Welcome to your
Scotia Plan Writer for business®
My Business Plan Menu List
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Getting Started
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Business Description
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The Marketplace
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Sales & Marketing
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Business Operations
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Financial Information
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Using My Plan
Tell us, what business sample most closely resembles your own business?
Getting Started
So why should you write a business plan?
Because writing a business plan can give you:
- an opportunity to consider, and plan for, the right work-life balance for you
- a user-friendly guide to your business for employees, investors, suppliers, and advisors
- a yardstick to measure your business' progress
- a method for identifying opportunities and challenges
- a tool for thinking through future staffing and financing needs
- a foundation for a loan application
Most important, writing a business plan is a way to help you succeed. That's because writing a plan forces you to answer tough questions about every aspect of your business, including the close relationship between it and your personal life.
Getting Started
What You Can Expect
So if you come across a section that you're convinced has no relevance to you and your business, skip it. And, if you're going to be the only user of your plan, feel free to use bullet points and lists instead of complete sentences.
A typical business plan has the following elements:
- The Executive Summary highlights key information and insights from your entire business plan. It's the last section that you'll write, and the first one people will read.
- Business Description presents background information, defines what's important for you and your business, establishes specific milestones for measuring success in the future, and introduces your product or service.
- The Marketplace section positions your business in a larger context, identifies and examines your competition, and describes the type of customer your business targets.
- Sales & Marketing focuses on your business' strategy for attracting and keeping customers.
- Business Operations outlines how your business works, including supplier and staffing issues.
- Financial Information considers your personal financial plan and provides financial statements for your business.
The Scotia Plan Writer for business™ helps you complete these key elements, while allowing you to customize your finished plan using Microsoft Word to edit and add material.
Getting Started
Planning Tips
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Before you begin writing, collect relevant materials. These may include:
- articles you've collected about your industry and your competitors
- agreements with customers and suppliers
- résumés of you and your team
- contact information for your lawyer, banker, accountant or bookkeeper, and insurance agent
- details of what you personally own and owe
- tax returns
- recent financial statements
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While the Scotia Plan Writer for business is designed to let you move freely about your business plan, we suggest working through the plan in the order presented—from Business Description through to Financial Information, writing your Executive Summary last.
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Try to keep your plan as brief as necessary, while making sure you've covered the key facts.
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Consider completing one section of your business plan per day, rather than undertaking the entire plan in one sitting.
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Don't worry if you are unable to complete some parts of the business plan on your first attempt. The fact that working through your plan may initially produce more questions than answers is exactly what makes the process so valuable.
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You can adapt your business plan for a wide range of readers, from employees to suppliers, investors to advisors. The Tailoring Your Plan component in Using Your Plan explains what sections and materials are most appropriate for different audiences.
Business Description
1. Where are you now?
2. Where would you like to go?
The first section of your business plan is designed to help you answer these questions.
- In Business Overview, you'll give general information about your business.
- In Personal Goals, you'll state your personal aspirations.
- In Business Vision, you'll define your business' overall purpose.
- In Business Objectives, you'll establish specific short-term and long-term goals you can use to measure your business' progress.
- In Product, you'll describe what your business is selling and what makes it unique.
Business Description
Business Overview
This section presents basic information about your business. Some information you enter will be used to fill in a cover letter and a cover page, if you decide to print them as part of your final document.
Helpful tips:
1. If you’re ever unsure, check out the "help"2. You can save as you go using "save" so you can return later
Both of these can be found in the top right of each page.
Business Description
Personal Goals
As a small business owner, you are your own boss. The plans you make now for your business can help you achieve your personal goals, whatever they may be.
It's essential to keep in mind what's important to you and what you want to achieve in both your business and your personal life when writing your business plan.
Business Description
Business Vision
Brief, compelling, and easy to grasp, your Business Vision can be a valuable tool for communicating what makes your business tick to advisors, investors, employees, suppliers, and even customers.
Business Description
Objectives
Objectives help you track your business' success according to plan. Your objectives might set targets for sales, profitability, even hours of personal time per week - whatever is most relevant to you, your business, and success as you define it.
The Market Place
By thinking carefully about the marketplace in which your business runs, you'll be better prepared to seize opportunities and deal with challenges.
- In Industry, you'll explain factors and trends that affect your business, discuss your industry's future, and estimate the size of your market.
- In Competition, you'll identify your competitors, and translate their strengths and weaknesses into opportunities for your business.
- In Customers, you'll describe the type of customers you're targeting, and consider the factors that make them choose your product or service.
