Business Startup Guide

8/6/2019 Business Startup Guide

1/40

City of OceansideEconomic & Community Development

BusinessStart-Up

ResourceGuide

JUNE 2009


2/40

Page

Title Page(s)

Section I: Starting a BusinessStarting A Business In Oceanside 2Home Based Businesses 3

Section II: Business Plans 4Questions to answer in a business plan 5

Section III: Example of a Business Plan 25

Section IV: Business Financing 32

Section V: Important Phone Contacts 35

Section XI: Business Notes 38

Business Start Up Resource GuideTable of Contents

1


3/40

Businesses operating in the City of Oceanside(including home based businesses) are required tohave a business license. Before signing a lease agree-ment, purchasing a business site, or commencingbusiness, an application for a business license must besubmitted to the Business License Office, 300 NorthCoast Hwy, with the appropriate fee.

Please Note: Submitting a business license applica-tion and paying the required fee does not authorizethe commencement of business. Applicants shouldwait for final approval to be certain that all regulatoryrequirements have been met.

Business License ProcessApplication costs are: Home Based Business, $25;Other, $37.50. Upon approval of the business licenseapplication an administrative processing fee will becharged and a six month business license will beissued to the applicant. At the end of six months abusiness license renewal form will be mailed and anannual administrative fee will be charged. The busi-ness license tax is also due based upon the first sixmonths gross receipts. The business license tax is .50cents per $1,000 of gross receipts. There is also a firefee of $152.00.

The approval process takes approximately 15 days.However, the process could take longer if a changeof occupancy permit or conditional use permit isrequired. This would occur if your proposed busi-ness use is different from previous use of the build-ing. Businesses locating in the Redevelopment Areamust be approved by the Community DevelopmentCommission, which could extend the 15 day process-ing period.

Contact the Business License Department at 760.435.3878concerning the appropriate license and processing fees.

Other Regulatory PermitsBuilding permits are required for all constructionand remodeling work except for painting, carpetingand the installation of counters, cases or partitionsless than 5 feet 9 inches high. Separate permits arerequired for the installation or alteration of signs.Building Department 760.435.3950

County health permits are required for several typesof businesses including restaurants.Health Department 800.253.9933

Every business that will sell tangible personal prop-erty to customers must obtain a sellers permit (resalelicense) from the State Board of Equalization.State Board of Equalization 760.510.5850

California requires every person conducting busi-ness under a name other than their surname to file afictitious business name statement with the CountyClerks Office.

The following is a checklist of some items new appli-cants should consider when planning a new business:

Correct Zoning Appropriate Building Adequate Parking Tenant Improvements (permit required) Signs - new or changes (permit required)

Hazardous Materials(Building Department, Fire Department, County Hazardous MaterialsManagement Div)

Fictitious Business Name (County Clerk) Sellers Permit/Resale Number (State Board of Equalization)

State Tax ID Number (Employment Development Department) Federal Tax ID Number (I.R.S.) Food Handlers Permit (County Health)

Any Special Federal, State or County Permits/or Licenses(which pertain to your business)

City Business License(Required in each city where you conduct business and at each location within the city)

Starting A Business in Oceanside

Page 2


4/40

If you will be operating a business out of your home,there are special considerations that need to beaddressed. Please make sure that you follow all regu-lations so that you are within city guidelines.

Home Occupation Regulations1. A home occupation shall be conducted entirely

within a building (with the exception of aHorticulture Limited use) and the combination of office/workspace and storage space shall occupyno more than 400 square feet of floor area (withthe storage space not to exceed 200 square feetof floor area). No outdoor storage, or storage inrequired garage parking areas shall be permitted.The amount and type of flammable, hazardous or

toxic materials stored on-site in conjunction witha home occupation shall not be in excess of theamount normally found in the district.

2. The existence of a home occupation shall not beapparent beyond the boundaries of the site. No useshall create noise, dust, vibration, smell, smoke,glare, electrical interference, fire hazard or otherhazard or nuisance to any greater or more frequentextent than that usually experienced in a districtunder circumstances where no home occupationexists. All noise shall comply with the CitysNoise Control Ordinance (Chapter 38 of the Codeof the City of Oceanside).

3. No signage shall be permitted.

4. No one other than a resident of the dwelling shallbe employed on-site or report to work at the site inthe conduct of a home occupation. This prohibi-tion also applies to independent contractors.

5. No kilns exceeding 10 cubic feet in size shallbe permitted, and a home occupation shall com-ply with the performance standards prescribed bySection 3026.

6. Not more than one truck with a maximum capacityof one ton incidental to a home occupation shallbe kept on the site. No signage identifying theexistence of the home occupation shall bepermitted on the vehicle.

7. The number of parking spaces available to adwelling unit housing a home occupation shallnot be reduced to less than two. At the minimum,a two-car garage with minimum dimensions of 20 feet by 19 feet shall be provided for the park-ing of vehicles (two 10-foot by 19-foot parkingspaces). Materials and goods shall not be storedand no permanent work area, work bench, orstructures shall be built within the required garageparking area.

8. A home occupation shall not create pedestrian,automobile, or truck traffic significantly in excessof the normal amount in the district.

9. The delivery of materials, goods or products toand from the location of a home occupation shallbe limited to the hours of 7:00 am and 7:00 pm,

with the exception of newspaper deliveries.

10. The size of delivery vehicles used in conjunctionwith the delivery of materials, goods or productsto and from the location of a home occupationshall be limited to a single unit truck with themaximum of 28-foot length and a maximum grossvehicle weight of 24,000 pounds.

11. No motor vehicle repair, beauty shop, barbershop or retail sales shall be permitted, and a homeoccupation shall not include an office, sales roomor any other space open to any business visitors,

customers or clients, and there shall be noadvertising of the address of the home occupationthat results in attracting persons to the premises.

__

Page 3

Home Based Businesses


5/40

A business plan is a written document that clearly defines the goals of a business and outlines the methods forachieving them. A complete business plan should describe the money, management and marketing strategies tobe used in the business.

Commercial lenders will generally not speak with you without a defined and complete business plan.

What is a business plan? It is the management and financial blueprint for a business start-up and profitable operation. It is written by the business owner with outside help as needed. It explains how the business will function and depicts its operational characteristics. It details how the business will be capitalized and managed.

The length of a good plan will vary from a few pages to well over a hundred pages. The plan should provide a

sound blueprint for your business and entice a reader to want to know more.

Elements of a business plan: Business description - include the business name, address and owner identification. Goals and objectives - describe why you want to be in business. Products and services - described in detail and justified as to the reason the product or service is

being offered. Sales and marketing - the core of your business rationale:

- Who and how large is your market?- How will you be competitive?- What pricing and sales terms are you planning?

- How will you market your products and services?

Management/operating requirements - describing the equipment, facilities and people necessary togenerate your products and services. Add also how your products and services will be produced andmade available to the customer.

Financial management - The most critical part of your business plan. Establish vital schedules thatwill guide the financial health of your business.

- Projected start-up costs.- Expected profit or return on investment for the first year.- Projected income statement and balance sheet for two years.- Projected monthly cash flow statement for 12 months.

Page 4

Business Plans


6/40

Page

Questions To Be Answered In A Business Plan

I. SUMMARYA. Describe Business and History

1. What is the name, legal form and history of thebusiness?2. What is the location of the business?3. What is the business's unique product?4. Who are the customers?5. Who is the competition?6. What is the expertise of the management?

B. Describe Business Goals1. What are the long terms of the business?2. What are the short terms of the business?

C. Loan Summary1. How much are you requesting?2. How much are you investing?3. How much will it be spent?4. How will it be paid back?

II. BUSINESS DESCRIPTIONA. Define Purpose/Goals of the Business

1. What is the purpose of the business?2. What are your specific business goals?

B. Legal Form1. What is the form of your business organization?2. What is the proprietary position, including pat

ents, copyrights, and legal and technical consider-ations?

C. Background1. What is the background of your industry?2. What are the industry trends?

3. Where does your product fit within the industry?

III. MARKET ANALYSIS AND STRATEGYA. Describe your Product/Service1. What is your product line?2. Where and how is it being used?3. What makes your product unique?4. Why is it a profitable product?5. What is the technical description of the product

(if applicable)?6. What is the manufacturing process (if applicable)

B. Target Markets1. Who are your customers-define type and number?2. Where are they located?3. How many/what type of purchases will they make

from you?

C. Location1. Where are you located and how does your location

attract customers?2. Describe the appearance of your business?

D. Competition1. Who is your major competition?2. How do you compare to the competition?

E. Promotion/Strategy1. How will you reach your customers?2. How will you promote your services?3. What is your pricing strategy?4. What are your customer service policies?

