A  Business  Plan

 

 

 

 

 

 

 

Rocky Mountain Region

of the

USDA Forest Service

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Presented by the

 

Colorado Small Business Development Center

 

 

 

 

 

 



 

 

Contents

 

 

 

 

Part I:  The Business........................................................................................................... 76

 Purpose and Goals............................................................................................................... 76

 Location of Your Business.................................................................................................... 79

 Market And Customers......................................................................................................... 80

 Competitive Analysis............................................................................................................. 81

 Management......................................................................................................................... 82

 Personnel.............................................................................................................................. 83

 

 

Part II:  Financial Data......................................................................................................... 84

 Capital-Equipment List.......................................................................................................... 84

 Start-Up Expenses................................................................................................................ 85

 Sources and Uses of Financing............................................................................................ 86

 Monthly Cash Flow Projection.............................................................................................. 88

 Start-Up Balance Sheet........................................................................................................ 90

 Start-Up Income Statement Projection.................................................................................. 91

 

 

Part III:  Historical Financial Reports for Existing Business.......................................... 93

 

 

Part IV:  Supporting Documents........................................................................................ 94

 

 

Part V:  Appendices............................................................................................................ 95

 Legal Organization................................................................................................................ 95

 Sole Proprietorship............................................................................................................... 95

 General Partnership.............................................................................................................. 95

 Corporation........................................................................................................................... 96

 Limited Partnership............................................................................................................... 98

 Limited Liability Company (LLC)........................................................................................... 98

 Break-Even Analysis............................................................................................................. 98

 Case Study #1.................................................................................................................... 101

 Case Study #2.................................................................................................................... 101

 Case Study #3.................................................................................................................... 101

 Available Business Resources............................................................................................ 103

 Colorado Small Business Development Centers................................................................ 104


 Part I:  The Business

Purpose and Goals

As we proceed through our business careers, it is vital that we set goals for the future.  Although this is difficult and time consuming, the final reward is worth the effort.  As you fill in the following, be as realistic as you can.  Answers you develop now will be the basis of your business plan.

 

 

What is your purpose in pursuing this business?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Define your business goals for the next year and what you foresee five years from now.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Description of the Business

This section should describe the nature and purpose of the company, background on its industry, and what opportunities you see for its products or services.  It provides you with insights that allow you to better correlate the projections and estimates presented in subsequent sections.

 

 

Brief description of the business.

 

 

 

 

 

 

 

 

 

 

 

 

Briefly describe your knowledge of this industry.

 

 

 

 

 

 

 

 

 

 

 

 

List the products and services you will provide.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Legal Structure

There are several ways in which your business can be legally organized.  To determine the best one for you and your organization, you need to seek competent legal and tax advice.  To give you a general frame of reference, the more popular forms and their reasons for use are outlined in Part V, Appendices.

 

 

How is your company legally organized?

 

 

 

 

 

 

 

Why is this legal organization most appropriate for your business?

 

 

 

 

 

 

 

 

 

 

Does your operation require a state registration number?  YES ____ NO ____  If ``Yes,''please include a copy of the registration in the Supporting Documents.

 

 

 

 

 

Include any appropriate information, including shareholder or partnership agreements, in the Supporting Documents, and complete the following list of owners:

 

Name                                      Address                                              SSN                 % Ownership

 

 

 

 

 

 

 

 

 

 

Location of Your Business

Describe the planned geographical location of the business and discuss any advantages or disadvantages of the site location in terms of wage rates, labor availability, closeness to customers or suppliers, access to transportation, state and local taxes, laws, and utilities.  Describe your approach to overcoming any problems associated with the location.

 

 

Planned geographical location.

 

 

 

 

 

 

 

 

Discuss advantages or disadvantages of the site location.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Describe your approach to overcoming any problems.

 

 

 

 

 

 

 

 

 

 

 

Market And Customers

The purpose of this section is to present sufficient facts to convince the evaluator that the product or service has a substantial market and can achieve sales in the face of competition.  Discuss who the customers are for the anticipated product or service.  Where are the major purchasers for the product or service?

 

 

Describe your anticipated target market (e.g., age, income, hobbies, regional, national, international).

 

 

 

 

 

 

 

 

 

 

 

Describe the size of the current total market and potential annual growth.

 

 

 

 

 

 

 

 

 

 

 

Discuss your advertising campaign in terms of how, when, and where you will advertise, and estimated annual cost.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Competitive Analysis

Each business has (or should have) a uniqueness that separates it from its competitors. Make a realistic assessment of the strengths and weaknesses of competitive products and services, and name the companies that supply them. Compare competing products or services on the basis of image, location, price, advertising, and other pertinent features. Discuss your three or four key competitors and explain why you think that you can capture a share of their business.  Discuss what makes you think it will be easy or difficult to compete with them.