The Market Place
Industry Factors & Trends
Every industry is shaped by a range of factors that affect how customers behave and businesses operate. As you consider industry factors and trends, pay special attention to those you think present special opportunities or challenges for your business.
Describe factors and trends affecting your industry, and consider their implications for your business. Issues to think about include:
Demographic: These refer to the basic characteristics your customers tend to have in common, like age, income level, geography or gender. (open dialog window to learn more about Demographic Factors and Trends) Learn More
Social: These are fads or shifts in popular opinion. If you sell desktop calendars, the fact that electronic business organizers are sweeping the nation is an important social trend. (open dialog window to learn more about Social Factors and Trends) Learn More
Economic: These indicate the state of the economy, on both a local and national level. Is the national economy booming? Is your community suffering through a recession, according to your local Chamber of Commerce and the local press? Does your industry tend to cycle between booms and busts, rising and falling with certain economic conditions? (open dialog window to learn more about Economic Factors and Trends) Learn More
Technological: These demonstrate how technology is affecting your industry. For instance, how is the Internet changing who you compete with? How is it changing the way customers research their purchases? Are your suppliers automating their processes? Has your industry been characterized by the same processes for many years, displaying a low rate of technological change? (open dialog window to learn more about Technological Factors and Trends) Learn More
Regulatory: These describe the role government or other rule-making bodies play in your industry. Rules about how businesses must operate often mean that not everyone who wants to can be your competitor. (open dialog window to learn more about Regulatory Factors and Trends) Learn More
Environmental: Many industries have a unique relationship to the environment. Some are seasonal, like patio furniture retailers that do most of their business in the spring and summer. Others like farmers or tourism businesses, can be especially dependent on the right weather conditions. (open dialog window to learn more about Environmental Factors and Trends) Learn More
Every dollar a customer spends is a choice made between you and your competitors. That's why your competitors' weaknesses can translate into opportunities for your business. Likewise, their strengths can be challenges your business will have to defend itself against.
If you're starting up or run an established business, understanding your competitors can help you spot the most under-served customers and the greatest opportunities for success.
If you’re winding down, identifying competitors may help you find potential buyers for your business.
Your business' success depends on your ability to attract customers and keep them satisfied. In fact, satisfied customers are one of the most effective marketing tools you can have, since they refer more customers to your doorstep. In this section, put yourself in your customers' shoes.
Sales & Marketing
In this section, you'll outline your strategies for attracting and satisfying customers.
- In Positioning, you'll define how you'd like customers to think about your product or service.
- In Pricing, you'll discuss the amount you charge customers.
- In Promotion, you'll outline your plans for informing people about your product or service.
- In Sales, you'll talk about how and where your product or service is sold, as well as customer service features you offer.
Your positioning is your business' answer to the question every customer asks when considering whether or not to buy: "What's in it for me?"
Sales & Marketing
Pricing & Promotions
Happy customers are the key to any business' success. That's why it's important to think carefully about the processes, people, and customer service that surround every sale.
Business Operations
In this section, you'll discuss how your business operates.
- In The Team, you'll talk about the key people involved in your business - from your employees to your advisors.
- In Suppliers and open definition dialog window:Alliances, you'll discuss other businesses that cooperate with your own.
- In Planned Changes, you'll consider new premises, new open definition dialog window:equipment, other big Purchases, or other changes that you'll need to make to carry out your plan.
- In Contingency Plans, you'll outline how you've prepared yourself and your business for unexpected challenges.
Business Operations
Suppliers & Alliance
Business Operations
Anticipating Changes
Business Operations
Contingency Plans
Financial Information
We've done our best to make financial statements understandable. That said, if accounting is not your area of expertise, you may want to work with an accredited accountant or bookkeeper to complete this section.
Especially if you aren't familiar with financial statements, it's a good idea to have your Financial Information section reviewed by a reputable accountant or bookkeeper before you share it with others.
- In Personal Finances, you'll outline what you personally own and owe and consider your plans for your long-term financial well-being.
- In Business Finances, you'll present financial statements that describe the past, present, and future of your business.
- In Financial Highlights, you'll have the opportunity to draw key conclusions that will appear at the beginning of the Financial information section in your printed plan.
There are a number of great accounting software programs on the market that can help you complete your Financial Information. If you currently use accounting software to prepare your financial statements, you may use it instead of the templates included here to prepare this section of your business plan.
Financial Information
Personal Finances
Many owners improve their business' chances of success by contributing personal resources in the form of loans and open definition dialog window:cash contributions.
That's why it's crucial to develop a personal financial plan that you periodically review in conjunction with your business plan, planning your personal finances and goals with your business'.
