Entrepreneurship. Rhonda Abrams
of your business plan to get a better picture of where you intend to go with your business, and it helps you more clearly articulate exactly what business you are in.
You should be able to sum up the basic objectives and philosophy of your company in just a few sentences. One statement should encapsulate the nature of your business, your business principles, your financial goals, your corporate culture, and how you expect to have your company viewed in the marketplace.
A Mission Statement provides focus for your company and should be the defining concept of your business for at least the next few years. It should be the result of a meaningful examination of the foundations of your company, and virtually every word should be important.
A finished Mission Statement might be: “AAA, Inc., is a spunky, imaginative food products and service company aimed at offering high-quality, moderately priced, occasionally unusual foods using only natural ingredients. We view ourselves as partners with our customers, our employees, our community, and our environment, and we take personal responsibility in our actions toward each. We aim to become a regionally recognized brand name, capitalizing on the sustained interest in Southwestern and Mexican food. Our goal is moderate growth, annual profitability, and maintaining our sense of humor.”
See pages 84–85
ENTREPRENEUR’S WORKSHEET
Statement of Mission
Describe your company’s philosophy in terms of the areas listed below.
Preparing Your Financials
For the financial portion of your business plan, the three most important forms you’ll prepare are:
■ Income statement. Shows whether your company is making a profit, by delineating the income and expenses for the period covered.
■ Cash flow statement. Shows whether the company has the cash to pay its bills.
■ Balance sheet. Shows how much the company is worth overall.
Chapter 7 covers these three forms in depth.
Predicting the future
In a business plan, you typically make guesses about what will happen in the future. But they shouldn’t be wild guesses. Your forward-looking projections should be conservative. Base your assumptions on the belief that will things take longer and cost more than you originally expect.
Other forms to include in your business plan are:
■ Break-even analysis. Shows the point at which sales exceed costs and you begin to make a profit. Advisable for internal planning. See pages 170–171 for more information on this analysis.
■ Start-up costs. For a new business, shows the initial investment necessary to begin operations. Base this form on the “Start-Up Costs” worksheet on page 207.
■ Sources and use of funds. Shows where you’ll get financing for your business and how you’ll spend the money invested or lent. A potential investor or loan officer will want to see this.
■ Assumption sheet. Shows those reading your financial statements how you determined the figures used. A good adjunct to other forms.
Sources and use of funds
If you seek outside financing, either through loans or investors, those contemplating giving you money will want to know what you’ll do with the money you raise. They’ll also want to see what other sources of money you have, if any.
To provide such information, devise a one-page description of the sources and use of funds. This can go in the business plan itself or can be sent with the cover letter to potential financing sources. It should tell a potential investor that you have specific plans for the money you raise, that you’re not taking on debts or giving up equity thoughtlessly, and that you’ll use the funds to make your business grow.
The worksheet “Sources and Use of Funds” on page 87 is particularly helpful to you with investors or lenders if you already have some commitment of financing from respected sources (which shows that other people believe in your company) and are committing significant personal funds (which shows that you believe in the project enough to take substantial personal risk). A sources and use of funds sheet also demonstrates that you’re using your funds to start or expand a business, rather than to offset existing debts (a use that investors notoriously dislike).
ENTREPRENEUR’S WORKSHEET
Sources and Use of Funds
Complete the following form to describe how much money you are seeking and how you will use the funds raised. Be as specific as possible: If you know what equipment you are going to buy, list it; if you have a loan from a bank, state the name of the lending institution, amount, and terms.
Think visually
As you work on your business plan, look for the kind of information and statistics that you can convey in graphic form, to make a greater impact and keep readers’ attention. As you do your research, capture any charts and graphs that will be helpful. Even consider “infographics” that display data in interesting fashion. Help your business plan come alive.
In your sources and use of funds statement, include both funds you’ve received to date and the amounts you’re now seeking, clearly delineating each. In preparing your statement, consider the following issues and terms:
■ Funding rounds. The number of development stages at which you’ll seek financing from the investment community.
■ Total amount. Amount of money sought in this round of financing, from all funding sources.
■ Equity financing. Amount you’ll raise by selling ownership interest in the company.
■ Preferred stock. Outstanding stock for which dividends will be paid, before other dividends can be paid for common stock or before other obligations of the company are paid; investors often want preferred stock.
■ Common stock. Stock for which dividends are paid when company is profitable and has paid preferred stock dividends and other obligations.
■ Debt financing. Amount of money you’ll raise by taking out loans.
■ Long-term loans. Loans to be paid back in more than a year’s time.
■ Mortgage loans. Loans taken out with property as collateral.
■ Short-term loans. Bridge loans, credit lines, and other loans to be paid back in less than a year.
■ Convertible debt. Loans that are later convertible