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Appendix A: Sample Business Plan

This sample is written to help you better understand the directions for writing a business plan. It is written in the first person (using I) because it is for the use of the owner only. If you are using the document to obtain a loan, then write the plan in the third person, referring to yourself as “him” or “her.”

Other help is available from the Small Business Administration in person and on the Internet. Software such as QuickBooks and the CD-ROM included with this book offer plenty of useful information when it comes to the bookkeeping required to operate a small business.

Visit www.sba.gov to learn more about writing a business plan. The site provides a step-by-step guide to writing a plan and gives examples for many industries.

Herbs, Herbs, Herbs

555 Any Road
Anytown, Any State

Phone: 555-555-5555

E-mail: Herbs@anyserver.com
Website: www.herbsanytown.com

Part 1: Table of Contents
Part 2: Executive Summary
Part 3: Business Development
Part 4: Description of Market
Part 5: Description of Products and Services
Part 6: Organization and Management
Part 7: Marketing and Sales Strategy
Part 8: Financial Management
Part 9: Appendices

Part 1: Table of Contents

Part 2: Executive Summary

The purpose of the business named Herbs, Herbs, Herbs is to provide a source of a wide variety of fresh herbs to the Anytown community. The business will primarily serve those who wish to make their own herb gardens to use the herbs for cooking and in improving their landscapes. By offering a wider variety of herbs the community can use, it is our hope to contribute to the health of the community by enabling people to cook with less reliance on salt and sugar and more on herbs for flavor in their foods.

Products

This business will sell herb plants, 17 varieties in the first year, and expand after that to other varieties, depending on community demands. When I have enough products in three basic categories, flat parsley, green globe basil, and rosemary, I intend to market cut herbs from these plants to retail customers and to local restaurants.

Part 3: Business Development and Vision

Mission statement: To provide the best quality herbs and expand the knowledge and use of herbs in greater Anytown while promoting healthy cooking choices by expanding the use of herbs in the kitchen rather than sugar and salt.

Company

This business will be a sole proprietorship. All necessary licenses and zoning variances have been obtained. Insurance will be an add-on to my current homeowners policy with Nationwide Insurance Company, including an increase in liability as well as coverage for the business materials. The insurance change goes into effect next month, which is two months before the scheduled opening of the business.

I have obtained a zoning variance from the city of Anytown to allow retail customers to visit my retail location between the hours of 9 a.m. to 5 p.m. on Saturday and Sunday as long as access is on the road in back of the house and parking is done in the school parking lot directly behind the house. All neighbors affected by traffic agreed to this variance and several testified on my behalf at the zoning hearing.

The garage attached to my home has been converted into the shop office and a small classroom. This variance was also approved by the city. Parking for my personal vehicles and business vehicle (a used truck) will be on the street, which is permitted zoning in the community.

There will be two signs directing customers to the location of my business. One will be on the garage, and the other will be at the back of the business near the school parking area. Magnetic signs will also be on the personal and company vehicles parked outside of my home.

Goal for the business

My objectives for the first year of the business are to:

1. Sell 80 percent of startup stock of plants.

2. Expand the number of herb varieties offered by the end of the year.

3. Be able to build a greenhouse (60 by 80 feet with plastic sheeting) by the end of the first six months and at that time, begin to sell herbs on a year-round basis to restaurants in the area.

4. Expand product line to garden gloves and hand tools.

Background of principal

My résumé is enclosed in the Appendix. I have had a home garden for many years and cooked with herbs extensively for the past ten years. I attended a culinary school program on using herbs in the kitchen at Southeast Community College in Washington, D.C., in 1995. Also during this time, I apprenticed for one month at DeBaggio Herbs in Chantilly, Virginia. I am a member of the Herb Society of America. To learn about growing herbs in the southeast, I attended the Georgetown Herb Society’s conferences and local courses.

Part 4: The Market

I have researched the market for this product and found there is indeed more interest. (Note to readers: The data in this sample are made up.)

Market

There are two primary markets for this company’s product: people who like to garden and who want to grow the herbs for their aesthetic as well as culinary value, and cooks who grow herbs for use in the kitchen. I plan to reach these markets through general publicity for the company and networking with various other businesses in the community. I also hope to gain business by establishing myself as an expert through speaking engagements at garden clubs. There is also a market in selling herbs to local restaurants, though this market may not be as large as the two primary markets.

