on your business. The rules of preparation and professionalism apply any time you seek either commercial or government financial assistance.
Many government programs give loans or loan guarantees to incorporated businesses only. Small proprietorships often find themselves ineligible for certain types of government funding. Even if you do strike out, the process of learning what is available is worthwhile. You may not be eligible now, but there may be a time later in your business cycle when your business will qualify, and the time spent will not have been wasted.
Your Business Plan
A good business plan is a simple, honest document that completely and precisely describes your experience, your proposed business, and your long-term plans for that business. It does not need to be long or complicated; it should tell a complete story that can be easily understood by a potential lender or investor.
A business plan is expected to follow a standard format, but it should be tailored to suit the situation. How your business plan is presented is as important as the information it contains. For professional polish, use a 12-point font for the text, double-spaced and printed on standard white paper. Have someone else proofread it and make sure it contains no mistakes or spelling and grammatical errors.
It should have a separate cover page with the company name, address, telephone and fax numbers, and your name as the person to contact for further information. It should also show the date that the document was prepared. Each section of the plan should have a heading and the pages should be numbered.
You might want to consider writing a short cover letter offering to provide any additional information that might be required. If you write a cover letter, make sure you have the correct information for your contact.
A business plan that includes three or four pages of solid information and a cash flow forecast will probably be sufficient for starting up a small special events business. If you have done thorough market research and financial forecasts, you will have all the information necessary to write a business plan.
Following is a brief discussion of each of the components that go into a business plan.
Executive summary
Your business plan should outline the following essential facts regarding your proposed business:
(a) Type of business
(b) Location of the business
(c) Legal structure of the business (proprietorship, partnership, incorporated company)
(d) Names of any other shareholders
(e) The amount of funds required
(f) The terms under which those funds will be repaid
Personal experience and background
This section includes your up-to-date resume and those of any partners or other key people in your proposed venture. Emphasize why your background and experience or that of your partner or key personnel is valuable to the success of your business. Potential lenders or investors must feel that you have the experience and expertise to make your business work. They are very aware that mismanagement can be a cause of business failure.
Description of service
Describe your special events business and service clearly and concisely. Explain why there is a need for your service and why it will do well in your chosen market. Emphasize the strengths your service has over your competition. Make sure you highlight your service’s uniqueness. Emphasize that your business will be home-based or in low-cost office space with low overhead, which will allow you to sell your service at a reasonable price.
Sales and marketing strategy
Prove that you have done your market research by providing details on your potential clients and how you intend to reach them. Explain how you will use the information you have gathered as the basis of your sales and marketing strategy. Describe your competition and why your service will sell in your targeted market. Show that you have a good understanding of your chosen market and why a potential lender should feel confident that your sales and marketing planning will be successful. See chapter 8 for more information on sales and marketing.
Forecasts and projections
This section of your business plan should be a summary of fixed expenses and overhead, planned sales and marketing expenses, start-up costs, projected revenue forecast, and a projected cash flow analysis. Your cash flow forecast should be a truthful and realistic projection of the financial needs of your new business. It should show the potential lender that the business has the ability to pay back the amount borrowed. This is generally where most lenders will be looking for weaknesses in your plan, so be prepared for scrutiny and to answer any questions regarding your proposed business.
For more detailed advice on business plans, Self-Counsel Press publishes many business kits and forms.
Financial Management
If you begin with a good business plan, you are off to a good start in your business’s financial management. Sound planning encourages you to think practically about the factors critical to your business, such as costs, space requirements, equipment purchases, and so on. The following list outlines some key benefits provided by a detailed business plan:
(a) Allows you to see your business on paper before you invest any money
(b) Indicates at what point your venture will break even and begin to show a profit
(c) Helps a lender or investor see the merits and potential profitability of your business
(d) Prepares you for the possible risks of starting a business and guides you in your personal financial planning
(e) Tells you how long your start-up capital will last and at what point you will need to rely on the revenues to operate the business
In addition, to prepare a financial forecast — an important part of a business plan — you must know and be able to predict the following:
(a) What is the amount of cash on hand you have to invest in your new business?
(b) What amount of loans or borrowed money from outside sources is available?
(c) What is your business capacity? How many events can you realistically expect to produce per year?
(d) What will you charge for your services?
(e) Based on your sales and marketing efforts, how many special events and what types of events can you produce?
(f) What are the costs involved in producing events?
(g) What are the fixed expenses of running your business?
Forecasting cash flow
Understanding cash flow is an absolute necessity for the new business owner. Along with loans and your personal investment, the cash flow into your business is created by the number of events you are paid to produce. The amount of cash your business will earn will depend on the number of events you produce and the income generated by producing those events.
In chapter 5, we discuss setting a price for your events and services. The cash flow out of your business is linked to the costs of producing your events and the expenses of running your business. Naturally, as a viable business, your objective should be to bring in more cash than goes out. To plan and monitor that process you need to develop a cash flow forecast. This forecast requires that you take into account fixed expenses and overhead, marketing costs, and start-up costs. You also need to forecast revenues. The next sections look at these elements in turn.
Fixed expenses and overhead