There are a number of elements to a personal financial plan, from how you manage your open definition dialog window:investments and finance your mortgage, to education, retirement, and will and estate planning.
Scotiabank offers a range of tools to help you develop and implement a personal financial plan that will help you achieve your goals—and, in turn, help your business succeed. You can learn more about these tools at Get Growing for Business or speak to your Financial Advisor at your local Scotiabank branch.
Financial Information
Personal Finances Report
Financial Information
Business Finances
3 financial statements complete the picture of your company:
- a open definition dialog window:Balance Sheet, which describes what your business owns and owes at a specific point in time, usually at the business' year end.
- an open definition dialog window:Income Statement, which details revenues (also called sales), expenses and net income over a specified period of time, usually one year.
- open definition dialog window:Cash Flow Projections, which forecast when money comes into your business, when you business pays money out, and helps you budget for both.
Whatever life stage your business is in, projected financial statements - or "Pro Forma" statements - can help you work through various "what if" scenarios for your business, and allow you to plan where you want your business to go.
Note: If you are seeking financing for your business, some lenders or investors may require Audited or open definition dialog window:Review Engagement statements prepared by an accredited accountant.
Financial Information
Balance Sheet
Whether you're starting up or you run an established business, create projected Balance Sheets that reflect your business plan. That means estimating your assets, liabilities, and equity for coming years.
A Balance Sheet is divided into 3 sections:
- Assets, or what your business owns.
- Liabilities, or what your business owes.
- open definition dialog window:Equity, or the difference between what your business owns and owes.
If you run an established business, include past Balance Sheets for your business, ideally for the last three years.
If you're starting up, create a Balance Sheet by detailing assets and liabilities your business already has.
Financial Information
Balance Sheet Report
Financial Information
Income Statements
It starts with your business' revenues (also called sales) and subtracts the expenses incurred to generate those revenues. The result is your business' net profit or loss.
If you run an established business, include Income Statements for your business, ideally for the last three years.
Whether you're starting up or you run an established business, create Pro Forma, or projected, Income Statements that reflects your business plan.
That means estimating your sales, cost of goods of sold (for non-service businesses), expenses - including depreciation, interest, and income taxes - and profit for coming years. (open dialog window to learn more about Projected Income) Learn More
Financial Information
Income Statement Report
A very small market may mean you'll have to fight tooth and nail with your competitors for every sale. A very large market may lead you to target a relatively narrow group of customers.
Financial Information
Cash Flow Report
Financial Information
Ratios
Financial ratios - calculations that relate one item in your financial statements to another - can be valuable tools for assessing your business' financial well-being. We've included some of the more common ones below.
In most cases, the usefulness of financial ratios depends on a clear understanding of the relationship between the numbers used and their implications for your day-to-day business.
That's why, unless you have a strong understanding of accounting principles, you may want to ask your accountant or bookkeeper to help you interpret your financial statements and financial ratios.
open definition dialog window: Current Ratio = open definition dialog window: Current Assets / open definition dialog window: Current Liabilities
The Current Ratio is a measure of liquidity. Liquidity describes your business' ability to meet current obligations, like paying supplier invoices or making upcoming loan payments, from assets that can be quickly turned into open definition dialog window: cash. Generally, the higher the Current Ratio, the more confident you can be of your business' ability to pay short-term obligations. A current ratio of less than 1:1 may mean your business does not have sufficient resources to meet its commitments in the near future and needs additional financing.
open definition dialog window: Return on Equity Ratio = Net Profit / Total Equity
The Return on Equity Ratio measures the return your business generates for owners who have invested in it. By measuring the percentage return to owners on their cash equity contributions, it is a general indicator of how efficiently your business makes use of owners' money.
open definition dialog window: Gross Profit Margin = Gross Profit / open definition dialog window: Sales
For non-service businesses, Gross Profit Margin captures the relationship between sales and open definition dialog window: cost of goods sold. A low Gross Profit Margin may indicate that your business is selling goods at too low a price, that demand for your product is weak, or that direct material, direct labour, or manufacturing overhead costs can be better controlled.
open definition dialog window: Net Profit Margin = Gross Profit / Sales
The Net Profit Margin is the percentage of each dollar of sales that remains after all expenses have been deducted. When compared to your Gross Profit Margin, Net Profit Margin can be an important indication of how your business manages its expenses.
open definition dialog window: Debt to Equity Ratio = Total Liabilities / Total Equity
The Debt to Equity Ratio describes the relationship between liabilities and equity. It compares the level of financing provided by creditors like suppliers and banks to the amount that owners have invested in the business.
Financial Information
Highlights
Now that the key components of your business plan are in place, you're ready ti transform them into a finished document.
