Checklist
Starting a business is risky at best. Your chances of becoming successful
and maintaining that success will be greater if you know which questions
to ask, understand the potential problems you may encounter, and work those
problems out before you "open your doors" for business. Use this Start-A
Business Checklist to organize those questions and find out where to
get the answers.
Identify you potential market
In your business plan, you will need to describe precisely the unserved need
that your product/service will fill and how you propose to fill it. Remember
the 4 w's --what, who, where, and why.
To help you estimate the number of potential customers in your market area,
use the U.S. Census data from your state or local library. North Dakota Data
Center website:
http://www.ndsu.nodak.edu/sdc OR U.S. Census Bureau website:
http://www.census.gov
Plan your Finances
Are you familiar with setting up and maintaining the following financial
procedures?
If not, then plan to obtain the necessary skills, either by better educating
yourself in this area (before you invest your hard-earned money into a business)
and/or by hiring a bookkeeper or an accountant.
The next step is to determine how much of your personal finances you are
willing to invest. If your anticipated costs exceed your investment, supplemental
funding through a financial institution or private investor should be obtained
before you "open for business". The general rule of financing a business
is if you do not have enough financing to carry your business through to
the "break-even point", you should seriously consider not starting your business
at this time. There are many resources (most on a regional level) to train
and assist you in organizing your financial portfolio. These are offered
through the Small Business Development Centers throughout the state. Start
organizing your thoughts and outlining your business ideas.
The first step in running a successful business is to familiarize yourself with every aspect of how the business will operate. A business plan is a must for all business owners, no matter how small or large the business will be. Your business plan, once completed, will answer many valuable questions, and help in keeping you on the right track.
How do I write a business plan and where can I get help? There are many places you can go for help, and many of them are in your area.
Organize the structure of your business.
Before you get very far along in the planning of your business venture, it is wise to contemplate how the business will be structured. Will your business operate as a sole proprietorship, a partnership, or will you form a corporation?
Each of these business structures has certain advantages and disadvantages,
and they should each be weighed to reflect your specific circumstances, goals,
and needs.
Entities that fall under this category are:
Association
Limited Liability Company
Limited Partnership
Nonprofit Corporation
Refer to the Resource Section for additional sources of information. Even
if you do not need this assistance now, keep this list handy so you can return
to it in the future.
Executive Summary
The Executive summary should concisely describe any key elements of the business
plan and briefly cover at least the following items:
Name of Business
Business location and plant description
Discussion of product, market and competition
Expertise of management team
Summary of financial projections
Amount of financial assistance requested
Form of and purpose of financial assistance
Business goals and objectives
The Executive summary will set the tone for the rest of the document and may be the only part of the plan read by some of the decision-makers. This is the point where you have to grab their attention, introduce the company and explain your future plans, all in three or four pages.
The Company
This section provides background information on the company and generally
includes:
---Name, date and place of formation, legal structure (e.g., corporation, partnership).
---Significant changes (including dates) in ownership, structure, new products, acquisitions, and the like.
---Subsidiaries and degree of ownership, including minority interests.
---Principals and the roles they played in the formation of the company.
The Product
Describe the present product(s):
Management
Organizational Chart.
Key individuals (including supervisory personnel) having special value to the
organization:
---Responsibilities
---Personal resumes (describing skills and experience as they relate to the
activities of the business).
---Present salaries (include other compensation such as stock options, bonuses).
Other employees:
---Number of employees at year end, total payroll expenses for each of the
previous three years (breakdown by wages, benefits, etc.).
---Method of compensation.
---Departmental/divisional breakdown of work force.
Planned staff additions.
Ownership
Names, addresses, business affiliations of principal holders of common stock and
other types of equity securities (including details on holdings).
Degree to which principal holders are involved in management.
Principal non-management holders.
Names of board of directors, areas of expertise, and role of board when business is operational.
Marketing Strategy/Market Analysis
Description of the industry:
---Describe the industry and the industry outlook. Identify the principal
markets (commercial/industrial, consumer, government, international). Include
industry size currently as well as it anticipated size in the next two years.