 

 

Identify three or four of your key competitors.

 

 

 

 

Discuss their strengths and weaknesses.

 

 

 

 

 

 

 

Compare your product or service on key areas.  For each area of comparison rank yourself and your selected competitors on a scale of 1 (high) to 5 (low).  Remember: no ties.

 

                                                                                                                          C o m p e t i t o r s

Area of Comparison                                                 You                             A         B         C            D

 

Image                                                                                                                                                        

 

Location                                                                                                                                             

 

Price                                                                                                                                                   

 

Advertising                                                                                                                                         

 

Service                                                                                                                                                           

 

Uniqueness                                                                                                                                        

 

Other                                                                                                                                                  

 

 

Why do you think you can compete with your competitors and capture a share of the market?

 

 

 

 

Management

Your management team is the key to turning a good idea into a successful business.  The evaluator looks for a committed management team with a proper balance of technical, managerial, and business skills and experience in doing what is proposed.  Be sure to include complete résumés for each key management member in the Supporting Documents section.

 

 

List owners and key management personnel and their primary duties.  If any key individuals will not be onboard at the start of the venture, indicate when they will join the staff.

 

 

 

 

 

 

 

 

 

 

Discuss any experience when the above people have worked together that indicates how their skills complement each other and result in an effective management team.

 

 

 

 

 

 

 

 

 

 

 

 

 

List the advisors and consultants that you have selected for your venture.  Capable, reputable, and well- known supporting organizations can not only provide significant direct and professional assistance, but also can add to the credibility of your venture.

 

Accountant                                                                                                                                                     

 

Attorney                                                                                                                                                          

 

Banker                                                                                                                                                            

 

Insurance Broker                                                                                                                                            

 

Advertising                                                                                                                                                     

 

Others                                                                                                                                                

Personnel

One of the key elements in any business is PEOPLE.  Explain how you plan to recruit, develop, and maintain your workers.  List the number of employees you will have, as well as their job titles and required skills.

 

 

Identify essential employees, their job titles, and required skills.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Identify the source and your plan to recruit essential employees.

 

 

 

 

 

 

 

 

 

 

 

 

Discuss any training or retraining that you plan for your employees.  Also, discuss any necessary first-aid certification or recertification, etc.

 

 

 

 

 

 

 

 

 

 

 

 Part II:  Financial Data

Capital-Equipment List

This section will help you plan purchases of capital equipment needed to start your business.  Capital equipment is defined as assets which have useful lives of more than one year.  Examples include machines, equipment, vehicles, livestock, tack, gear, and computers.  Describe the equipment, the quantity, whether the equipment is new or used (N/U), the expected useful life, and the cost.  This includes equipment purchased from existing businesses.

 

 

Equipment

Quantity

N/U

Life

Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Cost of Capital Equipment

 

 

$ _______________

 

 

Start-Up Expenses

Start-up expenses are the various costs it takes to open your doors for business.  Some of these will be one-time expenditures, whereas others will occur every year.

 

 

Item

 

Cost

 

 

 

 

 

Total cost of capital equipment (from page 84)

$

 

 

 

 

 

 

Beginning inventory of operating supplies

 

 

 

 

 

 

 

Legal fees

 

 

 

 

 

 

 

Accounting fees

 

 

 

 

 

 

 

Other professional fees

 

 

 

 

 

 

 

Licenses and permits

 

 

 

 

 

 

 

Remodeling and repair work

 

 

 

 

 

 

 

Deposits (public utilities, etc.)

 

 

 

 

 

 

 

Advertising

 

 

 

 

 

 

 

Insurance

 

 

 

 

 

 

 

Bonds

 

 

 

 

 

 

 

Advance permit fees

 

 

 

 

 

 

 

Other expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Start-Up Expenses

 

$ __________________

 

 

Sources and Uses of Financing

This section is another critical financial forecast.  What will be the sources of your initial financing?  The following step of how you will use this financing to buy the assets needed to open your doors for business is equally important, and will be of major interest.

 

Note:  This section will not be used if you own an existing business, unless you're planning a major refinancing and restructuring of your business.

 

On the next page:

 

v   Fill in the cash amounts to be invested by the various owners or shareholders.

 

v   Fill in the market value of noncash assets to be invested by the various owners or shareholders.  Examples include equipment, vehicles, and buildings.

 

v   Fill in the bank loans to your business, both short-term (one year or less) and long-term.