In Executive Summary, you'll provide an essential quick reference for readers (including yourself) by summarizing the key findings of your plan.
In Presentation, you'll have the opportunity to add a customized cover letter, cover page, and table of contents to your plan.
Using My Plan
- In Tailoring Your Plan, you'll get guidance on what parts of your plan may be appropriate for different people.
- In Looking Forward, you'll find tips for getting the most from your plan in the future.
Remember, different circumstances and different audiences require different things from your business plan.
In presenting your business plan to a new employee, for instance, your Executive Summary might be more focused on your Business Vision, and you may choose not to share your Financial Information.
That's why the Scotia Plan Writer for business™ is designed for flexibility once you publish your plan.
Using Microsoft Word, you can:
- spell check your plan.
- delete, change or add sentences.
- print out specific sections of your plan, or the whole document.
Using My Plan
Tailoring Your Plan
By reading below, you can find ideas about which sections of your plan will be relevant to different people, plus materials you should consider including in an appendix to appeal to them. In each case, you'll want to tailor the Executive Summary to your audience.
Most readers of your plan will appreciate you keeping your plan as short as possible, even as you include the key facts they need.
Your banker will likely be interested in seeing your entire plan, to test your assumptions, ensure you haven't overlooked anything, and make sure any financial solutions he or she offers fit with your personal and business needs.
If you're seeking financing, your banker will likely pay special attention to your estimates for upcoming open definition dialog window: purchases in Planned Changes, and may require your Personal open definition dialog window: Statement of Net Worth.
In addition, he or she will carefully review your Financial Information, and may request Audited or Review Engagement financial statements prepared by an accountant. It's always a good idea to check with your banker to confirm what information they need before presenting them with your plan.
Your accountant may be especially interested in the Business Description section, and your goals and objectives in particular; Business Operations, which will give them insight into the operations behind your financial statements; and Financial Information.
Like your banker, your accountant will be able to serve you better if he or she understands both your personal and business needs.
Potential investors will want to see your entire plan, so they can make an informed decision about whether your business is the best investment for them.
When it comes to Financial Information, they may request Audited or Review Engagement financial statements prepared by an accountant.
While you may choose to withhold your Personal Goals and Personal Finances, consider including an Appendix that includes references for your professional advisors; résumés of your team; photographs of your product or service; and past advertisements and promotional materials.
Business/Personal Advisors may be interested in seeing your entire plan, so they can pose questions and offer insight. You may choose not to share personal sections of the plan - like your Personal Statement of Net Worth - with your business advisors.
To give your advisors the most complete picture possible, consider adding an Appendix that includes references for your banker, lawyer, accountant or bookkeeper, marketing consultant, and insurance agent; résumés of your team; photographs of your product or service; past advertisements and promotional materials; and competitors' advertisements, and other materials about them.
Your marketing consultant may pay special attention to the Business Description section (excluding your Personal Goals), especially your objectives and your description of your product or service; The Marketplace, which offers understanding about the environment in which your business competes; and open definition dialog window: Sales & Marketing, where your marketing consultant may offer suggestions for refining your strategies.
Consider adding an Appendix that includes: photographs of your product or service, past advertisements and other promotional materials, and competitors' advertisements and other materials about them.
Your lawyer may be most interested in Business Description, The Marketplace, and Business Operations, all of which may provide special insight into legal issues. Your lawyer may also want to see Financial Information.
Your existing employees may benefit from reading your entire plan, although you may choose not to share your Personal Goals and Personal Finances.
Prospective employees may be able to get a much better sense of your business if you share Business Description (excluding Personal Goals), Sales and Marketing, and an appendix that includes résumés of your staff, past advertisements and promotional materials, and photographs of your product or service.
Potential buyers of your business may have their interest piqued by the Business Overview and Product or service description in Business Description.
As negotiations progress, you might consider sharing The Marketplace, Sales & Marketing, Business Operations, and your business' Financial Information.
Using My Plan
Looking Ahead
After you complete your business plan, you're in a position to transform what you've learned into action.
Too dependent on a single supplier? It's time to find another. A new customer moved into the neighbourhood? It's time to knock on their door. Take decisive action to seize opportunities and overcome challenges you've identified.
Here are some guidelines to using your plan in the coming weeks, months, and years:
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Share your business plan with people you trust - your banker, colleagues in the industry, your advisors, our family. What questions do they have? Do they have suggestions about how you can improve your plan?
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Use your findings from your open definition dialog window: Cash Flow Projections to get cash in hand before you need it. The earlier you address financing needs, the better positioned you'll be to achieve your goals.