Explain the sources of your projections.
Describe major characteristics of the industry
Describe the effects of major social, economic, technological or regulatory trends on the industry.
Description of major customers, including:
---Names
---Products sold to each
---Percentage of annual sales volume for each customer over previous three years
---Duration and condition of contracts in place
Describe the market and its major segments. Describe principal market participants and their performance. Identify the firm's target market. For each customer, include the requirements of each and the current way of filling these requirements. Also include information on the buying habits of the customers and the impact on the customer of suing the product.
Competition. Describe the companies with which the business competes and how business compares with these competitive companies. This is a more detailed narrative than contained in the description of the product, above.
Prospective customers. Describe prospective customers and their reaction to the firm.
Marketing activities. Describe the firm's marketing strategy, including overall strategy; pricing policy; method of selling, distributing, and servicing the product; geographic penetration; field/product support; advertising; public relations and promotion; and priorities among these activities.
Selling activities. Describe the sales effort you have and estimated sales and market share.
Technology
List of patents, copyrights, licenses or statements of proprietary interest in
the product or product line.
Describe new technologies that may become practical in the next two years which many affect the product.
Describe research and development efforts.
Production/Operating Plan
Explain how the firm will perform production. Describe capacity and status
in terms of:
---Physical facilities, current and planned; owned or leased, size and location. Capital equipment (types and quantities). Facilities plan, description of planned capital improvements and a timetable for construction and equipment installation.
---Suppliers; name/location of principal suppliers; length of lead time required; usual terms of purchase.
---Labor supply; number of employees planned for expansion; unionization; stability (seasonal or cyclical); and fringe benefits (insurance, profit-sharing, pension, etc).
---Technologies/skills required to develop and manufacture the products (provide listing/description).
---Cost breakdown for material, labor and manufacturing overhead for each product, plus cost vs. volume curves for each product.
Describe production or operating advantages of the firm. Discuss whether they are expected to continue.
Specify standard product costs at different volume levels. Present a schedule of work for the next one to two years.
Financial
Sample forms for preparing financial states follow. The forms are provided for
information purpose and do not need to be used if you have prepared the
information in a different format. However, the starred (*) financial
information must be complete for the application to be reviewed.
Accountant - name and address
Legal counsel - name and address
Banker - name, location, contact officer familiar with account.*
A funding request indicating the desired financing, capitalization, use of
funds, and future financing.*
Controls: cost system used and budget used.
Amount to be raised from debt and amount from equity.*
FOR EXISTING BUSINESSES ONLY:
Tax returns for the previous three years or for the number of years the business has been in existence if less than three years*
Financial statements for the past three years or for the number of years the business has been in existence if less than three years.*
Current financial statements.*
An aging of accounts receivable*
An aging of accounts payable.*
Financial statements and projections for the next three years:
---Profit and lost or income statements by month until break even, then by quarter.*
---Balance sheets as of year end for each year.*
---Monthly cash flow projections including the proposed financing for two years.*
---Capital budgets for equipment and other capital acquisitions.*
---Manufacturing/shipping plan (units).
Include key assumptions you have made in your pro formas and how these assumptions reflect industry performance.*
Personal financial statements for all principals.*
Source: Carol Goodman
Cavalier County JDA
901 3rd St., Langdon, ND 58249
North Dakota District Office - Small Business Startup Information visit
their website at:
www.sba.gov/nd/ndstartuplist.html
Visit their website for information on how to start a new business in North
Dakota. Here you will find links to ND state agencies for more helpful
information.
North Dakota New Business Registration website:
www.state.nd.us/businessreg -
This site contains valuable information on how to build a business, registering
your business name/organization, licensing information, sales tax requirements,
hired employees, doing business with government, and other useful information.