IV. MANAGEMENT PLANA. Management1. Who will manage the business?2. What is management's strength and weakness?3. How will you compensate for any weakness?

V. FINANCIAL INFORMATIONA. Narrative1. How much money is needed?2. How much will you contribute?3. How will it be spent?

B. Attachments1. Financial history (if existing business)

A. 3 year income statementsB. 3 year balance statements

2. Projections - 3 year (1st by month), (2nd & 3rd byquarters)

A. Profit and Loss statementsB. Balance sheetsC. Cash flowD. Capitol ExpendituresE. Projected incomeF. Start-up expenses

5


7/40

IntroductionOwning a business is the dream of manyAmericans....starting that business converts yourdream into reality. But, there is a gap between yourdream and reality that can only be filled with carefulplanning. As a business owner, you will need a plan

to avoid pitfalls, to achieve your goals and to build aprofitable business.

The Checklist for Going into Business is a guide tohelp you prepare a comprehensive business plan anddetermine if your idea is feasible, to identify ques-tions and problems you will face in converting yourideas into reality and to prepare for starting your busi-ness.

Operating a successful small business will depend on: a practical plan with a solid foundation dedication and willingness to sacrifice to reach your

goal technical skills basic knowledge of management, finance, record

keeping and market analysis

As a new owner, you will need to master these skillsand techniques if your business is to be successful.

Identify Your ReasonsAs a first, and often overlooked step, ask yourself why you want to own your own business. Check each of the reasons that apply to you.

1. Freedom from the 9-5 daily work routine. _____

2. Being your own boss. _____

3. Doing what you want when you want. _____

4. Improving your standard of living. _____

5. You are bored with your present job. _____

6. You have a product or service for whichyou feel there is a demand. _____

Some reasons are better than others, none are wrong:however, be aware of trade-offs. For example, youcan escape the 9-5 daily routine, but you may replaceit with a 6AM - 10 PM routine.

Self AnalysisGoing into business requires certain personal char-acteristics. This portion of the checklist deals withyou - the individual. These questions require seriousthought. Try to be objective. Remember, it is yourfuture that is at stake!

Personal Characteristics

1. Are you a leader? ____ ____

2. Do you like to make your own decisions?____ ____

3. Do others turn to you for help inmaking decisions? ____ ____

4. Do you enjoy competition? ____ ____

5. Do you have will power and

self discipline? ____ ____

6. Do you plan ahead? ____ ____

7. Do you like people? ____ ____

8. Do you get along well with others? ____ ____

Personal ConditionsThis next group of questions, though brief, is vitallyimportant to the success of your plan. It covers thephysical, emotional and financial strains you willencounter in starting a new business.

1. Are you aware that running your ownbusiness may require you working 12-16hours a day, six days a week, and maybeeven Sundays and holidays? ____ ____

2. Do you have the physical stamina tohandle the work load & schedule? ____ ____

3. Do you have the emotional strengthto withstand the strain? ____ ____

4. Are you prepared, if needed, to tempo-rarely lower your standard of living untilyour business is firmly established? ____ ____

5. Is your family prepared to go alongwith the strain they, too, must bear? ____ ____

6. Are you prepared to lose your savings?____ ____

Page 6

Checklist for Going into Business

Yes

Yes No

Yes No


8/40

Personal Skills & ExperienceCertain skills and experience are critical to the suc-cess of a business. Since it is unlikely that you pos-sess all the skills and experience needed, youll needto hire personnel to supply those you lack. There aresome basic and special skills you will need for yourparticular business.

1. Do you know what basic skills you will Yes Noneed in order to have a successfulbusiness? ____ ____

2. Do you possess those skills? ____ ____

3. When hiring personnel, will you be ableto determine if the applicants skills meetthe requirements for the positions youare filling? ____ ____

4. Have you ever worked in a managerialor supervisory capacity? ____ ____

5. Have you ever worked in a businesssimilar to the one you want to start? ____ ____

6. Have you had any business training inschool? ____ ____

7. If you discover you dont have the basicskills needed for your business, will yoube willing to delay your plans until youveacquired the necessary skills? ____ ____

Finding A NicheSmall businesses range in size from a manufacturerwith many employees and millions of dollars inequipment to the lone window washer with a bucketand a sponge. Obviously, the knowledge and skillsrequired for these two extremes are far apart, but, forsuccess, they have one thing in common - each hasfound a business niche and is filling it.

The most critical problems you will face in your earlyplanning will be to find you niche and determine thefeasibility of your idea. Get into the right businessat the right time is very good advice but followingthat advice may be difficult. Many entrepreneursplunge into a business venture so blinded by thedream that they fail to thoroughly evaluate its poten-tial.

Before you invest time, effort and money, the follow-ing exercise will help you separate sound ideas fromthose bearing a high potential for failure.

Is Your Idea Feasible?1. Identify and briefly describe the business you plan

to start.____________________________________________________________________________________________________________________________________________________________________________

2. Identify the product or service you plan to sell.___________________________________________

3. Does your product or service satisfy an unfulfilledneed? (Circle one) Yes No

4. Will your product or service serve an existingmarket which demand exceeds supply?

(Circle one) Yes No

5. Will your product or service be competitive basedon its quality, selection, price or location?

(Circle one) Yes No

Answering yes to any of these questions means youare on the right track; a negative answer means theroad ahead could be rough.

Market AnalysisFor a small business to be successful, the owner mustknow the market. To learn the market, you must ana-

lyze it, a process that takes time and effort. You donthave to be a trained statistician to analyze the marketplace nor does the analysis have to be costly.

Analyzing the market is a way to gather facts aboutpotential customers and to determine the demand foryour product or service. The more information yougather, the greater your chance of capturing a segmentof the market. Know the market before investingyour time and money in any business venture.

These questions will help you collect the informationnecessary to analyze your market and determine if your product or service will sell.

1. Do you know who your customers will be? Yes No

2. Do you understand their needs and desires? Yes No

3. Do you know where they live? Yes No

4. Will you be offering the kind of products or services that theywill buy? Yes No

Page 7


9/40

5. Will your prices be competitive in quality and value? Yes No

6. Will your promotional program be effective? Yes No

7. Do you understand how your business compares with yourcompetitors? Yes No

8. Will your business be conveniently located for the people youplan to serve? Yes No

9. Will there be adequate parking facilities for the people youplan to serve? Yes No

This brief exercise will give you a good idea of thekind of market planning that you need to do. Ananswer of no indicates a weakness in your plan, sodo your research until you can answer each questionwith a yes.

Planning Your Start-UpSo far, this checklist has helped you identify ques-tions and problems you will face converting your ideainto reality, and determining if you idea is feasible.Through self-analysis you have learned of your per-sonal qualifications and deficiencies, and throughmarket analysis you have learned if there is a demandfor your product or service.

The following questions are grouped according to

function. They are designed to help you prepare forOpening Day.

Name and Legal Structure1. Have you chosen a name for your business? Yes No

2. Have you chosen to operate as a soleproprietorship, partnership or corporation? Yes No

Your Business and the LawA person in business is not expected to be a lawyer,but each business owner should have a basic knowl-edge of laws affecting the business. Here are some of the legal matters you should be acquainted with:

1. Do you know which licenses and permits youmay need to operate your business? Yes No

2. Do you know the business laws you will haveto obey? Yes No

3. Do you have a lawyer who can advise you andhelp you with legal papers? Yes No

4. Are you aware of: Occupational Safety & Health requirements (OSHA)? Yes No Regulations covering hazardous material? Yes No

Local ordinances covering signs, snow removal,etc.? Yes No

Federal Tax Code provisions pertaining to smallbusiness? Yes No

Federal regulations on withholding taxes andSocial Security? Yes No

State Workmens Compensation laws? Yes No

Protecting Your BusinessIt is becoming increasingly important that attentionbe given to security and insurance protection for yourbusiness. There are several areas that should be cov-

ered. Have you examined the following categories of risk protection?

-fire Yes No-theft Yes No-robbery Yes No-vandalism Yes No-accident liability Yes No

Discuss the types of coverage you will need and makea careful comparison of the rates and coverage withseveral insurance agents before making a final deci-sion.