Will you put more money in the business, seek outside investors, or apply for a loan? Talk to your banker about financing options. -
Measure your progress on a monthly basis. Your business plan is really a benchmarking tool - it's a way for you to see whether your company is meeting your expectations.
How is your actual performance comparing to your projected Income Statements and your Cash Flow Projections? Are you on track to meet your Business Objectives? Are you staying true to your PersonalGoals? -
Use your business plan to communicate with suppliers, advisors, professionals, and employees. The better people understand your business, the better they'll be able to work with you.
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Review your business plan at least once a year, and consider revising it whenever significant changes occur in your personal life, inside your business, in the marketplace, or in the economy.
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Be sure to discuss changes in your plan with key advisors, like your banker, accountant, and lawyer.
Glossary
Scroll the glossary to letter AScroll the glossary to letter BScroll the glossary to letter CScroll the glossary to letter DScroll the glossary to letter EScroll the glossary to letter FScroll the glossary to letter GScroll the glossary to letter HScroll the glossary to letter IScroll the glossary to letter JScroll the glossary to letter KScroll the glossary to letter LScroll the glossary to letter MScroll the glossary to letter NScroll the glossary to letter OScroll the glossary to letter PScroll the glossary to letter QScroll the glossary to letter RScroll the glossary to letter SScroll the glossary to letter TScroll the glossary to letter UScroll the glossary to letter VScroll the glossary to letter WScroll the glossary to letter XScroll the glossary to letter YScroll the glossary to letter ZAccounts Receivable are the total amounts customers owe your business for goods or services sold to them.
Accrued Liabilities arise when you have received a service, but haven’t paid for it yet. For instance, if an employee has worked 20 hours this week, but you haven’t paid him yet, his salary is an accrued liability.
Alliances are mutually beneficial relationships your business has with other businesses or individuals who have agreed to complement their products or services with yours, or vice versa.
Amortization is an accounting practice that allows you to spread costs associated with intangible assets with a limited life over their estimated useful life.
Assets are things of value your business owns.
Audited Statements are financial statements that have been verified by an independent professional accountant who determines whether the statements comply with generally accepted accounting principles.
Bank Debt is the value of short-term loans you have outstanding to your bank, including the balance on your operating line of credit or credit card.
Balance Sheet is a financial statement showing your business’ assets, liabilities, and equity (net worth) on a given date.
Cash Disbursements (Money Out) are the total amounts your business paid out.
Cash Flow is the amount of money on hand available for running your day-to-day business.
Cash Flow Projections are financial statements that forecast when and how much money your business will collect and pay out over a specified period of time, usually one year, and help budget money coming in against money going out.
Cash Receipts (Money In) are the total amounts of money coming in to your business.
Cash Sales are the amounts paid by customers immediately at the time of sale. It can include payments made by cash, cheque, credit card or debit card.
Competitive Advantage is what makes your business unique and difficult for competitors to imitate.
Cost of Goods Sold is the cost to your business directly related to purchasing or manufacturing the products you sell. It does not include general administration or other indirect costs.
Credit Terms are the agreed-upon parameters that dictate when and how much your customers pay you for goods or services they don’t pay for immediately at the time of purchase (or, alternatively, when and how much you pay your suppliers for purchases you make on account). Credit terms usually include a period of time during which payment must be made (e.g. 30 days), and sometimes include a discount for payment within a certain period of time.
Current Assets are things your business owns that can readily be turned into cash, or which you expect to turn into cash as part of the normal course of business during the next 12 months.
Current Liabilities are debts you need to pay off in the next 12 months.
Current Ratio is calculated as current assets divided by current liabilities. It is a measure of your business’ liquidity, or the availability of cash or assets that can be converted easily to cash to run the business and meet short-term obligations.
Depreciation is an accounting practice that allows you to reflect that fixed assets wear out or become obsolete over time, by spreading out the cost of buying a fixed asset over the asset’s useful life.
Direct Costs are amounts paid to suppliers for products or services that you intend to resell to your customers. For example, a contractor would include all amounts paid to subcontractors for job-related work during the year.
Dividends or Owner’s Draw is the amount taken out of a business’ retained earnings by owners. In a sole proprietorship or partnership, this is called “owner’s draw”. In an incorporated business, where the money is distributed among shareholders, it is called “dividends”.
Equipment are fixed assets, including vehicles, that your business owns. Equipment should be recorded on your Balance Sheet at the amount you paid to acquire it. It is subject to depreciation.
Equity is the difference between a business’ assets and liabilities. It includes money that owners or shareholders have contributed to the business and profits that have been reinvested in it. For a sole proprietorship or partnership, this is often called “owner’s equity”. For an incorporated business, it can be referred to as “shareholder’s equity”.
