“An essential book to help entrepreneurs.” DALLAS MORNING NEWS With Downloadable Worksheets & Sample Plans 14TH EDITION How to Write a Business Plan • Create a plan to help your business grow and thrive • Prepare sound financial statements • Raise the money you need Mike P McKeever The leading business plan book for 30 years This Book Comes With Lots of FREE Online Resources Nolo’s award-winning website has a page dedicated just to this book Here you can: KEEP UP TO DATE When there are important changes to the information in this book, we’ll post updates And that’s not all Nolo.com contains thousands of articles on everyday legal and business issues, plus GET DISCOUNTS ON NOLO PRODUCTS Get a plain-English law discounts on hundreds of books, forms, and dictionary, all written by software Nolo experts and available READ BLOGS Get the latest info from Nolo for free You’ll also find authors’ blogs more useful books, LISTEN TO PODCASTS Listen to authors discuss timely issues on topics that interest you WATCH VIDEOS Get a quick introduction to a software, online apps, downloadable forms, plus a lawyer directory legal topic with our short videos With Downloadable FORMS Get forms and more at LAW for ALL www.nolo.com/back-of-book/SBS.html The Trusted Name (but don’t take our word for it) “ In Nolo you can trust.” THE NEW YORK TIMES “ Nolo is always there in a jam as the nation’s premier publisher of do-it-yourself legal books.” NEWSWEEK “ Nolo publications…guide people simply through the how, when, where and why of the law.” THE WASHINGTON POST “ [Nolo’s]…material is developed by experienced attorneys who have a knack for making complicated material accessible.” LIBRARY JOURNAL “ When it comes to self-help legal stuff, nobody does a better job than Nolo…” USA TODAY “ The most prominent U.S publisher of self-help legal aids.” TIME MAGAZINE “ Nolo is a pioneer in both consumer and business self-help books and software.” LOS ANGELES TIMES 14th Edition How to Write a Business Plan Mike P McKeever LAW for ALL FOURTEENTH EDITION JANUARY 2019 Editor ELIZABETH GJELTEN Cover Design SUSAN PUTNEY Production SUSAN PUTNEY Proofreading SUSAN CARLSON GREENE Index THÉRÈSE SHERE Printing BANG PRINTING Names: McKeever, Mike P., author Title: How to write a business plan / Mike P McKeever Description: 14th edition | Berkeley, CA : Nolo, [2018] | Includes index Identifiers: LCCN 2018022621 (print) | LCCN 2018025132 (ebook) | ISBN 9781413325461 (ebook) | ISBN 9781413325454 (pbk.) Subjects: LCSH: Business planning | New business enterprises Planning | New business enterprises Finance | Small business Planning | Small business Finance Classification: LCC HD30.28 (ebook) | LCC HD30.28 M3839 2018 (print) | DDC 658.15/224 dc22 LC record available at https://lccn.loc.gov/2018022621 This book covers only United States law, unless it specifically states otherwise Copyright © 1984, 1986, 1988, 1992, 1999, 2002, 2004, 2007, 2008, 2010, 2012, 2014, 2017, and 2018 by Mike P 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 by any means, electronic, mechanical, photocopying, recording, or otherwise without prior written permission Reproduction prohibitions 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 Call 800-955-4775 or write to Nolo, 950 Parker Street, Berkeley, California 94710 Please note We believe accurate, plain-English legal information should help you solve many of your own legal problems But this text is not a substitute for personalized advice from a knowledgeable lawyer If you want the help of a trained professional —and we’ll always point out situations in which we think that’s a good idea— consult an attorney licensed to practice in your state Dedication This book is dedicated to the memory of my late grandmother, Elizabeth Eudora Woodall Darby, whose influence I acknowledged only recently Acknowledgments After more than three decades of working with many people at Nolo, I am amazed at the uniform spirit of goodwill and cooperation I’ve been fortunate to work with some great editors at Nolo, beginning with the first edition (Jake Warner) Many more folks at Nolo improved the book greatly, especially Nolo’s Production team A special thanks to a number of generous individuals, each of whom knows a great deal about starting and operating a small business: Peg Moran, Terri Hearsh, Roger Pritchard, Jason Wallach, Harry Keller, Dan Peters, Sharyn Simmons, Larry Healy, and finally, Hugh Codding and Leroy Knibb of Codding Investments And special thanks to Doug Winter, a generalist extraordinaire, for his advice on business plans for nonprofits To all my readers, clients, and students who have shared their hopes, dreams, and problems with me over the years, thank you for your help The best parts are yours—all the mistakes are mine Many of your stories and suggestions appear here in disguised form I hope all