Business Premises and Location1. Have you found a suitable building in a

location convenient for your customers? Yes No

2. Can the building be modified for you needsat a reasonable cost? Yes No

3. Have you considered renting or leasing withan option to buy? Yes No

4. Will you have a lawyer check the zoningregulations and lease? Yes No

Merchandise1. Have you decided what items you will sell

or produce, or what service(s) you will provide? Yes No

2. Have you made a Merchandise Plan based uponestimated sales, to determine the amount of inventory you will need to control purchases? Yes No

Page 8


10/40

3. Have you found reliable suppliers who will assist in the start-up? Yes No

4. Have you compared the prices, quality and credit terms of suppliers? Yes No

Business Records1. Are you prepared to maintain complete records of sales, income and expenses, accounts payable and receivables? Yes No

2. Have you determined how to handle payroll records, tax reports and payments? Yes No

3. Do you know what financial reports should be prepared and how to prepare them? Yes No

FinancesA large number of small businesses fail each year. There are a number of reasons for these failures, but oneof the main reasons is insufficient funds. Too many entrepreneurs try to start-up and operate a business with-out sufficient capital (money). To avoid this dilemma, you can review your situation by analyzing these threequestions.

1. How much money do you have?

2. How much money will you need to start your business?

3. How much money will you need to stay in business?

Use the following charts to answer the first two questions:

Page 9

Chart-1Personal Financial Statement

Assets Liabilities

Cash on Hand ______ Accounts Payable ______

Savings Accounts ______ Notes Payable ______

Stocks. Bonds, Contracts Payable_______Securities _______

Accounts/NotesReceivable _______ Taxes ______

Real Estate_______ Real Estate Loans _______

Life Insurance ________ Other Liabilities ________

Automobile/othervehicles ___________

Other Liquid Assets _______

Total Assets _________ Total Liabilities ________

Chart-2Start Up Cost Estimates

Decorating, Remodeling _________Fixtures, Equipment _________Installing Fixtures, Equipment _________Services, Supplies _________Beginning Inventory Cost _________Legal, Professional Fees _________Licenses, Permits _________Telephone Utility Deposits _________Insurance _________Signs _________Advertising for Opening _________Unanticipated Expenses _________

Total Start Up Costs _________

The Answer to the third question (How muchmoney will you need to stay in business?) must bedivided into two parts - immediate costs and futurecosts.

From the moment the door to your new businessopens, a certain amount of income will undoubtedlycome in. However, this income should not be


11/40

projected in your operating expenses. You will needenough money available to cover costs for at least thefirst three months of operation. Chart 3 will help youproject your operating expenses on a monthly basis.

Chart-3Expenses for One Month

Your Living Costs _______

Employer Wages _______

Rent _______

Advertising _______

Supplies _______

Utilities _______

Insurance _______

Taxes _______

Maintenance _______

Delivery/Transportation _______

Miscellaneous _______

Total _______

Now multiply the total of Chart-3 by three. This isthe amount of cash you will need to cover operatingexpenses for three months. Deposit this amount in asavings account before opening your business. Use itonly for the purposes listed in the above chart becausethis money will insure that you will be able tocontinue in business during the crucial early stages.

By adding the total start-up costs (Chart-2) to the totalexpenses for three months (three times the total coston Chart-3) you can learn what the estimated costswill be to start-up and operate your business for threemonths. By subtracting the totals of Charts-2 and 3from the cash available (Chart-1), you can determinethe amount of additional financing you may need, if any.

Now, you will need to estimate your operatingexpenses for the first year after start-up. Chart-4 isused for this estimation.

The first step in determining your annual expensesis to estimate your sales volume month by month.Be sure to consider seasonal trends that may affectyour business when estimating the sales volume.Information on seasonal sales patterns and typicaloperating ratios can be secured from your tradeassociations.

(NOTE: The relationships between amounts of capi-tal that you invest, levels of sales, each of the costcategories, the number of times that you will sellyour inventory (turnover) and many other items formfinancial ratios. These ratios provide you withextremely valuable checkpoints before its too late to

make adjustments. In the reference section of yourlocal library are publications such as The Almanacof Business and Industrial Financial Ratios as asource of ratios to compare your performance withthat of other, similar businesses.

For thorough explanations of these ratios and how touse them, follow up on the sources of help and infor-mation mentioned at the end of this publication.)

Next, determine the cost of goods that will be sold to

produce your expected sales. The cost of goods soldor the operating ratio is expressed in dollars and as apercentage of the sales. After determining the operat-ing ratio, estimate the expenses necessary to achieveyour anticipated sales.

As you prepare Chart-4, understand that you are look-ing for the percent of total sales that each item repre-sents. Fill out each months column in dollars, totalthem in the far right column and then divide eachitem into the total net sales to produce the operat-ing ratios (cost of goods sold to sales, rent to sales).Now, fill in Chart-4.

Page 10


12/40

After Start-UpThe primary source of revenue in your business willbe from sales but your sales will vary from month tomonth because of seasonal patterns and other factors.So it is important to determine if your monthly saleswill produce enough income to pay each monthsbills.

An estimated cash flow projection (Chart-5) willshow if the monthly cash balance is going to be sub-

ject to such factors as: failure to recognize seasonal trends excessive cash taken from the business for

living expenses too rapid expansion slow collection of account if credit is extendedto customersUse the following to build a worksheet to help you

with this problem. In this example, all sales are madefor cash.

Chart-5Estimated Cash Flow Forecast

Conducting Your

Start-Up AnalysisBeyond a doubt, preparing an adequate business planis the most important step in starting a new business.A comprehensive business plan will be your guide tomanaging a successful business. The business planis paramount to your success. It must contain all thepertinent information about your business: it mustbe well written, factual, and organized in a logicalsequence. Moreover, it should not contain any state-ments that cannot be supported.

If you have carefully answered all the questions onthis checklist and completed all the worksheets, youhave seriously thought about your goal. But theremay be some things you may feel you need to knowmore about.

Owning and running a business is a continuous learn-

ing process. Research your idea and do as much asyou can yourself, but dont hesitate to seek help frompeople who can tell you what you need to know.

SCORE (Service Corps of Retired Executives, anation-wide volunteer organization of retired busi-ness executives and professionals) is a good placeto start. Information and assistance is also availablefrom trade associations, Chambers of Commerce,community colleges, universities and Small BusinessDevelopment Centers.

Information is Power!Make it your business to know what business infor-mation is available, where to get it and most impor-tantly, how to use it. Sources of information include:

U.S. Small Business Administration (SBA)-SBA District Offices-Small Business Development Centers (SBDCs)-Service Corps of Retired Executives (SCORE)-Small Business Institutes (SBIs)

Consult your telephone directory underUS Government for your local SBA office or call theSmall Business Answer Desk at 1.800.827-5722 forinformation on any of the above resources.

Page 11

Cash in Bank(1st of month)

Petty Cash(1st of month)

Total Cash(1st of month)

Anticipated Cash Sales

Total Receipts

Total Cash &Receipts

Disbursements for Mo.(rent, loan payments, utilities,

wages, etc.)

Cash Balance

Jan Feb March etc.


13/40

Page 12

% of Sales

Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

Sales 100

Cost of Sales 47.51

Gross Pro t 52.49

ControllableExpensesOperating Supplies 1.82

Gross Wages 16.98

Repairs &Maintenance

38

Advertising 1.45

Car & Delivery 1.52

Bad Debts .04

Administrative &Legal

.74

Outside Labor 1.21

Misc Expenses .81

Total ControllableExpenses

24.95

Fixed Expense

Rent 3.35

Utilities 2.05

Insurance .95

Taxes & Licenses .86

Interest .12

Depreciation 1.25

Total Fixed Expenses

8.59

Total Expenses 33.53

Net Pro t 18.96


14/40

Estimated Cash ForecastJan Feb Mar Apr May June July Aug Sept Oct Nov Dec

Cash in Bank

Petty Cash

Total Cash

Expected CashSalesExpected Collec-tionsOther MoneyExpected

Total Receipts

Total Cash &Receipts

All Disbursements

Cash Balance atEnd of Month inBank Account &Petty Cash

Page 13

Whether you have the funds (savings) or borrowthem, your new business will have to pay back thesestart-up costs. Keep this fact in mind as you work on

the expenses section, and on other financial aspectsof your plan.

Break Down Your Expenses. Your quick estimate of expenses provides a starting point. The next step is tobreak down your expenses so they can handled overthe 12 months. Use the Expenses Worksheet formto make up an expense budget.

Matching Money and Expenses. A budget helps you tosee the dollar amount of your expenses each month.Then from month to month the question is: Willsales bring in enough money to pay the firms billson time? The answer is maybe not or I hope sounless owner-manager prepares for the peaks andvalleys that are in many service operations.

A cash forecast is a management tool, which caneliminate much of the anxiety that can plague youif your business goes through lean months. Use the

worksheet, Estimated Cash Forecast, above, or ask your accountant to use it to estimate the amounts of cash that you expect to flow through your business

during the next 12 months.