Equity Contributions / Capital Stock represents the amount of money (equity) owners, partners, or shareholders have invested in the business, excluding owner’s – or shareholder’s – loans. For sole proprietorships or partnerships, this is known as “cash equity contributions”. For incorporated companies, it is known as “capital stock”.
Gross Profit is the difference between sales and cost of goods sold. It’s the amount your business has left over to cover all remaining expenses and taxes.
Gross Profit Margin captures the relationship between sales and cost of goods sold. It’s the percentage of every dollar in sales you have left over after paying direct costs for manufacturing or acquiring goods sold, to cover all remaining expenses and taxes.
Incorporated Company is a legal structure for a business, where the liability of owners, who are called “shareholders”, is limited to the amount of their financial investment in the business.
Intangible Assets / Goodwill are things your business owns that have value, but that you can’t touch or feel – like licences, copyrights, trademarks, patents, proprietary customer lists, service contracts, goodwill and brands.
Interest Expense reflects the cost of borrowing money. It is the amount you pay in interest on your business borrowings during a specified period, and may include interest on your operating line of credit, term loans, credit card balances, and loans from finance companies and other lenders.
Inventory is the raw materials, partially completed products, and finished goods that your business is currently holding to sell to your customers.
Investments that are listed as current assets on your Balance Sheet include stocks and bonds that can be readily sold for cash.
- For a sole proprietorship, it may be the legal name of the owner or a registered business name. (For banking purposes, the legal name of a sole proprietorship is the business owner’s legal name.)
- For a partnership, it may be either the legal names of the partners or a registered business name.
- For an incorporated business, it is the registered business name, shown on its incorporating documents, which ends with words such as “Incorporated”, “Inc.”, “Limited”, “Ltd.”, “Corporation”, or “Corp.”.
Limited Partnership is a business structure, where there are two kinds of partners: general partners who manage the business and are personally liable for debts, and limited partners whose participation in the business is limited to investing money, and whose liability is consequently limited to their investment in the business.
Liquidity is your business’ ability to meet current obligations using assets that can be quickly turned into cash.
Loan Proceeds include any money you receive from new loans to your business.
Long-Term Debt is the total amount you owe on long-term loans, including mortgages. The amount due in the next 12 months, called the current portion of long-term debt, is listed as a current liability on your Balance Sheet. The portion not due to be repaid in the next 12 months is listed as a long-term liability.
Long-Term Investments include investments that have a term longer than one year, as well as loans extended by your business that you don’t expect to collect in the next 12 months.
Long-Term Liabilities are debts that will not be repaid within the next 12 months.
Net Income, also called Net Profit or loss, is equal to total sales (revenue) minus all business expenses, including income taxes.
Net Profit Margin is the percentage of each dollar of sales that remains after all expenses have been deducted.
Operating Line of Credit is a short-term loan to cover day-to-day operating expenses of a business. It allows a borrower to continuously borrow and repay a loan up to an agreed limit.
Owner’s Draw or Dividends is the amount taken out of a business’ retained earnings by owners. In a sole proprietorship or partnership, this is called “owner’s draw”. In an incorporated business, where the money is distributed among shareholders, it is called “dividends”.
Owner’s Equity Contributions include all monies that owners, partners, or shareholders inject into your business, excluding owner’s/shareholder’s loans.
Owner’s/Shareholder’s Loans are the amounts owed to you, your partners, or other shareholders for loans made to your business, which are expected to be repaid. For sole proprietorships or partnerships, these are known as “owner’s loans”. For incorporated businesses, they are known as “shareholder’s loans”.
Pro Forma Statements are financial statements that show the projected financial status of a business, assuming certain events will take place.
Purchase of Materials or Stock includes amounts paid to purchase raw materials, partially finished goods, and finished goods for later sale.
Purchases are costs paid to suppliers for raw materials used to produce the goods you sell or finished goods which you intend to resell to your customers.
Return on Equity Ratio measures the return your business generates for owners who have invested in it.
Review Engagement Statements are financial statements that have been reviewed by an independent accountant who determines whether they are plausible within the framework of generally accepted accounting principles. A review engagement is similar to an audit, except that no opinion is expressed on the statements.
Short-Term Debt is the amount your business owes on loans that are due to be repaid within one year, including the balances outstanding on your company’s operating line of credit and credit cards.
Sole Proprietorship is a legal structure of a business, where the business is wholly owned by one person, called the sole proprietor. The business owner and the business are not separate legal entities, which means the sole proprietor personally owns the business’ assets and is liable for all business debts.
