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How To Start A Consumer Finance Business

Modified: December 30, 2023

Learn how to start a consumer finance business and navigate the world of finance with our comprehensive guide. Empower your financial future today!

• Consumer Finance

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Table of Contents

Introduction, understanding the consumer finance industry, market research and analysis, developing a business plan, setting up legal and regulatory requirements, obtaining financing, establishing operations and infrastructure, developing products and services, marketing and advertising strategies, hiring and training staff, risk management and compliance, building customer relationships, continuous improvement and growth strategies.

Welcome to the world of consumer finance! This dynamic industry serves as the backbone of our economy by providing individuals and households with the necessary funds to meet their financial needs. Consumer finance businesses play a vital role in facilitating personal loans, credit cards, auto financing, and other forms of credit to help people make major purchases, cover unexpected expenses, or simply manage their day-to-day expenses.

If you’re considering starting a consumer finance business, you’re stepping into a sector with immense potential for growth and profitability. However, it’s important to note that this industry is highly regulated and competitive. It requires a comprehensive understanding of financial services, compliance with legal and regulatory requirements, and strategic planning to succeed.

In this article, we will guide you through the essential steps to start a consumer finance business. From conducting market research to establishing operations, developing products and services, and implementing marketing strategies, we will cover all the key elements you need to consider.

It’s important to note that starting a consumer finance business requires a deep understanding of finance, lending practices, risk management, and compliance. It’s recommended to have a background or experience in finance or work closely with financial experts and legal advisors to ensure your business is set up for success.

So, if you’re ready to embark on this rewarding entrepreneurial journey, let’s dive into the world of consumer finance and explore how to establish and grow your own business in this exciting industry.

Before diving into the world of consumer finance, it’s crucial to gain a solid understanding of the industry and its key components. Consumer finance refers to the range of financial products and services that are designed to meet the borrowing and credit needs of individuals and households. This includes personal loans, credit cards, installment plans, and various other forms of credit.

The consumer finance industry plays a vital role in supporting economic growth by providing individuals with the means to make major purchases, cover unexpected expenses, and manage their finances. It helps bridge the gap between consumers’ financial needs and the available resources by offering convenient and accessible funding options.

Consumer finance companies typically operate by borrowing money from various sources such as banks, investors, or other financial institutions, and then lending it to consumers at a higher interest rate. They generate revenue through the interest charged on loans and fees associated with the financial services they provide.

One of the key aspects of the consumer finance industry is risk assessment and management. Lenders must carefully evaluate the creditworthiness of borrowers to mitigate the risk of default. This is done through assessing various factors including credit history, income stability, debt-to-income ratio, and other relevant financial indicators.

In recent years, technology has played a significant role in transforming the consumer finance landscape. Online lending platforms, mobile banking apps, and digital payment solutions have made financial services more accessible and efficient for consumers. As a result, consumer finance businesses face the challenge of staying up-to-date with technological advancements and adapting their operations to cater to the evolving needs of consumers.

Furthermore, consumer finance is a heavily regulated industry. Governments and regulatory bodies enforce strict rules and guidelines to ensure fair lending practices, protect consumers, and maintain the integrity of the financial system. To operate in this industry, businesses must comply with these regulations, which can vary by jurisdiction.

By understanding the consumer finance industry’s intricacies and keeping abreast of the latest trends and regulations, you can position yourself for success and develop strategies that meet the needs of both your target market and the regulatory environment.

Conducting thorough market research and analysis is a critical step in starting a consumer finance business. This process involves gathering data and insights about the target market, competitor landscape, and customer preferences to make informed decisions and develop effective strategies. Here are some key points to consider:

Identify your target market: Determine the specific demographic and psychographic characteristics of the customers you want to serve. Consider factors such as age, income level, creditworthiness, and financial goals. Understanding your target market will help tailor your products and services to meet their needs.

Assess market demand: Evaluate the demand for consumer finance in the market. Analyze market trends, economic indicators, and consumer behavior to identify the potential size of the market and growth opportunities. This information will help you determine the viability and profitability of your business.

Analyze the competition: Understand the competitive landscape by researching existing consumer finance companies in your area. Assess their offerings, pricing strategies, target markets, and customer satisfaction levels. This analysis will help you identify gaps in the market and develop a unique value proposition that sets your business apart.

Research regulatory requirements: Familiarize yourself with the legal and regulatory frameworks governing consumer finance businesses in your jurisdiction. Ensure compliance with licensing, reporting, and disclosure requirements to avoid legal issues and penalties.

Gather customer insights: Conduct surveys, interviews, or focus groups to understand customer preferences, pain points, and expectations in the consumer finance sector. This information will guide the development of products, services, and marketing strategies that resonate with your target audience.

Analyze risks and opportunities: Assess the potential risks associated with operating a consumer finance business, such as regulatory changes, economic downturns, and credit risk. Develop risk management strategies to mitigate these risks and capitalize on opportunities for growth.

Consider technology and innovation: Evaluate emerging technologies and innovations within the consumer finance industry, such as online lending platforms or digital payment solutions. Determine how these advancements can enhance your operations and customer experience.

By conducting comprehensive market research and analysis, you will gain valuable insights into your target market, competition, and regulatory environment. Armed with this knowledge, you can make informed decisions and develop a solid foundation for your consumer finance business.

Creating a comprehensive business plan is essential for the success of your consumer finance business. A business plan serves as a roadmap that outlines your company’s goals, strategies, and financial projections. Here are the key elements to consider when developing your business plan:

Executive Summary: Provide an overview of your business, including its mission statement, target market, unique value proposition, and competitive advantage. This section should grab the reader’s attention and summarize the key highlights of your business plan.

Company Description: Describe your consumer finance business in more detail. Explain your business structure, ownership, and legal status. Highlight your experience and credentials in the industry and outline the key products or services you offer.

Market Analysis: Conduct a thorough analysis of the consumer finance industry, including market size, growth potential, and trends. Identify your target market and analyze the competitive landscape. Provide insights into consumer preferences, regulatory requirements, and risks and opportunities.

Products and Services: Outline the range of financial products and services you will offer to consumers. Detail their features, eligibility criteria, interest rates, and fees. Highlight how your offerings meet the unique needs of your target market and differentiate your business from competitors.

Marketing and Sales Strategies: Develop a marketing plan that outlines how you will attract and retain customers. Identify your target audience and outline your marketing channels, such as digital marketing, social media, and partnerships. Explain your sales strategy and how you will promote your products or services to potential clients.

Operational Plan: Describe the day-to-day operations of your consumer finance business. Explain how you will process loan applications, manage risk, and ensure compliance with regulations. Outline the technology and infrastructure you will need to operate efficiently.

Financial Projections: Provide financial forecasts for your business, including revenue projections, cash flow statements, and profitability analysis. Consider factors such as loan volumes, interest rates, operating expenses, and loan default rates. Back up your projections with market research and industry benchmarks.

Management and Personnel: Outline the organizational structure of your business and introduce key members of your team. Highlight their experience, qualifications, and roles. Emphasize how your team’s expertise will contribute to the success of your consumer finance business.

Risk Management and Contingency Plans: Identify potential risks and challenges your business may face and develop strategies to mitigate them. Consider regulatory changes, economic downturns, and credit risk. Develop contingency plans to handle unexpected situations and maintain a resilient business.

Exit Strategy: Although it may seem premature, having an exit strategy is vital. Outline how you plan to exit the consumer finance business, whether through selling the company, merging with another organization, or passing it on to a successor.

Remember, a business plan is a living document that should be regularly reviewed and adapted as your consumer finance business evolves. It serves as a guiding tool and a reference point to ensure that you stay focused on your goals and stay on track for success.

When establishing a consumer finance business, it is crucial to understand and comply with the legal and regulatory requirements of the industry. Adhering to these requirements ensures that you operate within the law, protects the interests of consumers, and avoids costly penalties or legal issues. Here are the key steps to setting up the legal and regulatory aspects of your consumer finance business:

Research and understand the regulatory framework: Familiarize yourself with the laws and regulations governing consumer finance in your jurisdiction. Consult relevant government agencies, financial regulators, and legal experts to ensure you have a comprehensive understanding of the requirements.

Business registration and licensing: Register your consumer finance business as a legal entity. Choose a suitable business structure – such as a sole proprietorship, partnership, or corporation – and complete the necessary registration and licensing procedures with the appropriate authorities.

Compliance with lending regulations: Consumer finance businesses are subject to specific lending regulations that vary by jurisdiction. These regulations typically include interest rate limits, disclosure requirements, fair lending practices, and credit reporting obligations. Ensure that your lending practices and loan terms comply with these regulations to protect your business and provide transparent services to consumers.

Data protection and privacy: Consumer finance businesses handle sensitive customer information, such as personal and financial details. Ensure compliance with data protection and privacy laws, and implement strong security measures to safeguard customer data from unauthorized access or misuse.

Anti-money laundering (AML) and know-your-customer (KYC) requirements: Implement robust AML and KYC procedures to prevent your business from being used for money laundering or fraudulent activities. Understand the requirements for customer identification, due diligence, record-keeping, and suspicious transaction reporting.

Consumer protection and disclosure requirements: Consumer finance businesses are obligated to provide clear and transparent information to customers about loan terms, fees, interest rates, and repayment obligations. Incorporate appropriate disclosure practices and adopt customer-friendly policies to ensure consumer protection and fair treatment.

Risk management and compliance policies: Develop comprehensive risk management and compliance policies to monitor and mitigate risks associated with your consumer finance operations. These policies should address credit risk assessment, loan approval processes, collections practices, and adherence to relevant regulations.

Obtain professional advice: Engage with legal advisors, compliance professionals, and industry experts to ensure you are fully aware of the legal and regulatory requirements specific to the consumer finance industry. Seek their guidance throughout the setup process and for ongoing compliance and risk management strategies.

Setting up your consumer finance business in compliance with legal and regulatory requirements is essential for establishing a trustworthy reputation and building long-term success. By ensuring compliance from the outset, you demonstrate your commitment to operating ethically, protecting your customers, and maintaining the integrity of the financial system.

Obtaining financing is a crucial step in starting a consumer finance business. It involves securing the necessary funds to establish your operations, cover initial expenses, and have sufficient working capital. Here are some key considerations to help you navigate the financing process:

Evaluate your capital needs: Determine how much capital you will need to launch and sustain your consumer finance business. Consider factors such as office space, technology infrastructure, employee salaries, marketing expenses, and regulatory compliance costs. Develop a detailed budget to calculate your funding requirements.

Self-funding: Using your personal savings or resources to fund your business is a common option. Self-funding demonstrates your commitment and belief in your venture, but it may not be sufficient to cover all your financial needs. Evaluate how much personal capital you can contribute to the business.

Explore traditional lenders: Banks and financial institutions are potential sources of financing for your consumer finance business. Prepare a comprehensive business plan, financial projections, and collateral (if required) to present to potential lenders. Explore loan options such as small business loans, lines of credit, or equipment financing.

Consider alternative lenders: If traditional lenders are not an option or if you need additional funding, consider alternative financing sources. Peer-to-peer lending platforms, online lenders, or business credit cards can provide access to capital with less stringent requirements. However, carefully review the terms and interest rates associated with these alternatives.

Establish strategic partnerships: Seek partnerships with investors or financial institutions that can provide both financial support and industry expertise. Consider private equity firms, venture capital funds, or angel investors who may be interested in supporting consumer finance startups.

Pitch to potential investors: Prepare a compelling pitch deck and present your business to potential investors. Highlight your unique value proposition, market potential, competitive advantage, and financial projections. Be prepared to answer questions and negotiate terms if investors express interest.

Government programs and grants: Research government programs and grants available to support small businesses in the consumer finance sector. These programs may provide financial assistance, mentorship, or access to resources that can help you establish and grow your business.

Bootstrap and seek growth funding: In the early stages, focus on bootstrapping and managing your expenses wisely. As your consumer finance business grows and establishes a track record, you may become eligible for additional funding options such as business expansion loans or lines of credit to fuel your growth.

Financial projections and investor confidence: Presenting realistic and well-researched financial projections can instill confidence in potential lenders and investors. Demonstrate how your consumer finance business will generate revenue, manage expenses, and achieve profitability over time.

Remember, securing financing for your consumer finance business may require a combination of approaches. Be prepared to demonstrate your expertise, market potential, and risk mitigation strategies to increase your chances of obtaining the necessary funds. With the right financing in place, you can lay a strong foundation for success in the consumer finance industry.

Once you have secured financing, the next step in starting a consumer finance business is to establish your operations and infrastructure. Properly setting up your operations is crucial for smooth day-to-day functioning and delivering excellent services to your customers. Here are key points to consider when establishing your operations and infrastructure:

Physical Location: Determine the location of your consumer finance business. Consider factors such as accessibility, visibility, proximity to your target market, and cost. Choose a location that aligns with your business goals and regulatory requirements.

Office Setup: Set up a functional and professional office space that accommodates your staff and supports the operations of your consumer finance business. Furnish the office with the necessary equipment, such as computers, phones, printers, and other office supplies.

Technology Infrastructure: Invest in a robust technology infrastructure to support your operations. This includes a secure network, hardware, software applications, and data management systems. Implement encryption and other security measures to protect sensitive customer information.

Lending and Loan Management Systems: Implement a loan management system to effectively process loan applications, assess creditworthiness, calculate interest rates, and manage loan portfolios. Choose a system that is compliant with regulatory requirements and integrates with your other operational systems.

Accounting and Financial Systems: Set up accounting and financial systems to track and manage your finances accurately. This includes bookkeeping software, payroll management, and financial reporting tools. Maintain accurate records of income, expenses, loan repayments, and overall financial performance.

Compliance and Risk Management: Develop comprehensive policies and procedures to ensure compliance with legal and regulatory requirements. Implement robust risk management practices to mitigate the risk of fraud, default, and non-compliance. Regularly review and update your policies to reflect changes in regulations or industry best practices.

Staffing and HR: Hire and train a skilled and knowledgeable workforce to handle the day-to-day operations of your consumer finance business. Develop job descriptions, recruitment processes, and training programs. Implement HR policies and procedures, including employee contracts, benefits, and performance management.

Customer Relationship Management (CRM) System: Implement a CRM system to manage your customer relationships effectively. This includes capturing and organizing customer data, tracking interactions, and providing personalized services. Utilize the CRM system to nurture customer relationships and identify cross-selling or upselling opportunities.

Partnerships and Vendor Management: Identify strategic partnerships with third-party vendors, such as credit bureaus, payment processors, or collections agencies. Establish clear communication channels and service level agreements with these partners to ensure smooth operations and enhance the customer experience.

Comprehensive Training: Provide comprehensive training to your employees on your company’s policies, procedures, and compliance requirements. Ensure that they have a thorough understanding of lending practices, customer interactions, and the regulatory environment. Regularly provide refresher training to keep staff informed of industry updates and best practices.