Is Additional Money Needed? Suppose at this point youhave determined that your business plan needs moremoney than can be generated by sales. What do youdo?

What you do depends on the situation. For example,the need may be for bank credit to tide your businessover during the lean months. This loan can be repaidduring the fat sales months when expenses are far lessthan sales. Adequate working capital is necessary forsuccess and survival.

Whether an owner-manager seeks to borrow moneyfor only a month or so or on a long-term basis, thelender needs to know whether the stores financialposition is strong or weak.


15/40

Your lender will ask to see a current balance sheet.

A blank current balance sheet is included below.Even if you dont need to borrow, use it, or have youraccountant use it, to draw the picture of your firmsfinancial condition. Moreover, if you dont need toborrow money, you may want to show your plan tothe bank that handles your stores checking account.It is never too early to build good relations with yourbanker, to show that you are a manager who knowswhere you want to go rather than a storeowner whohopes to make a success.

Control and FeedbackTo make your plan work you will need feedback. Forexample, the year-end profit and loss statement showswhether your business made a profit or loss for thepast 12 months.

But you cant wait 12 months for the score. To keepyour plan on target you need readings at frequentintervals. A profit and loss statement at the end of each month or at the end of each quarter is one typeof frequent feedback. However, the income statementor profit and loss statement (P&L) may be more of aloss than a profit statement if you rely only on it. Youmust set up management controls which will help youinsure that the right things are being done from day today and from week to week. In a new business, the

record-keeping system should be set up before busi-ness opens. After youre in business is too late. Forone thing, you may be too busy to give a record-keep-ing system the proper attention.

The control system which you set up should give youinformation about: stock, sales, and disbursements.The simpler the system, the better, since its purposeis to give you current information. You are after factswith emphasis on trouble spots. Outside advisors,such as an accountant, can be helpful.

Stock Control. The purpose of controlling parts andmaterials inventory is to provide maximum serviceto your customers and to see that parts and materialsare not lost through pilferage, shrinkage, errors, orwaste. Your aim should be to achieve a high turnoveron your inventory. The fewer dollars you tie up ininventory, the better.

Current Balance Sheet for:

____________________________________________________(name of your firm)

As of___________________________(date)

Assets

Current Assets:Cash:Cash in Bank $_______________Petty Cash $_______________Accounts Receivable $_______________Less Allowance for Doubtful Accounting $_______________Merchandise Inventories $_______________ Total Current Assets $_______________

Fixed Assets:Land $_______________Buildings $_______________Delivery Equipment $_______________

Furniture & Fixtures $_______________Less Allowance for Depreciation $_______________Leasehold Improvements, less amortization $_______________ Total Fixed Assets $_______________

Liabilities & Capital

Current Liabilities:Accounts Payable $_______________Notes Payable, due within 1 year $_______________Payroll Taxes & Withheld Taxes $_______________Sales Taxes $_______________ Total Current Liabilities $_______________

Capital:Proprietors capital, beginning of period $_______________Net Profit for the Period $_______________Less Proprietors Drawings $_______________Increase in Capital $_______________Capital, end of period $_______________ Total Liabilities & Capital $_______________

In a small business, inventory control helps theowner-manager to offer customers efficient service.The control system should enable you to determine

what needs to be ordered on the basis of:(1) What is on hand(2) What is on order(3) What has been usedIn setting up inventory controls, keep in mind that thecost of inventory is not your only cost. You will alsohave costs such as the cost of purchasing, the cost of keeping control records, and the cost of receiving andstoring your inventory.

Page 14


16/40

Sales. In a small business, sales slips and cash registertapes give the owner-manager feedback at the endof each day. To keep on top of sales, you will needanswers to questions such as: How many sales weremade? What was the dollar amount? What creditterms were given to customers?

Disbursements. Your management controls should alsogive you information about the dollars your com-pany pays out. In checking on your bills, you do notwant to be penny-wise and pound-foolish. You needto know what major items, such as paying bills ontime to get the suppliers discount, are being handledaccording to your policies. Your review systemshould also give you the opportunity to make judg-ments on the use of funds. In this manner, you canbe on top of emergencies as well as routine situations.Your system should also keep you aware that tax

monies such as payroll income tax deductions, are setaside and paid out at the proper time.

Break-Even. Break-even analysis is a managementcontrol device because the break-even point showshow much you must sell under given conditions inorder to just cover your costs with No profit and Noloss.

Profit depends on sales volume, selling price, andcosts. Break-even analysis helps you to estimate

what a change in one or more of these factors will doto your profits. To figure a break-even point, fixedcosts, such as rent, must be separated from variablecosts, such as the cost of sales and the other itemslisted under controllable expenses on the expenseworksheet.

An example of the formula is: Bill Jackson plans toopen a laundry. He estimates his fixed expenses atabout $9,000, the first year. He estimates his variableexpenses at about $700 for every $1,000 of sales.

BE Point = 9,000 = 9,000 = 9,000 = 30,0001-700 1-70 30

1,000

Is Your Plan WorkableStop when you have worked out your break-evenpoint. Whether the break-even point looks realistic orway off base, it is time to make sure that your plan isworkable.

Take time to re-examine your plan before you back it with money. If the plan is not workable better tolearn it now than to realize 6 months down the roadthat you are pouring money into a losing venture.

In reviewing your plan, look at the cost figures youdrew up when you broke down your expenses for oneyear. If any of your cost items are too low, changethem. You can write your changes in the white spacesabove or below your original entries on that work-sheet. When you finish making your adjustments,you will have a Revised projected statement of sales

and expenses for 12 months.

With your revised figures, work out a break-evenpoint. Whether the new break-even point looks goodor bad, take one more precaution. Show your plan tosomeone who has not been involved in working outthe details.

Your banker, contact man at SBA, or other advisoroutside of your business may see weaknesses thatfailed to appear as you poured over the details of your

plan. They may put a finger on strong points thatyour plan should emphasize.

Putting Your Plan Into ActionWhen your plan is as near on target as possible, youare ready to put it into action. Keep in mind thataction is the difference between a plan and a dream.If a plan is not acted upon, it is of no more value thata pleasant dream that evaporates over the breakfastcoffee.

A successful owner-manager does not stop after hehas gathered information and drawn up a plan, as youhave done in working through this aid. The owner-manager begins to use the plan.

Page 15


17/40

At this point, look back over your plan. Look forthings that must be done to put your plan into action.

What needs to be done will depend on your situa-tion. For example, if your business plan calls for anincrease in sales, one action to be done will beproviding funds for this expansion.

Have more money to put into this business?

Do you borrow from friends and relatives? Fromyour bank? From your suppliers by arranging liberalcommercial credit terms?

If you are starting a new business, one action stepmay be to get a loan for fixtures, employee salariesand other expenses. Another action step will be tofind and hire capable employees.

In the spaces that follow, list things that must be doneto put your plan into action. Give each item a date sothat it can be done at the appropriate time. To put myplan into action, I must do the following:

Action Completion Date

_________________________ ___________

_________________________ ___________

_________________________ ___________

_________________________ ___________

_________________________ ___________

_________________________ ___________

_________________________ ___________

_________________________ ___________

_________________________ ___________

_________________________ ___________

_________________________ ___________

_________________________ ___________

Keeping Your Plan Up To DateOnce you put your plan into action, look out forchanges. They can cripple the best made businessplan if the owner-manager lets them.

Stay on top of changing conditions and adjust yourbusiness plan accordingly.

Sometimes the change is within your company.For example, several of your employees quit their

jobs. Sometimes the change is with customers: forexample, their desires and tastes shift. Sometimes thechange is technological as when new raw materialsare put on the market introducing the need for newprocesses and procedures.

In order to adjust your plan for such changes, an

owner-manager must:(1) Be alert to the changes that come in yourcompany, line of business, market &customers

(2) Check your plan against these changes(3) Determine what revisions, if any, are needed

in your plan

The method you use to keep your plan current so thatyour business can weather the forces of that marketplace is up to you. Read the trade papers and maga-

zines for your line of business. Another suggestionconcerns your time. Set some time -- two hours,three hours, whatever is necessary -- to review yourplan periodically. Once each month, or every othermonth, go over your plan to see whether it needsadjusting. If revisions are needed, make them and putthem into action.

Page 16


18/40

Getting the Work DownAn important step in setting up your business is tofind and hire capable employees. Then you musttrain them to work together to get the job done.Obviously, organization is needed if your businessis to produce what you expect it to produce, namelyprofits.

Organization is essential because you as the owner-manager cannot do all the work. As your organiza-tion grows, you have to delegate work, responsibilityand authority. A helpful tool in getting this done isthe organization chart. It shows at a glance who isresponsible for the major activities of a business.Examples are given here to help you in preparing anorganization chart for your business.

