Business Plan Final 1_0

Sample Business Plan This sample plan is a guide only. The statistical and financial information provided are assumptions for the case study and should not be used for an actual business plan. Intending or existing business people must undertake their own research and use reliable data to prepare their business plans. When setting up your business, be sure to find out which legislation, licences licences and codes of practise will affect your enterprise.

Executive Summary  Summary  Definition The Executive Summary is a basic overview of your business plan that outlines the business strategy and the major issues that could impact on your marketing plan. This synopsis is written last and used as a check-list for the main document. This This can also include a mission statement. statement.

Case Example Canterbury Renovations will specialise in the renovation of domestic kitchens,  bathrooms and and laundries. The The business is expected expected to expand expand in two two or three years years to include residential construction. The business emphasis will be the delivery of high quality products and services, the reinvestment of profits into business growth and the development development of a strong business identity. As the proprietors, we have a combined building background with a flair for interior  design. Our research found a number of suitable premises available, with one shop currently available for rent and outgoings of $14,000 per annum. The initial funding will be $85,000. This comprises of $40,000 provided by the  proprietors  proprietors and a $45,000 $45,000 overdraft, overdraft, secured through through the provision provision of a mortgage mortgage on our  home. We expect to achieve a turnover of $300,000 in the first year, which yields a gross profit of $50,000 after an owner salary is paid. This will pay overhead expenses such as rent, interest and advertising. In the second year, we expect the annual turnover to be $450,000, and to employ two additional staff. This growth is predicted to occur as a result of a strong marketing strategy and the development development of a reputation for supplying excellent products and services. The manufacturing manufacturing works may be required to relocate to an industrial site in the future and this would require additional finance.

Mission Statement (Optional) The core activity of Canterbury Canterbury Renovations will be the renovation of kitchens,  bathrooms and and laundries. The The business will will provide a complete service, service, including free designs and quotes, supply and installation of equipment equipment and fittings, all associated  building services, services, after sales sales maintenance and and a seven-year seven-year guarantee covering covering

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workmanship.

Your Business Products and Services Definition  It is important to identify your products and services in the plan. You need to consider  these in terms of existing competition and market perception. You will need to market  new products differently to those already well established.

Case Example Canterbury Renovations is a new business with no existing clients, projects or history. We provide timber, tiles, paint and plaster with our renovations services. Our products will also include built-in appliances such as ovens, microwaves, cook tops and dishwashers, which will suit each individual project. Although these products are available through other businesses, we offer them as part of a service rather than a stand-alone product. One company in the western suburbs also offers these appliances as part of their renovations package, but they do not service the eastern suburbs. Our main competitor Balwyn Kitchens does not supply equipment when installing new kitchens.

Premises Definition To run a business, you need to have premises. It may be a home office, a mobile  service, a business centre office or a shop, and the location should appeal to customers. Compare the premises to your competitors’ premises and consider the marketing  advantages.  Premises can be optional and both external and internal business factors need to be considered. Marketing analysis and research (conducted using the separate Marketing   Plan attachment) can help identify your position.

Case Example Canterbury Renovations will establish a showroom in the eastern suburbs to allow demonstration work of products and provide a space for discussion, planning and the signing of contracts. However, such discussions can similarly take place at the home of   prospective clients. The premises will also allow for storage space and some manufacturing work will take  place at our residence, which has council approval as a home-based business premises.

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SWOT Analysis Definition  A SWOT (strengths, weaknesses, opportunities and threats) analysis can provide a lot  of useful information for a business. It can give direction to the business and its marketing strategies. The results need to be concise, relevant and interesting. The report should give an understanding of the business aims, and key issues and objectives  should flow from it easily. Some factors to consider for this analysis include: • • • • • •

unique characteristics of the business amount of money available existing client base  suppliers and distributors  price structure  profit margins

Case Example Strengths •

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• •

•

technical competence of the  proprietors total agreement between  proprietors on their objectives financial resources good network of contacts for   potential clients, suppliers and tradespersons  business is located within the target market

Weaknesses • • •

• •

•

Opportunities • •

•

•

•

•

rapidly growing market  poor reputation of existing renovation businesses large number of old yet valuable homes availability of casual staff and tradespersons availability of display and manufacturing premises within the area high disposable income within the target market

lack of management skills no track record in business no current plan for management succession in the short term inefficient equipment  proprietors have limited security with which to raise finance for  future growth  business is principally dependent on one person during the formative stages Threats

• • • • •

• • •

 poor reputation of the industry  potential for economic downturns existence of competitors increasing cost of materials retaining suitable staff and reliable subcontractors  possible government regulation geographically diverse market an increased number of Do It Yourself (DIY) renovations, inspired by magazines and television programs 3