Continuous Improvement: Establish a culture of continuous improvement within your consumer finance business. Encourage feedback from customers and staff, and regularly evaluate your operations to identify areas for improvement. Stay up-to-date with industry trends and technological advancements to ensure your operations remain efficient and competitive.

By carefully establishing your operations and infrastructure, you are setting a strong foundation for the success of your consumer finance business. Efficient processes, compliant systems, and a skilled workforce will enable you to deliver exceptional services to your customers and drive growth in the competitive consumer finance industry.

In the consumer finance industry, developing a comprehensive range of products and services is essential to meet the diverse financial needs of your target market. By offering tailored and innovative solutions, you can attract and retain customers, differentiate your business from competitors, and drive growth. Here are key points to consider when developing your products and services:

Market Research and Analysis: Conduct in-depth market research to understand the specific financial needs and preferences of your target market. Analyze market trends, customer feedback, and competitor offerings to identify gaps and opportunities for differentiation.

Product Portfolio: Create a portfolio of products and services that cater to different customer segments and financial requirements. This may include personal loans, credit cards, auto financing, debt consolidation, or installment plans. Tailor your offerings to meet customers’ needs for convenience, flexibility, and competitive interest rates.

Interest Rates and Terms: Determine interest rates, loan terms, and repayment options based on market conditions, risk assessment, and regulatory requirements. Strive for competitive rates that offer value to customers while maintaining profitability for your business.

Flexible Financing Options: Offer flexible financing options to accommodate various customer preferences and financial situations. This may include adjustable repayment terms, interest-only periods, or grace periods for late payments. Empower customers to choose options that align with their cash flow and financial goals.

Streamlined Application Process: Develop a user-friendly and efficient loan application process to streamline customer interactions. Utilize technology to automate data collection, credit checks, and document processing. Offer online applications for added convenience and faster approvals.

Credit Assessment and Financial Education: Develop robust credit assessment processes to evaluate the creditworthiness of applicants. Consider factors such as credit history, income stability, and debt-to-income ratio. Additionally, provide educational resources to help customers make informed financial decisions and improve their credit scores.

Value-Added Services: Enhance your product offering with value-added services that differentiate your business. This may include financial planning consultations, debt management programs, or credit monitoring services. These additional services can attract and retain customers by providing comprehensive financial support.

Digital Solutions: Embrace technology to provide digital solutions that enhance the customer experience. Offer online account management, mobile banking applications, and secure digital payment options. Implement e-signatures and e-documents to streamline processes and reduce paperwork.

Compliance and Transparency: Ensure that your products and services comply with all relevant legal and regulatory requirements. Clearly communicate terms, fees, and any potential risks to customers. Maintain transparency and provide customers with all the information they need to make informed decisions.

Continuous Improvement: Regularly assess the performance and feedback of your products and services. Monitor market trends, customer needs, and competitor offerings to identify areas for improvement or the development of new products. Stay agile and adaptable to meet evolving financial demands.

By developing a robust portfolio of products and services, you can position your consumer finance business as a trusted financial partner. Tailor your offerings to meet the unique needs of your target market, leverage technology for efficiency, and continuously improve to stay competitive in the ever-changing consumer finance industry.

In the highly competitive consumer finance industry, effective marketing and advertising strategies are essential to attract customers, build brand awareness, and differentiate your business from competitors. A well-executed marketing plan will help you reach your target audience and drive growth. Here are key points to consider when developing your marketing and advertising strategies:

Define Your Target Audience: Clearly identify the demographic and psychographic characteristics of your target market. Understand their financial needs, preferences, and pain points. This will help you tailor your marketing messages and channels to resonate with your ideal customers.

Brand Identity and Messaging: Develop a strong brand identity that communicates your unique value proposition, mission, and commitment to customer satisfaction. Craft clear and compelling messaging that highlights the benefits of your products and services. Consistently communicate your brand message across all marketing channels.

Multi-Channel Marketing: Utilize a mix of marketing channels to reach your target audience. This may include digital marketing (such as SEO, content marketing, social media, and online advertising), traditional advertising (such as print and broadcast media), direct mail, and event marketing. Experiment with different channels to determine the most effective ones for your business.

Content Marketing: Create valuable and informative content that educates customers about personal finance, credit management, and other relevant topics. Publish blog articles, videos, and downloadable resources on your website or through other platforms. Position your business as a trusted source of financial knowledge.

Referral Programs: Implement referral programs that incentivize your existing customers to refer friends, family, or colleagues to your consumer finance business. Offer rewards or discounts for successful referrals. Word-of-mouth referrals can be a powerful marketing tool in building trust and expanding your customer base.

Partnerships and Affiliations: Seek strategic partnerships with other businesses or organizations that align with your target market. This could include real estate agencies, car dealerships, or educational institutions. Collaborate on joint marketing initiatives or referral programs to reach a wider audience and increase brand visibility.

Online Presence and Website Optimization: Invest in a professional and user-friendly website for your consumer finance business. Optimize your website for search engines (SEO) to improve visibility in organic search results. Provide informative and engaging content, user-friendly navigation, and clear calls-to-action to drive website conversions.

Customer Testimonials and Reviews: Encourage satisfied customers to provide testimonials and reviews about their positive experiences with your consumer finance business. Display these testimonials on your website, social media, or other marketing materials to build trust and credibility with potential customers.

Data-driven Marketing: Utilize data analytics to track and measure the effectiveness of your marketing efforts. Monitor key performance indicators (KPIs) such as website traffic, conversion rates, and customer acquisition costs. Use these insights to optimize your marketing strategies and allocate resources effectively.

Compliance with Advertising Regulations: Ensure that your marketing and advertising materials comply with relevant laws and regulations specific to the consumer finance industry. Review guidelines on fair lending practices and truth-in-advertising requirements. Avoid misleading claims or deceptive practices that could harm your reputation and attract legal issues.

Continuous Brand Monitoring and Adaptation: Continuously monitor your brand reputation and customer feedback. Stay updated on industry trends, consumer preferences, and regulatory changes. Adapt your marketing strategies accordingly to capitalize on emerging opportunities and address any potential challenges.

By implementing effective marketing and advertising strategies, you can build brand awareness, establish credibility, and attract customers to your consumer finance business. Tailor your messaging to resonate with your target audience, leverage a diverse range of marketing channels, and measure the effectiveness of your efforts to optimize your campaigns over time.

Building a skilled and knowledgeable team is crucial for the success of your consumer finance business. The people you hire will be the face of your company and will play a significant role in delivering excellent customer service and driving growth. Here are key points to consider when hiring and training staff:

Define Roles and Responsibilities: Clearly define the roles and responsibilities you need to fill within your consumer finance business. Consider positions such as loan officers, customer service representatives, underwriters, collections agents, and compliance officers. Determine the qualifications, experience, and skills required for each role.

Recruitment Strategy: Develop a recruitment strategy to attract top talent. Advertise job openings on online job boards, your company website, and social media platforms. Leverage professional networks and consider working with recruitment agencies specialized in the finance industry. Screen applicants thoroughly to ensure they align with your business values and possess the necessary skills and qualifications.

Financial Industry Knowledge: Seek candidates with a solid understanding of the consumer finance industry. Look for individuals with experience in lending, credit analysis, risk management, compliance, or other relevant areas. Their familiarity with industry regulations and best practices will contribute to your business’s success and provide valuable insights to your customers.

Customer Service Skills: Customer service is a critical aspect of the consumer finance industry. Look for candidates who possess exceptional communication skills, empathy, and the ability to handle customer concerns and inquiries with professionalism and respect. Prioritize candidates who are attentive to detail and have the ability to explain complex financial concepts in a clear and understandable way.

Training and Development: Implement a comprehensive training program to equip your staff with the necessary skills and knowledge. Provide training on lending processes, compliance requirements, customer service protocols, and any specific systems or software you use. Offer ongoing professional development opportunities to keep your team updated on changes in the industry and enhance their skills.

Compliance and Ethics: Emphasize the importance of compliance and ethical practices within your consumer finance business. Train your staff on regulatory requirements, fair lending practices, and customer data confidentiality. Foster a culture of integrity and ensure that all employees adhere to established policies and guidelines.

Team Collaboration: Encourage a collaborative and supportive work environment. Foster teamwork, open communication, and knowledge sharing among your staff. Create opportunities for cross-training and skill development to increase versatility within your team.

Performance Management: Develop a performance management system to set clear expectations and goals for your staff. Conduct regular performance evaluations and provide constructive feedback to help them improve. Recognize and reward high-performing employees to foster motivation and job satisfaction.

Company Culture: Cultivate a positive company culture that promotes inclusivity, respect, and continuous growth. Clearly communicate your company values and ensure your staff understands and embraces them. This will help create a cohesive and productive work environment.

Employee Engagement: Foster employee engagement by offering competitive compensation and benefits packages, opportunities for career advancement, and a healthy work-life balance. Encourage open communication, provide regular feedback, and empower your staff to contribute ideas and suggestions for improving processes and customer service.

Compliance with Labor Laws: Ensure compliance with labor laws and regulations related to hiring, employment contracts, working hours, and compensation. Stay updated with legal requirements to avoid any legal issues or penalties.

Hiring and training staff who are knowledgeable, skilled, and aligned with your company’s values is essential for the success of your consumer finance business. Invest in their professional development, foster a positive work environment, and prioritize exceptional customer service to create a culture that drives growth and exceeds customer expectations.

In the consumer finance industry, effective risk management and compliance practices are critical to protect your business, maintain regulatory compliance, and safeguard the interests of your customers. By implementing robust risk management strategies and organizational compliance, you can minimize potential financial losses and maintain the integrity of your operations. Here are key points to consider when managing risks and ensuring compliance:

Identify and Assess Risks: Conduct a comprehensive risk assessment to identify potential risks and vulnerabilities within your consumer finance business. This includes assessing credit risk, interest rate risk, liquidity risk, operational risk, regulatory risk, and reputational risk. Evaluate the likelihood and potential impact of each risk to establish a risk profile for your business.

Develop Risk Management Strategies: Develop strategies to manage and mitigate identified risks. This may involve implementing risk control measures, such as underwriting guidelines, monitoring systems, internal controls, and audit procedures. Establish protocols for addressing risks and ensuring prompt action when risks are detected.

Compliance with Regulatory Requirements: Stay up-to-date with the regulatory landscape governing the consumer finance industry. Regularly review and assess any changes or updates to regulatory frameworks and ensure your business is compliant. Develop and maintain policies and procedures that align with regulatory requirements, including fair lending practices, data protection, and anti-money laundering measures.

Employee Training and Awareness: Provide comprehensive training to your staff on compliance requirements, risk management protocols, and regulatory obligations. Ensure that employees understand the importance of compliance, ethical behavior, and their individual responsibilities. Foster a culture of compliance and provide ongoing training to keep your staff updated on regulatory changes.

Data Security and Privacy: Implement robust security measures to protect sensitive customer data. Encrypt data, restrict access on a need-to-know basis, and regularly monitor systems for any suspicious activity. Comply with data protection and privacy regulations, and have protocols in place for data breaches or incidents.

Internal Controls and Audits: Establish internal controls and audit procedures to ensure compliance with regulations and identify any potential weaknesses in your processes. Regularly review and assess your policies, procedures, and control mechanisms. Conduct internal audits to identify areas for improvement and ensure ongoing compliance.

Compliance Monitoring and Reporting: Establish a compliance monitoring program to regularly assess your adherence to regulatory requirements. Designate individuals or teams responsible for monitoring compliance, conducting periodic reviews, and producing compliance reports. Report any non-compliance issues promptly and take appropriate corrective actions.

Vendor and Partner Due Diligence: Conduct due diligence on vendors and partners to ensure they comply with relevant regulations and adhere to industry best practices. Regularly assess their performance and take appropriate actions if any compliance issues arise. Maintain clear communication and documentation with vendors and partners to ensure all parties understand compliance expectations.

Regular Compliance Reviews: Conduct regular compliance reviews to evaluate the effectiveness of your risk management and compliance programs. Engage with external experts or auditors for independent assessments when necessary. Use findings from these reviews to make necessary improvements and adjustments to your risk and compliance strategies.

Continual Risk Assessment and Adaptation: Regularly reassess and adapt your risk management and compliance strategies to address emerging risks and regulatory changes. Stay informed about industry trends, market conditions, and evolving customer behaviors to proactively mitigate risks and adjust your compliance practices as needed.

By effectively managing risks and ensuring compliance within your consumer finance business, you can protect your assets, maintain the trust of your customers, and operate within the boundaries of the law. Establishing a strong risk management and compliance framework will contribute to the long-term success and sustainability of your business in the consumer finance industry.

In the consumer finance industry, building strong and lasting customer relationships is essential for the success of your business. By fostering trust, providing exceptional service, and offering personalized experiences, you can attract and retain loyal customers. Here are key points to consider when building customer relationships in the consumer finance industry:

Customer-Centric Approach: Place the customer at the center of your business strategy. Understand their needs, preferences, and pain points. Tailor your products, services, and customer interactions to meet their individual requirements. Demonstrate genuine care and empathy to build a strong foundation of trust.

Personalized Customer Experience: Provide a personalized experience for each customer. Use data analytics and customer relationship management (CRM) systems to track individual preferences, history, and interactions. Leverage this information to offer customized recommendations, targeted offers, and a seamless customer journey.

Excellent Customer Service: Strive for excellence in customer service at every touchpoint. Train your staff to provide personalized and efficient service. Respond promptly to customer inquiries, concerns, and complaints. Resolve issues promptly and make the customer feel valued and appreciated.

Proactive Communication: Engage with your customers regularly through various channels. Keep them informed about updates, new products or services, and any changes that may affect them. Be proactive in providing relevant information, such as payment reminders or educational resources, to help them make informed financial decisions.

Building Trust: Trust is crucial in the consumer finance industry. Act with integrity, transparency, and professionalism at all times. Honor your commitments, explain your products and services clearly, and ensure that customers understand the terms and conditions. Safeguard customer data and maintain strict confidentiality to instill confidence in your business.

Reward Loyalty: Implement a customer loyalty program to reward and incentivize repeat business. Offer exclusive discounts, rewards, or VIP benefits for loyal customers. Regularly communicate with your loyal customers to express gratitude and offer personalized promotions or upgrades.

Feedback and Improvement: Encourage customer feedback and actively seek input on their experience with your business. Conduct surveys, monitor online reviews, and engage with customers through social media platforms. Use this feedback to identify areas for improvement and make necessary adjustments to enhance the customer experience.

Community Engagement: Engage in community initiatives and sponsorships to build a positive presence and demonstrate your commitment to the communities you serve. Participate in local events, support charitable causes, and be a contributing member of the community. This can enhance your brand reputation and generate goodwill among your customers.

Continual Relationship-Building: Building customer relationships is an ongoing process. Maintain regular communication and engagement even after a transaction is complete. Follow up with personalized messages, birthday or anniversary greetings, or relevant financial tips. This keeps your business top of mind and fosters long-term loyalty.