EXCERPTS FROM THE BUSINESS PLAN
REVITALIZING RURAL AMERICA
A Cooperative Extension System Response
(sample)
Source: Written by: Allen Bjergo, Montana State University Extension
Service, 1018 Burlington, Missoula, MT 59806, (406) 728-7799
Revitalizing Rural America - Getting Down to Business
Business Plan
Business name: _________________________________________________________________
Your name: _______________________________________
Address: _______________________________________ZIP_________ Telephone: (____)
__________________ Statement of
purpose:__________________________________________________________________________
Table of
contents:_____________________________________________________________________________
Part one - The Plan
Description of the business
A. Purposes and objectives:
What is my business? ______________________________
type: retail, wholesale, service:______________________
status: new, takeover, expansion:____________________
form: partnership, corporation:______________________
Why am I doing this?
Why will it be profitable?__________________________
My special competencies are:______________________
I will be open:__________________________________
My expansion plans will be:________________________
I'm justifying this to family, investors and customers
by:_______________________________________
3. Permits and licenses required may include:
Federal: Employer Identification Number
Employers
Quarterly Return
Annual Federal
Unemployment
State: Workman's Compensation
Employers Income Tax Registration
Application for store license
Local: Zoning and sanitation permits
(See others in "A list of permits and licenses which may be required,")
Market analysis and planning
A. Description of the industry
Industry characteristics:____________________________________
Market trends are:_______________________________________
Market segment
The market I intend to enter is:___________________________
The needs of consumers in this market are:__________________
The size of the market now is:____________________________
In the future it will
be:_________________________________
The size and area I intend to market in is:____________________
Share of the market
I project my market share to be:__________________________ of the____________
I plan to secure and hold the market by:_____________________________________
The needs and habits of buyers are:________________________________________
Competition
My competitors are:
Names
Locations
Advantages
Disadvantages
I will overcome competition by:____________________________________
I will meet future competitors by:___________________________________
Market plan
Profiles: Customers; geographic area; spending habits;
Details of market strategies are:____________________________________
Details of market penetration, and marketing strategies are:
______________________________________
Operations and location
Operations
Those responsible for startup are:__________________________
My suppliers and sources are: (Expand 1 & 2 as needed)
Name Address Telephone Products
Location
My location will be:________________________________________
Advantages of my location are:_______________________________
Disadvantages are:_______________________________________
Traffic studies indicate:____________________________________
Ownership and management
Résumés for myself.
Organization charts and a list of investors, partners and officers.
Position descriptions include:_____________________________
(Give details of duties of officers
and partners)
The line of succession, should anyone be lost, is:
______________________________________________________
Personnel and Services
A. Employees: (as needed, attach a table of employees needed and a list of
skills, or position description for each)
B. Employee policies: Use outline of existing policy manuals.
My employee policy manual includes: details of how I will recruit, wages
and benefits.
Part Two - Financial Data and Loan/Investor Request
Summary of investment needs
(List names, addresses, telephone numbers, form of business, source and amounts of funds.)
Loan request and explanations
Amount needed in addition to our equity is:$________________________
Terms requested are:_____years, at____% interest. (repeat for each loan if
more than one is requested)
Collateral offered is: (Make up a separate chart, as long as it needed)
Item
Location
Ownership
Value
______ ____________ __________ $_________
______ ____________ __________ $_________
In summary, the purpose of this loan is to acquire:_________________ and
finance:___________________
Summary of funds
(Each source and use should be documented by legal papers, notes, copies of stock, real estate contracts, bids and construction or property documents, orders and budgets for operations.)
Sources of funds:
Our equity: $________
Our venture capital: ________
Loans: ________
Other investments: ________
Total funds available: $________
Uses of funds:
Property to be acquired: $_______
Construction required: _______
Capital goods required: _______
Inventory to be acquired: _______
Operating capital needed: _______
Total funds to be used: $ _______
Balance $_________________
Financial Statements
(See Appendix E for examples of standard financial
summaries which may be used as a guide.)