the readers will profit from your wisdom and generosity Mike P McKeever San Leandro, California About the Author Mike P McKeever’s education, work experience, business ownership, writing, and teaching careers give him a broad and unique perspective on business planning He has a BA in Economics from Whittier College and a Master’s in Economics from the London (England) School of Economics, and he has done postgraduate work in financial analysis at the USC Business School Mike has taught classes at numerous community colleges in entrepreneurship and small business management He has published articles on entrepreneurship for Dow Jones publications, the Sloan Publications Business Journal, and numerous newspapers and periodicals Mike has successfully purchased, expanded, and sold a number of businesses, including a manufacturing company, tune-up shop, gas station, retail store, and commercial building He has worked for a variety of companies ranging from small groceries to multimilliondollar manufacturers As an independent business broker, he ­assessed the strengths and weaknesses of hundreds of companies As senior financial analyst for a Fortune 500 company, he wrote and analyzed nearly 500 business plans You can learn more about his achievements at the Who’s Who Lifetime Achievement site (www.lifetimeachievement.com/2018/02/28/ mike-mckeever) Currently, Mike enjoys email correspondence with a few readers relating to business plan issues You can contact him at mckeever.mp@gmail.com, or by phone at 415-816-2982 (remember this is Pacific Standard Time) Table of Contents and How to Write a Business Plan 1 Why What Kind of Business Plan Do You Need? Why Write a Business Plan? Business Plans and Forms You’ll Find in This Book How to Use This Book to Write Your Business Plan Getting Started on Your Business Plan .11 Why This Book Is for You .12 You Really Want to Own a Business? 15 Do Identifying Your Personal Goals .16 Self-Evaluation Exercises .17 How to Use the Self-Evaluation Checklist 23 Reality Check: Banker’s Analysis 24 the Right Business 27 Choosing Know Your Business 28 Be Sure You Like Your Business 30 Describe Your Business 31 Taste, Trends, and Technology: How Will the Future Affect Your Business? 40 Break-Even Analysis: Will Your Business Make Money? 45 What You Have Accomplished 61 Sources of Money to Start or Expand Potential Your Small Business 63 Ways to Raise Money 65 Common Money Sources to Start or Expand a Business 76 Now That You’ve Proven Yourself, How About Expanding? 91 If No One Will Finance Your Business, Try Again 94 Secondary Sources of Financing for Start-Ups or Expansions 95 Conclusion .98 Résumé and Financial Statement .99 Your Draft Your Business Accomplishment Résumé 100 Draft Your Personal Financial Statement 110 Profit and Loss Forecast .129 Your What Is a Profit and Loss Forecast? 131 Determine Your Average Cost of Sales 132 Complete Your Profit and Loss Forecast 136 Review Your Profit and Loss Forecast 152 How Your Profit and Loss Forecast Relates to Your Income Tax Return 153 Cash Flow Forecast and Capital Spending Plan 155 Your What Is a Cash Flow Forecast? 156 Prepare Your Capital Spending Plan 157 Prepare Your Cash Flow Forecast 161 Required Investment for Your Business 173 Check for Trouble 174 Your Marketing and Personnel Plans 179 Write Marketing Plan 180 Personnel Plan 196 and Finalizing Your Business Plan 201 Editing Decide How to Organize Your Plan 202 Write Final Portions of Your Plan 204 Create the Appendix .211 Create Title Page and Table of Contents 212 Complete Your Final Edit 212 Consider Using a Business Consultant 214 Your Business Plan 217 10 Selling How to Ask for the Money You Need 218 How to Approach Different Backers 221 What to Do When Someone Says “Yes” 226 Plan in Advance for Legal Details 227 You Open—Keeping on the Path to Success 231 11 After Watch Out for Problem Areas .232 Getting Out of Business .239 Resources for Small Businesses 243 12 Good Business Consultants 244 Online Business Resources 247 Books 248 Magazines and Online Information Sources; Continuing Small Business Help .257 Formal Education 258 Plans for Nonprofits .261 13 Business Describe the Nonprofit Organization .263 Forecast the Nonprofit’s Cash Needs 263 Find Donors .264 ... to show how to prepare a business plan for a retail business There is no specific plan for a wholesale business because the basic financial fundamentals for a wholesale business are similar to. .. a manager On average, and assuming you already have some knowledge of the business you want to start, you can make decent “ballpark” assumptions in a matter of hours and complete the plan that... 16  |  HOW TO WRITE A BUSINESS PLAN B efore getting into the nitty-gritty details of writing a business plan, it’s always a good idea to some reflection as to your personal goals for starting a business,