Adapting to Customer Needs: Stay agile and adaptive to changing customer needs and preferences. Regularly assess market trends and emerging technologies to ensure your products and services align with evolving customer expectations. Continually innovate and introduce new features or enhancements based on customer feedback and market demands.

Handling Complaints Effectively: Address customer complaints promptly and effectively. Train your staff to handle complaints with empathy and professionalism. Resolve issues to the customer’s satisfaction and use complaints as an opportunity to improve your processes and prevent similar occurrences in the future.

By focusing on building strong customer relationships, you can differentiate your consumer finance business in a crowded market, enhance customer loyalty, and drive long-term growth. Prioritize excellent customer service, personalization, and trust to establish your business as a trusted financial partner and preferred choice for consumers.

In the consumer finance industry, continuous improvement and strategic growth are essential to stay competitive and meet the evolving needs of your customers. By embracing innovation, adopting new technologies, and implementing effective growth strategies, you can expand your customer base, increase revenue, and solidify your position in the market. Here are key points to consider for continuous improvement and growth in the consumer finance industry:

Market Research and Analysis: Continuously conduct market research to identify emerging trends, customer preferences, and market opportunities. Stay informed about changes in regulations, industry competition, and technological advancements. Use this information to optimize your offerings and develop targeted growth strategies.

Innovation and Technological Advancements: Embrace innovation and stay updated with the latest technologies that can enhance your operations and customer experience. Explore digital payment solutions, advanced data analytics, mobile banking apps, and automation tools. Leverage technology to streamline processes, improve efficiency, and deliver greater convenience to your customers.

Product Diversification: Expand your product portfolio to meet a broader range of customer needs. Identify additional services, such as insurance products, investment options, or financial planning services, that align with your business and customer base. Diversification can attract new customers, increase revenue streams, and enhance customer loyalty.

Targeted Marketing and Customer Acquisition: Develop targeted marketing strategies to reach new customer segments. Utilize data analytics and customer segmentation to tailor your marketing messages and channels to specific demographic or psychographic groups. Implement customer acquisition tactics such as referral programs, strategic partnerships, and digital marketing campaigns to attract new customers.

Customer Retention and Upselling: Focus on retaining and deepening relationships with existing customers. Implement strategies to foster loyalty, such as personalized communication, rewards programs, and proactive customer service. Continually analyze customer data and behavior to identify opportunities for upselling or cross-selling additional products or services.

Partnerships and Collaborations: Seek strategic partnerships or collaborations with complementary businesses or industries. This can expand your reach, provide access to new customer segments, and offer opportunities for joint marketing or product development. For example, partnering with a real estate agency can help you connect with potential homebuyers who may require financing.

Enhanced Customer Experience: Continuously seek ways to improve the customer experience at every touchpoint. Conduct customer satisfaction surveys, analyze feedback, and implement necessary improvements. Leverage technology to provide self-service options, streamline processes, and offer personalized financial guidance. Invest in employee training to ensure exceptional customer service across all interactions.

Continuous Education and Industry Involvement: Stay up-to-date with industry trends, regulatory changes, and best practices. Attend industry conferences, join professional associations, and pursue continuing education opportunities for you and your staff. Engage in thought leadership by sharing insights and expertise through articles, speaking engagements, or webinars.

Strategic Acquisitions or Expansion: Explore opportunities for strategic acquisitions or expanding into new markets. Assess the potential benefits, risks, and alignment with your long-term goals. Acquiring established businesses or expanding geographically can provide access to new customer bases, talent, and additional revenue streams.

Financial Analysis and Key Performance Indicators (KPIs): Continually monitor and analyze key financial indicators to assess your business’s performance. Regularly review metrics such as loan portfolio quality, profitability, customer acquisition costs, and customer lifetime value. Use these insights to inform decision-making, identify areas for improvement, and determine the effectiveness of your growth strategies.

Agility and Adaptability: Be agile and adaptable to changing market dynamics and consumer preferences. Continually assess and adjust your strategies as needed. Embrace a culture of continuous improvement, encourage innovation, and empower your employees to contribute ideas and suggestions for growth and optimization.

By embracing continuous improvement and implementing strategic growth strategies, you position your consumer finance business for long-term success and sustainability. Regularly evaluate market trends, innovate, and prioritize customer-centricity to differentiate your business and maximize growth opportunities in the dynamic consumer finance industry.

Starting a consumer finance business requires careful planning, extensive market research, and a focus on delivering excellent customer service. As you navigate through the complex landscape of the consumer finance industry, it is essential to understand the regulatory requirements, manage risks effectively, and continuously adapt to changing market trends.

By conducting thorough market research and analysis, you can identify opportunities, understand customer needs, and position your business for success. Develop a robust business plan that encompasses your market strategy, operational setup, and financial projections.

Obtaining the necessary financing and setting up the legal and regulatory requirements are vital steps in establishing your consumer finance business. Complying with relevant laws and regulations and implementing risk management strategies are essential for maintaining the trust of your customers and protecting your business.

Building strong customer relationships and providing exceptional service are key to winning the loyalty of your customers. Continuously improve your offerings, leverage technology, and tailor your marketing strategies to meet the unique needs and preferences of your target audience.

As you grow and expand your business, prioritize continuous improvement and strategic thinking. Stay informed about industry trends, engage in continuous education, and seek opportunities for collaboration and expansion.

Ultimately, succeeding in the consumer finance industry requires a combination of industry expertise, compliance with regulations, customer-centricity, and a proactive approach to risk management. By focusing on these core elements, you can navigate the competitive landscape, gain a competitive edge, and build a profitable and sustainable consumer finance business.

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How To Start A Consumer Lending Business

Till recent years, the lending industry was strongly associated with banks, credit unions, and other financial organizations. The area was rather complicated and required a large staff to operate.

With the development of digital technologies and automated tools, starting a lender business has become much simpler and less time-consuming. 

Let’s analyze the process of starting a lending business step by step.

Table of Contents

What is consumer financing?

The term consumer financing refers to the financial tool that enables customers to pay for services or goods in installments instead of repaying the whole sum at once. 

In the case of consumer financing, the lenders either offer their own funds or get them from third-party lending companies, such as banks, credit unions, or other alternative funding institutions. 

This enables customers to purchase high-ticket goods that they wouldn’t buy if they are sold without installments. The retailers can convert passive browsers into active buyers by offering them consumer finance programs.

The rise of digitization of consumer lending helps shorten the distance between buyers and sellers. Fast and convenient online customer financing allows retailers to easily turn potential clients into regular customers by offering them transparent lending programs on fair and understandable conditions.

The fairer and simpler the consumer financing program is, the better the conversion rate of potential clients into loyal repaying customers. 

Consumer financing can be applied not only to luxury or high-ticket goods. It can be used to fund a wide range of services or goods.

Due to the development of digital technologies, online consumer lending made instantaneous purchasing very fast and convenient. 

Figure 1 shows the areas of consumer lending with top KPIs: auto financing, vacation and recreation, credit card issuing, luxury and electronic equipment purchasing. 

Figure 1. Spheres of consumer lending with the highest KPIs

Consumer financing. The way it works

Simply put, consumer financing is a form of crediting when a loan is repaid for a certain period of time in equal installments. A lender defines the amount of the down payment and collects monthly payments with interest rate until the loan is repaid.

The most crucial reason for outsourcing the service to banks or other alternative lenders is the complexity of accurate risk evaluation and borrower creditworthiness assessment. 

Now, with a wide range of digital technologies for lenders, it’s easy to automate risk evaluation, loan origination, decisioning, servicing, collection, and reporting without hiring an underwriting department. 

Now, it’s much easier for alternative lenders to get a competitive edge over traditional banks or credit unions. Due to intelligent automation of the lending process at all stages and bank-grade software solutions available for everyone, lending has become safer for lenders and more transparent for borrowers. 

The opportunities to launch an online store, start POS financing or issue student loans have become easily accessible to anyone due to online lending automation solutions delivered by experienced software providers. 

The spheres for online lending are versatile, from secured and unsecured personal lending to POS financing and real estate crowdfunding. Figure 2 shows the available touchpoints for online lending.

Figure 2. Online lending application touchpoints

Consumer lending company. Steps to start

To successfully launch a lending company, it’s necessary to have a clear picture of how to start a money lending business . Here is a small guide to follow for you.

Business model selection

The online lending industry usually embraces two major business models. The first is focused on consumer lending. The other one has its specialization in commercial lending. They often differ in amounts of funding, interest rates, and repayment periods.

Commercial lending programs are usually referred to short-term loans as a prominent type of loan to operate with. Their characteristics are:

• Loan amounts from $1,000
• The repayment period is 3-18 months
• 13-70% annual interest rates

Online consumer loans (also known as “payday loans”) usually have the following conditions:

• The funding amount is up to $500
• 2-4 weeks for repayment
• Interest rates may go up to 400%

Consumer loans are more appealing to lending companies due to the low-risk rate and smaller funding amounts. In addition, they are offered at significantly higher interest rates and their turnover is much faster than that of business loans.

Business or commercial loans are often less risky and have a comparatively low default probability. But they bring lower profit margins and are repaid in a longer period of time.

Compliance with state legislation and local regulations

Yet online lending is as simple as a few clicks of the mouse, this convenience is often accompanied by the complexity of government regulations and laws. 

Without knowing the laws and complying with them, the lending business has a risk of being penalized or even closed. Consultations with experts in the sphere of legislation are vital to ensure full compliance of the lending business.

Business plan creation

After outlining the online lending model type and clearing out laws regulating the industry, the next challenge is writing a detailed business plan. It should be clear and comprehensive and contain the following parts:

• An executive summary should contain the description of what you plan to do, market challenges and opportunities, your leadership qualifications, and advantages in comparison with competitors.
• The detailed business description should comprise full information about strategies of lending and interest rates, describe online branding, operational points of interest, and marketing plans.
• Market research should demonstrate your expertise in the industry, online lending statistics, the potential for revenue, marketing of services, growth points, and expected challenges.
• Team description should include information about the founder and all key team members, and describe their experience and skills that add value to the business for the potential investors.
• Financial data should have detailed projections and reports on anticipated losses and profit, expected revenue, operational costs calculation, and cash flow statements for at least three next years.

Business planning

During the stage of planning, it’s necessary to choose a brand name and incorporation type, and figure out the way of lending company financing. It’s vital to have consultations with all necessary experts or attorneys at this stage to clear up all disputable questions.

Underwriting criteria are also defined at this stage for efficient and fast loan application assessment while staying compliant with different legal rules and regulations governing the market.

Search of funding sources

The funding of an online lending company can be realized either by the founder, investors, or have a mixed basis. 

It’s possible to collect the necessary funds from family, friends, or through crowdfunding. The involvement of independent investors is often more complicated because they usually carefully study the perspectives of the future lending endeavor.

A mixed or hybrid approach is a usage of funding from private investors and commercial loans to get to a point of launching the business.

Obtaining merchant services

The availability of reliable and fair merchant services is the right start for an online lending business. Since all payments are collected electronically, the appropriate equipment for card processing is a must-have for accepting direct payments and credit cards.

But obtaining approval for payment processing can be rather complicated in the lending industry because alternative lenders are often ranked as “highly risky” by banks.

Site launching

As a qualified lender, you need to have an official website to maintain your brand. To launch a site, it’s necessary to find an experienced web developer.

The web developer should have a full understanding of the importance of designing a GDPR-compliant website for the company. To ensure website security, it’s necessary to implement effective security and encryption services for the protection of borrowers’ financial and personal information.

Building a contingency plan

A contingency plan is another must, since starting to extend loans to customers. It’s necessary for the continuous evolution of business strategy and for building further experience and knowledge. 

Bearing in mind the changes in legislation and local rules, contingency plan development is a wise choice to always comply with them and stay as flexible and adaptable as possible.

Digital solutions for online lending

While launching an online money lending business, you may face lots of challenges on the way. At ABLE Platform, we hope our small guide will help you solve the majority of them. As well, software solutions designed by our team can lead your lending business to success.

Mikhail Chirkunov

Founder and CEO

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What Is a Business Plan?

Understanding business plans, how to write a business plan, common elements of a business plan, how often should a business plan be updated, the bottom line, business plan: what it is, what's included, and how to write one.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

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A business plan is a document that details a company's goals and how it intends to achieve them. Business plans can be of benefit to both startups and well-established companies. For startups, a business plan can be essential for winning over potential lenders and investors. Established businesses can find one useful for staying on track and not losing sight of their goals. This article explains what an effective business plan needs to include and how to write one.

Key Takeaways

• A business plan is a document describing a company's business activities and how it plans to achieve its goals.
• Startup companies use business plans to get off the ground and attract outside investors.
• For established companies, a business plan can help keep the executive team focused on and working toward the company's short- and long-term objectives.
• There is no single format that a business plan must follow, but there are certain key elements that most companies will want to include.

Investopedia / Ryan Oakley

Any new business should have a business plan in place prior to beginning operations. In fact, banks and venture capital firms often want to see a business plan before they'll consider making a loan or providing capital to new businesses.

Even if a business isn't looking to raise additional money, a business plan can help it focus on its goals. A 2017 Harvard Business Review article reported that, "Entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical nonplanning entrepreneurs."

Ideally, a business plan should be reviewed and updated periodically to reflect any goals that have been achieved or that may have changed. An established business that has decided to move in a new direction might create an entirely new business plan for itself.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. These include being able to think through ideas before investing too much money in them and highlighting any potential obstacles to success. A company might also share its business plan with trusted outsiders to get their objective feedback. In addition, a business plan can help keep a company's executive team on the same page about strategic action items and priorities.

Business plans, even among competitors in the same industry, are rarely identical. However, they often have some of the same basic elements, as we describe below.

While it's a good idea to provide as much detail as necessary, it's also important that a business plan be concise enough to hold a reader's attention to the end.

While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.

Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.

The length of a business plan can vary greatly from business to business. Regardless, it's best to fit the basic information into a 15- to 25-page document. Other crucial elements that take up a lot of space—such as applications for patents—can be referenced in the main document and attached as appendices.

These are some of the most common elements in many business plans:

• Executive summary: This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
• Products and services: Here, the company should describe the products and services it offers or plans to introduce. That might include details on pricing, product lifespan, and unique benefits to the consumer. Other factors that could go into this section include production and manufacturing processes, any relevant patents the company may have, as well as proprietary technology . Information about research and development (R&D) can also be included here.
• Market analysis: A company needs to have a good handle on the current state of its industry and the existing competition. This section should explain where the company fits in, what types of customers it plans to target, and how easy or difficult it may be to take market share from incumbents.
• Marketing strategy: This section can describe how the company plans to attract and keep customers, including any anticipated advertising and marketing campaigns. It should also describe the distribution channel or channels it will use to get its products or services to consumers.
• Financial plans and projections: Established businesses can include financial statements, balance sheets, and other relevant financial information. New businesses can provide financial targets and estimates for the first few years. Your plan might also include any funding requests you're making.

