
The Basics Of Business Planning
Writing A Business Plan
Start-up Business Plan
Quick Business Plan
Business Plan Outline
Business Plan Sections
Business Plan Template
Executive Summary
The Mission Statement
Company Summary
Products and Services
Marketing Plan
Marketing Strategy
Marketing Summary
Market Research
Competitive Analysis
Competitive Strategy
Management Summary
Managing Your People
Operational Plan
Start-up Expenses
Sales Forecast
Profit And Loss
Balance Sheet
Cash Flow
Business Loan
SBA Loans
Franchising Your Business
Exit Strategy


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