new ventures business development provides resources for starting and growing businesses
Creating Your Business Plan
Starting a venture without a business plan is like putting to sea in a ship without a rudder; you end up going whichever way the wind blows. On the other hand, a formal business plan provides potential investors and lenders with the information they need to make financial decisions. It also clarifies your ideas to potential suppliers, professionals and, in some cases, future employees. A business plan is a company's constitution, its manual, its Bible.
It is best to begin your business plan with an executive summary. This section is a short (no more than 3-4 pages) summary of the Who, What, Why, How, When, Where and How much of your business. It should give a brief overall view of the opportunity you will attempt to pursue.
The executive summary is a useful tool for bankers, investors, potential employees, and other interested parties. The summary allows the entrepreneur to present the business idea in a concise manner to people who may not have the time or inclination to read through the entire plan. It is best to write the summary after working through the plan.
The complete business plan should start in the beginning – with the entrepreneur, and the management team if other individuals are involved. This section should highlight strengths and competencies. It should stress technical abilities and management skills, detailing pertinent experiences.
In essence, you should express why you are the right person to start and run this business? What skills do you possess that make it likely that you will succeed? Investors and lenders are unanimous in citing the personal integrity and strength of management as prime factors in their decision to jump in or stay away.
The next section of your business plan spells out the purpose of your business. Crystallize your idea into two to three sentences, paying attention to what sets you apart from your competition. The key question is: What business am I in?
Next, describe the market area you are entering. Define the geographic limits of your market. Discuss the general trends in your industry and gradually narrow your description to include the segment of the market you are targeting.
Describe your target customer, whether it's an individual consumer or another business. Customers should be described in terms of age range, income range, sex, education level and interests that may effect purchasing habits (ex. do they have children). How much do you anticipate the average customer spending in one year? Note the size and decision making patterns of any markets you are targeting.
Develop a detailed description of your product or service. How will you make or create it? How will customers purchase it? How will you provide it? Explain your sources of supply, the quality of their materials and the relationship you will have with them. Touch on any potential problems in procuring or dispensing your product. What do you anticipate the product life or your product or service to be? What changes do you expect in the market and how quickly can you react to them?
Now, describe your competition. With whom will you compete for market dollars? How well are they doing? What do they charge for their products and how does that compare to your prices or rates? What are your specific advantages and disadvantages compared to your competition? Present any data about competitors' sales and market shares.
Describing your marketing plan is the next step. How will you convince potential customers to buy your product or service? What types of advertising, promotion, and public relations strategies will you use? Document how much the strategies will cost. Note any strategies used by the competition. Detail your expected sales projections.
How will you distribute your product or service? In the case of a retail business, describe the location you will need.
Now comes the most challenging part – the financial breakdown of the business. Make sure you touch on every possible cost. Itemize all start-up expenses from rent and space renovations to insurance and advertising. Describe how much equity financing you will be providing and how much additional equity and debt financing you will require. Note likely payback rates for your loans and plans for returning profits to the sources of equity financing. Using your start-up cost estimates and your proposed financing, compile an opening-day balance sheet. You may need to seek professional help to develop this section, but the expense is usually worth it.
Extend your financial section by preparing projected income statements for your first three years in business, and prepare a cash-flow statement for the first year. Explain when you expect to break even. Briefly explain the legal structure of the business, any licenses you will need, any potential regulatory or zoning problems. Finally, describe any professional help you need – an attorney, accountant, architect or contractor – and describe their qualifications. How many employees will you need and what will they do? If the professionals or employees are experienced in your industry, stress that fact. Remember, you will be calculating professional fees and employee salaries in your financial statements, so you should describe any benefit the people bring to your business. Your business plan will create an image of your business for anyone who reads it. Make sure the plan creates a positive impression. Create a neat document with a clean, professional cover. Write clearly and concisely. Don't make the plan too long or it won't be read. If you have a sample of your product, include it with the business plan. Logos, store designs, photos and description of specialized equipment should also be included. Avoid being too flashy, but remember, lenders and potential investors want your plan to show them why you are the best person to start and run the business.
When you complete your business plan you should have a good "feel" for your advantages and disadvantages in the marketplace. You should know who your target market will be and how customers will learn about you, where your business will be located, how it will be financed, how clients will obtain and pay for your product or services, how you will repay your debts, and what you will do if your original plan does not go as you expected. Sound like a lot? It is. But, the business plan and the planning and thought that go into it have the highest potential payoff of any activity associated with starting your business.
However, consider this, most business experts and small business owners confess that only about 20-30 percent of a business plan's predictions actually come true. Fluctuation in the national, regional and local economy, combined with the whims and needs of the marketplace, force most entrepreneurs to adjust their plans.
Developing a business plan gives you a better than average chance for success by forcing you to critically and logically examine your product or service, the marketplace, financial resources, and the pitfalls of the venture.