General and local market signs

Nationwide, there is a growing interest in gardening with a specialization in herbs. This is substantiated by the Gardening Club of America’s 2012 report and forecast on gardening. I have contacted the Anytown garden club to substantiate this interest is also found locally. General interest in cooking with more complex herbs has increased. This information has been verified in a number of ways. In the June 2011 edition of the National Restaurant Association, it says, “More restaurants are using local sources for herbs and greens to create international cuisine as well as local dishes.” Overall, the number of magazines on herbs and cooking published nationally has increased in the past few years.

I have substantiated local interest by talking to local cooking clubs and by investigating the number of cooking magazines carried at local magazine retailers — all of which showed a marked increase in the number of cooking magazines in the past five years.

My competitive edge

Although major stores such as Walmart®, Target®, Home Depot®, and Costco® in this area also sell herbs, they sell only three or four varieties and only in the spring. The staff members at major stores are not always specialists in herbs and herb growing. They sell herbs that come from large wholesalers in other parts of the country.

My competitive edge will be in my knowledge and my herb selection. My herbs will be locally grown, better cared for, and sold at a lower cost (if possible); plus, I will offer a larger variety of herbs. Customers will receive sound advice from me and will leave knowing more about herbs than when they first approached me. In the future, I hope to hold classes to teach locals about herbs.

Part 5: Description of Products and Services

When the business opens, I plan to offer 17 different herbs in pots in a variety of sizes priced at $1, $2, and $3. The pots offered with these plants will be simple, disposable containers. The smallest is the size of an 8-ounce paper cup, the next is a 3-inch pot, and the last is a 6-inch pot. We also plan to sell larger ceramic pots and potting soil as well as small packages of common fertilizer.

List of herbs:

Additional varieties of herbs will be added according to customer demand. The above list was selected after talking with local garden clubs and conducting an informal survey of what other stores in the area were offering. Our offerings will be more extensive and will give gardeners access to plants they have not been able to purchase in Anytown before this — and at a better price.

Services

In addition to the herb plants, the business will allow garden groups to meet in the back room behind the office at no charge (at a limit of 20 people, once per month). The room limit is set by the fire marshal. Free herb talks will be offered to garden clubs at their sites, and free talks on herbs will be offered to elementary schools in the area. These classes will acquaint children with the idea of using herbs in cooking and will get them interested in the healthful activity of gardening.

Herb craft classes will be held in the back room at a charge of $10 per person. These classes will be advertised on the business website, through the Anytown Chamber of Commerce, and with press releases to the local media outlets.

Increased product and service offerings

Other products and services will be added as customer demand increases. Planned product increase includes dishes for multiple herb plantings, larger pots, garden tools, garden gloves, herb-related books, and crafts.

Part 6: Organization and Management

The business to be known as Herbs, Herbs, Herbs (www.herbsherbsherbs.com) is scheduled to open on April 1, 2013. The business is registered and licensed and will be a sole proprietorship in the name of Sue Wilson of Anytown. The business operates on my home property. Potential expansion to the empty lot next door is not within the scope of the first year of planning. The lot is owned by a family member, so it is possible expansion to this land may occur during the next five years.

I will operate the business on a part-time basis, opening it only on Saturdays and Sundays to the public. I will keep my full-time job as a marketing analyst for Cookies Incorporated, but after work, I will turn my attention to the herb business. Tending to the plants and keeping up with accounting will be a daily obligation.

Customers will be able to walk through the garden area to see the plants. The garden can be entered using the rear access to the property, which will actually be the front of the business. The former garage (already remodeled into a living area) will be the office and classroom space.

Office equipment was purchased secondhand from the accounting firm Big Accounting that my brother-in-law owns. At the present time, an electrical survey by a local firm, Elgin Electrical, says the amount of electricity used by the business will probably mean an increase of only $15 per month to our home account. This small amount does not warrant a separate line of electricity, and billing for the business will stay on my home bill. The telephone for the business will be my personal cell phone. I have already worked with the cell phone company to arrange a plan that will accommodate the additional number of minutes. Half of the cost will be apportioned to the business, which will make the cost for telephone $30 per month. The garage does not have a separate meter at this time. The garage is heated and cooled by an extended duct from the house.

The water company has installed a separate meter for water for the business and for any outside watering I may do at the home. The installation cost was $100, and the estimate for monthly charges to water all of the plants is $30 per month.

My work at Cookies Incorporated provides the necessary health and other benefits for me. My savings from my full-time job has provided most of my startup capital. In addition, my boss at Cookies Incorporated has agreed to sell me a truck at a discount. The truck, formerly used in their business, will cost me $5,000 total. I will pay off this debt at the rate of $100 a month with no interest.