The best business plans aren't generic ones created from easily accessed templates. A company should aim to entice readers with a plan that demonstrates its uniqueness and potential for success.

2 Types of Business Plans

Business plans can take many forms, but they are sometimes divided into two basic categories: traditional and lean startup. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.

• Traditional business plans : These plans tend to be much longer than lean startup plans and contain considerably more detail. As a result they require more work on the part of the business, but they can also be more persuasive (and reassuring) to potential investors.
• Lean startup business plans : These use an abbreviated structure that highlights key elements. These business plans are short—as short as one page—and provide only the most basic detail. If a company wants to use this kind of plan, it should be prepared to provide more detail if an investor or a lender requests it.

Why Do Business Plans Fail?

A business plan is not a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections to begin with. Markets and the overall economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All of this calls for building some flexibility into your plan, so you can pivot to a new course if needed.

How frequently a business plan needs to be revised will depend on the nature of the business. A well-established business might want to review its plan once a year and make changes if necessary. A new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is an option when a company prefers to give a quick explanation of its business. For example, a brand-new company may feel that it doesn't have a lot of information to provide yet.

Sections can include: a value proposition ; the company's major activities and advantages; resources such as staff, intellectual property, and capital; a list of partnerships; customer segments; and revenue sources.

A business plan can be useful to companies of all kinds. But as a company grows and the world around it changes, so too should its business plan. So don't think of your business plan as carved in granite but as a living document designed to evolve with your business.

Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."

U.S. Small Business Administration. " Write Your Business Plan ."

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Reinventing the Direct-to-Consumer Business Model

• Leonard A. Schlesinger,
• Matt Higgins,
• Shaye Roseman

Instagram ads and influencer campaigns can only take you so far.

Over the past decade, a new breed of “direct-to-consumer” startups including Warby Parker and Casper helped forge a new business model. But lately that business model is faltering as the advantages that early entrants enjoyed have evaporated. To retool, DTC companies will need to embrace an omnichannel strategy, create tighter ties with their communities, and vertically integrate to increase margins.

For decades, a handful of brands dominated consumer retail in the United States. Whether Kodak in cameras or Gillette in razors, the top brands in more than 10 categories were unchanged from 1923 to 1983.

• Leonard A. Schlesinger is the Baker Foundation Professor at Harvard Business School, where he serves as chair of its practice-based faculty.
• Matt Higgins is an executive fellow at Harvard Business School and a cofounder of RSE Ventures, a private investment firm. He is the author of Burn The Boats: Toss Plan B Overboard and Unleash Your Full Potential .
• SR Shaye Roseman is a  member of the 2021 MBA Class at Harvard Business School.

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Financial Consumer Agency of Canada Business Plan 2024–2025

From: Financial Consumer Agency of Canada

Business Plan 2024–2025 [ PDF - 309 KB ]

Information contained in this publication or product may be reproduced, in part or in whole, and by any means, for personal or public non-commercial purposes without charge or further permission, unless otherwise specified.

Commercial reproduction and distribution are prohibited except with written permission from the Financial Consumer Agency of Canada.

For more information, contact:

Financial Consumer Agency of Canada 427 Laurier Ave. West Ottawa, Ontario  K1R 7Y2

ww.canada.ca/en/financial-consumer-agency

Cat. No. FC2-4E-PDF (PDF, English)

ISSN 2562-5896

©His Majesty the King in Right of Canada, as represented by the Minister of Finance Canada, May 2024.

Aussi disponible en français sous le titre : Plan d’activités 2024-2025

Message from the Interim Commissioner

I am pleased to present the 2024–2025 Business Plan for the Financial Consumer Agency of Canada (FCAC).

The transformation of the financial services industry and the escalating pace of change is continuing. This brings both risks and opportunities that require all members of the financial ecosystem to work together to protect financial consumers and support their diverse needs. The Agency’s activities for the coming fiscal year demonstrate an ongoing commitment to advance the rights and interests of consumers in this changing and challenging environment.

The Agency is currently in a transition phase as we await the appointment of a new Commissioner. During this time, we will continue the steady progress we’ve achieved over the past 4–5 years. This includes advancing the strategic goals identified in our five-year 2021–2026 Strategic Plan, which position us to be a leader and innovator in financial consumer protection.

The Agency can also look forward to taking on new responsibilities because of Budget 2024, which included announcements that demonstrate the importance of our consumer protection mandate. FCAC will be mandated to oversee, administer and enforce a Consumer–Driven Banking Framework (also known as open banking). We are excited about this opportunity which we are well-placed to take on. Our policy, research and education functions have already made important contributions to the development of a future framework that prioritizes innovation and ensures strong and consistent protection for financial consumers.

The Agency will remain focused on mobilizing efforts to advance financial consumer protections, guided by the milestone Financial Consumer Protection Framework and our ambitious National Financial Literacy Strategy. We will also continue to grow our capacity to leverage data and conduct cutting-edge research. Data-driven approaches, such as our analysis of regulatory data and the National Strategy’s Measurement Plan, are an essential component of designing effective interventions and informing policy responses to protect consumers and enable them to build financial resilience.

As always, at the core of everything we do is our people. We know that by investing in our team members and promoting initiatives that prioritize their well-being, we not only enhance individual growth but also propel the organization towards greater heights of achievement. This work is founded on a commitment of continuous improvement, and includes actions to modernize our internal processes, enhance our risk management practices, and administer our resources in an effective and disciplined manner.

It is an honour to lead FCAC during this exciting period. FCAC is adapting to changing dynamics in the financial sector, embracing emerging technologies, and responding to evolving regulatory frameworks. We are staying ahead of the curve and meeting the needs of Canadians in an ever-changing landscape.

Werner Liedtke Interim Commissioner

The Financial Consumer Agency of Canada (FCAC) is a federal government agency that was established in 2001 to protect the rights and interests of Canadian consumers of financial products and services. FCAC derives its mandate from the Financial Consumer Agency of Canada Act .

As a regulator, FCAC protects financial consumers by supervising the compliance of federally regulated entities with their market conduct obligations as established by legislation, codes of conduct and public commitments. The Supervision Framework describes the Agency’s approach and the variety of supervisory tools and activities that FCAC uses to promote, monitor and enforce the obligations that govern federally regulated entities in Canada’s financial ecosystem.

The Agency is also mandated to strengthen the financial literacy of Canadians and:

• promote awareness of the rights and responsibilities of Canadians in their dealings with financial institutions
• monitor, evaluate and promote awareness of trends and issues that may affect financial consumers
• develop and publish research, content, tools and programs to strengthen the financial literacy of Canadians
• foster an understanding of financial services and related issues in collaboration with stakeholders, including government, regulatory and community organizations

Our vision and mission

To be a leader and innovator in financial consumer protection

Our mission

• To protect consumers of financial products and services
• To supervise regulated entities
• To educate Canadians and strengthen their financial literacy

Our core responsibility: The protection of financial consumers

FCAC’s core responsibility is to protect financial consumers in Canada. This is achieved by delivering 2 programs — ‘‘Supervision and Enforcement’’ and ‘’Research, Policy and Education’’ — that are designed to:

• promote, monitor and enforce compliance on the part of regulated entities that are subject to market conduct obligations established by legislation, codes of conduct and public commitments
• strengthen the financial literacy and resilience of Canadians by working with stakeholders and relying on evidence-based research and collaboration to propose policies, educate consumers and encourage them to take beneficial financial action

FCAC’s programs are supported by a solid foundation of expert advice and services provided by its marketing, communications, stakeholder relations, legal, human resources, information technology, finance and administration teams. (See Annex A for performance information related to this core responsibility.)

FCAC’s strategic goals

In September 2021, FCAC released its 5-year strategic plan , which articulates 4 strategic goals:

• Be the national leader in financial consumer protection FCAC provides national leadership in financial consumer protection through the effective supervision of regulated entities and constructive contributions to policymaking.
• Strengthen the financial literacy of Canadians for an increasingly digital world FCAC strengthens the financial literacy of Canadians through educational tools and resources, research, experimentation, and stakeholder collaboration and partnerships, to foster responsible financial behaviours and decision-making.
• Be the authoritative source of Canadian financial consumer protection information FCAC is recognized by Canadians, partners and stakeholders as a trusted source of unbiased, evidence-based information pertaining to the protection of financial consumers.
• Enable the future of work FCAC invests in its people and optimizes its workplace and processes to enable an inclusive culture of innovation, collaboration and excellence.

FCAC’s 2024–2025 Business Plan supports and builds on these 4 strategic goals with proactive, responsive and innovative initiatives that will advance financial consumer protection for all Canadians.

FCAC recognizes that the risk environment in which it operates is dynamic, with emerging new technologies that affect how financial products and services are created, distributed and sold, and that could impact how the Agency delivers on its mandate.

In 2023–2024, FCAC continued refining its internal risk management processes, improving its monitoring and early identification of current and potential risks, and developing sound strategies to manage and mitigate these risks.

In 2024–2025, FCAC will implement an enhanced risk management framework that sets out FCAC’s mission-critical risks and outlines its commitment to sound risk management practices and principles. A strong risk culture—with norms, attitudes and behaviours related to the awareness, management and control of risks—and a disciplined approach to managing these factors, enables the Agency to operate proactively, enhance governance, increase accountability and improve overall performance. For 2024–2025, the Agency identified 5 key areas of operational risk:

• Foresight and responsiveness: FCAC must ensure it can anticipate and respond to emerging risks and challenges that could compromise the Agency’s ability to effectively protect consumers.
• External crisis management: FCAC must be adequately prepared for, and able to effectively respond to, a Canada-wide and/or large-scale catastrophic event, such as a major banking incident, terrorist attack, cyber-related event or climate disaster.
• Digital capabilities and capacity: FCAC must ensure sufficient skills and capacity to advance its digital priorities and fulfill its ongoing operational requirements. These requirements include managing and analyzing information and data, developing enterprise solutions, and maintaining secure and effective information technology (IT) systems.
• Workforce and workplace resilience: FCAC must sustain workplace conditions and a workforce culture that supports adaptation, innovation and resilience.
• Business processes: FCAC must ensure its current business processes are efficient and effective, to ensure the sound management of its resources and the delivery of its mandate.

FCAC continues to implement strategies and measures to mitigate each of these risks, and its governance bodies monitor them on a regular basis.

2024–2025 planning context

The changing financial landscape and the expansion of financial vulnerabilities over the past few years underscores the importance of consumer protection in financial services. Consumer protection builds trust and confidence that contribute to the stability of Canada’s financial system. In its regulatory, research and education roles, FCAC is working alongside its federal, provincial and international partners to ensure progress is made in advancing consumer protection to meet the evolving needs of Canadians.

Consumer protection in a complex and changing financial landscape

Canadian households are expected to continue facing economic pressures over 2024–2025. As a result, FCAC will remain focused on protecting and informing consumers who are experiencing financial stress. The Agency will continue to engage in initiatives that encourage Canadians to check up on their financial health, manage their debt, seek advice when experiencing financial difficulties and understand how to protect themselves against scams and frauds.

Last year, FCAC published its expectations for how federally regulated financial institutions should work with residential mortgage holders, to provide tailored relief measures to consumers at risk. These expectations are set out in the Agency’s Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances . FCAC is actively monitoring the compliance of financial institutions with the guideline. In addition, the Agency is leading an initiative to modernize the current public commitment on low- and no-cost bank accounts to make them more responsive to the current needs of consumers.

FCAC is also continuing to focus on mobilizing the financial ecosystem—including members from the financial industry, governments and regulators, as well as community organizations and other key players—to improve financial outcomes for Canadian consumers. All ecosystem members share a responsibility to reduce barriers and catalyze actions that will help Canadians build financial resilience in an increasingly complex and digital financial marketplace. FCAC’s planned activities demonstrate the Agency’s commitment to work with the financial ecosystem to adapt to the changing conditions and sector evolution. The focus on improving consumer outcomes is central to the Framework and National Strategy, both of which will continue to drive the Agency’s efforts for the coming year. FCAC will bring insights from its research and education together with its regulatory interventions, exemplifying how the 2 sides of FCAC’s mandate work in tandem to meet the needs of financial consumers.

Managing money in today’s financial marketplace

Significant growth in new and emerging technologies is reshaping traditional financial services and provides increased choice and convenience. Saving, depositing and borrowing money can now be transacted on faster and more efficient digital platforms. However, consumers are generally not aware that the use of novel technologies in financial services can occur on platforms that are largely unregulated. Further, these platforms may not be subject to consumer protection measures set out in legal frameworks, such as the right to make a complaint through a financial institution’s complaint-handling process if something goes wrong.

FCAC will continue to closely monitor this evolving space and conduct on-going research and analysis. The Agency will also look for opportunities to help shape policy frameworks, to ensure that consumers benefit from consistent protections and market conduct standards as products and markets evolve.

In addition, consumer education will increase in importance while appropriate regulatory frameworks are being considered and implemented in response to emerging technologies. A better-informed consumer is a better-protected consumer. To that end, the Agency will continue to share information with consumers both proactively and responsively, and to serve as a leader and authoritative source of Canadian financial consumer protection information.

The need for trustworthy and reliable information and resources

Consumers are faced with a wide and growing array of products and services, and conflicting messages about how they should manage their money.

The importance of consumers’ trust in the financial sector and the need for dependable information were thrown into sharp relief in 2023, when front page news was made by the sudden collapse of banks in the US and internationally. The bank runs seen at these financial institutions were amplified and accelerated due to information and misinformation that spread quickly on social media, and risked extending to other banks.

While strong regulation, good supervision, and an agile risk culture greatly protect Canada’s banking industry and support overall financial stability in Canada, these recent events also underline the vital importance of consumer confidence and trust in the financial system. FCAC’s mandate and mission serve to bolster Canadian financial consumers’ confidence in the financial system by protecting financial consumers, supervising federally regulated financial institutions (FRFEs) and educating Canadians to strengthen their financial literacy.

The Agency works with its partners to help consumers understand the Canadian financial system and appropriately use financial products and services. Information on consumers’ rights and responsibilities, alerts of risks and areas of concern, along with clarity on what steps to take when problems occur will continue to be a focus. Increasingly, this financial education work is informed by behavioural design, in recognition that simply disseminating information is insufficient as a driver of success. Rather, information must be presented in ways that facilitate and motivate positive behaviours.

The National Strategy includes a strong focus on behavioural design and FCAC is leading by example. As outlined in this plan, the Agency is leveraging its research and behavioural science experiments to provide trustworthy and unbiased information for financial consumers about managing money and their rights in dealing with financial institutions, with a particular focus on vulnerable populations.

Budgetary planning summary

FCAC is a federal government agency that covers its costs through revenues from assessments of the financial entities it supervises, and from an annual statutory expenditure that supports its activities related to strengthening the financial literacy of Canadian consumers. The Agency’s disciplined administration of its resources ensures it delivers high-quality services and programs for both ecosystem stakeholders and financial consumers in Canada.

In recent years, FCAC has made significant investments in its program capabilities and resources. The expanded legislative mandate of the Framework and increased opportunities related to the National Strategy have contributed to the required resource growth. Additional investments in internal services—especially in its information management/information technology (IM/IT) functions, to support the growth in data acquisition, management and analytics—have also been prioritized. “Internal services” includes FCAC’s marketing, communications, stakeholder relations, legal, human resources, information technology, finance and administration teams that are required to support the Agency’s programs and other corporate obligations.

Budget 2023 committed to reduce planned spending by the Government of Canada and its agencies on consulting, other professional services, and travel. FCAC’s planned expenses are compliant with these targeted reductions. The table below identifies the planned spending over the next 3 years.

Note: Totals may not add up due to rounding.

2024–2025 planning highlights

This section presents the key enabling initiatives and activities that FCAC plans to undertake during the 2024–2025 fiscal year to advance its strategic goals. These initiatives and activities are in addition to, and enhance, the core business functions—that is, the daily work to protect, supervise and educate—that help the Agency fulfill its legislated requirements as set out in the Financial Consumer Agency of Canada Act and other statutes.

Strategic goal 1: Be the national leader in financial consumer protection

As a regulator, FCAC protects financial consumers by supervising the compliance of federally regulated entities with their market conduct obligations as established by legislation, codes of conduct and public commitments. 

Enabling initiative: Strengthen the risk-based, outcome-driven Supervision and Enforcement program

FCAC’s Supervision and Enforcement program actively oversees the federal financial sector through supervisory engagements, industry self-reporting and, increasingly, data and trend analysis. The program is designed to be risk-based and outcome-driven. It seeks to promote and enable compliance on the part of regulated entities by ensuring supervisory activities are transparent, proactive, timely, and effective. The Supervision Framework describes the Agency’s approach and the variety of supervisory tools and activities that the Agency uses to promote, monitor and enforce the obligations that govern federally regulated entities in Canada’s financial ecosystem.

2024–2025 activities:

• Deliver on the Government of Canada’s public commitment to make low-cost/no-cost accounts meet the evolving banking needs of Canadians. FCAC is leading the review and revision of the current public commitment by banks to offer low-cost and no-cost accounts to reflect the current needs of Canadian consumers.
• Oversee the transition to a single External Complaints Body. In October 2023, the Government of Canada announced the designation of a single external complaints body for banking. FCAC conducted the open application process leading to the designation; the Ombudsman for Banking Services and Investments will assume its responsibilities as Canada’s single external complaints body for banking on November 1, 2024. FCAC will supervise regulatory compliance and oversee the transition to ensure minimal impact on consumers.
• Monitor industry compliance with FCAC’s Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances. FCAC issued its Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances in July 2023. The Guideline outlines the Agency’s expectations related to the measures that should be taken by federally regulated financial institutions to assist mortgage-holders who are at risk of default on their principal residences because of exceptional circumstances. In 2024–2025, FCAC will monitor and report on industry compliance with FCAC’s Guideline through regular reporting requirements.
• Update Supervisory Guidance. FCAC issues guidance to communicate its expectations to the industry. In 2024–2025, FCAC will continue to issue guidance, to further enable the compliance of federally regulated financial entities with their market conduct obligations.
• Enhance the Risk Assessment Framework. Data analytics enhance FCAC’s ability to leverage data to identify compliance risk and inform supervisory priorities. In 2024–2025, FCAC will implement an enhanced risk-assessment framework and continue to invest in its data analytics capabilities.

Enabling initiative: Advance the rights and interests of financial consumers

Innovation in the financial sector continues to drive the emergence of new business models, applications, processes and products. FCAC advances the rights and interests of financial consumers by conducting research, developing timely and evidence-based analysis and advice on emerging financial protection issues, and contributing to the development of Government of Canada financial, regulatory and consumer protection-oriented policies.

FCAC also leverages its international engagements to both reflect and help further inform its leadership on consumer protection issues, including its core principle of focusing on good consumer outcomes through principles-based regulation. The Agency’s efforts will continue to be guided by the updated G20/Organization for Economic Co-operation and Development (OECD) High-Level Principles on Financial Consumer Protection , endorsed by Canada and other G20 leaders in 2022.

• the Financial Sector Legislative Review. In 2023, the Department of Finance launched consultations on the federally regulated financial institutions statutes as part of the financial sector legislative review announced in Budget 2022. In 2024–2025, FCAC will contribute to the development of legislative changes to further strengthen financial consumer protections for Canadians.
• the development of Canada’s Open Banking framework (also known as Consumer-Driven Banking), and Phase II of the Retail Payment Activities Act . The Government of Canada announced plans to introduce legislation to establish an open banking framework, and continue initiatives to support the modernization of Canada’s retail payments system. FCAC will advocate for shaping these policy frameworks to ensure consumers benefit from consistent protections and market conduct standards.
• conducting research and analysis on consumer vulnerabilities, to improve Canadians’ financial resilience and increase financial inclusion. FCAC will conduct research on consumer vulnerabilities related to over-indebtedness, high-cost lending, digital capability and fraud. FCAC will also identify systemic barriers related to access to banking services, and will provide recommendations on how to address them to increase financial inclusion.
• enhancing international and domestic engagement to support financial consumer protection. The Agency does this through research, information-sharing and identification of best practices in consumer protection, while working proactively with provincial, federal and international organizations and committees to advance consistent financial consumer protection in Canada.

Strategic goal 2: Strengthen the financial literacy of Canadians for an increasingly digital world

Open banking, digital financial assets and the use of artificial intelligence in the financial sector all introduce new risks, such as fraud, privacy breaches and cyber-attacks. Increasingly, enhancing digital literacy is an essential component of improving financial literacy, and is a requirement to navigate the new financial landscape.

Enabling initiative: Mobilize the financial ecosystem to advance the implementation of the National Financial Literacy Strategy

The National Strategy is a framework for a more accessible, inclusive and effective financial ecosystem for all Canadians. Last year, FCAC published the National Strategy Measurement Plan and Dashboard . The Measurement Plan provides a common methodology to assess progress against the National Strategy’s target outcomes, and provides reliable information on gaps in knowledge and opportunities for improvement in the Canadian financial ecosystem. The Dashboard allows interested parties to explore initiatives led by the ecosystem that are aligned with the National Strategy, and to survey the findings associated with those initiatives. This information allows FCAC to focus its resources where they have the most impact, on the interventions that are likely to be most effective at increasing financial resilience and achieving good financial outcomes.

At the mid-way point of the National Strategy, the Agency is satisfied by the progress to date and will continue its implementation through collaboration and support for the financial ecosystem to identify, conduct and measure innovative activities aimed at advancing positive financial outcomes for consumers.

• Invest in initiatives that support consumer organizations, and advance a program to support the financial ecosystem in delivering financial literacy services to Canadians and in further amplifying the National Strategy’s call to action.
• Conduct ongoing outreach to mobilize stakeholders to adopt the National Strategy Measurement Plan , to support measurement efforts aligned with the National Strategy’s priorities target outcomes, and to contribute to effective reporting.
• Form expanded partnerships, including through proactive engagement with other international, federal and provincial bodies, to share knowledge and identify collaboration opportunities to support financial literacy and contribute to better outcomes for financial consumers in Canada.
• Continue to enhance the Agency’s research, data and collaboration platform , created to facilitate knowledge sharing and collaboration in support of the advancement of the National Strategy, including developing collaboration-specific functionalities and optimizing the existing data-visualization capabilities.

Strategic goal 3: Be the authoritative source of Canadian financial consumer protection information

FCAC is recognized by its partners, stakeholders and the Canadian public as a trusted source of unbiased and evidence-based information. Insights that come from the Agency’s research and behavioural science experiments are key to providing trustworthy, practical, clear information for financial consumers, about managing money and about their rights when dealing with federally regulated financial institutions.

Enabling initiative: Leverage data and research to impact consumer' financial outcomes

Evidence-based research on consumer outcomes can lead to tangible improvements in the design and delivery of financial literacy interventions that can increase Canadians’ financial resilience. FCAC leverages insights from data and behavioural science research to offer direct-to-consumer tools and interventions that support financial consumers in Canada, with a particular focus on vulnerable populations.

• launch FCAC's innovative new Measure of Financial Resilience , an evidence-based index of Canadians’ financial resilience. This measure represents a holistic approach that goes beyond existing measures by including environmental factors.
• analyze and report on data collected through nationally representative surveys , including the FCAC's Monthly Financial Well-being Monitor , that enable the Agency to monitor emerging trends, respond to a changing digital environment and share findings on the financial well-being of Canadians.
• Leverage data from the financial ecosystem , to enhance understanding of current and emerging consumer challenges, to explore innovative solutions, and to scale up tested approaches that have proven effective.

Enabling initiative: Promote timely, relevant and effective tools and resources

FCAC provides timely and relevant information and resources to support the needs of financial consumers in today’s changing and challenging economic environment. To increase awareness of FCAC’s consumer protection actions and its tools and resources, the Agency will continue to extend its reach through marketing, advertising and digital communications.

• Equip consumers with timely and effective resources. With insights from FCAC’s research studies, the Agency will continue to expand the scope of its consumer resources, to provide timely and authoritative educational information.
• Enhance the impact of tools, resources and Financial Literacy Month. FCAC will leverage its digital channels and engage in strategic collaborations to extend the reach of its consumer tools and resources, to help Canadians make informed financial decisions. The Agency will also work closely within the financial ecosystem to further heighten the impact of Financial Literacy Month.
• Enhance the Agency’s capability to provide support directly to financial consumers. FCAC’s Consumer Services Centre responds to inquiries and provides unbiased information directly to financial consumers, merchants and stakeholders. Consumers also submit complaints that provide important insights into trends and issues, potential regulatory gaps, and areas that would benefit from additional consumer education or research. In 2024–2025, the Agency will implement an action plan to enhance FCAC’s ability to provide information and support directly to financial consumers.

Strategic goal 4: Enable the future of work

FCAC fosters a culture of collaboration, innovation and excellence, and reaffirms its commitment to public service values by strengthening its people-management practices, modernizing its internal processes, and leveraging new technologies.

Enabling initiative: Strengthen and support the workforce

The Agency will continue to strengthen its people-management programs and initiatives, to attract and retain the talent it needs to achieve its vision and mission.

• Continue to prioritize equity, diversity and inclusion (EDI) and employee well-being. FCAC invests in its people and management practices, recognizing that the value of a diverse and resilient workforce enables the Agency’s role as regulator, educator and employer. FCAC will continue to implement its multi-year EDI, official languages, and mental health and wellness action plans.
• Fully implement the hybrid model of work. FCAC has developed a purpose-driven hybrid work model that serves to address Agency requirements while maintaining flexibility in work arrangements and geographic location within Canada. The organization will implement Agency, Branch and Team Charters, which provide clarity for in-office expectations while continuing to foster FCAC’s culture of collaboration, innovation, and excellence.

Enabling initiative: Use data to support decision-making

Data collection and analysis enable FCAC to identify ongoing and emerging issues in the financial ecosystem. Investments in tools, skills and capabilities are expanding, as more data sources are obtained and more uses identified. Insights derived from effective data analysis support the development of research projects, supervisory decision-making, and policy advice.

• Leverage data and analytics. The Agency creates and receives data through its research activities, its partnerships and its supervisory activities. Results from effective data analysis can be used to inform research projects, to support policy recommendations or to determine appropriate supervisory actions. FCAC will continue to bolster the value of its data by enhancing its analytic capabilities, automating processes, and utilizing available data to assist in decision-making.
• Enhance and maintain data security and integrity. The Agency will continue to proactively manage the safety and security of its data sets and sensitive information. A focus on cyber resilience and data management best practices is fundamental to FCAC’s mandate to protect Canadian consumers.

Spending and human resources

This section provides a holistic view of the Agency’s planned spending and human resources for the next 3 fiscal years and compares planned spending for the upcoming years with the current year’s forecast and previous years’ actual spending. The Agency uses the full accrual method of accounting to prepare and present its annual expenses.

This year's plan continues to follow the reductions in spending required by the Government of Canada’s Budget 2023, in line with the goal of reducing 3% of planned discretionary spending by 2026–2027, with specific reductions to planned travel and professional services. FCAC remains committed to demonstrating financial discipline and prudent financial management practices.

Planned spending

FCAC is a federal government agency that recovers its costs mainly through assessments against the regulated entities it supervises. In addition to revenues from these assessments, FCAC receives an annual statutory authority of a maximum of $5 million to support the financial literacy of Canadians.

The following table shows actual, forecasted and planned spending for each of FCAC’s programs and Internal Services. FCAC’s programs are supported by a solid foundation of expert advice and services provided by its marketing, communications, stakeholder relations, legal, human resources, information technology, finance and administration teams (Internal Services) required to support the programs and other corporate obligations.

Note: Totals may not add up due to rounding. Expenses are presented on an accrual basis.

The following table is used to calculate the Agency’s funding requirements, by reconciling planned expenses calculated on an accrual basis with its funding requirements on a cash basis.

The requested funding line represents the Agency’s costs of operation, including both operating and capital expenditures, which may be requested as advance amounts out of the Government of Canada’s Consolidated Revenue Fund.

Note: Totals may not add up due to rounding. 

Planned human resources

Note 1: Totals may not add up due to rounding. 

Note 2: In addition, FCAC has created a dedicated student employment program funded at the equivalent of 10 full-time students commencing in 2024–2025.

Future-oriented condensed statement of operations

The future-oriented condensed statement of operations provides an overview of FCAC’s operations for fiscal year 2023–2024 to fiscal year 2024–2025.

The forecast for financial information related to expenses and revenues is prepared on an accrual accounting basis, to strengthen accountability and to improve transparency and financial management.

A more detailed future-oriented statement of operations and associated notes, including a reconciliation of the net cost of operations to the requested authorities, is available on the FCAC website .

Website:   Canada.ca

Telephone (Consumer Services Centre):

Toll-free: 1-866-461-3222 ln Ottawa or outside Canada: 613-960-4666

TTY (for persons with hearing impairment):

Toll-free: 1-866-914-6097 ln Ottawa or outside Canada: 613-947-7771

Email:   Contact us

Facebook :  FB.com/FCACan

LinkedIn:   fcac_can

Instagram:   fcac_can

X (formerly Twitter):   @FCACan

YouTube:   FCACan

Postal address:

Financial Consumer Agency of Canada 427 Laurier Ave. West Ottawa, Ontario  K1R 7Y2

Annex A: Departmental Results Framework

As per the Treasury Board of Canada’s Policy on Results , Government of Canada entities are expected to identify core responsibilities and describe at a high level what the organization does, what it is trying to achieve, and how it will assess its progress.

FCAC’s core responsibility is to protect financial consumers. It achieves this by implementing 2 programs: "Supervision and Enforcement" and "Research, Policy and Education." The Agency’s budgetary resources, employees and activities are organized around this core responsibility and these 2 enabling programs.

FCAC’s program inventory and associated performance indicators were updated in 2023–2024 to represent the key outcomes the Agency wishes to achieve.

Core responsibility: Protection of financial consumers

Departmental results framework.

Departmental result: Regulated entities comply with consumer protection measures

• Indicator: Percentage of FCAC’s supervisory actions in response to non-compliance that are completed on time
• Indicator: Percentage of FCAC’s supervisory actions that have resulted in the correction of non-compliance

Program: Supervision and Enforcement

Departmental result: Canadians’ financial resilience is improved

• Indicator: Percentage of Canadians demonstrating positive financial knowledge, attitudes, and behaviours
• Indicator: Percentage of Canadians demonstrating financial well-being

Program: Research, Policy and Education

FCAC protects financial consumers in Canada by overseeing the market conduct of federally regulated financial institutions—including Canada’s banks, federally regulated trust and loan companies, insurance companies, credit unions, as well as external complaints bodies and payment card network operators—to ensure consumers’ rights are protected. The Agency also monitors developments and trends in the financial sector, promotes public awareness of all matters related to protecting consumers of financial products and services, and makes recommendations, including policy recommendations, to the Government of Canada on issues relevant to financial consumers and industry. The Agency also conducts research and creates and deploys educational material related to protecting and improving the well-being of financial consumers.

Program 1: Supervision and Enforcement

This program promotes, monitors and enforces compliance on the part of federally regulated financial entities subject to market conduct obligations established by legislation, codes of conduct and public commitments.

Program 2: Research, Policy and Education

This program strengthens the financial literacy and resilience of Canadians. Working with stakeholders (that is, through mobilizing the financial ecosystem), it relies on evidence-based research and collaboration to propose policies, educate consumers, and encourage them to take beneficial financial actions. The scope of this program is covered comprehensively by the National Financial Literacy Strategy (that is, measuring indicators related to the National Financial Literacy Strategy captures the target outcomes for the program).

Internal services

FCAC’s programs are supported by a solid foundation of expert advice and services provided by its marketing, communications, stakeholder relations, legal services, human resources, information technology, finance and administration teams.

More information can also be found in the GC InfoBase .

Annex B: Evaluation plan

Information management.

Evaluate the effectiveness and efficiency of the Agency’s information management processes

Core control self-assessment Footnote 1

Assess compliance with federal financial management policies related to pay administration, travel, and financial management governance

Enforcement program

Evaluate the application and effectiveness of an element of the enforcement program

Consumer information

Evaluate the relevance and effectiveness of core online consumer information

Assess compliance with federal financial management policies related to hospitality and accountable advances

Thematic reviews

Evaluate the effectiveness of the process to conduct thematic reviews

Assess compliance with federal financial management policies related to acquisition cards and employee leave

National Financial Literacy Strategy

Evaluate the effectiveness of Make Change that Counts: National Financial Literacy Strategy 2021–2026

Performance management

Evaluate the effectiveness of FCAC’s performance management program

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Financial Services Business Plan

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Green Investments

Executive summary executive summary is a brief introduction to your business plan. it describes your business, the problem that it solves, your target market, and financial highlights.">.

Green Investments (GI) is a financial service company that focuses on stocks of environmentally responsible companies. The Washington-based L.L.C. is lead by Sarah Lewis and Steve Burke. GI uses financial research purchased from Bear Stearns and in-house environmental responsibility analysis to make recommendations to clients.

Services GI has developed a criteria-based marker system which is easy and effective in evaluating a wide range of different companies on their environmental impact. Only financially prudent/performing companies are evaluated, ensuring that its recommendations make both financial and environmental sense.

Competitive Edge GI will leverage the proprietory evaluation system to quickly gain market share. The system is convenient and based on extensive research, providing a streamlined overview of the environmental performance of the companies.

Market GI will concentrate on the unserved niche of environmental investing within the financial services market. GI faces indirect competition from environmentally responsible mutual funds, which do a similar job in assessing a company’s environmental performance but do not allow for investing in individual equity.

Management Team GI is lead by two experienced managers, Sarah Lewis, and Steve Burke. Sarah has a masters degree in environmental studies and has worked for the Environmental Protection Agency where she was responsible for preparing environmental impact statements. Steve has an MBA and has worked for Salomon Smith Barney where he developed an extensive amount of networking contacts.

GI addresses a previously ignored niche of the financial services market. GI will generate $230,000 and $261,000 in sales in year two and three respectively.

1.1 Objectives

• To become the premier environmental investment firm.
• Attract more people into making investments based on environmental actions of the prospective companies, in effect raising the awareness of and supporting investments in companies that act on environmental concerns.
• Continue to drive down the costs associated with investment research as it relates to environmental criteria.

1.2 Mission

Green Investments’ mission is to become the premier financial service organization that makes investment in companies with outstanding environmental records and practices. Green Investments, through comprehensive research and well thought out and verifiable marker criteria will be able to identify sound environmental investments. By offering the highest level of services, Green Investments will succeed as a company as well as have a positive impact on our environment.

1.3 Keys to Success

• Develop a workable, accurate set of environmental markers for a wide range of environmental impacts a company faces.
• Purchase high-quality financial performance investment research, recognizing that there is no value added for Green Investments doing this research themselves.
• Price the service so that there is a good profit margin while remaining competitive.

Company Summary company overview ) is an overview of the most important points about your company—your history, management team, location, mission statement and legal structure.">

Green Investments is a Washington-based financial service company that is concentrating on the niche of environmentally responsible companies. The company is owned by Steve Burke and Sarah Lewis. It has been formed as a L.L.C.

2.1 Start-up Summary

The following equipment will be needed for start up:

• Phone system (5 line).
• Workstation computers (4), back end server, DSL Internet connection, and laser printer.
• Office furniture, meeting room and waiting room furniture.
• Monthly service charge for Bears Stearns software.
• Fax machine, copier, lighting, and assorted office supplies.

2.2 Company Ownership

Steve Burke and Sarah Lewis equally own Green Investments. While they initially were going to create a S Corporation as the business formation, they decided to form as a L.L.C. as a means to avoid double taxation found with a corporation yet realizing the benefits of personal liability avoidance.

Green Investments is a financial service company that offers investment advice specifically for stocks. GI purchases fiscal performance research from Bear Stearns, one of the highest respected firms in the market. In addition to solid financial performance criteria, GI has developed a set of environmental markers by which it can analyze and grade the attractiveness of the environmental impact that a company has.

As mentioned earlier, the economic performance of a company is rated by the financial firm Bear Stearns. Green Investments purchases Bear Stearns research based on recognition that there is no value added to do this research. The confidence of the research is quite high because of the firm performing it. If Bear Stearns’ research or another firm of comparable quality was not available Green Investments would have to rethink the decision to farm out this research.

Green Investments has developed a comprehensive set of environmental markers for which a company and their environmental impact can be evaluated. The following areas are evaluated:

• Energy usage
• Water usage
• Recycling program
• Paper consumption and procurement
• Chemical cleaning usage
• Ground maintenance impact
• Formal environmental policy
• Recycling rate

All of the markers include current, next stage, and long run benchmarks.

Green Investments takes the list of recommended investments from Bear Stearns and then applies environmental marker criteria to narrow the list down. The result is a list of possible investments (stocks) that are recommended because of their fiscal and environmental performance. Green Investments attempts to make evaluations of companies in a wide range of sectors allowing the customer to make the choice as to what type of company/industry that they would like to invest in.

Green Investments’ service charge is similar to a typical brokerage fee system based on a percentage. While Green Investments is a bit more expensive than other standard financial services companies because of the additional research required, the variance is not that material, particularly to customers that want good performing stocks but only want to invest with environmentally sound companies.

Several recent well respected studies indicate that “green” stocks are not inherently under performing. Actually it is just the reverse, companies that make decisions with environmental considerations in mind generally perform better.

Market Analysis Summary how to do a market analysis for your business plan.">

Green Investments has identified two distinct groups of target customers. These two groups of customers are distinguished by their household wealth. They have been grouped as customers with <$1 million and >$1 million in household wealth. The main characteristic that makes both of these groups so attractive is their desire to make a difference in the world by making investment decisions that take into account environmental factors.

The financial services industry has many different niches. Some advisors provide general investment services. Others will only offer one type of investments, maybe just mutual funds or might concentrate on bonds. Other service providers will concentrate on a specific niche like technology or socially responsible companies.

4.1 Market Segmentation

Green Investments has segmented the target market into two distinct groups. The groups can be differentiated by their difference in household wealth, households of <$1 million and >$1 million.

• <$1 million (household worth): These customers are middle class people who have a concern for the environment and are taking personal action through their choosing of stock investments based on companies with both strong economic and environmental performance records. Because these people do not have an over abundance of money they choose stocks that are of moderate risk. Generally, this group has 35%-45% of their portfolio in stocks, the remaining percentages in other types of investments.
• >$1 million (household worth): These customers are upper middle class to upper class. They have amassed over $1 million in savings and are fairly savvy investors (themselves or the people they hire). These people are generally concerned about the rate of return of their investments but also have environmental concerns.

• Vehicles are chosen with environmental concerns in mind. This means they are unlikely to own a SUV, they may in fact be one of the first adopters of the new hybrids (gas/electric vehicles).
• Many of the people commute by bike, car pool or use public transportation when possible.
• Active recyclers, both at work as well as at home.
• Retail purchases are made with environmental concerns in mind.
• A higher percentage of these people relative to the general population are vegetarians.
• For recreational sports, particularly outdoor sports, the people are more likely to enjoy hiking, XC skiing, and other human powered activities instead of golf, downhill skiing, snowmobiling, and jet skiing, all sports that are destructive to the environment.

4.2 Target Market Segment Strategy

Green Investments has chosen the previously mentioned target market segments because of the ideological beliefs and the fact that these beliefs translate into the customer groups needing services that Green Investments can provide. While the people can always purchase shares of an environmentally responsible mutual fund, a way that they can exercise their beliefs, mutual funds are just one type of investments. The downside of investments are their relatively low rate of return (relative to good stocks) and the inability to receive personalized service and the ability to make custom choices beyond the type of mutual fund.

Therefore, Green Investments has chosen these specific customer segments because it is a market group that has unmet needs. These groups have the money and willingness for an environmental investment, yet their only current choice is a mutual fund. Green Investments has chosen to distinguish the two market segments by household worth since this characteristic provides useful behavioral information regarding the different people.

4.3 Service Business Analysis

Green Investments participates within the financial service industry. This multi-billion dollar ($14.8) industry services a wide range of people and companies with financial services such as investments. There are many different types of investments offered including but not limited to:

• Treasury bills
• Stocks, mutual funds
• Insurance policies

Within the industry, customers are served by a wide range of service providers including:

• Large national firms such as Merrill Lynch or Charles Schwaab
• Individual firms
• Online brokers

Buying decisions are often based on who you know or familiarity that the person may have with a specific company. Most of the service providers can provide a similar menu of investment options.

Fee structures vary from firm to firm. Many are percentage based on the amount of money the client investments. Some firms charge hourly rates while other firms charge a quarterly management fee. The fee structures are set in stone for some service providers while others take a more flexible approach and are willing to work with the customer to set up special arrangements.

4.3.1 Competition and Buying Patterns

Green Investments has no direct competitors that offer environmentally sound stock investment services. All of the current environmental investment options are mutual fund based. Examples of this type of mutual funds include Janus, Citizen Funds, Sierra Club Environmental Fund, and Portfolio 21.

Other competitors that Green Investments faces are the typical range of financial advisors. These indirect competitors provide customers with a wide range of different investment options. They could always place an investment order for a specific company, but these specific competitors do not do any independent research on the environmentalism of different companies.

Strategy and Implementation Summary

Green Investments will leverage its sustainable competitive edge of independent environmental research based on a custom set of criteria based markers for an objective measure of a company’s dedication to environmentalism. The competitive edge will be marketed by using the mantra of “think globally, act locally.” This marketing slogan will encourage people to do their part in regards to helping the environment through responsible investing. The sales campaign will rely on metrics that indicate environmental investments can and do outperform the S&P 500 Index.

5.1 Competitive Edge

Green Investments’ competitive edge is the environmental marker criteria that when applied indicates which economic performing companies with solid environmental commitments. The markers are effective for extremely valuable for several reasons:

• Meaningful: They are based on extensive research, providing a streamlined overview of the environmental performance of the companies.
• Context-based: Allows a high degree of comparability with similar businesses.
• Convenient: Far easier to use than large scale internal audits.

The key here is the fact that an objective, easy to apply, and accurate measurement system has been developed to provide environmental analysis for any company that has the markers applied to them. No one else offers this type of service as an information source for the decision making process of stock investments.

5.2 Marketing Strategy

“Think globally, act locally.” This well known and concise mantra simply suggests everyone should do their part. Green Investments services allows people to make investments based on their conscience. So many people want to do good but are unsure how to. Green Investments’ services allows people to do the right thing, with no real cost relative to the other options. Green Investments’ returns are better than the S&P 500 Index.

The marketing effort will concentrate on Green Investments’ ability to empower people to make a substantial difference in this world while getting a great return on their money. Green Investments will use magazine advertisements and community based marketing (networking, sponsorship and participation in seminars) to increase visibility for Green Investments and the services offered. The advertisements will be a steady way that people will become aware of the investment options as well as some visibility for the company itself. The community involvement implicitly accepts the premise that good business relies on networking (inter relationships, both business and personal) to be a significant source of business and good will. Green Investments will participate in numerous on-topic events and seminars that will display them as experts as well as give them a podium to describe the different services.

5.3 Sales Strategy

The sales strategy will rely on using quantitative evidence the recommended companies outperform the S&P 500 Index. In 1999-2001, Green Investments’ chosen companies outperformed the index by 2.4%. This is a significant amount. The sales strategy will concentrate on that by making smart green investments, you can achieve better then average returns on your money. A sales packet will be assembled and distributed to prospective customers that shows the better than average historic returns that Green Investments recommended companies enjoy.

5.3.1 Sales Forecast

5.4 Milestones

Green Investments has identified several milestones which will act as ambitious yet achievable goals for the organization. By establishing the goals, the need to reach them will develop an implicit incentive for all organizational members to work hard to achieve the milestones.

• Business plan completion: The business plan is the roadmap for the organization. There is value in the process of the writing of the business plan, forcing the writers to analyze a multitude of issues.
• First account of over $1 million invested: This would be a significant amount of money for an individual account and the organization will strive to achieve many of these customers.
• Profitability: An eventual necessity.
• Revenue of $250,000: With the achievement of this milestone and the previous one, there will be a clear reaffirmation that the business model is successful.

Management Summary management summary will include information about who's on your team and why they're the right people for the job, as well as your future hiring plans.">

Green Investments will be lead by the founding team of Sarah Lewis and Steve Burke. Sarah has an undergraduate and Masters in environmental studies from the University of Burlington. After Sarah obtained the degrees she moved to Washington DC where she worked for the Environmental Protection Agency (EPA) for four years, performing environmental impact statements for a variety of industries, companies, and projects. Sarah was also a project manager for Janus in their evaluation department where they performed company wide environmental assessments of companies that were perspective investments for the fund.

The other member of Green Investments management team is Steve Burke. Steve hails from a financial background. Steve has an undergraduate degree in Finance from Seattle University and a MBA from the University of Washington. After school Steve went to work for Salomon Smith Barney in their investment department for eight years.

7.1 Personnel Plan

• Sarah: Company research, development of markers, sales.
• Steve: Sales, accounting and finance, account management, and marketing.
• Account manager: Customer support for their investment accounts.
• Administrative assistant: Assorted odd and ends.
• Bookkeeper: Handles the day to day accounts receivables and payable duties.
• Research assistant: Assisting Sarah on her research.

The positions will be phased in on an as needed basis. Please review the following chart for personnel forecasts.

Financial Plan investor-ready personnel plan .">

The following sections will outline important financial information.

8.1 Important Assumptions

The following table details important Financial Assumptions.

8.2 Break-even Analysis

The Break-even Analysis is shown in the following table and chart.

8.3 Projected Profit and Loss

The following table will indicate Projected Profit and Loss.

8.4 Projected Cash Flow

The following table and chart will indicate Projected Cash Flow.

8.5 Projected Balance Sheet

The following table will indicate the Projected Balance Sheet.

8.6 Business Ratios

The following table indicates Business Ratios found within the industry of financial services as well as ratios specific to Green Investments. Please note that while there are some similarities between the general financial service industry and Green Investments, GI is more unusual in that they do their own assessment of companies, beyond typical research.

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How to Write a Business Plan in 9 Steps (+ Template and Examples)

Every successful business has one thing in common, a good and well-executed business plan. A business plan is more than a document, it is a complete guide that outlines the goals your business wants to achieve, including its financial goals . It helps you analyze results, make strategic decisions, show your business operations and growth.

If you want to start a business or already have one and need to pitch it to investors for funding, writing a good business plan improves your chances of attracting financiers. As a startup, if you want to secure loans from financial institutions, part of the requirements involve submitting your business plan.

Writing a business plan does not have to be a complicated or time-consuming process. In this article, you will learn the step-by-step process for writing a successful business plan.

You will also learn what you need a business plan for, tips and strategies for writing a convincing business plan, business plan examples and templates that will save you tons of time, and the alternatives to the traditional business plan.

Let’s get started.

What Do You Need A Business Plan For?

Businesses create business plans for different purposes such as to secure funds, monitor business growth, measure your marketing strategies, and measure your business success.

1. Secure Funds

One of the primary reasons for writing a business plan is to secure funds, either from financial institutions/agencies or investors.

For you to effectively acquire funds, your business plan must contain the key elements of your business plan . For example, your business plan should include your growth plans, goals you want to achieve, and milestones you have recorded.

A business plan can also attract new business partners that are willing to contribute financially and intellectually. If you are writing a business plan to a bank, your project must show your traction , that is, the proof that you can pay back any loan borrowed.

Also, if you are writing to an investor, your plan must contain evidence that you can effectively utilize the funds you want them to invest in your business. Here, you are using your business plan to persuade a group or an individual that your business is a source of a good investment.

2. Monitor Business Growth

A business plan can help you track cash flows in your business. It steers your business to greater heights. A business plan capable of tracking business growth should contain:

• The business goals
• Methods to achieve the goals
• Time-frame for attaining those goals

A good business plan should guide you through every step in achieving your goals. It can also track the allocation of assets to every aspect of the business. You can tell when you are spending more than you should on a project.

You can compare a business plan to a written GPS. It helps you manage your business and hints at the right time to expand your business.

3. Measure Business Success

A business plan can help you measure your business success rate. Some small-scale businesses are thriving better than more prominent companies because of their track record of success.

Right from the onset of your business operation, set goals and work towards them. Write a plan to guide you through your procedures. Use your plan to measure how much you have achieved and how much is left to attain.

You can also weigh your success by monitoring the position of your brand relative to competitors. On the other hand, a business plan can also show you why you have not achieved a goal. It can tell if you have elapsed the time frame you set to attain a goal.

4. Document Your Marketing Strategies

You can use a business plan to document your marketing plans. Every business should have an effective marketing plan.

Competition mandates every business owner to go the extraordinary mile to remain relevant in the market. Your business plan should contain your marketing strategies that work. You can measure the success rate of your marketing plans.

In your business plan, your marketing strategy must answer the questions:

• How do you want to reach your target audience?
• How do you plan to retain your customers?
• What is/are your pricing plans?
• What is your budget for marketing?

How to Write a Business Plan Step-by-Step

1. create your executive summary.

The executive summary is a snapshot of your business or a high-level overview of your business purposes and plans . Although the executive summary is the first section in your business plan, most people write it last. The length of the executive summary is not more than two pages.

Generally, there are nine sections in a business plan, the executive summary should condense essential ideas from the other eight sections.

A good executive summary should do the following:

• A Snapshot of Growth Potential. Briefly inform the reader about your company and why it will be successful)
• Contain your Mission Statement which explains what the main objective or focus of your business is.
• Product Description and Differentiation. Brief description of your products or services and why it is different from other solutions in the market.
• The Team. Basic information about your company’s leadership team and employees
• Business Concept. A solid description of what your business does.
• Target Market. The customers you plan to sell to.
• Marketing Strategy. Your plans on reaching and selling to your customers
• Current Financial State. Brief information about what revenue your business currently generates.
• Projected Financial State. Brief information about what you foresee your business revenue to be in the future.

The executive summary is the make-or-break section of your business plan. If your summary cannot in less than two pages cannot clearly describe how your business will solve a particular problem of your target audience and make a profit, your business plan is set on a faulty foundation.

Avoid using the executive summary to hype your business, instead, focus on helping the reader understand the what and how of your plan.

View the executive summary as an opportunity to introduce your vision for your company. You know your executive summary is powerful when it can answer these key questions:

• Who is your target audience?
• What sector or industry are you in?
• What are your products and services?
• What is the future of your industry?
• Is your company scaleable?
• Who are the owners and leaders of your company? What are their backgrounds and experience levels?
• What is the motivation for starting your company?
• What are the next steps?

Writing the executive summary last although it is the most important section of your business plan is an excellent idea. The reason why is because it is a high-level overview of your business plan. It is the section that determines whether potential investors and lenders will read further or not.

The executive summary can be a stand-alone document that covers everything in your business plan. It is not uncommon for investors to request only the executive summary when evaluating your business. If the information in the executive summary impresses them, they will ask for the complete business plan.

If you are writing your business plan for your planning purposes, you do not need to write the executive summary.

2. Add Your Company Overview

The company overview or description is the next section in your business plan after the executive summary. It describes what your business does.

Adding your company overview can be tricky especially when your business is still in the planning stages. Existing businesses can easily summarize their current operations but may encounter difficulties trying to explain what they plan to become.

Your company overview should contain the following:

• What products and services you will provide
• Geographical markets and locations your company have a presence
• What you need to run your business
• Who your target audience or customers are
• Who will service your customers
• Your company’s purpose, mission, and vision
• Information about your company’s founders
• Who the founders are
• Notable achievements of your company so far

When creating a company overview, you have to focus on three basics: identifying your industry, identifying your customer, and explaining the problem you solve.

If you are stuck when creating your company overview, try to answer some of these questions that pertain to you.

• Who are you targeting? (The answer is not everyone)
• What pain point does your product or service solve for your customers that they will be willing to spend money on resolving?
• How does your product or service overcome that pain point?
• Where is the location of your business?
• What products, equipment, and services do you need to run your business?
• How is your company’s product or service different from your competition in the eyes of your customers?
• How many employees do you need and what skills do you require them to have?

After answering some or all of these questions, you will get more than enough information you need to write your company overview or description section. When writing this section, describe what your company does for your customers.

The company description or overview section contains three elements: mission statement, history, and objectives.

• Mission Statement

The mission statement refers to the reason why your business or company is existing. It goes beyond what you do or sell, it is about the ‘why’. A good mission statement should be emotional and inspirational.

Your mission statement should follow the KISS rule (Keep It Simple, Stupid). For example, Shopify’s mission statement is “Make commerce better for everyone.”

When describing your company’s history, make it simple and avoid the temptation of tying it to a defensive narrative. Write it in the manner you would a profile. Your company’s history should include the following information:

• Founding Date
• Major Milestones
• Location(s)
• Flagship Products or Services
• Number of Employees
• Executive Leadership Roles

When you fill in this information, you use it to write one or two paragraphs about your company’s history.

Business Objectives

Your business objective must be SMART (specific, measurable, achievable, realistic, and time-bound.) Failure to clearly identify your business objectives does not inspire confidence and makes it hard for your team members to work towards a common purpose.

3. Perform Market and Competitive Analyses to Proof a Big Enough Business Opportunity

The third step in writing a business plan is the market and competitive analysis section. Every business, no matter the size, needs to perform comprehensive market and competitive analyses before it enters into a market.

Performing market and competitive analyses are critical for the success of your business. It helps you avoid entering the right market with the wrong product, or vice versa. Anyone reading your business plans, especially financiers and financial institutions will want to see proof that there is a big enough business opportunity you are targeting.

This section is where you describe the market and industry you want to operate in and show the big opportunities in the market that your business can leverage to make a profit. If you noticed any unique trends when doing your research, show them in this section.

Market analysis alone is not enough, you have to add competitive analysis to strengthen this section. There are already businesses in the industry or market, how do you plan to take a share of the market from them?

You have to clearly illustrate the competitive landscape in your business plan. Are there areas your competitors are doing well? Are there areas where they are not doing so well? Show it.

Make it clear in this section why you are moving into the industry and what weaknesses are present there that you plan to explain. How are your competitors going to react to your market entry? How do you plan to get customers? Do you plan on taking your competitors' competitors, tap into other sources for customers, or both?

Illustrate the competitive landscape as well. What are your competitors doing well and not so well?

Answering these questions and thoughts will aid your market and competitive analysis of the opportunities in your space. Depending on how sophisticated your industry is, or the expectations of your financiers, you may need to carry out a more comprehensive market and competitive analysis to prove that big business opportunity.

Instead of looking at the market and competitive analyses as one entity, separating them will make the research even more comprehensive.

Market Analysis

Market analysis, boarding speaking, refers to research a business carried out on its industry, market, and competitors. It helps businesses gain a good understanding of their target market and the outlook of their industry. Before starting a company, it is vital to carry out market research to find out if the market is viable.

The market analysis section is a key part of the business plan. It is the section where you identify who your best clients or customers are. You cannot omit this section, without it your business plan is incomplete.

A good market analysis will tell your readers how you fit into the existing market and what makes you stand out. This section requires in-depth research, it will probably be the most time-consuming part of the business plan to write.

• Market Research

To create a compelling market analysis that will win over investors and financial institutions, you have to carry out thorough market research . Your market research should be targeted at your primary target market for your products or services. Here is what you want to find out about your target market.

• Your target market’s needs or pain points
• The existing solutions for their pain points
• Geographic Location
• Demographics

The purpose of carrying out a marketing analysis is to get all the information you need to show that you have a solid and thorough understanding of your target audience.

Only after you have fully understood the people you plan to sell your products or services to, can you evaluate correctly if your target market will be interested in your products or services.

You can easily convince interested parties to invest in your business if you can show them you thoroughly understand the market and show them that there is a market for your products or services.

How to Quantify Your Target Market

One of the goals of your marketing research is to understand who your ideal customers are and their purchasing power. To quantify your target market, you have to determine the following:

• Your Potential Customers: They are the people you plan to target. For example, if you sell accounting software for small businesses , then anyone who runs an enterprise or large business is unlikely to be your customers. Also, individuals who do not have a business will most likely not be interested in your product.
• Total Households: If you are selling household products such as heating and air conditioning systems, determining the number of total households is more important than finding out the total population in the area you want to sell to. The logic is simple, people buy the product but it is the household that uses it.
• Median Income: You need to know the median income of your target market. If you target a market that cannot afford to buy your products and services, your business will not last long.
• Income by Demographics: If your potential customers belong to a certain age group or gender, determining income levels by demographics is necessary. For example, if you sell men's clothes, your target audience is men.

What Does a Good Market Analysis Entail?

Your business does not exist on its own, it can only flourish within an industry and alongside competitors. Market analysis takes into consideration your industry, target market, and competitors. Understanding these three entities will drastically improve your company’s chances of success.

You can view your market analysis as an examination of the market you want to break into and an education on the emerging trends and themes in that market. Good market analyses include the following:

• Industry Description. You find out about the history of your industry, the current and future market size, and who the largest players/companies are in your industry.
• Overview of Target Market. You research your target market and its characteristics. Who are you targeting? Note, it cannot be everyone, it has to be a specific group. You also have to find out all information possible about your customers that can help you understand how and why they make buying decisions.
• Size of Target Market: You need to know the size of your target market, how frequently they buy, and the expected quantity they buy so you do not risk overproducing and having lots of bad inventory. Researching the size of your target market will help you determine if it is big enough for sustained business or not.
• Growth Potential: Before picking a target market, you want to be sure there are lots of potential for future growth. You want to avoid going for an industry that is declining slowly or rapidly with almost zero growth potential.
• Market Share Potential: Does your business stand a good chance of taking a good share of the market?
• Market Pricing and Promotional Strategies: Your market analysis should give you an idea of the price point you can expect to charge for your products and services. Researching your target market will also give you ideas of pricing strategies you can implement to break into the market or to enjoy maximum profits.
• Potential Barriers to Entry: One of the biggest benefits of conducting market analysis is that it shows you every potential barrier to entry your business will likely encounter. It is a good idea to discuss potential barriers to entry such as changing technology. It informs readers of your business plan that you understand the market.
• Research on Competitors: You need to know the strengths and weaknesses of your competitors and how you can exploit them for the benefit of your business. Find patterns and trends among your competitors that make them successful, discover what works and what doesn’t, and see what you can do better.

The market analysis section is not just for talking about your target market, industry, and competitors. You also have to explain how your company can fill the hole you have identified in the market.

Here are some questions you can answer that can help you position your product or service in a positive light to your readers.

• Is your product or service of superior quality?
• What additional features do you offer that your competitors do not offer?
• Are you targeting a ‘new’ market?

Basically, your market analysis should include an analysis of what already exists in the market and an explanation of how your company fits into the market.

Competitive Analysis

In the competitive analysis section, y ou have to understand who your direct and indirect competitions are, and how successful they are in the marketplace. It is the section where you assess the strengths and weaknesses of your competitors, the advantage(s) they possess in the market and show the unique features or qualities that make you different from your competitors.

Many businesses do market analysis and competitive analysis together. However, to fully understand what the competitive analysis entails, it is essential to separate it from the market analysis.