 

v   Fill in the amounts of loans secured by your personal assets (for example, your home).

 

v   Fill in any Small Business Administration loans from any other sources.

 

v   Fill in the amounts of cash used to buy various assets in the Uses of Financing section.

 

v   Fill in the noncash assets contributed by the owner (use the same amounts listed in Sources of Financing).

 

v   Estimate your ``working capital'' needs.  This is an often misused term, since it strictly means ``current assets minus current liabilities.''  However, we use ``working capital'' here to describe that money which you'll need to pay operating expenses for the first few months of business operation until profits are realized.  The number of months working capital depends on the business, but as an absolute minimum you should have three months of expense money in the bank.  You should discuss this with your banker, and you may want to consider a pre-approved loan called a ``line of credit,'' from which you draw funds only when you need to have them.  DON'T SKIP THIS STEP!

 

v   Total both sections (Sources and Uses); they should be equal.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sources of Financing

 

Investment of cash by owners

 

$ ________________________

 

 

 

Investment of cash by shareholders

 

    ________________________

 

 

 

Investment of noncash assets by owners

 

    ________________________

 

 

 

Investment of noncash assets by shareholders

 

    ________________________

 

 

 

Bank loans to business:  short term (one year or less)

 

    ________________________

 

 

 

Bank loans to business:  long term (more than one year)

 

    ________________________

 

 

 

Bank loans secured by personal assets

 

    ________________________

 

 

 

Small Business Administration loans

 

    ________________________

 

 

 

Other sources of financing (specify)

 

  

 

 

 

   ________________________________________

 

    ________________________

 

 

 

   ________________________________________

 

    ________________________

 

 

 

 

 

 

Total Sources of Financing

 

$ _________________________

 

 

 

 

 

 Uses of Financing

 

Buildings

 

$ ________________________

 

 

 

Equipment

 

    ________________________

 

 

 

Initial inventory

 

    ________________________

 

 

 

Working capital to pay operation expenses

 

    ________________________

 

 

 

Noncash assets contributed by owners

(use same amount as in Sources, above)

 

    ________________________

 

 

 

Other assets (specify)

 

  

 

 

 

   ________________________________________

 

    ________________________

 

 

 

   ________________________________________

 

    ________________________

 

 

 

 

 

 

Total Uses of Financing

 

 

$ _________________________

 

Monthly Cash Flow Projection

The cash flow projection is the most important financial planning tool available to you.  If you were limited to one financial statement, the Cash Flow Projection would be the one to choose.

 

For a new or growing business, the cash flow projection can make the difference between success and failure.  For an ongoing business, it can make the difference between growth and stagnation.

 

Your Cash Flow Projection will show you:

 

v   how much cash your business will need;

v   when it will be needed;

v   whether you should look for equity, debt, operating profits, or sale of fixed assets; and

v   where the cash will come from.

 

The cash flow projection attempts to budget the cash needs of a business and shows how cash will flow in and out of the business over a stated period of time.  Cash flows into the business from sales, collection of receivables, capital injections, etc., and flows out through cash payments for expenses of all kinds.

 

A cash flow deals only with actual cash transactions.  Depreciation, a noncash expense, does not appear on a cash flow.  Loan repayments (including interest), on the other hand, do, since they represent a cash disbursement.

 

After it has been developed, use your cash flow projection as a budget.  If the cash outlays for a given item increase over the amount allotted for a given month, you should find out why and take corrective action as soon as possible.  If the figure is lower, you should also find out why.  If the cash outlay is lower than expected, it is not necessarily a good sign.  Maybe a bill wasn't paid.  By reviewing the movement of your cash position you can better control your business.

 

Use the Cash Flow Projection chart on the next page to make sure you don't omit any ordinary cash flow item.  But be sure to add any items that are peculiar to your business.

 

The level of detail you wish to provide is another judgement call.  You may want to provide much more detail than is shown in these examples.  You might benefit from breaking down your total cash flow into a series of cash flows, each representing one profit center or other business unit.  This can be particularly helpful if you have more than one source of revenue.  The accumulated information gained by several projections can be very valuable.