An organization chart for a small service business

will reflect the fact that the owner-manager does mostof the managing. For example, an organization chartfor a small service business might look like this:

Company President(owner-manager)

Shop Manager Sales Manager Office (owner-manager) (owner-manager)

Or like this?


Sales Manager Shop Manager Office (owner-manager) (owner-manager)

As the service business grows, its organization chartcould look like this:


Shop Manager Sales Manager Office (owner-manager)

Foreman PartsManager

In the space below, draw up an organization chart foryour business.

As an additional aid in determining both what needsto be done and who will do it, list each activity thatis involved in your business. Next to the activ-ity indicate who will do it. You may do this byname or some other designation such as worker #1.Remember that a name may appear more than once.

Activity Name

________________________________ _______________

________________________________ _______________

________________________________ _______________

________________________________ _______________

________________________________ _______________

Putting Your Plan Into Dollars

At this point, take some time to think about what yourbusiness plan means in terms of dollars. This sectionis designed to help you put your plan into dollars.

The first question concerns the source of dollars.After your initial capital investment, the major sourceof money is the sale of your services. What dollarvolume of business do you expect to do in the next 12months $_____________?

Expenses. In connection with your annual dollar vol-ume of business, you need to think about expenses.If, for example, you plan to do $100,000 in business,what will it cost you to do this amount of servicing?And even more important, what will be left over asprofit is your pay. Even if you pay yourself a salaryfor living expenses, your business must make a profitif it is to continue year after year and pay back themoney you invested in it.

Page 17


19/40

The following work-block is designed to help youmake a quick estimate of your expenses. To use thisformula, you need to get only one figure - the cost of sales figures for your line of business. If you donthave this operating ratio, check with your trade asso-ciation or with sources such as those listed in

Ratio Analysis for Small Business .

Start-Up Costs. If you are starting a new business, listthe following estimated start-up costs:

Fixtures & Equipment $____________

Starting Inventory $____________

Office Supplies $____________

Decorating & Remodeling $____________

Installation of Equipment $____________

Deposits for Utilities $____________

Legal & Professional Fees $____________

Licenses & Permits $____________

Advertising for the Opening $____________

Operating Cash $____________

Owners withdraw during Prep-TimeStart-Up $____________

Total $____________

Before you make any supply arrangements, examinethe suppliers obsolescence policy. This can be a vitalfactor in service parts purchasing. You should alsolook at the suppliers warranty policy.

Now that you have determined the parts and materialsyoull need, you should think about the type of con-trol system youll use. A stock control system shouldenable you to determine what needs to be ordered onthe basis of:(1) what is on hand(2) what is on order(3) what has been used

When you have decided on a system for stock con-trol, estimate its cost. My system for stock controlwill cost me $_______________ for the first year.

Overhead. List the overhead items that will be needed.Examples are: rent, utilities, office help, insurance,interest, telephone, postage, accountant, payroll taxes,and licenses or other local taxes. If you plan to hireothers to help you manage, their salaries should belisted as overhead.

___________________________________________

___________________________________________

___________________________________________

___________________________________________

___________________________________________

___________________________________________

___________________________________________

___________________________________________

___________________________________________

___________________________________________

Determining the Sales PotentialIn the service business, your sales potential willdepend on the area you serve. That is, how manycustomers in this area will need your services? Willyour customers be industrial, commercial, consumer,or all of these?

When picking a site to locate your business, considerthe nature of your service. If you pick up and deliver,you will want a site where the travel time will be lowand you later install a radio dispatch system. Or, if the customer must come to your place of business thesite must be conveniently located and easy to find.

You must pick the site that offers the best possibilitiesof being profitable. The following questions will helpyou think through this problem.

Page 18


20/40

In selecting an area to serve, consider the following: population and its growth potential income, age, occupation of population number of competitive services in and around your

proposed location local ordinances and zoning regulations type of trading area (commercial, industrial,

residential, seasonal)

For additional help in choosing an area, you might trythe local chamber of commerce and the manufacturerand distributor of any equipment and supplies youwill be using.

You will want to consider the next list of questions inpicking the specific site for your business. Will the customer come to your place of business? How much space do you need?

Do you need any special features required inlighting, heating, ventilation? Is parking available? Is public transportation available? Is the location conducive to drop-in customers? Will you pick up and deliver? Will travel time be excessive? Will you prorate travel time to service call? Would a location close to an expressway or main

artery cut down on travel time? If you choose a remote location, will savings in rent

offset the inconvenience? If you choose a remote location, will you have to

pay as much as you save in rent for advertising tomake your service known?

If you choose a remote location, will the customerbe readily able to locate your business?

Will the supply of labor be adequate and thenecessary skills available?

What are the zoning regulations of the area? Will there be adequate fire and police protection? Will crime insurance be needed and be available at a

reasonable rate?

I plan to locate in _____________________ because

__________________________________________

__________________________________________

__________________________________________

Is the area in which you plan to locate supported bya strong economic base? For example, are nearbyindustries working full time? Only part time? Didany industries go out of business in the past severalmonths? Are new industries scheduled to open in thenext several months?

Write your opinion of the areas economic base andyour reason for that opinion here:______________

__________________________________________

__________________________________________

Will you build? _______ What are the terms of theloan or mortgage?

__________________________________________

__________________________________________

Will you rent? ________ What are the terms of thelease?

__________________________________________

__________________________________________

Is the building attractive?_____ In good repair?____

Will it need remodeling?_______

Cost of remodeling: $_________

What services does the landlord provide?________

__________________________________________

What is the competition in the area you have picked?The number of firms that handle my service_______.Does the area appear to be saturated?How many of these firms appear prosperous?Do they have any apparent advantages over you?How many look as though theyre barely getting by?How many similar services went out of business inthis area last year?Can you find out why they failed?How many new services opened in the last year?How much do your competitors charge for your ser-vice?

Page 19


21/40

Which firm or firms in the area will be your biggestcompetition?List the reasons for your opinion here:___________

__________________________________________

__________________________________________

__________________________________________.

Attracting CustomersWhen you have a location in mind, you should work through another aspect of marketing. How will youattract customers to your business? How will youpull customers away from your competition?

It is working with this aspect of marketing that manysmall service firms find competitive advantages.

The ideas which they develop are as good, and oftenbetter, than those which large companies developwith hired brains. The work-blocks that follow aredesigned to help you think about image, pricing, cus-tomer service policies and advertising.

Image. Whether you like it or not, your service busi-ness is going to have an image. The way peoplethink of your firm will be influenced by the way youconduct your business. If people come to your placeof business for your service, the cleanliness of the

floors, the manner in which they are treated, and thequality of your work will help form your image. If you take your service to the customer, the conduct of your employees will influence your image. Pleasant,prompt, and courteous service before and after thesale will help make satisfied customers your bestform of advertising.

Thus, you can control your image. Whatever imageyou seek to develop, it should be concrete enough topromote in your advertising. For example, servicewith a smile is an often-used image.

Write out what image you want customers to have of your business.

__________________________________________

__________________________________________

__________________________________________

Pricing. In setting prices for your service, there arefour main elements you must consider:

1. materials and supplies2. labor and operating expenses3. planned profit4. competition

Further along in the Aid you will have the opportunityto figure out the specifics of materials, supplies, laborand operating expenses. From there you may wantthe assistance of your accountant in developing pricestructure that will not only be fair to the customer, butalso fair to yourself. This means that not only mustyou cover all expenses but also allow enough marginto pay yourself a salary.

One other thing to consider, will you offer credit?Most businesses use a credit card system. Thesecredit costs have to come from somewhere. Plan for

them. If you use a credit card system, what will itcost you? Can you add to your prices to absorb thiscost?

Some trade associations have a schedule for servicecharges. It would be a good idea to check with thetrade association for your line of business. Their fig-ures will make a good yardstick to make sure yourprices are competitive.

And, of course, your prices must be competitive.

Youve already found out your competitors prices.Keep these in mind when you are working with youraccountant. If you will not be able to make an ade-quate return, now is the time to find it out.

Customer Service Policies. Customers expect certainservices or conveniences, for example, parking.These services may be free to the customer, but notto you. If you do provide parking, you either pay foryour own lot or pick up your part of the cost of a lot,which you share with other businesses. Since theseconveniences will be an expense, plan for them.

List the services that your competitors providecustomers.

__________________________________________

__________________________________________

__________________________________________

Page 20


22/40

Now list the services that you will provide yourcustomers.