Occasionally, extra help with the gardening and in the transport of heavy materials will be provided by Don Wilson, my husband, at no charge. Don Wilson is a certified public accountant and will handle the bookkeeping and accounting as well as the taxes for the business, all at no charge. Don Wilson is employed by Big Accounting and will retire at the end of this year from that company.

Future expansion considerations may include adding a greenhouse on the far edge of the property or on the lot next door, which would be rented to the business at a nominal cost of $1 per year. I plan to spend an estimated $7,000 on the following items: a 25-by-50-foot greenhouse made out of polycarbonate with plastic sheeting, a heater;, additional hosing, a portable mister, benches for the potted plants, pots, trays, soil, seeds, and decking or gravel to keep the ground dry for customers walking through the structure. The cost of the building will be met by savings from the profits of the business, which will cover $100 of the rental rate for the first three months and $200 for the next nine months. I will obtain a loan from the local bank for the balance of the cost.

Startup Requirements

Startup Expenses

Legal (permits, fees, zoning variance)

$400

Stationery, including brochures and business cards

$250

Insurance (additional cost to current homeowner policy)

$200

Website development

$300

Website annual cost

$250

Electrical additional cost per month

$15

Electrical survey

$100

Water meter

$100

Monthly additional water cost

$30

Used truck

$5,000

Purchase of plants, pots, and other stock

$1,500

Membership in local chamber of commerce

$255

Total startup expenses

$8,400

Startup Assets

Cash required

$10,000

Startup inventory

$0

Other current assets

$500

Long-term assets (retirement fund after penalty for cashing if I must)

$15,000

Total assets

$25,500

Liabilities and Capital

Liabilities

Current borrowing with interest

$0

Long-term liabilities

$0

Accounts payable (outstanding bills)

$0

Other current liabilities (interest-free truck loan)

$5,000

Total liabilities

$5,000

Capital

Planned investment

Sue Wilson

$10,000

Other

$0

Additional investment requirement

$0

Total planned investment

$10,000

Loss at startup (startup expenses)

($8,500)

Total capital

$1,500

Total Capital and Liabilities

$10,000

Total Funding

$10,000

Part 7: Marketing Strategy

The initial survey of garden groups was given to determine the herbs that would be included in the offerings for the first year. This would ensure I offer products that most appeal to the local customer base.

The target market is divided into two main segments: gardeners and cooks. The category of cooks includes individuals who cook both professionally and for leisure. I plan to expand my market among restaurants and those who like to cook by joining the local chamber of commerce and advertising my business to their chefs. I have also scheduled interviews with a local radio cooking show and on the morning television show. I will speak on the value of herbs in cooking.

To reach the gardening market, I have called all of the local garden clubs and offered to give free lectures on herbs. I am in the process of approaching women’s groups and other local service groups as well.

Market Analysis

Potential Customers

Individual Consumers/Gardeners

30%

Individual Customers

Cooking

50%

Restaurants

15%

Other

5%

Target market segment strategy

Individuals: The gardening and cooking-oriented customers will be buying from Herbs, Herbs, Herbs at the business site in Anytown. In addition, several farmers markets and festivals allow booths. Many have offered free space for the first year. If Don Wilson is available to work these festivals, he will provide his assistance for free. This will expand the customer base by creating more exposure for the business.

Restaurants: From recent telephone calls, I have about 20 restaurants interested in purchasing fresh cut herbs. Three of them will use herbs during season and then go to other sources, but the other 17 want a guarantee of the business being able to supply the herbs during the entire year. I will grow these herbs indoors in order to accommodate them during the colder weather. I will not start supplying herbs to those 17 restaurants until I have sufficient supply, about six months into the business.

When I calculated the required amount to supply restaurants, my estimations led me to believe during season there will be a surplus of cut herb product, which I will sell to individuals at the farmers markets, festivals, and at the retail site.

My competition

Supermarkets sell potted herbs on a limited basis. Their prices are higher than mine, and the quality is usually lower. In addition, supermarkets generally sell plants only in early spring and sell a limited variety. Their cut herbs are of a larger variety, but they are pricey.

Similar local sources: At present, there are none in the Anytown area.

Large distributors with home and garden sections like Costco® and Target® are nationwide stores. These outlets usually only carry herb plants in the spring and, at least in this area, only carry a limited variety of plants. Their quality and price are good, but the staff rarely has extensive knowledge about herbs.

Sales strategy

Herbs, Herbs, Herbs will use a strategy of getting the business name out in the community through a variety of personal talks, press releases, networking with other business owners at the chamber of commerce, and a ribbon-cutting ceremony on opening day.

