Modish Biz Tips

RETAIL: Brick by Brick- Financial Part 1

{Photo by Traceylikesyou. The Regional Assembly of Text, one of our favorites in Vancouver, BC.}

After all the writing you've done over the last few weeks, the next section of our Business Plan Challenge is all math, the Financial Statements. The previous sections of your plan explain the ideas and concepts behind your business, and the Financial Statements will prove that your business idea is viable.

Your business plan will include three financial statements.

1. Cash Flow
2. Income Statement
3. Balance Sheet

Today we are going to start with Cash Flow. As my dad always says, "Cash is king" and it's a good way to measure your business' health. In order to estimate your Cash Flow Statements for your business plan, you will first need gather some information and do some sales forecasting.

Cash Flow Statement

For the Cash Flow Statement, all the money that the business pays or receives is recorded. The money that leaves the business is an expense. For your statements to be accurate, make a list of every expense that your business might have over the next year. Some odd things you might not think of that we included were, traveling to trade shows, insurance, business license, buying trade magazines, office supplies and gas for your car.

RETAIL: Brick by Brick- Operations

{Photo by M. Fleur-Ange Lamothe. Don't you wish your production line looked as lovely as this?}

We're back again today for another post in the Business Plan Challenge! Today's section of your business plan covers Operations, or the day to day of how your business will run. You'll be writing about your actual Operations, Production and Management and Human Resources. All very important to the success of your business! Lets get started!

Operations:

Legal form of Business: You'll need to identify the business structure your business will take. This can be sole proprietor, partnership or incorporation. Jena has an excellent post explaining the differences.

Seasonality: How do seasonal trends effect your business? If you're selling outdoor plants, your busiest time of the year will be the spring and summer. What will you do in the fall and winter to promote your business? In the summer, when you're very busy, will you hire employees? In the busy holiday craft fair season, will you only do one craft fair a weekend or hire someone to man a table for you? These are things to consider when writing about seasonality.

Regulations: What regulations will effect your business? You might need to register to collect taxes or, you might need a permit to make chocolate in your home. (Proven fact. Chocolate makes business plan writing more enjoyable!) You can research permits you might need through your local government.

Business Records: Describe how you will manage important financial documents and receipts. From what we hear, most accountants do not like receiving a box of papers two days before taxes are due. We might be prone to keeping our receipts in boxes too, but we think you can save yourself and your accountant loads of stress if you set up good practices from the beginning.

Protection of Designs and Ideas: Describe if you hold or intend to hold a patent, copyright or trademark.

Production:

Retail: Brick by Brick- Business Plan Qs answered

{photo of the cutest little desk ever by Quaint Handmade - see full studio tour on Modish!}

We've had a couple of really excellent questions on the last few Business Plan Challenge posts that we wanted to answer today. We're sure that others probably had the same questions and we want to make sure everyone reads the answers. Plus, we get to feel like the Dear Abby of business plans! Next week we'll be back with a post on Operations! 
 
To start, Mallory has a general question about preparing the business plan: 

Mallory on May 31, 2009 - 

I keep wishing I could find more free examples of business plans to refer to. While I have a lot of this information stored in my head or written down in notes, it's a lot to try and organize and write down in a cohesive manner. I found some business plan software that looks fantastic, but it's for PC only! That's no good for a Mac gal like me. :( 

When we created our business plan we used Microsoft Office (Word and Excel) and did not purchase any business plan software. I'm sure there are lots of Office equivalents for Macs, and you probably know more than I do Mallory, but if you need an Excel-like program try Open Office. 
 
As for the structure of your business plan, its important to remember that this is a professional document. And like all professional documents, it is not going to be an example of your most creative writing! The structure that we have been formatting our posts for Modish BIZtips is actually the structure we used in our own business plan. Though it seems very basic and sometimes repetitive, addressing each topic as its own paragraph will allow you to fully explain that aspect of your business as well as making it easy for your reader to understand. Also remember, if a topic doesn't fit with your business, don't include it in your business plan! 
 
An example of how our business plan was formatted using the last post, Marketing and Sales Part 2: 

Retail: Brick by Brick- Marketing and Sales, Part 2

{photo by Erin Darcy. Time to wrap your business plan up with some pretty packaging!}

We're back again today to finish up the second half of the Marketing and Sales plan in our Business Plan Challenge! We only have 3 more topics to discuss - Operations, Financial plan and the Executive Summary. You're almost there!