 

 

 

 

 

 

 

 

 


Cash Flow Projection (or Cash Flow Budget) by Month:  Year One

 

 

A

B

C

D

E

F

G

H

I

J

K

L

M

N

1

 

Oct

Nov

Dec

Jan

Feb

March

April

May

June

July

Aug

Sept

TOTAL

 

2

Cash Receipts

 

 

 

 

 

 

 

 

 

 

 

 

 

3

              Sales Receivables

 

 

 

 

 

 

 

 

 

 

 

 

 

4

Wholesale

 

 

 

 

 

 

 

 

 

 

 

 

 

5

Retail

 

 

 

 

 

 

 

 

 

 

 

 

 

6

                    Other Services

 

 

 

 

 

 

 

 

 

 

 

 

 

7

Total Cash Receipts

 

 

 

 

 

 

 

 

 

 

 

 

 

8

Cash Disbursements

 

 

 

 

 

 

 

 

 

 

 

 

 

9

                      Cost of Goods

 

 

 

 

 

 

 

 

 

 

 

 

 

10

                      Variable Labor

 

 

 

 

 

 

 

 

 

 

 

 

 

11

Advertising

 

 

 

 

 

 

 

 

 

 

 

 

 

12

Insurance

 

 

 

 

 

 

 

 

 

 

 

 

 

13

           Legal and Accounting

 

 

 

 

 

 

 

 

 

 

 

 

 

14

               Delivery Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

15

 Fixed Cash Disbursements*

 

 

 

 

 

 

 

 

 

 

 

 

 

16

                 Mortgages (Rent)

 

 

 

 

 

 

 

 

 

 

 

 

 

17

                            Term Loan

 

 

 

 

 

 

 

 

 

 

 

 

 

18

                        Line of Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

19

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

20

Total Cash Disbursements

 

 

 

 

 

 

 

 

 

 

 

 

 

21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22

Net Cash Flow

 

 

 

 

 

 

 

 

 

 

 

 

 

23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24

Cumulative Cash Flow

 

 

 

 

 

 

 

 

 

 

 

 

 

25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26

*Fixed Cash Disbursements

 

 

 

 

 

 

 

 

 

 

 

 

 

27

Utilities

 

 

 

 

 

 

 

 

 

 

 

 

 

28

Salaries

 

 

 

 

 

 

 

 

 

 

 

 

 

29

  Payroll Taxes and Benefits

 

 

 

 

 

 

 

 

 

 

 

 

 

30

                     Office Supplies

 

 

 

 

 

 

 

 

 

 

 

 

 

31

  Maintenance and Cleaning

 

 

 

 

 

 

 

 

 

 

 

 

 

32

Licenses

 

 

 

 

 

 

 

 

 

 

 

 

 

33

                Boxes, Paper, etc.

 

 

 

 

 

 

 

 

 

 

 

 

 

34

Telephone

 

 

 

 

 

 

 

 

 

 

 

 

 

35

Miscellaneous

 

 

 

 

 

 

 

 

 

 

 

 

 

36

                    Total FCD/Year

 

 

 

 

 

 

 

 

 

 

 

 

 

37

FCD/Month

 

 

 

 

 

 

 

 

 

 

 

 

 

38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39

Cash on Hand

 

 

 

 

 

 

 

 

 

 

 

 

 

40

Opening Balance

 

 

 

 

 

 

 

 

 

 

 

 

 

41

+ Cash Receipts

 

 

 

 

 

 

 

 

 

 

 

 

 

42

­ Cash Disbursements

 

 

 

 

 

 

 

 

 

 

 

 

 

43

Total = New Balance

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Start-Up Balance Sheet

Balance sheets are designed to show how the assets, liabilities, and net worth of a company are distributed at a given point in time.  The format is standardized to facilitate analysis and comparison; do not deviate from it.

 

Balance sheets for all companies, great and small, contain the same categories, arranged in the same order.  The difference is one of detail.  Your balance sheet should be designed with your business information needs in mind.  These will differ according to the kind of business you are in, the size of your business, and the amount of information your bookkeeping and accounting systems make available.

 

A sample balance sheet follows.

 

 

Name of the Business

Date (month, day, year)

Balance Sheet

 

 

Assets

 

 

    Current Assets

 

$  ____________________

    Fixed Assets

$  ____________________

 

        Less Accumulated Depreciation

$  ____________________

 

        Net Fixed Assets

 

$  ____________________

    Other Assets

 

$  ____________________

        Total Assets

 

$  ____________________

 

 

 

Footnotes:

 

 

 

 

 

 

 

 

Liabilities

 

 

    Current Liabilities

 

$  ____________________

    Long-Term Liabilities

 

$  ____________________

        Total Liabilities

 

$  ____________________

 

 

 

Net Worth or Owner's Equity

 

$  ____________________

  (Total assets minus total liabilities)

 

 

        Total Liabilities and Net Worth

 

$  ____________________

 

 

 

Footnotes:

 

 

 

 

 

 

 

 

Start-Up Income Statement Projection

Income Statements, also called Profit and Loss Statements, complement balance sheets.  The balance sheet gives a static picture of the company at a given point in time.  The income statement provides a moving picture of the company during a particular period of time.