Statement of Net Worth is a personal financial statement that shows your personal assets, liabilities, and net worth on a given date.
Tax Rate is the percentage of your net profit before tax that you’ll be required to pay in taxes. Only incorporated businesses show and subtract income tax on their Income Statements.
Term Financing describes loans, usually taken out to make a specific purchase, that must be repaid according to a fixed schedule, by a certain date.
Trade Name is the name your business “goes by,” which can be different from its legal name. For example, a sole proprietor “John B. Smith” could trade as “John’s Pizzeria”. 887905 Ontario Inc. could trade as “Jill's Hair Salon”.
Sales
Go to Glossary
Notes
More Information
Accounting depreciation may vary from tax depreciation. Talk to your accountant or bookkeeper, or contact the Canada Customs & Revenue Agency, for standard depreciation rules for your business.
- If you own the only hardware store in your area, your location may be your greatest competitive advantage, since it makes you a more convenient option than your competitors.
- If you run a marketing consultancy out of your basement, your low overhead might be a competitive advantage, since it allows you to charge lower prices than your competitors.
- If you are a dentist, your special training in cosmetic dental surgery might be your competitive advantage, since your competitors can't easily offer the same expertise.
If the way you offer or deliver your product or service is unique and adds value for your customers, be sure to discuss it as part of your competitive advantage.
Once you've completed your business plan, consider returning to Business Objectives. You may want to change or add new objectives as a result of the plan-writing process.
- Focus on what's relevant to your business. If you run a local flower store, don't worry about the total amount of money being made from the sale of flowers in North America. Instead, consider annual sales of flowers in your area.
- Consider doing some research. Your local Chamber of Commerce may have exactly the numbers you're looking for. Also, check out online sources like www.gdsourcing.com, a directory of free statistics specifically designed for entrepreneurs doing market research.
- If you can, quantify your market in terms of dollars in sales. Doing so will help you confirm that your own revenue goals are reasonable.
- If you can't find the exact information you're looking for, work with what you know. Let's say you know how many people live in your province and you can make an educated guess about how much the average person spends on shoes each year. Multiplying the two numbers will give you an idea of the provincial market for footwear.
- Start by scanning the yellow pages and searching online.
- If you run an established business, ask your customers who they think your competitors are.
- Read trade magazines and local magazines to learn more about competitors who may enter your market in the future. For instance, if you run the only electronics retailer in your area, it's important to consider the possibility of a discount superstore moving into your area.
- Beware the temptation to suggest your company has no competition. Even if you're introducing something completely new to the market, your potential customers are currently satisfying their need in some other way. Remember, when the automobile was introduced, it competed with the horse and buggy!
- If you run a swimming pool cleaning service, home pool owners, high schools with pools, apartment buildings with pools, and sports clubs are different customer segments.
- If you're a DJ, event planners and nightclubs are different customer segments.
- If you own a greenhouse, landscapers and home gardeners are different customer segments.
- If you're starting up, pay special attention to what you discovered in the Competition section when choosing your target customer. For instance, if your largest competitor's greatest strength is its lower prices, think twice before you go after customers whose purchase decisions are based primarily on price.
- If you run an established business, be sure to ask your customers what's important to them, how they make decisions, and why they choose you over the competition. Also, think about how your customer base has changed over time, and why. If, for instance, you've stopped attracting new customers or you've become overly dependent on one or two accounts, you may need to take action.
- Also, consider your business' strengths and competitive advantage. Your target customers should be customers you can serve well!
- If you run an established business, be sure to ask your customers what qualities they associate with your product or service. What you learn may surprise you!
- Your prices must cover the cost of providing your products or services and running your business. You'll have a chance to test whether or not they do when you complete the Financial Information section later in the business planning process.
- Your prices should be consistent with your positioning. For instance, if the target customers of your travel agency are bargain hunters, you'll want to set your prices low. If your target customers value luxury, consider pricing higher.
- Your prices should take competition into account. If your prices are much lower than competitors', ask yourself how you're able to charge that amount and still make a profit; are your costs lower? On the other hand, if your prices are much higher than your competitors', there must be a special reason customers are willing to pay your price.
Finally, remember that lower prices may mean you'll sell more, but you'll make smaller profits on each sale. Higher prices will likely mean that you'll attract fewer customers - however, you may make more on each transaction.
Your suppliers must be able to meet your needs in terms of delivery, billing, cost, and service. They should help you get your products to your customers on time, at the right place and in the right condition - all of which have a direct impact on customer satisfaction and sales success. If you run an established business, consider how your suppliers do this and if any improvements could be made.