•

 potential for future expansion of  the business

Key issues Drawn from the SWOT analysis, the significant issues for Canterbury Kitchens are: • • • •

inexperience and lack of brand awareness sufficient funds for projections but limited resources for growth keeping projects affordable if materials costs increase unexpectedly need to gain knowledge in recruiting and managing staff 

Key opportunities Key opportunities include: •

• • •

 providing good customer service that will increase market perceptions and earn word of mouth advertising  popularity of renovations in the area utilising technology to promote business and keep staff contact good networking allows good service and joint promotional activity

Personnel Planning  Definition You will need to consider business size, service level and hours or operation to determine the staff you will employ. It is also important to establish what skills and  experience they should have, the possibility of training, recruiting, replacing and the roles your staff will take.

Case Example We have industry experience, but need training and experience in managing staff. Canterbury Renovations has a team of dedicated and qualified staff and we will provide training in the areas of our preferred service technique and business style. A set of guidelines has been written for all staff outlining expected behaviours such as cleaning, punctuality and customer courtesy. We also intend to employ a professional writer to create an Operations manual. Deficiencies will be identified and addressed through a training strategy.

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The priority areas for staff training will be: • • • • • • • •

 building and production techniques using new products using new machinery marketing skills selling communication skills customer service estimating and pricing

Staff will wear a work shirt with the business logo to identify them and present a uniformed team approach. Eventually, we will provide vehicles will the business name  printed on the side. As the proprietors, we will attend the 'Planning and Starting a Business' course at the Box Hill College of TAFE. We also intend to join the Master Builders Association and attend a number of relevant industry courses, trade shows and subscribe to relevant  business magazines.

Financial Forecasts Definition  Financial forecasting means making a set of financial projections that will provide the  figures to support the written information in your business plan. This section will also include your break even analysis. You need to provide fairly detailed forecasts for at least the first 12 months of your  operations. Give careful thought to the initial capital requirements. Undercapitalisation can have serious repercussions- if you underestimate the establishment and initial operating costs, there is a far greater chance of failure.

Case Example *GST has been included where relevant.

Pre-business costs Travel Accommodation Entertainment Phone, fax, letters, copying Legal fees Accounting Fees Consultants Business planning Market Research Publications Translations Samples

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Valuation fees Total:

Initial costs Wages Opening stock  Credit card establishment fee Initial promotion Leasing costs: Legal costs Stamp duty Rent in advance Bond Promotional premium Loans establishment costs Electricity, gas and phone costs: Connections Security deposits Stationary and office supplies Computer software: Installation Training Statutory charges:

Licences Permits Registrations Subscriptions to publications Association membership fees Insurance premiums:

Property damage Public risk  Vehicle damage Theft Personal disability Professional indemnity Painting and artwork  Total initial costs:

Capital costs Purchase price of business Franchise fee Training

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Office equipment Desks Chairs Safe Computers, printers Fax, phone system Vehicles Plant and machinery: Purchase price/deposit

Delivery Repairs Installation/commissioning Shop fittings: Counters Racks, shelving Storage Decorations Security System Business Structure: Registration Professional fees Trademark/design/patents: Registrations Patent solicitor fees Refer ence materials: Land Building costs: Shop front Partitions Electrical wiring and fittings Floor coverings Toilets, plumbing and drainage Painting Signage Total capital costs:

Operating Costs Rent Outgoings Wages Staff amenities Advertising Replenish stock  Maintenance and repairs Wrappings Electricity and gas Postage Waste disposal

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WorkCover  Group tax Sales tax Payroll tax Hire purchase payments Bank charges Capital repayments Interests Bank charges Lease payments Commissions Subcontractors Royalties Freight Motor vehicle expenses Entertainment Travel and accommodation Postage Subscriptions Insurance premiums Accounting fees Legal fees Total operating costs for the first three months:

Possible direct/renovation costs for the first year  Subcontractors Materials Wages WorkCover  Group tax/payroll tax Maintenance and repairs Waste disposal Commissions Royalties Freight

$103,300 $84,300 $50,400

Subtotal: $12,000 Total:

$250,000

Possible overhead expenses for the first year  Rent

$14,400

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Outgoings Interests Motor vehicle expenses Advertising and promotion Bank charges Hire purchase payments Lease payments Insurance payments Accounting fees PAYG TAX Legal fees Staff amenities Electricity and gas Postage Entertainment Travel and accommodation Subscriptions

$1600 $2250 $9600 $12,000

Subtotal: $10,800 Total:

$50,650

Add up the first year overhead expenses = $50,650 Add pre-business and initial costs = $12,000 Total overheads for the first business year = $62,650

Initial funding of the business As the proprietors, we have $20,000 of our own money to invest in the business, supplemented by a $20,000 long term interest free loan from our parents. The closing  balance in the projected cash flow (Attachment 2) shows that, in addition to this, some $41,000 will be required over the first year. We also had preliminary discussions with our bank manager and, subject to the  provision of a documented business plan and the provision of a mortgage over our  home, we will be provided with an overdraft of $45,000. An overdraft was agreed to be the most suitable arrangement for our first year as financial requirements will vary substantially from month to month and there will be no  profits with which to repay capital. After the first year, trading levels will be more  predictable and finance arrangements will be reviewed.