 

Income projections are forecasting and budgeting tools, estimating income and anticipating expenses in the near to middle-range future.  For most businesses (and for most bankers), income projections covering one to three years are more than adequate.  In some cases, a longer-range projection may be called for, but in general, the longer the projection, the less accurate it will be as a guide to action.

 

While no set of projections will be 100% accurate, experience and practice tend to make the projections more precise.  Even if your income projections are not accurate, they will give you a rough set of benchmarks to test your progress toward short-term goals.  They become the base of your budgets.

 

The reasoning behind income projection is:  Since most expenses are predictable and income doesn't fluctuate too drastically, the future will be much like the past.  For example, if your gross margin has historically been 30% of net sales, it will (barring strong evidence to the contrary) continue to be 30% of net sales.  If you are in a start-up situation, look for financial-statement information and income ratios for businesses similar to yours.  The Robert Morris Associates' Annual Statement Studies and trade association publications are two possible sources.

 

Try to understate your expected sales and overstate expenses.  It is better to exceed a conservative budget than to fall below optimistic projections.  However, being too far under can also create problems, such as not having enough capital to finance growth.  Basing income projections on hopes or unjustified fears is hazardous to your business's health.  Be realistic;  your budget is an extension of your forecasts.

 

A suggested format for an income projection follows on the next page.  The content as shown in the sample may have to be modified to fit your particular operation, but do not change the basic form.

 


Income Projection by Month:  Year One

 

 

A

B

C

D

E

F

G

H

I

J

K

L

M

N

 

1

 

Oct

Nov

Dec

Jan

Feb

March

April

May

June

July

Aug

Sept

TOTAL

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

Wholesale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

Retail

 

 

 

 

 

 

 

 

 

 

 

 

 

6

Total Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

Cost of Materials

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

                    Variable Labor

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

   Cost of Goods Sold                     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12

Gross Margin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

           

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15

 Utilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16

                 Salaries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17

  Payroll Taxes and Benefits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18

               Advertising

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19

Office Supplies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20

Insurance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21

Maintenance and Cleaning

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22

Legal and Accounting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23

Delivery Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24

Licenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25

Boxes, Paper, etc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26

Telephone

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27

Depreciation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28

Miscellaneous

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29

  Rent

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30

Total Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31

  

 

 

 

 

 

 

 

 

 

 

 

 

 

32

Other Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

33

              Interest (Mortgage)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34

Interest (Term Loan)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35

Interest (Line of Credit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

36

Total Other Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

37

Total Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39

Net Profit (Loss) Pre-Tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 Part III:  Historical Financial Reports for Existing Business

Each applicant is required to submit all four items listed below. Failure to receive these items may eliminate the response from further consideration.

 

____ Balance sheet (past three years)

 

____ Income statement (past three years)

 

____ Tax returns (past three years)

 

____ Current credit report from major credit bureau

 


 

 Part IV:  Supporting Documents

Each applicant is required to submit all five items listed below. Failure to receive these items may eliminate the response from further consideration.

 

____ Personal résumés of business owners, officers, and partners

 

____ Personal financial statements of business owners, officers, and partners

 

____ Bank or investor letters of intent to finance project

 

____ Copies of business leases pertinent to this business

 

____ Copies of all pertinent existing permits or licenses applicable to this business

 


 Part V:  Appendices

Legal Organization

There are several ways in which your business can be legally organized.  To determine the best one for you and your organization, you need to seek competent legal and tax advice.  To give you a general frame of reference, the more popular forms and their reasons are outlined below.  Business Start-Up Kits and information on registration, licensing, and permit requirements can be obtained in Colorado by calling the Business Assistance Center Hotline:  592-5920 in Denver, or (800) 333-7798 outside the Denver area.

Sole Proprietorship

A sole proprietorship is a business owned by one person.  This form of business is regulated by the state only in that some states (including Colorado) require you to register your trade name to do business as a sole proprietor.  You do not have to register with the state if you are operating your business under your own full legal name.  (Note:  You must be licensed where required, and pay all appropriate taxes.  You should also plan to maintain a separate checking account for your business, even if using your own Social Security number).

Advantages

 

v   Simple to start.

 

v   Easy to dissolve.

 

v   Owner makes all management decisions.

 

v   Pay only personal income tax; business entity not taxed separately.

Disadvantages

 

v   Unlimited liability (owner legally liable for all debts, claims and judgments).

 

v   Difficulty in raising additional funds.

 

v   No one to share the management burden.

 

v   Impermanence (company can't be sold or passed on; however, you may sell or pass on assets of the company).