_________________________ ______________

_________________________ ______________

_________________________ ______________

Advertising. In this section on attracting customers,advertising was saved until last because you haveto have something to say before advertising can beeffective. When you have an image, price range, andcustomer services, you are ready to tell prospectivecustomers why they should use your services.

When the money you can spend on advertising islimited, it is vital that your advertising be on target.Before you can think about how much money you canafford for advertising, take time to determine what

jobs you want advertising to do for your business.The work blanks that follow should be helpful to yourthinking.

The strong points about my service business are:

__________________________________________

__________________________________________

My service business is different from my competitionin the following ways:

__________________________________________

__________________________________________

My advertising should tell customers and prospectivecustomers the following facts about my business andservices:

__________________________________________

__________________________________________

__________________________________________

__________________________________________

Once you have these facts in mind, you need to deter-mine whom you are going to tell it to. Your adver-tising needs to be aimed at a target audience - thosepeople who are most likely to use your services. Inthe space below, describe your customers in terms of age, sex, occupation, and whatever else is necessarydepending on the nature of your business. This isyour customer profile. For example, an auto repairbusiness may have a customer profile of male andfemale automobile owners, 18 years old and above.Thus, for this repair business, anyone who owns a caris likely to need its service.

The customer profile for my business is:

__________________________________________

__________________________________________

Now you are ready to think about the form youradvertising should take and its cost. You are lookingfor the most effective means to tell you story to themost likely to use your service. Ask the local media(newspapers, radio, TV, & printers of direct mail piec-es) for information about services and the results theyoffer for your money.

How you spend advertising money is your decision,but dont fall into the trap that snares many advertis-

ers. As one consultant describes this pitfall: It isamazing the way many managers consider themselvesexperts on advertising copy and media selection with-out any experience in these areas.

The following blanks should be useful in determiningwhat advertising is needed to sell your strong pointsto prospective customers.

_________ _______ ________ $____ $_____

_________ _______ ________ $____ $_____

_________ _______ ________ $____ $_____

_________ _______ ________ $____ $_____

Total Cost $_______

Page 21

Service Estimated Cost

Form of Advertising

Size of Audience

Frequency& Cost Run

Cost of Single

TotalCost


23/40

When you have a figure on what your advertisingfor the next 12 months will cost, check it againstwhat similar stores spend. Advertising expenses isone of the operating ratios (expenses as a percentageof sales) that trade associations and other organiza-tions gather. If your estimated cost for advertising issubstantially higher than this average for your line of service, take a second look. No single expense itemshould be allowed to get way out of line if you wantto make a profit. Your task in determining how muchto spend for advertising comes down to: How muchto spend and still do the job that needs to be done?

Selling to CustomersTo complete your work on marketing, you need tothink about what happens after you get a customer.Your goal is to provide your service, satisfy custom-ers, and put money into the cash register.

One-time customers cant do the job. You needrepeat customers to build a profitable annual salesvolume. When someone returns for your service, itis probably because he was satisfied by his previousexperience. Satisfied customers are the best form of advertising.

If you previously decided to work only for cash, takea hard look at your decision. Americans like to buyon credit. Often a credit card, or other system of

credit and collections, is needed to attract and holdcustomers.

Based on this description and the dollar amount of business you indicated that you intend to do this year,fill in the following work-blocks.

Fixtures and Equipment. No matter whether or not cus-tomers will come to your place of business, there willbe certain equipment and furniture you will need inyour place of business which will allow you to per-form your service. List the equipment and its cost toyou here.

____________________ ____ ______ $___________________________ ____ ______ $___________________________ ____ ______ $___________________________ ____ ______ $_______

Parts and Materials. You will probably need parts ormaterials to provide your service. List them and theircost to you in the follow-

ing work-block.

__________________ ______ _______ $______

__________________ ______ _______ $______

__________________ ______ _______ $______

__________________ ______ _______ $______

__________________ ______ _______ $______

__________________ ______ _______ $______

__________________ ______ _______ $______

__________________ ______ _______ $______

__________________ ______ _______ $______

__________________ ______ _______ $______

__________________ ______ _______ $______

__________________ ______ _______ $______

__________________ ______ _______ $______

__________________ ______ _______ $______

__________________ ______ _______ $______

__________________ ______ _______ $______

__________________ ______ _______ $______

__________________ ______ _______ $______

__________________ ______ _______ $______

__________________ ______ _______ $______

Page 22

Type of Equipment # Needed UnitCost

TotalCost

ItemAmt. for12 Mo.

UnitCost

TotalCost


24/40

I plan to buy parts and materials from:

Name of item Name of Supplier

Address of Supplier

DiscountOffered

DeliveryTime*

FreightCosts **

Fill-inPolicy

***

* How many days or weeks does it take the supplier to deliver the parts and materials to you?** Who pays? You, the buyer? The supplier? (This cost can be a big expense item.)*** What is the supplier's policy on fill-in orders? That is, do you have to buy a gross, dozen,or only 2 or 3 items? How long does it take to deliver to you?

Page 23


25/40

Business Plan SummaryA business plan can provide the owner-manager orprospective owner-manager of a small service firmwith a pathway to profit. This Aid is designed to helpan owner-manager in drawing up a business plan.

In building a pathway to profit you need to considerthe following questions: What business am I in?What services do I provide? Where is my market?Who will buy? Who is my competition? What is mysales strategy? What merchandising methods willI use? How much money is needed to operate myfirm? How will I get the work done? What manage-ment controls are needed? How can they be carriedout? When should I revise my plan? Where can I gofor help? And many more.

No one can answer such questions for you. As the

owner-manager you have to answer them and draw upyour business plan. The pages of this Aid are a com-bination of text and workspace so you can write in theinformation you gather in developing your businessplan -- a logical progression from a common sensestarting point to a common sense ending point.

A Note on Using this AidIt takes time and energy and patience to draw up asatisfactory business plan. Use this Aid to get yourideas and the supporting facts down on paper. And,

above all, make changes in your plan on these pagesas that plan unfolds and you see the need for changes.

Bear in mind that anything you leave out of the pic-ture will create an additional cost, or drain on yourmoney, when it crops up later on. If you leave outor ignore enough items, your business is headed fordisaster.

Keep in mind, too, that your final goal is to put yourplan into action. More will be said about this near theend of this Aid.

Whats in this for Me?You may be thinking: Why should I spend my timedrawing up a business plan? Whats in it for me? If youve never drawn up a plan, you are right in want-ing to hear about the possible benefits before you doyour work.

A business plan offers at least four benefits:(1) A plan gives you a path to follow. A plan

makes the future what you want it to be. Aplan with goals and action steps allows youto guide your business through turbulent eco-nomic seas and into harbors of your choice.The alternative is drifting into any old port ina storm.

(2) A plan makes it easy to let your banker in onthe action. By reading, or hearing, the detailsof your plan, he will have real insight intoyour situation if he is to lend you money.

(3) A plan can be a communications tool whenyou need to orient sales personnel, suppliers,and others about your operations and goals.

(4) A plan can help you develop as a manager. Itcan give you practice in thinking about com-petitive conditions, promotional opportunities,and situations that seem to be advantageousto your business. Such practice over a periodof time can help increase an owner-managersability to make judgments.

Why am I in Business?Many enterprising Americans are drawn into start-ing their own business by the possibilities of making

money and being their own boss. But the long hours,hard work and responsibilities of being the bossquickly dispel any preconceived glamour.

Profit is the reward for satisfying consumer needs.But it must be worked for. Sometimes a new busi-ness might need two years before it shows a profit.So where, then, are reasons for having your own busi-ness?

Every small business owner-manager will have his orher own individual reasons for being in business. Forsome, satisfaction comes from serving their commu-nity. They take pride in serving their neighbors andgiving them quality work which they stand behind.For others, their business offers them a chance to con-tribute to their employees financial security.

There are as many rewards and reasons for being inbusiness as there are business owners. Why are youin business?_________________________________

Page 24


26/40

The Way-Off-Broadway Delicatessen

Table of Contents

Plan Summary

I. Business Description

A. Overall Purpose. The WAY - OFF - BROADWAYDELICATESSEN will be a delicatessen-type restau-rant patterned after New York delicatessens whichserve Jewish ethnic style foods. The delicatessen willoffer counter, table and take-out service.

B. Specific Purpose. The delicatessen will be located at

the St. Pauls U.S. Interstate I-95 exit and will be openseven days a week serving luncheons and dinner. Abreakfast menu will be added three months after theopening. Prices will be moderate compared to NewYork delis but somewhat higher then other St. Paulrestaurants.

C. Marketing Strategy. The great majority of customerswill come from Interstate I-95. Accordingly, heavyuse of billboard advertising will be made to attractcustomers.