Break even analysis The average mark up on direct/renovation costs is 25%. For example, a $10,000 job will have a direct cost of $8000. Therefore the gross profit will be $2000 (20% of the value of the job). The projected overheads for the first year will be $62,650. To break even, the business will have to achieve sales of which 80% pays for the direct/renovation costs and 20%  pays for the overheads of $62,650.

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If sales x 20% = $62,650 then the sales required to reach break-even would be $62,650, multiplied by five ($313, 250). Therefore, the break even point of sales in the first year will be $313,250. This will not  be achieved in the first year. However, in the second year the profit margin of 18% of  the projected sales of $450,000 ($81,000 gross profit) will cover the overheads of about $73,150 and produce a net profit of $8350.

Costing  Definition Show how you have established the price of your products and services.

Case Example Canterbury Renovations will be involved in the following activities: •

 purchase and supply of equipment

•

 purchase and conversion of raw or partially finished materials

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 provision of manufacturing and onsite labour 

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 provision of subcontract work 

The following assumptions are made when preparing quotations: Direct costs Overhead expenses Business profit Total

$368,500 $73,150 $8350 $81,500 +81,500 $450,000

Annual turnover in the second year Therefore, to cover profit overheads, the average mark up on all direct costs, equipment, materials, labour and subcontractors' costs will be 25%.

Accordingly, quotations will be prepared on the following basis for a typical job of, for  example, $10,000: Item

Direct Cost $

Mark up %

Mark up $

Equipment

2,500

15

375

Material

1500

35

525

Labour

2300

30

690

Subcontractors

1700

25

425

Total

$8000

(avg.) 25%

(approx.) $2000

Hourly labour rates will be calculated as follows: Costs Hourly rate (according to award or  workplace agreement) Add on costs (e.g. WorkCover 5%) Medical costs

$ $18.00

$0.90 $1.00

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Superannuation 6% $1.08 Payroll tax (N/A) Sick pay allowance $2.00 Annual leave allowance ($18x52/48)-$18 $1.50 Tools allowance $1.00 Total $25.48 Allowance for non-productive time, eg. $2.55 industrial action, maintenance, travelling, tool maintenance, training, injuries etc, eg. 10% Total $28.03 Therefore, the hourly rate for estimating work will be charged at $28.00 + 25% mark up = $36.50 per hour.

Records Definition  Provide details of the management information systems that will keep your business running. Outline the types of records you will keep whilst operating the business.

Case Example Canterbury Renovations will maintain sufficient business records to demonstrate the financial position of the business on a monthly basis. Financial records will compare  profitability with projected profit/loss and cash flow statements. Records will also be kept for each job to show its progress and cost in labour, materials and subcontractors. These will be regularly compared with estimates for that job. The following specific records will be kept: • • • • • • • • • • • •

cash book  receipt book  invoices, received and sent  bank deposits and statements  petty cash expenditure wage, WorkCover, superannuation and long service leave records employee details capital assets register  materials purchased and allocated to each job or temporarily as floating stock  contact details of all enquirers, existing clients, suppliers and subcontractors individual job records showing progress  job estimates

Supporting documents Definition  Including certain documents will support the statements you have made throughout 

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 your plan. You should include figures for projected cash flows and profit and loss, as well as a statement of financial position.  If applicable, you should also attach copies of your references, qualifications, licences,  permits, partnership agreement, research data, current promotional literature and  locality map.

Case Example The following documents have been prepared as a support to the business plan for  Canterbury Renovations. Projected profit/loss for the first year  Projected cash flow for the first year  Projected profit/loss for the second year  Projected cash flow for the second year  Statement of financial position

Your Marketing Plan Definition  An essential component of any business plan is a marketing plan. Your marketing plan  should cover such areas a market overview, marketing objectives, marketing strategy, resource requirements, and budgets. Sales, pricing strategy and generated revenue are all an important component of the marketing plan. Once your business is up and running, the marketing plan should be updated regularly. To download a sample marketing plan, visit the Sample Marketing Plan page in this section.

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