Personal Financial Statement
Business Financial Statement
Income Statement
Income Statement Forecast
Farm Cash Flow Statement
Break-Even Analysis
Part three - The Appendix to your Business Plan
In this portion, you can include your resume, any drawings or maps, architectural
drawings, and other details, which you may not wish to include in the other
parts of the Business Plan.
You may also wish to place the explanations for your financial figures here, such as: letters from utilities estimating your probable expenses, projected tax assessments, insurance worksheets, summaries of contractor's bids and other hard data to justify your figures.
Include also: copies of corporate or partnership documents, copies of authorizations by the Board of Directors to assume debt or undergo obligations, and any other relevant legal documents.
Copies of appraisals, corporate resolutions and anything else required by lenders or investors may also be placed in the appendix.
Steps in starting a business
Preliminary
Form the idea
Begin the idea
Find partners
Secure capital commitments
for the equity you must have
Select the appropriate
professionals who will advise you
*Attorney (Never make a contract, lease, agreement or property acquisition without counsel.)
*Accountant (Along with the attorney, the accountant can help set up your organization, as well as taxes and books.)
*Architect and other consultants.
Assemble facts
Census data
Marketing (see next)
Locations
Contractors
Beginning steps
Agree on capital
-Meet with attorney and partners, to complete agreements
-Assure that all cash commitments are with a trustee
-Enter details in your BUSINESS PLAN concerning the shares by each Partner and your present financial status, provide periodic reports of income and expenses
-If a loan request is planned, be sure to have 2-30 percent of the total business requirements as cash or value in hand.
Use capital for: Land, buildings and professional services.
Preparing a loan package:
Usually 70-75% of the total needed.
APPENDIX E
Examples of standard financial summaries. Use these as guides when preparing
your own forms.
1. Personal Financial Statement
Net Worth Statement
ASSETS LIABILITIES (Immediately available) (Payable within this year) Cash on hand $______ Current bills $______ Savings ______ Mortgage payments ______ Securities ______ Loan payments ______ Other_______________ ______ Other_____________________ ______ ____________________ ______ __________________________ ______ Subtotal $______ Subtotal $______ Intermediate-term assets Intermediate-term liabilities (Could be sold, overtime) (Payable in the next 2-7 years) Household $______ Loans $______ Automotive ______ Payments ______ CDs ______ Other______________________ ______ Other______________ ______ ___________________________ ______ Subtotal $______ Subtotal $______ Long-term assets Long-term liabilities IRA $______ Mortgages $______ Real Estate ______ Other ______ Stocks, bonds ______ ___________________________ ______ Other equity ______ ___________________________ ______ Subtotal $______ Subtotal $______ Total Assets $______ Total Liabilities $______ Net Worth:___________(Assets minus liabilities)
Balance Sheet
Assets Liabilities
Current Assets Current Liabilities
Cash on hand $________ Accounts payable $________
Accounts receivable ________ Short-term notes ________
Inventory ________ Current due/long-term
Notes ________
Temporary investments ________ Interest payable ________
Prepaid Exp. ________ Taxes payable ________
Other ______________ ________ Accrued payroll ________
Subtotal $________ Subtotal $________
Long-term Assets Long-term Liabilities
(list) (list)
___________________ $________ _____________________________ $________
___________________ ________ _____________________________ ________
___________________ ________ _____________________________ ________
Total $________ Total $________
Fixed Assets (Net book value costs, minus depreciation)
Real Estate $________
Equipment ________
Other ________
Total Assets $________ Total Liabilities $________
Equity
Total owners equity: $________
-(sample)
(Use as a guide; this summary should be derived from more detailed worksheets, consult your county Extension agent for specific examples)