D. Food Preparation Strategy. Since many of the ingre-dients used in the menu cannot be supplied locally,arrangements will be made with out of area food sup-pliers and wholesalers. Even though management isassured of overnight deliveries, a one-week inventoryof all food items will be maintained in either a walk-in cooler or freezer.

E. Management Team. Mary and John Ashford will own

100 Per Cent of the capital stock of the corporation.Each will own 50 Per Cent of the outstanding stock.John Ashford is President. Mary Ashford is VicePresident and Secretary.

F. Objectives of the Team. It is the objective of the teamto operate the business with a minimal first year lossand have an operating profit by the first quarter of the second year of operations. The principals will paythemselves a minimum salary so as not to imperil thecash flow of the business.

G. Financial Consideration. Anticipated profits for thefirst year of operations are forecast as follows:

Year 1 $ 6,892Year 2 $ 41,773Year 3 $ 57,715

Sources of the necessary funds for financing the business are as follow:

Building Mortgage $ 25,000St. Pauls State Bank

Working Capital $ 29,167St. Pauls State Bank $ 15,000Ashford Savings $ 14,167

ProductsThe Off-Broadway Delicatessen Menu

Appetizers and SoupsOrange Juice Tomato JuicePotato Skins Chopped LiverDaily SoupLox and Cream CheeseChicken Noodle (Served daily)TomatoVegetableSplit PeaChicken VegetableClam Chowder

Main Dishes, Sandwiches and Side OrdersBologna Corn Beef Turkey Salami

Reuben Chopped LiverChicken Salad Tuna SaladPotato Pancakes Kosher Hot DogsPotato Salad Cole SlawFrench Fries Bagels with Cream Cheese

Daily Hot MealChickenHamburger Steak Roast Beef FishMinute Steak

Page 25

Example of a Completed BusinessPlan


27/40

DessertsCheesecakes Hot Fudge CakeChocolate Cake Walnut CakeIce Cream Fresh Fruit in Season

BeveragesCoffee TeasMilk Coca ColaRoot Beer Orange SodaDr. Brown's Sodas Milk ShakesIce Cream Sodas

Unique Features of the Menu:The entire menu has been patterned after typicalNew York - style delicatessens, and will be uniqueto St. Pauls and the surrounding community. Withthe exception of the daily hot meals and future

breakfast menu, almost all of the food items will beunavailable at any place other then the WAY - OFF -BROADWAY DELICATESSEN.Because of the menu and the marketing strategy,management forecasts that approximately 80 to 85 percent of it's business will come from InterstateI-95. Approximately 10 to 15 per cent of its businesswill come from North Carolina State Highway 20 andU.S. Highway 301.

Only 5 per cent of the deli's business is expected to

come from the local community.

Future Breakfast MenuThe final menu has not yet been determined but willinclude such items as:

Eggs PancakesHash Brown Potatoes GritsBacon HamSausage ToastDanish Pastry BagelsEnglish Muffin Fruit JuicesFresh Fruit in Season

It is expected to begin serving breakfasts approxi-mately three months after the initial opening of thedeli.

II. Market Definition

A. Customers. The primary market for the WAY - OFF- BROADWAY - DELICATESSEN is that of the I-

95 Interstate Highway travelers going in both northand south directions. These travelers are primarilyvacationers and those driving long distances. Theirprimary vehicle is the automobile.

It is expected that the average number of passengersper vehicle will be two. There will be some seasonal-ity to the business in view of the much heavier trafficthat is expected on the interstate during the wintermonths.

B. Customer Size. It is anticipated that approximately100 customers will be served daily. Weekend trafficshould be 25 to 30 per cent higher than activity fromMonday to Friday noon. Traffic count studies madeby the Robeson County Highway Department indicatethe following average motor vehicle traffic flow:

North to South 23,000 vehiclesSouth to North 24,200 vehicles

During the period of November 15 through April 1,average daily traffic increases by approximately 4,000vehicles. In addition to this very high traffic flow,U.S. Highway 301 has some 3,000 vehicles in aver-age daily traffic flow. Finally, within the town of St.Pauls, local vehicle traffic approximates some 5,000vehicles a day.

All of these traffic flow figures make for a very largepotential market. Management strongly believes that85 per cent of their customer base will come from theInterstate. An additional 10 per cent will come fromU.S. 301 and North Carolina State Highway 20. Only5 per cent is expected to come from the local commu-nity, but may be higher simply because of curiosity.

III. Market Growth

First month sales are forecast at $ 18,000. Businessis expected to grow by approximately $ 500 permonth. Translated into numbers of customers served,the anticipated monthly increase will be approxi-mately 166 customers. Initially, the Delicatessen willserve some 100 customers daily, or a monthly totalof 3,000. Therefore, within six months, the monthlynumber of customers will be approximately 4,000, oron a daily average basis, will number 110.

Page 26


28/40

IV. Competition

The town of St. Pauls has four eating establishmentsand one facility for lodging. With the exception of Joe Danny's, all of the other eating establishments arelocated within St. Pauls and away from the InterstateHighway 95 exit. They are not visible from the high-way. A brief description of each is as follows:

Cliff's Barbecue: A barbecue house that serves bothlunches and dinners with moderate pricing.

Ferguson's: Specializes in sandwiches, including ham-burgers and hot dogs. Serves breakfast and is the old-est continuous operating restaurant in St. Pauls.

Hardee's: Very successful food operation, and is theonly fast food restaurant in St. Pauls. It's very popular

with both the highway tourist traffic and the local citi-zenry. It's open for breakfast and into the late hours of the evening.

Joe Don Danny's: Busiest restaurant. Attracts custom-ers from U.S. Interstate I-95 since it is the only truck stop in the area. It is quite popular and is visible fromthe Interstate.

Hardee's and Joe Don Danny's are mentioned innational automobile publications. They also have bill-

board advertising, and Hardee's is able to take advan-tage of national advertising in view of its nationalaffiliation. Joe Don Danny's, a truck stop, is wellknown within trucking circles.

The fact that Joe Don Danny's and Hardee's have suchvisibility is considered an advantage to THE-WAY-OFF-BROADWAY-DELICATESSEN, bringing trafficoff the exit of I-95.

V. Competition Strengths & Weaknesses

A. Competitive Strengths.1. HARDEE'S is a national franchise with a highlyfavorable reputation for both food quality and speedof service. In addition, it has both a very strongadvertising campaign and high name recognition. It isespecially popular with the children of many tourists,the primary drawing population by the deli.

2. JOE DON DANNY'S has an excellent reputation.

Its location puts the restaurant into a very competitiveposition with the deli since it is located off of the I-95exit.

3. Both of the above competitors are open for break-fast.

4. Both of the above restaurants, as well as the twoothers in St. Pauls, are popular with the local popula-tion.

B. Competitive Weaknesses.

1. None of the competitors will offer the uniquenessin their menu that is offered by THE-WAY-OFF-BROADWAY DELICATESSEN. The menu will bean attraction for many of the I-95 Interstate drivers.2. Only JOE DON DANNY'S is located adjacent tothe exit, which means the deli will compete with only

one restaurant for its clientele.

3. The mere name of the deli: THE WAY-OFF-BROADWAY DELICATESSEN will offer consider-able curiosity appeal to some vehicle occupants, thusbringing in a certain amount of traffic.

VI. Marketing Plan

A. Overview. THE WAY-OFF-BROADWAYDELICATESSEN will offer high quality food at mod-

erate prices compared to the pricing of New York del-icatessens, which it will be modeled after. However,the menu prices for the WAY-OFF-BROADWAYDELICATESSEN will be somewhat higher than com-parable dishes at other St. Pauls' food establishments.

It will not be a fast food restaurant, although quick service will be offered either at a counter or at sitdown tables. Take-out service will also be available.The owners recognize that Interstate I-95 is the mainhighway traveled by tourists coming from as far northas Bangor, Maine, including residents of the heavilypopulated cities of Boston, New York, Philadelphia,Baltimore, and Washington, D.C., who are going toFlorida vacation spots.

New York-style delicatessens that serve Jewish eth-nic foods are immensely popular with these northerntourists. Thus, a restaurant such as the WAY-0FF-BROADWAY DELICATESSEN will be a welcomechange and relief to these tourists from the conven-

Page 27


29/40

tional fast food establishments that they normally findalong an interstate highway.

THE WAY-OFF-BROADWAY DELICATESSENwill be open for business seven days a week. Initiallyit will provide luncheon and dinner service to itspatrons, remaining open until the early hours of theevening. Both cold and hot dish selections, togetherwith unique desserts, will be available.