General Partnership

A partnership is an association of two or more persons to carry on as co-owners of a business for profit.  Some states require that you register your name if it is a trade name (not your full legal name).  You must file state and Federal ``information returns,'' but business income and losses flow through to the partners' personal taxes.  The business pays no separate income taxes.  Partners may share the profits of the business (and the losses) on an equal basis, or may pro rate the proceeds as set forth in a Partnership Agreement.  Whichever way you determine to share in the business, you need to have a written Partnership Agreement outlining the ownership, responsibilities, and eventualities of dissolution or liquidation for the business.

Advantages

 

v   Simple to start.

 

v   Fairly easy to dissolve.

 

v   Additional sources of capital from partners.

 

v   Broader management base.

 

v   More opportunity for each partner to specialize.

 

v   Tax advantages: no separate income tax.

 

v   Limited outside regulation, compared to a corporation.

Disadvantages

 

v   Unlimited financial liability for all general partners (some partners' personal debts can even be charged to the business).

 

v   Difficulty if raising outside capital.

 

v   Divided authority.

 

v   Continuity problems (business dies when any partner leaves or dies, unless succession has previously been spelled out in a Partnership Agreement.  Partnership terminates in the event of a personal bankruptcy on the part of any partner).

 

v   Difficult to find suitable (compatible) partners.

 

v   One partner may be responsible for the actions of another partner, regardless of whether  that partner had prior approval.

Corporation

There are two types of corporations generally recognized today:  a regular ``C'' corporation, organized under the laws of the state in which you do business; and an ``S'' Corporation, so designated by the IRS and not necessarily recognized by your state.

 

A corporation is a business entity separate and distinct from its owner(s) or shareholder(s).  You must file incorporation papers with the state of your choice.  The corporation must file annual reports with the Secretary of State, and may have to file separate quarterly income tax returns.  The corporation exists forever, can be bought and sold, and is regulated by the state.  In Colorado,  information about forming a corporation can be obtained from the Secretary of State's Office, 1560 Broadway, Denver; (303) 894-2251, or from the Business Assistance Center.

 

 

 

``C'' Corporation Advantages

 

v   Limited liability (as long as you act like a corporation­which means having a separate checking account and  phone number, paying interest on any borrowed money, keeping up a corporate record book, filing annual reports, meeting with your Board of Directors at least annually, etc.).

 

v   Easier to bring in additional capital.

 

v   Ownership is transferable.

 

v   Company has continuous, perpetual existence.

 

v   Possible tax advantages (seek adequate advice from a tax professional).

 

v   Gives you more sense of permanence, thus more ``weight,'' in the business world.

``C'' Corporation Disadvantages

 

v   More expensive to organize.

 

v   Highly regulated.

 

v   Extensive record-keeping requirements.

 

v   Double taxation (corporation pays its own income taxes; if you pay yourself a salary or a dividend, you also pay personal income taxes).

 

v   Shareholders/Board of Directors may counter your management decisions.

``S'' Corporation Advantages

 

v   Filing a Subchapter Selection with the Internal Revenue Service allows you to be taxed on your corporate profits through your personal tax return.

 

v   You still maintain the limited liability of a corporation.

 

v   If you have additional personal income against which to deduct company losses, or if your personal tax rate is lower than the corporate tax rate, this form may be advantageous for you.  Again, please seek professional tax advice to make this determination.

``S'' Corporation Disadvantages

 

v   There are some restrictions on S Corporations, mainly in how you can sell your shares.  You can have a maximum of 35 shareholders, all of whom must be U.S. citizens, and be individuals (not corporations).

 

v   You must request permission from the IRS to be an S Corporation, and generally, must maintain the calendar year as your fiscal year.

 

We suggest that, if you intend to be an ``S'' Corporation, you do so at the inception of your incorporation to meet IRS deadlines, and to be able to pass all losses on to the shareholders.

Limited Partnership

In a Limited Partnership, there are two kinds of partners:  general partners, who carry full liability; and limited partners, who carry limited liability.  Limited partners must make known, through filing with the Secretary of state, that they indeed are limited partners, and they may not participate in the day-to-day management of the business.  Again, as in the ``S'' Corporation, profits from Limited Partnerships are taxed through each partner's personal tax return.  Limited partnerships are popular in industries where a great deal of ``up-front'' money is needed for projects that are expected to produce a high return, such as in real estate, energy, movie production, and sports teams.

Limited Liability Company (LLC)

While wearing the corporate form, essentially, an LLC is similar to a Limited Partnership, except the general partner also carries limited liability.  Profits are taxed through individual owners' personal tax returns.  The advantage of this form over an ``S'' Corporation is that other corporations may be owners, and the Limited Liability Company may also hold 100% ownership in subsidiary companies.  If you are a small corporation, but have interest from institutional or corporate investors, this form of organization may hold distinct advantages for you.