The Paper Trail: Legal Necessities
At this point let's assume that you have completed your business plan and are ready to go "into business." You may now need to list yourself as a proprietorship, partnership, or corporation with a number of agencies. In many cases you will need permits and licenses before you can present yourself as a representative of your firm and begin to create a product to service. Some types of businesses, such as restaurants, must have a variety of inspections and permits in order before they can open. In other cases you may not be able to hire employees or rent a business location without proper licenses.
This section will cover the necessary checklists, fees, permits and licenses you will need to be "in business." However, please realize that a booklet such as this cannot cover every license, fee and permit for every type of business. Contact the local tax office and the NC Department of Revenue office for specific details about legal steps.
Note: Seeking the assistance of an attorney or accountant familiar with the legal and financial steps of starting a business will save time, and in the long run, may save money and prevent legal and financial problems.
Checklist for Organizing a Business
- General Requirements for All Forms of Organization:
- Assumed Name Certificate, if trade name used
- Open bank accounts
- Complete and remit all forms necessary to meet federal, state, and local taxation, licensing and fee reporting requirements (See Taxation and Fee Requirements)
- Partnerships:
- Choose type of partnership (General or Limited)
- Partnership agreement
- If Limited Partnership, file certificate with register of deeds
- Corporations: Contact the Secretary of State Corporations Office for a free booklet, "Guidelines for Incorporation."
- Choose name
- File Articles of Incorporation with Secretary of State. If the name is allowed proceed with the rest of the steps. If disallowed (usually because another business already has the name), choose another name and resubmit to the Secretary of State.
- Record Articles with Register of Deeds
- Choose registered agent/office (registered agent is you or whomever you designate to do business in the name of your company)
- Elect officers and directors
- Adopt by-laws and seal
- Designate fiscal year
- Issue shares
- Shareholder's agreement
Checklist for Requirements Based on Business Legal Structure
Individual Income Tax
| Legal Form | Proprietor | Partner | Corp |
|---|---|---|---|
| Local Occupational Licenses | X | X | X |
| State "Operating" Licenses | X | X | X |
| State Sales Tax ID Number | X | X | X |
| Merchants Annual Wholesale License | X | X | X |
| Local Property Tax Forms | X | X | X |
| Assumed Name Certificate | X | X | X |
NC Department of Revenue
| Legal Form | Proprietor | Partner | Corp. |
|---|---|---|---|
| Corporate Tax | X | ||
| Franchise Tax | X | ||
| Partnership Tax | X | X | |
| Sales and Use Tax | X | X | X |
| Intangibles Tax | X | X | X |
Checklist for Taxation/Fee Requirements
Your first step in filing the appropriate forms with state and federal agencies should be obtaining two booklets. "NC 30, Income Tax Withholding Tables and Instructions for Employers" is the guide for filing state forms. You can obtain a copy through the local office of the N.C. Department of Revenue. "Circular E, Employers Tax Guide" is a guide for filing federal forms. You may be able to obtain a copy at a local post office, or by contacting the Internal Revenue Service at 1-800-424-1040.
WARNING: Tax laws are extremely complex with a variety of exceptions to the rules. Also, changes in taxes and filing procedures due to legislative action may occur without your knowledge. As noted above, contacting a professional accountant – at least during the start-up phase – may provide the necessary expertise to save time and money later.
- File Articles of Incorporation with N.C. Secretary of State
- Apply for Federal Employee Identification Number, Federal Form SS4
- File Form 941 Employers Federal Income Tax Withheld and FICA Tax with Internal Revenue Service
- File Form 940 Employers Federal Unemployment Tax with Internal Revenue Service
- File Form 8109 Corporation Estimated Income Tax with Internal Revenue Service
- File Form NC-1 Application for a Withholding Identification Number with N.C. Department of Revenue
- Obtain unemployment account number from N.C. Employment Security Commission, Form NC-101 & 625
- File Form NC E-504 Application for Sales and Use Tax Registration and Annual Wholesale License with N.C. Department of Revenue
- File Form NC CE-302, Initial Franchise Tax Return (corporations only) with N.C. Department of Revenue S Corporation selection, Form 2553, if desired.
- Contact Union County Tax Collector to request information on city-county business license tax.
- Contact North Carolina Department of Revenue (License and Tax Division) for State privilege license tax information.
- List tangible property as of January 1 each year with County Tax Collector using City-county Business Personal Property Listing Form
Page Navigation
The paper trail: the legal necessities
Checklist for organizing a business
Checklist for Requirements Based on Business Legal Structure
Checklist for Taxation/Fee Requirements
Credits
The South Piedmont Community College Small Business Center developed the "How to start your own business" guide.
The Small Business Center supports the development of new businesses and the growth of existing businesses by being a community-based provider of training, counseling, and resource information. There is no fee for its services.
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