The right credit terms can be especially critical when working with suppliers. For instance, you may have a hard time paying the bills if your biggest supplier requires payment in 30 days, and your customers don't pay you for 60 days. Also, you may be able to save money by taking advantage of supplier discounts for paying within a certain period of time.
If you're starting up, speaking with other businesses in your industry can be a great way to identify potential suppliers. The yellow pages are also a good place to start.
- Your sales projections should be reasonable. Remember, it takes time for most new businesses to build up sales. You can also use what you know about the size of your market. For instance, think twice before projecting $300,000 in sales if total sales in your market are only $250,000. Here's another simple test of your sales projection: How many "units" of your product or service would you have to sell at the price specified in your Sales & Marketing section per week or per day to meet your sales projection for a certain year? Does the answer seem reasonable to you?
- Cost of goods sold (for non-service businesses) should incorporate what you know about suppliers, their prices, and potential changes in costs.
- Expenses should be based on your plan and your educated understanding of what things cost. For instance, have you included salaries of employees you intend to hire? What about rent for the office space you intend to move in to, or the cost of phone service associated with your planned telemarketing campaign?
- Depreciation in any year can be very roughly estimated by dividing the amount spent on furniture, fixtures, equipment, and vehicles to start your business by the average number of years you expect your business will use such assets before replacing them. It's a good idea to consult your bookkeeper or accountant, who will have more information on current accounting rules and relevant tax legislation. For instance, furniture and fixtures can only be depreciated over a maximum of five years. As for Amortization, you may assume that it's zero to be conservative, unless you've purchased your business and assigned a value to intangible assets as part of the purchase price.
- For incorporated businesses, the tax rate will be based on the business' net profit before tax. If you don't know your tax rate, it's okay to leave the line blank and end your Income Statement at net profit before tax. If you choose to use an estimate based on taxes paid in past years or your accountant's recommendation, it's a good idea to indicate you have done so in your statement.
- If you're an established business, use your past Income Statements as a guide in creating your projected Income Statements.
- Cost of goods sold (for non-service businesses) and expenses tend to rise and fall in the same proportion as sales. That means if you think sales will grow by 10%, you can expect your cost of goods sold and expenses to grow by about 10% too.
- Depreciation and Amortization will stay about the same from one year to the next, assuming you don't buy, sell, or completely depreciate any buildings, furniture, fixtures, vehicles, equipment or intangible assets. Consult your accountant or bookkeeper to confirm applicable depreciation rules for your business.
- Interest expense will tend to rise and fall each year depending on changes in the amount you owe and fluctuation in interest rates. For instance, if you pay back half of the $50,000 you owe the bank for a loan with a fixed interest rate, you can expect your interest expense to decrease. For floating rate loans - loans where the interest you pay varies based on changing short-term interest rates - you may want to take into consideration educated expectations about whether rates will rise or fall.
- For incorporated businesses, the tax rate will be based on your business' net profit before tax. If you choose to estimate a tax rate after consulting your accountant or bookkeeper, it's a good idea to indicate you have done so in your statement. It's also acceptable to leave the line blank, ending your projected Income Statement with net profit before tax.
- Once you've established basic projected Income Statements based on these rules of thumb, adjust them to reflect your business plan. For example, have you included the commission for the new salesperson you intend to hire in your payroll expenses? Have you lowered cost of goods sold in light of the new production technology you'll be installing? Have you increased rent expenses to reflect the fact that you plan to move to a bigger office? Have you adjusted marketing expenses to cover the cost of your planned marketing blitz?
Cost of goods sold can be calculated by taking inventory at the start of the accounting period, adding any expenses that relate directly to your products, and subtracting the amount left in inventory at the end of the period. Different types of businesses include different costs in cost of goods sold:
- a retailer would include the amount paid to wholesalers, as well as items like freight and customs duties.
- a manufacturer would include the cost of raw materials, the salaries of workers that assemble its products, and the overall costs of running its production line.
Publish Settings
If you have finished your business plan or would like to produce a hard copy of your business plan, you can use one of the two options below. By selecting "Copy To Text File" you will have copied all of the business plan into your memory or clipboard. Go to your desired word processor and select "Paste". You will most likely need to format the text and layout for your desired look. Or you can select "Export as Word Document" and you will be prompted for a file name and location. Once complete you can open the file you have just created using word. You now have a finished and formatted business plan.
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The next portion of writing your business plan involves creating some detailed financial statements including a balance sheet, cash flow statement and income statement. If you prefer not to complete the financials, feel free to move onto section 7, where you’ll be able to complete your plan.
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