So lets be serious for a minute. Are you working on your business plan? Anyone feeling really overwhelmed? You're entitled to! Writing a business plan is a really big commitment, and some parts are very painful. Trust us, once you get your first copy completed it will feel wonderful.

The second half of the Marketing and Sales plan covers your marketing and sales strategy. With each of these you will be developing your company brand, the one image that pops into people's minds when they think of your business.

The Marketing Strategy:

Company Image: Describe the image you want your company to project. This will includes both the image you present to your customers and how you want your customers to describe your business. By image, include both tangible and intangible descriptions. For example, maybe your business will be known for great window displays and excellent customer service.

Advertising and Promotion: Thinking about the description of your target market, what advertising and promotional methods will best reach your customer? In this section, include all of the advertising and promotional ideas your business will use. Make sure all of your ideas are cost effective. Thinking of new, creative promotional ideas can often be very inexpensive and produce great results. One of the best promotions I've experienced was for the opening of a new hair salon. One Saturday, on one of the local shopping streets, the salon had their employees hand out cotton candy from a machine. The free bright pink cotton candy inspired memories of my childhood and instantly made me a fan of the salon.

Sales Strategy:

Retail: Brick by Brick- Marketing and Sales

The focus of the next section of the business plan, in our Business Plan Challenge, is Marketing and Sales. We’re sure that all of the smart Modish BIZtips readers know the difference between marketing and sales, but just to make sure everything is clear, lets do a quick review.

Marketing is building relationships and letting people know what your business does. Sales, on the other hand, are the result of your customer seeing your business’ marketing information, and ultimately paying you money!

This section of the business plan addresses both of these areas: how you are going to attract customers to your business and how you are going to deliver the sale.

Product or Service Information

• Product or Service Description: Describe in detail what your business will be selling or what service you will be offering. This should be quite specific.


• Differentiation: What makes your product or service different than others currently available (examine your competition to make this section easier to answer)


• Pricing Strategy: There are three ways to compete in any market – speed of delivery, quality of product and price of product. Your pricing strategy will be a combination of two of these items, but not all three. You can have a high quality product that is quickly delivered, but it will cost a lot of money (you’re not competing on price). Or, your product will be inexpensive and delivered quickly, but the quality will not be recognized. For your strategy, choose a combination of these items that will be a strong position against the competition.

Target Market

Retail: Brick by Brick- Business Concept

{photo by nankano}

In today’s section of the Business Plan Challenge we are going to focus on the Business Concept. It is here you will write about both your business and the industry as a whole. You also get to do some fun stuff like the Mission and Vision Statements, as well as your Business Goals; these are areas where you get to really dream and be creative!

Before we get started, a few tips:

• Write as though the person reading it doesn’t understand a thing about your business. Put everything in simple terms and leave out the industry specific jargon.
• Leave out “I” and “we”. Instead, use your company’s name or some variation of “the company”.
• Avoid words like “might,” “maybe” and “however”.
• And last, be positive! This document is selling your business idea!

Now! On to the writing!  

Business Description:

The description of your business venture should give the reader an idea of what your business is all about. This includes the name of your business, expected form it will take (i.e. sole proprietorship or incorporation), names of key personnel (you, any partners or investors), names and description of main products and/or services and purpose they serve, why your business is unique (explain why customers will do business with you), and a brief description of what you have done or are doing to start the business (do you have any existing or potential customers; if so, mention them).

Industry Overview:

The Industry Overview outlines the current state of your business industry and consists of four subsections: Industry Description, Industry Segment, Growth and Trends, and Barriers to Entry. A lot of this information for this section comes from the Market Research you did last week. In this section you will not be talking about the specifics of your business, instead you will be addressing the market from a wide view down to narrow view. Think of it as funnel. We’ll start broad at the top and work our way down to the specifics at the bottom.

We know a few of you were confused about the NAICS codes we discussed last week. The NAICS, or North American Industry Classification System, groups together businesses into categories. By finding your code, you can also find information about businesses similar to yours. Let's carry on and see where this data fits in.

Industry Description: