Also discuss physical location for the production of your product or service. Justify this decision as well, by talking about savings in rent or lease, convenience to suppliers, labor, materials, or other factors important to your business. An investor wants to know that a business does not intend to sell "Ice to Eskimos," simply because the ice is cheaper to make in the Arctic regions! Cost of Production and Development Present and explain a design and development budget. This budget should include the cost of the design of a prototype as well as the expense to take it into production. Testing and evaluation expenses should also be included. Be sure to include labor, materials, consulting fees, and the cost of professionals such as patent attorneys. While the cost of production section may be more readily apparent to product companies, this section is important for all businesses. Service businesses have expenses such as consulting services, training for principals, and preparation of documentation materials, among many other things. Labor Requirements The management team is outlined in the management section. This section provide details of other labor one will need to start up and run the business. Address how many people are required and what skills they need to possess. Be sure to cover the important issues such as labor pool, recruitment, training, cost of labor, and future labor pool. Training and evaluation of employees, and having enough support personnel to accomplish the mission of the business must be planned for. While having all the other elements of a business are necessary, not having the employees to perform duties of the company can be the death of a company. Any cooperative agreements with colleges, training schools, and state departments of labor should be included in the plan. For example, a treatment center for emotionally disturbed children, located some distance from centers of education, would have a difficult time recruiting professional employees. This may drive salary requirements for recruitment out of range. Expenses and Capital Requirements One must also create at least three financial forms that will build a foundation for the Financial section of your plan: operating expenses, capital requirements, and cost of goods. Generate spreadsheets for the year in which one establishes the business as well as projections for two years or more after.
Operating Expenses By creating a financial form called Operating Expenses, you pull together the expenses incurred in running your business. The attention of a business consultant and an accountant is most needed in these preparations. All expenses, the obvious as well as the hidden, must be considered. An experienced consultant can ask the questions that a new entrepreneur would not think of. Capital Requirements