Assets Liabilities Current Farm Assets Current Farm Liabilities (Immediately available) (Past due or payable this year) Cash on hand $________ Accounts payable $________ Savings ________ Current notes ________ Livestock or crops ________ CCC loans ________ for sale Feed on hand ________ Rent, lease due ________ Growing crops ________ Taxes due ________ (Cash Invested) (Accrued Interest) ________ Securities ________ Loan payments due ________ Receivables ________ Annual mortgage ________ Cash value of life ________ Other current ________ Insurance Subtotal $________ Subtotal $_______ TOTAL ASSETS $________ TOTAL LIABILITIES $________ NET WORTH $________
Current month Year to Date Revenue Gross fees or sales $________ $________ Cost of sale ________ ________ Less: returns, allowances ________ ________ Net sales $________ $________ Operating expenses Salaries and wages $________ $________ Benefits, taxes ________ ________ Commissions ________ ________ Advertising ________ ________ Rental, utilities ________ ________ Insurance, taxes ________ ________ Travel, transportation ________ ________ Repairs, maintenance ________ ________ Supplies ________ ________ Interest ________ ________ Other ________________ ________ ________ Total operating expenses $________ $________ Other expenses Salaries, withdrawals $________ $________ Depreciation ________ ________ Principal payments ________ ________ ________________________ ________ ________ Total other expenses $________ $________ Pretax net income $________ $________ Extraordinary expenses ________ ________ Taxes ________ ________ Net Income $________ $________
(Profit and Loss Statement)
Revenue Sales of crops _________________________________ $_________ _________________________________ _________ Sales of livestock _________________________________ _________ _________________________________ _________ Sales of products _________________________________ _________ Cash from custom work _________________________________ _________ Government payments _________________________________ _________ Dividends, leases, other _________________________________ _________ Total revenue $_________ Expenses Cash operating expenses Labor (includes benefits and taxes) $________ Repair ________ Rents and leases ________ Seed ________ Fertilizer ________ Chemicals ________ Custom machine hire ________ Supplies ________ Livestock expenses ________ Feed and hay ________ Gas, fuel, oil lubricants ________ Telephone and electricity (farm) ________ Operating loan interest ________ Vehicle expenses ________ Insurance ________ Taxes, real estate, personal prop. ________ Mortgage and loan payments ________ Other ____________________________ ________ Total cash expenses $________ Gain or loss from disposal of assets ________ Depreciation ________ Total expenses $________ Net Farm Income $_________ Off-farm income____________ ________ Other non-farm income ________ Total $_________ Expenses for non-farm income $________ Net non-farm income $_________ Total farm and non-farm income $_________
(Pro-forma income statement)
(Month or year) ______ ______ ______ ______ ______ Sales income (less returns) ______ ______ ______ ______ ______ Cost of goods sold ______ ______ ______ ______ ______ Material, labor, other ______ ______ ______ ______ ______ Total Cost ______ ______ ______ ______ ______ Gross profit margin ______ ______ ______ ______ ______ Operating Expenses Wages and benefits ______ ______ ______ ______ ______ Accounting and legal ______ ______ ______ ______ ______ Advertising ______ ______ ______ ______ ______ Dues, subscriptions ______ ______ ______ ______ ______ Entertainment ______ ______ ______ ______ ______ Insurance ______ ______ ______ ______ ______ Repair and maintenance ______ ______ ______ ______ ______ Rent or leases ______ ______ ______ ______ ______ Supplies ______ ______ ______ ______ ______ Telephone ______ ______ ______ ______ ______ Auto or transportation ______ ______ ______ ______ ______ Utilities ______ ______ ______ ______ ______ Interest expense ______ ______ ______ ______ ______ Property, sales taxes ______ ______ ______ ______ ______ Other__________ ______ ______ ______ ______ ______ Other__________ ______ ______ ______ ______ ______ Total operating Expenses______ ______ ______ ______ ______ Net operating income ______ ______ ______ ______ ______ Depreciation ______ ______ ______ ______ ______ Loan principal repayment______ ______ ______ ______ ______ Owners withdrawals ______ ______ ______ ______ ______ Total other expenses ______ ______ ______ ______ ______ Net income before taxes ______ ______ ______ ______ ______ Income taxes ______ ______ ______ ______ ______ Net income after taxes ______ ______ ______ ______ ______
NDSU Extension Service
North Dakota State University