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10th editionHow to Write aBusiness Planby Mike McKeever

TENTH EDITIONJANUARY 2011EditorRICHARD STIMCover DesignSUSAN PUTNEYProductionMARGARET LIVINGSTONProofreadingCATHY CAPUTOCD-ROM PreparationELLEN BITTERIndexMEDEA MINNICHPrintingDELTA PRINTING SOLUTIONS, INC.McKeever, Mike P.How to write a business plan / by Mike McKeever. -- 10th ed.p. cm.Includes index.Summary: “Contains the detailed forms and step-by-step instructions needed to prepare a well-thought-out, wellorganized business plan. The 10th edition has been completely updated with the laws, banking regulations, andresources”--Provided by publisher.ISBN-13: 978-1-4133-1280-5 (pbk.)ISBN-10: 1-4133-1280-2 (pbk.)ISBN-13: 978-1-4133-1297-3 (e-book)ISBN-10: 1-4133-1297-7 (e-book)1. Business planning. 2. New business enterprises--Planning. 3. New business enterprises--Finance. 4. Smallbusiness--Planning. 5. Small business--Finance. I. Title.HD30.28.M3839 2010658.15’224--dc222010021162Copyright 1984, 1986, 1988, 1992, 1999, 2002, 2004, 2007, 2008, and 2010 by Mike McKeever.All rights reserved. The NOLO trademark is registered in the U.S. Patent and Trademark Office.Printed in the U.S.A.No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or byany means, electronic, mechanical, photocopying, recording, or otherwise without prior written permission.Reproduction prohibitions do not apply to the forms contained in this product when reproduced for personal use.For information on bulk purchases or corporate premium sales, please contact the Special Sales Department. Call800-955-4775 or write to Nolo, 950 Parker Street, Berkeley, California 94710.Please noteWe believe accurate, plain-English legal information should help you solve many of your ownlegal problems. But this text is not a substitute for personalized advice from a knowledgeablelawyer. If you want the help of a trained professional—and we’ll always point out situations inwhich we think that’s a good idea—consult an attorney licensed to practice in your state.

DedicationThis book is dedicated to the memory of my late grandmother,Elizabeth Eudora Woodall Darby, whose influence I acknowledged onlyrecently.AcknowledgmentsAfter more than a decade of working with many people, I am amazed at theuniform spirit of goodwill and cooperation.My first editor, Ralph “Jake” Warner, showed patience working with afirst-time author. My second editor, Lisa Goldoftas, challenged the grammarwhile gracefully deferring to my knowledge about the subject.Also at Nolo: Steve Elias designed many charts; Adam Stanhopeeducated me about computers; Mark Stuhr tuned sections on computerrelated material; Stephanie Harolde worked her word processingwonders on the manuscript; Terri Hearsh designed the book; EddieWarner gave helpful suggestions on online information; and many morefolks at Nolo improved the book greatly.A special thanks to a number of generous individuals, each of whomknows a great deal about starting and operating a small business. PegMoran, Terri Hearsh, Roger Pritchard, Jason Wallach, Harry Keller,Dan Peters, Sharyn Simmons, Larry Healy, and finally, Hugh Coddingand Leroy Knibb of Codding Investments. For these and all my readers,clients, and students who have shared their hopes, dreams, and problemswith me over the years, thank you for your help. The best parts areyours—all the mistakes are mine. Many of your stories and suggestionsappear here in disguised form. I hope all the readers will profit fromyour wisdom and generosity.Mike P. McKeeverSanta Rosa, California

About the AuthorMike P. McKeever’s education, work experience, business ownership,writing, and teaching careers give him a broad and unique perspectiveon business planning. He has a BA in Economics from Whittier Collegeand a Master’s in Economics from the London (England) School ofEconomics, and has done postgraduate work in financial analysis at theUSC Business School. Mike has taught classes at numerous communitycolleges in entrepreneurship and small business management. He haspublished articles on entrepreneurship for Dow Jones publications,the Sloan Publications Business Journal, and numerous newspapers andperiodicals.Mike has successfully purchased, expanded, and sold a number ofbusinesses, including a manufacturing company, tune-up shop, gasstation, retail store, and commercial building. He has worked for avariety of companies ranging from small groceries to multimillion-dollarmanufacturers. As an independent business broker, he assessed thestrengths and weaknesses of hundreds of companies. As senior financialanalyst for a Fortune 500 company, he wrote and analyzed nearly 500business plans.Currently, Mike enjoys email correspondence with a few readersrelating to business plan issues. He also acts as consulting controller andfinancial advisor to an online retail business. You can contact him atmckeever.mp@gmail.com.

Downloading Forms and Other MaterialsThe printed version of this book comes with a CD-ROM that containslegal forms and other material. You can download that material by going towww.nolo.com/back-of-book/sbs.html. You’ll get editable versions of theforms, which you can fill in or modify and then print.

Table of ContentsYour Legal Companion1 Benefits of Writing a Business Plan. 1. 5What Is a Business Plan?. 6Why Write a Business Plan?. 6Issues Beyond the Plan. 82 Do You Really Want to Own a Business?.11Introduction.12Self-Evaluation Exercises.13How to Use the Self-Evaluation Lists.17Reality Check: Banker’s Analysis.173 Choosing the Right Business.21Introduction.22Know Your Business.22Be Sure You Like Your Business.24Describe Your Business.24Taste, Trends, and Technology: How Will the Future Affect Your Business?.30Break-Even Analysis: Will Your Business Make Money?.34What You Have Accomplished.47Potential Sources of Money to Start or4Expand Your Small Business.49Introduction.51Ways to Raise Money.51

Common Money Sources to Start or Expand a Business.59Additional Money Sources for an Existing Business.68If No One Will Finance Your Business, Try Again.70Secondary Sources of Financing for Start-Ups or Expansions.72Conclusion.755 Your Resume and Financial Statement.77Introduction.78Draft Your Business Accomplishment Resume.78Draft Your Personal Financial Statement.856 Your Profit and Loss Forecast.101Introduction.102What Is a Profit and Loss Forecast?.102Determine Your Average Cost of Sales .103Complete Your Profit and Loss Forecast.106Review Your Profit and Loss Forecast.1197 Your Cash Flow Forecast and Capital Spending Plan.121Introduction.122Prepare Your Capital Spending Plan.123Prepare Your Cash Flow Forecast.125Required Investment for Your Business.135Check for Trouble.1368 Write Your Marketing and Personnel Plans.139Introduction.140Marketing Plan.140Personnel Plan.152

9 Editing and Finalizing Your Business Plan.157Introduction.158Decide How to Organize Your Plan.158Write Final Portions of Your Plan.159Create the Appendix.165Create Title Page and Table of Contents.166Complete Your Final Edit.166Consider Using a Business Consultant.16810 Selling Your Business Plan.171How to Ask for the Money You Need.172How to Approach Different Backers.174What to Do When Someone Says “Yes” .178Plan in Advance for Legal Details.17911 After You Open—Keeping on the Path to Success. .183Introduction.184Watch Out for Problem Areas.184Getting Out of Business.18912 Good Resources for Small Businesses.193Introduction.194Business ontinuing Small Business Help.203Computers and Business.203Online Business Resources .206Formal Education.209

AppendixesA Business Plan for a Small Service BusinessB Business Plan for a Manufacturing BusinessC Business Plan for Project DevelopmentD How to Use the CD-ROM.211.227.245.255Installing the Files Onto Your Computer.256Using the Business Plan Files.257Using the Spreadsheets.258Forms on the CD-ROM.260Index