This section of the plan describes the nature of your product of service, its key features, benefits and its competitive advantage.
1. What is your product or service? Describe its features in a "brochure" format that is designed for your intended audience (consumers, other businesses, government, others).
2. What are your product's or service's key features? Give a list of the features, for example: specialized materials, workmanship, geography, convenience, delivered, customized, educational, etc. What are the benefits to your customers?
3. Describe the price structure in your industry including: mark-ups, commissions, discounts and refund policies. Where does your product/service fit in the price matrix? Determine your prices and volume of sales. Document the assumptions that you have made to derive these figures. They will make up the "revenue" side of your cash flow forecasts. It is required by some financial lenders that you come up with a best and worst case scenario matrix.
4. Describe the distribution methods (wholesalers, agents, etc) that are typically used in your industry. Note the terms for volume discounts, incentives, factoring for cost increases/decreases and include in our cash flow forecasts.
5. Describe the customer service policy? e.g. guarantees, layaways, warranties, return policies, etc.
6. Does your product or service require you to rent/lease/own commercial space, property or licenses? What are the advantages/disadvantages of the space available to you? What is your plan for projected business growth and at what stage in your business plan do you need to take this into account?
7. What are the product/service risks in your business or industry? Can you obtain liabililty insurance to protect your business from these risks? Are they required by your industry associations? Can you join an industry association to become an accredited business to reduce these costs, join group insurance policies, learn best practices, etc?
8. Does your product or service competitive advantage include joint venture, partnering businesses, brand name suppliers, et al? What kind of support can you expect from them/provide for them?
Complete the sales forecast for your product or service below:
Sales Assumptions must be supported by research in order to be credible. Past history of the business is one way to arrive at the numbers, as are trends in the industry and consumer spending habits, and competitor figures.
Make a list of sales assumptions and research to support sales assumptions in the table below. Add more rows if you require them.
Sales Assumptions |
Research to Support Sales Assumptions |
Critical Risk/
Weakness of this Assumption |
Calculating Sales and Cash Flow Projections from
Sales (example):
Month |
Units Sold |
Price Per Unit |
Monthly Sales Subtotal |
% Cash Collected This Month* |
% Cash Collected from Previous Month* |
% Cash Collected from 60 days prior* |
Total Cash Monthly from Sales |
| January | 15 |
$200 |
$3000 |
$1500 |
$0 |
$0 |
$1500 |
| February | 12 |
$200 |
$2400 |
$1200 |
$750 |
$0 |
$1950 |
| March | 11 |
$200 |
$2200 |
$1100 |
$600 |
$750 |
$2450 |
| April | 9 |
$200
|
$1800 |
$900 |
$550 |
$600 |
$2050 |
| May | 7 |
$200
|
$1400 |
$700 |
$450 |
$550 |
$1650 |
| June | 3 |
$200
|
$600 |
$300 |
$350 |
$450 |
$1100 |
| August | 3 |
$200
|
$600 |
$300 |
$150 |
$350 |
$800 |
| September | 4 |
$200
|
$800 |
$400 |
$150 |
$150 |
$700 |
| October | 6 |
$200
|
$1200 |
$600 |
$200 |
$150 |
$950 |
| November | 8 |
$200 |
$1600 |
$800 |
$300 |
$200 |
$1300 |
| December | 10 |
$200 |
$2000 |
$1000 |
$400 |
$300 |
$1700 |
| Totals | 95 |
0 |
$17,600 |
$16,150 |
* In this exercise 50% collected in current month of sales and
25% collected in each of the following two months after the sales
are generated. If you provide credit terms to your customers or
take deposits/balance of payment on a different time scale you
will need to adjust your
sales and
cash flow projections.
Cash flow is the life blood of a business. It is important to reflect on how customer terms, late payments on invoices and possible non-payment will impact your business management, commitments to financers and payroll. You can see from this example that your cash collection could potentially be almost 10% behind your sales figures on a monthly basis.
This sales/cash flow information will be used in creating the financial information for your new business.
- Business Plans -