 

Be aware, however, that the LLC is a relatively new business form.  Legal precedents have not yet been set to outline clearly all the legal and tax ramifications of this form of organization.  If interested in becoming an LLC, you are strongly urged to seek competent, professional legal and tax advice.

Break-Even Analysis

You certainly don't want to sell your product or service below cost, expecting to make it up in volume!  To avoid this difficulty, you need to know how much to sell each month in order to stay afloat, or to make a certain amount of profit.

 

Separating your costs into two categories, fixed costs and variable costs, will help with this.  Some costs won't readily fall into one or the other category.  These are termed ``semi-variable.''  If you wish to get very specific, there are some more sophisticated techniques to help you sot these costs out.  Generally, however, place the cost into the category to which it most conforms.

Variable Costs

These costs vary directly with the sale of your product or service: costs you won't have if you don't make the sale. (If I rent motor boats, I won't have gas costs if I don't rent any boats.  The gas costs are variable costs.)  Generally, materials and labor to make the product or produce the service are considered variable costs.  Note: Just because a cost changes from month to month does not make it a ``variable cost.''  Ask yourself, ``If I didn't have the sale, would I have the cost?''

Fixed Costs

If you answered ``Yes'' to the above question, you have a fixed cost.  These are costs you will have to pay regardless of whether you sell your product.  In the example above, gas costs are variable, but the monthly interest payment for the motor boat is fixed.  Telephone costs are usually considered fixed costs, as well.  Other examples of fixed costs might include automobile expenses, administrative salaries, rent, bank charges, insurance, and utilities.

Breaking Even

Since variable costs vary with sales, and we need to cover fixed costs as well, a formula has been developed that helps us determine if we are selling below cost.

 

Sales Price Per Unit Sold minus Variable Costs Per Unit Sold will give us the Contribution Margin (per unit sold).  This tells us how much we have left over on each sale to contribute to our fixed costs.  If we know what those fixed costs are for each month, we can divide them by the Contribution  Margin to see how many units we have to sell.

 

 

(Sales Price) - (Variable Costs) = Contribution Margin

 

(Fixed Costs) ÷ (Contribution Margin) = Break-Even Point in # of Units that Must Be Sold

 

 

Another method is to look at the total dollar volume you must sell instead of the number of units.  This is done by expressing the Contribution Margin as a percentage of the Sales Price and then dividing the Total Fixed Costs by that percentage.

 

 

(Contribution Margin) ÷ (Sales Price) = % of Sales Price

 

(Total Fixed Costs) ÷ (% of Sales Price) = Break-Even Point in Dollar Volume that Must Be Sold


Example of Break-Even Point

The Bar-O Guiding Company wants to sell three-day fly-fishing trips for $1,250 per person.  The variable costs of the trip amount to $475 per person.  The fixed costs of licensing, insurance, Forest permit, etc., is $10,000.  How many trips will the Bar-O Guiding Company need to sell to break even?  How much total dollar volume must it sell?

 

 

Determining # of Units to Break Even

 

 

   Step 1:

    Example                            

Your Figures

     Sales Price

$  ____________________

$ ____________________               

      - Variable Costs

$  ____________________

$ _____________________  

        = Contribution Margin

$  ____________________

$  ____________________

   Step 2:

 

 

      Fixed Costs

$  ____________________

$  ____________________

      ÷ Contribution Margin

$  ____________________

$  ____________________

= Break-Even-Point # of Units

#  ____________________

#  ____________________

 

 

 

Determining Dollar Volume to Break Even

 

 

 

   Step 3:

 

 

      Contribution Margin

$  ____________________

$  ____________________

     ÷ Sales Price

$  ____________________

$  ____________________

= % of Sales Price

%   ___________________

%   ___________________

   Step 4:

 

 

      Fixed Costs

$  ____________________

$  ____________________

     ÷ % of Sales Price

%   ___________________

%   ___________________

= Break-Even-Point Dollar Volume

$  ____________________

$  ____________________

 

 

 


 Available Business Resources

The following offices are available as resources to those interested in responding to a prospectus that offers an opportunity to supply a recreation activity to the Forest visitor.