Mary and John Ashford believe that a very viablebusiness opportunity exists for the opening of a NewYork-style delicatessen at the exit of U.S. InterstateI-95 in St. Pauls. In view of the proposed location of the delicatessen, the anticipated restaurant businessshould be excellent.

B. Marketing Objectives.

1. The primary objective of the WAY-OFF-BROADWAY DELICATESSEN will be to attractcustomers from the very heavily traveled U.S.Interstate I-95 Highway. These customers are mostlytourists traveling between the Florida vacation areasand the heavily populated eastern seaboard urbanand suburban centers. Additional customers will comefrom U.S. Highway 301 and North Carolina StateHighway 20. Some local customers are expected topatronize the deli.

2. A second marketing objective will be to gain repeatcustomers from those who patronize the deli for thefirst time as well as to gain customers through wordof mouth advertising from first time users. This willbe done by serving a high quality food product inpleasant surroundings and a clean comfortable atmo-sphere.

C. Marketing Strategy Advertising & Promotion.1. An important consideration in the total marketingeffort of the Deli is found in the name itself: THEWAY-OFF-BROADWAY DELICATESSEN. Thisname will not only arouse interest and curiosity fromtravelers and tourists, but it will also lend itself wellto the major theme of the establishment. The themewill be carried out in every aspect of the deli, includ-ing advertising, promotion and public relations.

2. Since it is anticipated that the great majorityof customers who will patronize the WAY-OFF-BROADWAY DELICATESSEN will be tourists using

U.S. Interstate I-95, the company will make wide useof billboard advertising. An important feature of thebuilding purchase and land lease includes the use forfour large billboards, two on each side of I-95 approx-imately one and one half miles from the St. Pauls'exit going in both north and south directions, and twosimilar signs located approximately 5 miles from theSt. Pauls' exit in the same manner. The use of thesebillboards is for the remaining three years of the cur-rent land lease, and subject to renegotiation at thattime. Additional billboard locations will be placed onboth U.S. 301 and North Carolina State 20 highways.It is expected that the billboards will carry the samemessage and theme of the name.

3. Since the name THE WAY-OFF-BROADWAYDELICATESSEN connotes the New York Broadwayname, the use of theatres, theatre lights, a Broadway

stage, and Time Square will be used. The format anddcor of the deli include spotlights as used on stage.For example, with regard to the exterior of the build-ing, the deli's name will be highlighted by two largespotlights in the evening hours, thus giving it a show-time look. At the take-out counter, the menu itemswill be encased in circulating theatre lights similar tothose found on a theater marquis. The menus will notonly have the theater theme done artistically on theircovers, but each item will contain names having aBroadway theme also. For example, "The Big Apple

Reuben", "The Times Square Hot Dog", "Lindy'sCherry Cheesecake", and so on. A likewise similarart and copy approach will be given to the point-of-purchase displays used throughout the delicatessen.Items with a Broadway theme will be used to give theinterior a proper finishing touch. These will includeBroadway Show posters, pictures of actors andactresses, VARIETY magazine pages and reviews of famous shows.

4. Delicatessen items will be attractively displayed inrefrigerated delicatessen cases. Also, each of the des-sert specialties will be similarly displayed in a refrig-erated bakery display case. Such displays will give ahigh point-of-purchase advertising appeal to patrons.

5. Finally, all of the staff, including waitresses andwaiters, will wear T-Shirts, specially silk-screenedwith the WAY-OFF-BROADWAY DELICATESSENlogo.

Page 28


30/40

VII. Sales

All sales will be for cash or major credit card. Creditcards from VISA, MASTER CARD, AMERICANEXPRESS, and DISCOVER-AMERICA will beaccepted. Only checks from local residents of St.Pauls will be accepted.

VIII. The Production Plan

A. Facility Requirements.1. The deli will be located in a building immediatelyadjacent to the I-95 exit. This facility was a formerrestaurant. It has current seating of 60 and can beexpanded to accommodate 90 persons at a very mod-erate cost.

2. Since it is a former restaurant, it contains veryimportant restaurant equipment and fixtures thatwould be available for purchase together with the res-taurant building. The asking price on the building is $30,000.

B. Equipment Requirements.

1. Equipment furnished with the building at a cost of $ 5,000 includes:1 Small desk 1 60 gal. water heater

1 2 Compartment sink 1 6x10 walk-in cooler 2 6x8 walk-in freezer 1 Small bake table2 three ton heating and air conditioning units1 6ft. stainless steel table with hot dog warmer 1 Small bake oven 12 42 inch tables44 black upholstery chairs 1 48 inch grill1 stainless steel up-draft unit with exhaust fan2 19 quart deep fryers 1 pan steam unit 2 19 Hobart dishwasher 1 2 burner elec. cooker 2 sandwich refrigerators 48 feet metal shelving

2. Additional tableware, kitchen tools, and accessorieswill have to be purchased as well as the following:2 Microwave ovens 1 Large refrigerator 1 Cash register 1 Scale1 Meat slicer 1 Bread slicer 1 Refrigerated deli 1 Bakery display case

display case 1 Large freezer

IX. Labor Requirements

A. The two principal positions needed to operate thedeli are that of the Manager and the Cook. Both Maryand John Ashford will co-share these responsibili-ties. Arrangements have been made to take a specialone-week delicatessen cooking and food preparationcourse in New York City.

B. The following employees and their projectedmonthly salaries are as follows:Manager Cook John Ashford $ 1,500Co-Manager Cook Mary Ashford $ 1,200Halftime cook $ 600Waiters/Waitresses $ 2,400Dishwasher/Custodial $ 900Miscellaneous $ 400

Total Labor costs $ 7,000

X. Food Preparation Process

A. As a Jewish-style delicatessen, many of the ingre-dients and final menu items will have to be suppliedby out-of-the-area food and restaurant wholesalers.

B. There is no concern for the freshness of theseitems since arrangements are being made to keep aone week minimum inventory on hand at all times.

This will be done with the use of the freezer andwalk-in cooler. Arrangements have been made withthe following food suppliers and wholesalers to pro-vide for their specialty food requirements.

C. Each of these wholesalers have assured theAshfords that they can deliver orders within 48 hoursand, if necessary, deliver within 24 hours subject toan added delivery charge.1. Lincoln Delicatessen Bakery, Washington, D.C.

Bagels Rye Breads2. Fancy Foods, Norfolk, Virginia

Cheesecakes Chocolate CakeWalnut Cake

3. Zion-Kosher-Company, New York, New York Nova Scotia Lox

4. Hebrew National Products Company, New York,New York BolognaCorn Beef Kosher Hot DogsSalami

Page 29


31/40

Page

D. A back-up supplier and wholesaler for all of the above products is:Reuben Foods, Washington, D.C.

E. Some purchases will be made on a periodic basis from Reuben Foods to assure the company of a secondsource of supply. All other food products and ingredients can be purchased from local wholesalers who makedaily runs to St. Pauls form neighboring North Carolina cities. These include dairy products, fruits, vegetables,seasonings, baking needs, breads, canned goods, etc.

F. Management expects to make wide use of Microwave ovens. Delicatessen meats will be stored in the freez-er and then in the refrigerated delicatessen case. All meats will be freshly sliced. Most desserts will be kept inthe freezer until the day of use.

XI. Company Structure

A. Mary and John Ashford have incorporated their restaurant under the name of the WAY-OFF-BROADWAYDELICATESSEN. John is the president while Mary is vice president and secretary. Each have fifty percent of the capital stock of the corporation.

B. With regards to the day-to-day operations, they have assumed the following titles:Manager John AshfordCo-Manager Mary Ashford

C. John expects to work 60 hours a week until the operation can afford additional staffing. Mary expects towork a 40 hour week.

XII. Business Advisors

A. The following business advisors have been or will be used as needed:

Accountant Michael Stefanson with Stefanson and Byron, Certified Public Accountants Lawyer Susan Fallek with Fallek, Hamline, and Zimmerman Banker Jerome Pinkerton, President of St. Pauls State Bank Insurance Bobby Maisel with Bear, Rose and Mythroat General Agents

XIII. The Financial Plan Summary

A. Taking into consideration that the WAY-OFF-BROADWAY DELICATESSEN will be a new eating estab-lishment catering to the highway traffic on U.S. Interstate I-95, conservative accounting procedures and pro-

jections have been made. The following Profit and Loss projections are as follows for the first three years of operations for the deli:

YEAR 1- $ 6,892YEAR 2- $ 41,773YEAR 3- $ 57,715

B. Cash flow projections indicate that the deli will have a positive cash flow beginning with the fifth month of operations. At that time

Business Startup Guide

Documents

Transcript of Business Startup Guide