The website will give the business presence on the Web and will hopefully serve as a resource for local gardeners that will encourage them to come and buy at the storefront.

Maintaining relationships with customers will be done with an e-newsletter and a card file on each customer’s needs and interests. Keeping a file will also help determine what herbs should be added to the business.

Restaurants will be contacted on a regular basis to maintain relationships with the chefs and keep abreast of their needs.

Sales forecast

The first month of 2013 will be used to begin germinating the plants in the home basement and to get marketing underway with advance publicity and speaking engagements. There will not be sales activity until month four, when the first herbs will be sprouting. Month five will see a steady increase in production and sales, and this will continue until month nine, when the consumer sales will decrease due to the closing of the farmers markets. From month nine to 12 of the first year, business will be in decline with individual customers. The business should swing up for restaurants buying cut herbs that will continue to be grown over the winter. At month 12, I will assess the long-term market to see if money needs to be borrowed to build the greenhouse in year two. I will not be taking a salary, but even so, it is not anticipated the business will make a profit until year three, even if a greenhouse is not built.

Sales Forecast

Sales

Year 1

Year 2

Year 3

Individual Consumers (both culinary and garden focused)

$3,000

$5,000

$10,000

Restaurants

$1,000

$3,000

$6,000

Total Sales

$4,000

$8,000

$16,000

Direct Cost of Sales

Year 1

Year 2

Year 3

Individual Consumers

$2,000

$4,000

$7,000

Restaurants

$1,000

$1,500

$2,000

Subtotal Direct Cost of Sales

$3,000

$4,500

$9,000

Annual overhead costs

There is no increase anticipated, but costs will be incurred from the first month of year one even though the business will not officially open until April.

Insurance:

$400

Electricity:

$180

Water:

$360

Loan on truck:

$1,200

Chamber membership:

$250

Publicity, other:

$150

Website:

$250

Total:

$2,790

Milestones for Year One

1. November 2012: Business plan completed. I do not need a plan for financing, but it will set out the goals and objectives and give me benchmarks by which to judge the success of the operation as it grows.

2. April 2013: First herb sales.

3. September 2013: The end of the farmers market season and the push to continue the restaurant supply through indoor growing.

4. December 2013: Evaluate the need for a greenhouse.

Part 8: Financial Analysis

Important assumptions

For the first three years, taxes on the business income will be paid out of my salary from my full-time job.

The break-even analysis indicates the monthly sales needed to break even for other expenses of the business. A break-even point is the point at which the business starts to make enough money to sustain itself and cover the initial investment costs for starting the business.

Sales tax collected for the state will be put aside, and not counted in revenue, to be sent to the state on a regular basis. Sales tax will be collected on potted plants and other items sold in the retail store as required. Due to contracts with the providers, there will be no increase in the fixed costs for the first three years of the business. The annual break-even point will be reached in year two.

Projected profit and loss

The following chart will indicate projected profit and loss. Our losses at startup are evident, as is the turn of the corner in July, when we become profitable.

Pro Forma Profit and Loss

Year 1

Year 2

Year 3

Sales

$4,000

$8,000

$16,000

Direct Cost of Sales

$3,000

$4,500

$9,000

Overhead Expenses (See page__ for detail) same for each year 1-3

$2,790

Net Profit

($1,790)

$710

$3,210

Projected cash flow

Cash Received

Year 1

Year 2

Year 3

Cash from Operations

Cash Sales

$4,000

$8,000

$16,000

Sales Tax, VAT, HST/GST Received

$0

$0

$0

New Current Borrowing

$0

$0

$0

New Other Liabilities (interest-free)

$0

$0

$0

New Long-term Liabilities

$0

$0

$0

Sales of Other Current Assets

$0

$0

$0

Sales of Long-term Assets

$0

$0

$0

New Investment Received

$0

$0

$0

Expenditures

Year 1

Year 2

Year 3

Expenditures from Operations

Cash Spending

$3,000

$4,500

$9,000

Bill Payments

$2,790

$2,790

$2,790

Subtotal Spent on Operations

$5,790

$7,290

$11,790

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out

$0

$0

$0

Principal Repayment of Current Borrowing—included in total above

$1,200

$1,200

$1,200

Other Liabilities Principal Repayment

$0

$0

$0

Long-term Liabilities Principal Repayment

$0

$0

$0

Purchase Other Current Assets

$0

$0

$0

Purchase Long-term Assets

$0

$0

$0

Dividends

$0

$0

$0

Subtotal Cash Spent

$5,790

$7,290

$11,790

Net Cash Flow

(1,790)

$710

$3,210

Cash Balance

0

$710

$3,210

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