 

 

USDA Forest Service

Nebraska NF & Associated Units

Rocky Mountain Regional Office

125 North Main

740 Simms, P.O. Box 25127

Chadron, NE  69337-2118

Lakewood, CO  80225

(308) 423-0300

(303) 275-5350

 

 

Pike and San Isabel NFs

Arapahoe and Roosevelt National Forests

1920 Valley Drive

Administrative Offices

Pueblo, CO  81008

240 West Prospect Road

(719) 545-8737

Fort Collins, CO  80526-2098

 

(970) 498-1100

San Juan - Rio Grande NFs

Visitor Information/Map Sales

1803 West Highway 160

1311 South College Avenue

Monte Vista, CO  81144

Fort Collins, CO  80526-2098          

(719) 852-5941

(970) 498-2770

Durango Office

 

701 Camino del Rio

Bighorn NF

Durango, CO  81301

1969 South Sheridan Avenue          

(970) 247-4874

Sheridan, WY  82801

 

(307) 672-0751

Shoshone NF

 

808 Meadow Lane

Black Hills NF

Cody, WY  82414

Rural Route 2, Box 200

(307) 527-6241

Highway 385 North

 

Custer, SD  57730-9501

White River NF

(605) 673-2251

9th & Grand, P.O. Box 948

 

Glenwood Springs, CO  81602

Grand Mesa, Uncompahgre & Gunnison NFs

(970) 945-2521

2250 Highway 50

 

Delta, CO  81416-8723

 

(970) 874-7691

Office of Outfitter Registration

 

1560 Broadway, Suite 1340

Medicine Bow - Routt NFs

 Denver, CO  80202          

2468 Jackson Street

(303) 984-7778

Laramie, WY  82070

 

(307) 745-2300

 

Steamboat Springs Office

Colorado Outfitters Association

29587 West U.S. 40, Suite 20

P.O. Box 440021

Steamboat Springs, CO  80487

Aurora, CO  80044

(970) 879-1870

(303) 368-4731

 


 

 

Colorado Small Business Development Centers

 

Adams State College                                                      Mesa State Community College

School of Business, Room 105                                       Western Colorado Business Development Corp.

Alamosa, CO  81102                                                      304 West Main Street

(719) 589-7372                                                             Grand Junction, CO  81505-1606

                                                                                    970) 243-5242

Community College of Aurora

9905 East Colfax Street                                                  Aims Community College

Aurora, CO  80010-2119                                               Greeley and Weld Chamber of Commerce

 (303) 341-4849                                                            902 7th Avenue

            (Satellite)                                                          Greeley, CO

            420 Jerry Street                                                            (970) 352-3661

            Castle Rock, CO  80104                                    

            (303) 814-0936                                                 Red Rocks Community College

                                                                                    Lakewood SBDC

Boulder Chamber of Commerce                                      1726 Cole Boulevard

2440 Pearl Street                                                           Building 22, Suite 310

Boulder, CO  80302                                                       Golden, CO  80401

(303) 442-1475                                                             (303) 277-1840

                                                                                   

University of Colorado at Colorado Springs                      Lamar Community College

Pikes Peak Community College                                      2400 South Main Street

CITTI Building                                                               Lamar, CO  81052

1420 Austin Bluffs Parkway                                            (719) 336-8141

Colorado Springs, CO  80933                                                    

(719) 592-1894                                                             Pueblo Community College        

                                                                                    900 West Orman Avenue

Colorado Northwestern Community College                      Pueblo, CO  81004

50 College Drive                                                            (719) 549-3224

Craig, CO  81625                                                                      (Satellite)

(970) 824-7078                                                                         3080 East Main

                                                                                                Cañon City, CO  81212 

Delta Montrose Vocational School                                               (719) 275-5335

1765 U.S. Highway 50                                                              

Delta, CO  81415                                                           Trinidad State Junior College     

(970) 874-8772                                                             136 West Main Street

                                                                                    Trinidad, CO  81082

Denver SBDC                                                               (719) 846-5644

1445 Market Street                                                       

Denver, CO  80202                                                        Front Range Community College

(303) 620-8076                                                             3645 West 112th Avenue

                                                                                    Westminster, CO  80030

Fort Lewis College                                                         (303) 460-1032

1000 Rim Drive                                                                          (Satellite)

136-G Hesperus Hall                                                                  125 S. Howes St., Ste. 105

Durango, CO  81301-3999                                                         Fort Collins, CO  80526

(970) 247-7009                                                                         (970) 498-9295

                                                                                   

Morgan Community College                                           

300 Main Street                                                            

Fort Morgan, CO  80701                                   

(970) 867-3351

                                                                                    Lead Center

Colorado Mountain College                                             Colorado Office of Business Development

215  9th Street                                                               1625 Broadway, Suite 1710

Glenwood Springs, CO  81601                                        Denver, CO  80202

(970) 928-0120                                                             (303) 892-3809