Competitive analysis for your business can also include analysis on how to overcome barriers to entry in your target market.

The primary goal of conducting a competitive analysis is to distinguish your business from your competitors. A strong competitive analysis is essential if you want to convince potential funding sources to invest in your business. You have to show potential investors and lenders that your business has what it takes to compete in the marketplace successfully.

Competitive analysis will s how you what the strengths of your competition are and what they are doing to maintain that advantage.

When doing your competitive research, you first have to identify your competitor and then get all the information you can about them. The idea of spending time to identify your competitor and learn everything about them may seem daunting but it is well worth it.

Find answers to the following questions after you have identified who your competitors are.

• What are your successful competitors doing?
• Why is what they are doing working?
• Can your business do it better?
• What are the weaknesses of your successful competitors?
• What are they not doing well?
• Can your business turn its weaknesses into strengths?
• How good is your competitors’ customer service?
• Where do your competitors invest in advertising?
• What sales and pricing strategies are they using?
• What marketing strategies are they using?
• What kind of press coverage do they get?
• What are their customers saying about your competitors (both the positive and negative)?

If your competitors have a website, it is a good idea to visit their websites for more competitors’ research. Check their “About Us” page for more information.

If you are presenting your business plan to investors, you need to clearly distinguish yourself from your competitors. Investors can easily tell when you have not properly researched your competitors.

Take time to think about what unique qualities or features set you apart from your competitors. If you do not have any direct competition offering your product to the market, it does not mean you leave out the competitor analysis section blank. Instead research on other companies that are providing a similar product, or whose product is solving the problem your product solves.

The next step is to create a table listing the top competitors you want to include in your business plan. Ensure you list your business as the last and on the right. What you just created is known as the competitor analysis table.

Direct vs Indirect Competition

You cannot know if your product or service will be a fit for your target market if you have not understood your business and the competitive landscape.

There is no market you want to target where you will not encounter competition, even if your product is innovative. Including competitive analysis in your business plan is essential.

If you are entering an established market, you need to explain how you plan to differentiate your products from the available options in the market. Also, include a list of few companies that you view as your direct competitors The competition you face in an established market is your direct competition.

In situations where you are entering a market with no direct competition, it does not mean there is no competition there. Consider your indirect competition that offers substitutes for the products or services you offer.

For example, if you sell an innovative SaaS product, let us say a project management software , a company offering time management software is your indirect competition.

There is an easy way to find out who your indirect competitors are in the absence of no direct competitors. You simply have to research how your potential customers are solving the problems that your product or service seeks to solve. That is your direct competition.

Factors that Differentiate Your Business from the Competition

There are three main factors that any business can use to differentiate itself from its competition. They are cost leadership, product differentiation, and market segmentation.

1. Cost Leadership

A strategy you can impose to maximize your profits and gain an edge over your competitors. It involves offering lower prices than what the majority of your competitors are offering.

A common practice among businesses looking to enter into a market where there are dominant players is to use free trials or pricing to attract as many customers as possible to their offer.

2. Product Differentiation

Your product or service should have a unique selling proposition (USP) that your competitors do not have or do not stress in their marketing.

Part of the marketing strategy should involve making your products unique and different from your competitors. It does not have to be different from your competitors, it can be the addition to a feature or benefit that your competitors do not currently have.

3. Market Segmentation

As a new business seeking to break into an industry, you will gain more success from focusing on a specific niche or target market, and not the whole industry.

If your competitors are focused on a general need or target market, you can differentiate yourself from them by having a small and hyper-targeted audience. For example, if your competitors are selling men’s clothes in their online stores , you can sell hoodies for men.

4. Define Your Business and Management Structure

The next step in your business plan is your business and management structure. It is the section where you describe the legal structure of your business and the team running it.

Your business is only as good as the management team that runs it, while the management team can only strive when there is a proper business and management structure in place.

If your company is a sole proprietor or a limited liability company (LLC), a general or limited partnership, or a C or an S corporation, state it clearly in this section.

Use an organizational chart to show the management structure in your business. Clearly show who is in charge of what area in your company. It is where you show how each key manager or team leader’s unique experience can contribute immensely to the success of your company. You can also opt to add the resumes and CVs of the key players in your company.

The business and management structure section should show who the owner is, and other owners of the businesses (if the business has other owners). For businesses or companies with multiple owners, include the percent ownership of the various owners and clearly show the extent of each others’ involvement in the company.

Investors want to know who is behind the company and the team running it to determine if it has the right management to achieve its set goals.

Management Team

The management team section is where you show that you have the right team in place to successfully execute the business operations and ideas. Take time to create the management structure for your business. Think about all the important roles and responsibilities that you need managers for to grow your business.

Include brief bios of each key team member and ensure you highlight only the relevant information that is needed. If your team members have background industry experience or have held top positions for other companies and achieved success while filling that role, highlight it in this section.

A common mistake that many startups make is assigning C-level titles such as (CMO and CEO) to everyone on their team. It is unrealistic for a small business to have those titles. While it may look good on paper for the ego of your team members, it can prevent investors from investing in your business.

Instead of building an unrealistic management structure that does not fit your business reality, it is best to allow business titles to grow as the business grows. Starting everyone at the top leaves no room for future change or growth, which is bad for productivity.

Your management team does not have to be complete before you start writing your business plan. You can have a complete business plan even when there are managerial positions that are empty and need filling.

If you have management gaps in your team, simply show the gaps and indicate you are searching for the right candidates for the role(s). Investors do not expect you to have a full management team when you are just starting your business.

Key Questions to Answer When Structuring Your Management Team

• Who are the key leaders?
• What experiences, skills, and educational backgrounds do you expect your key leaders to have?
• Do your key leaders have industry experience?
• What positions will they fill and what duties will they perform in those positions?
• What level of authority do the key leaders have and what are their responsibilities?
• What is the salary for the various management positions that will attract the ideal candidates?

Additional Tips for Writing the Management Structure Section

1. Avoid Adding ‘Ghost’ Names to Your Management Team

There is always that temptation to include a ‘ghost’ name to your management team to attract and influence investors to invest in your business. Although the presence of these celebrity management team members may attract the attention of investors, it can cause your business to lose any credibility if you get found out.

Seasoned investors will investigate further the members of your management team before committing fully to your business If they find out that the celebrity name used does not play any actual role in your business, they will not invest and may write you off as dishonest.

2. Focus on Credentials But Pay Extra Attention to the Roles

Investors want to know the experience that your key team members have to determine if they can successfully reach the company’s growth and financial goals.

While it is an excellent boost for your key management team to have the right credentials, you also want to pay extra attention to the roles they will play in your company.

Organizational Chart

Adding an organizational chart in this section of your business plan is not necessary, you can do it in your business plan’s appendix.

If you are exploring funding options, it is not uncommon to get asked for your organizational chart. The function of an organizational chart goes beyond raising money, you can also use it as a useful planning tool for your business.

An organizational chart can help you identify how best to structure your management team for maximum productivity and point you towards key roles you need to fill in the future.

You can use the organizational chart to show your company’s internal management structure such as the roles and responsibilities of your management team, and relationships that exist between them.

5. Describe Your Product and Service Offering

In your business plan, you have to describe what you sell or the service you plan to offer. It is the next step after defining your business and management structure. The products and services section is where you sell the benefits of your business.

Here you have to explain how your product or service will benefit your customers and describe your product lifecycle. It is also the section where you write down your plans for intellectual property like patent filings and copyrighting.

The research and development that you are undertaking for your product or service need to be explained in detail in this section. However, do not get too technical, sell the general idea and its benefits.

If you have any diagrams or intricate designs of your product or service, do not include them in the products and services section. Instead, leave them for the addendum page. Also, if you are leaving out diagrams or designs for the addendum, ensure you add this phrase “For more detail, visit the addendum Page #.”

Your product and service section in your business plan should include the following:

• A detailed explanation that clearly shows how your product or service works.
• The pricing model for your product or service.
• Your business’ sales and distribution strategy.
• The ideal customers that want your product or service.
• The benefits of your products and services.
• Reason(s) why your product or service is a better alternative to what your competitors are currently offering in the market.
• Plans for filling the orders you receive
• If you have current or pending patents, copyrights, and trademarks for your product or service, you can also discuss them in this section.

What to Focus On When Describing the Benefits, Lifecycle, and Production Process of Your Products or Services

In the products and services section, you have to distill the benefits, lifecycle, and production process of your products and services.

When describing the benefits of your products or services, here are some key factors to focus on.

• Unique features
• Translating the unique features into benefits
• The emotional, psychological, and practical payoffs to attract customers
• Intellectual property rights or any patents

When describing the product life cycle of your products or services, here are some key factors to focus on.

• Upsells, cross-sells, and down-sells
• Time between purchases
• Plans for research and development.

When describing the production process for your products or services, you need to think about the following:

• The creation of new or existing products and services.
• The sources for the raw materials or components you need for production.
• Assembling the products
• Maintaining quality control
• Supply-chain logistics (receiving the raw materials and delivering the finished products)
• The day-to-day management of the production processes, bookkeeping, and inventory.

Tips for Writing the Products or Services Section of Your Business Plan

1. Avoid Technical Descriptions and Industry Buzzwords

The products and services section of your business plan should clearly describe the products and services that your company provides. However, it is not a section to include technical jargons that anyone outside your industry will not understand.

A good practice is to remove highly detailed or technical descriptions in favor of simple terms. Industry buzzwords are not necessary, if there are simpler terms you can use, then use them. If you plan to use your business plan to source funds, making the product or service section so technical will do you no favors.

2. Describe How Your Products or Services Differ from Your Competitors

When potential investors look at your business plan, they want to know how the products and services you are offering differ from that of your competition. Differentiating your products or services from your competition in a way that makes your solution more attractive is critical.

If you are going the innovative path and there is no market currently for your product or service, you need to describe in this section why the market needs your product or service.

For example, overnight delivery was a niche business that only a few companies were participating in. Federal Express (FedEx) had to show in its business plan that there was a large opportunity for that service and they justified why the market needed that service.

3. Long or Short Products or Services Section

Should your products or services section be short? Does the long products or services section attract more investors?

There are no straightforward answers to these questions. Whether your products or services section should be long or relatively short depends on the nature of your business.

If your business is product-focused, then automatically you need to use more space to describe the details of your products. However, if the product your business sells is a commodity item that relies on competitive pricing or other pricing strategies, you do not have to use up so much space to provide significant details about the product.

Likewise, if you are selling a commodity that is available in numerous outlets, then you do not have to spend time on writing a long products or services section.

The key to the success of your business is most likely the effectiveness of your marketing strategies compared to your competitors. Use more space to address that section.

If you are creating a new product or service that the market does not know about, your products or services section can be lengthy. The reason why is because you need to explain everything about the product or service such as the nature of the product, its use case, and values.

A short products or services section for an innovative product or service will not give the readers enough information to properly evaluate your business.

4. Describe Your Relationships with Vendors or Suppliers

Your business will rely on vendors or suppliers to supply raw materials or the components needed to make your products. In your products and services section, describe your relationships with your vendors and suppliers fully.

Avoid the mistake of relying on only one supplier or vendor. If that supplier or vendor fails to supply or goes out of business, you can easily face supply problems and struggle to meet your demands. Plan to set up multiple vendor or supplier relationships for better business stability.

5. Your Primary Goal Is to Convince Your Readers

The primary goal of your business plan is to convince your readers that your business is viable and to create a guide for your business to follow. It applies to the products and services section.

When drafting this section, think like the reader. See your reader as someone who has no idea about your products and services. You are using the products and services section to provide the needed information to help your reader understand your products and services. As a result, you have to be clear and to the point.

While you want to educate your readers about your products or services, you also do not want to bore them with lots of technical details. Show your products and services and not your fancy choice of words.

Your products and services section should provide the answer to the “what” question for your business. You and your management team may run the business, but it is your products and services that are the lifeblood of the business.

Key Questions to Answer When Writing your Products and Services Section

Answering these questions can help you write your products and services section quickly and in a way that will appeal to your readers.

• Are your products existing on the market or are they still in the development stage?
• What is your timeline for adding new products and services to the market?
• What are the positives that make your products and services different from your competitors?
• Do your products and services have any competitive advantage that your competitors’ products and services do not currently have?
• Do your products or services have any competitive disadvantages that you need to overcome to compete with your competitors? If your answer is yes, state how you plan to overcome them,
• How much does it cost to produce your products or services? How much do you plan to sell it for?
• What is the price for your products and services compared to your competitors? Is pricing an issue?
• What are your operating costs and will it be low enough for you to compete with your competitors and still take home a reasonable profit margin?
• What is your plan for acquiring your products? Are you involved in the production of your products or services?
• Are you the manufacturer and produce all the components you need to create your products? Do you assemble your products by using components supplied by other manufacturers? Do you purchase your products directly from suppliers or wholesalers?
• Do you have a steady supply of products that you need to start your business? (If your business is yet to kick-off)
• How do you plan to distribute your products or services to the market?

You can also hint at the marketing or promotion plans you have for your products or services such as how you plan to build awareness or retain customers. The next section is where you can go fully into details about your business’s marketing and sales plan.

6. Show and Explain Your Marketing and Sales Plan

Providing great products and services is wonderful, but it means nothing if you do not have a marketing and sales plan to inform your customers about them. Your marketing and sales plan is critical to the success of your business.

The sales and marketing section is where you show and offer a detailed explanation of your marketing and sales plan and how you plan to execute it. It covers your pricing plan, proposed advertising and promotion activities, activities and partnerships you need to make your business a success, and the benefits of your products and services.

There are several ways you can approach your marketing and sales strategy. Ideally, your marketing and sales strategy has to fit the unique needs of your business.

In this section, you describe how the plans your business has for attracting and retaining customers, and the exact process for making a sale happen. It is essential to thoroughly describe your complete marketing and sales plans because you are still going to reference this section when you are making financial projections for your business.

Outline Your Business’ Unique Selling Proposition (USP)

The sales and marketing section is where you outline your business’s unique selling proposition (USP). When you are developing your unique selling proposition, think about the strongest reasons why people should buy from you over your competition. That reason(s) is most likely a good fit to serve as your unique selling proposition (USP).

Target Market and Target Audience

Plans on how to get your products or services to your target market and how to get your target audience to buy them go into this section. You also highlight the strengths of your business here, particularly what sets them apart from your competition.

Before you start writing your marketing and sales plan, you need to have properly defined your target audience and fleshed out your buyer persona. If you do not first understand the individual you are marketing to, your marketing and sales plan will lack any substance and easily fall.

Creating a Smart Marketing and Sales Plan

Marketing your products and services is an investment that requires you to spend money. Like any other investment, you have to generate a good return on investment (ROI) to justify using that marketing and sales plan. Good marketing and sales plans bring in high sales and profits to your company.

Avoid spending money on unproductive marketing channels. Do your research and find out the best marketing and sales plan that works best for your company.

Your marketing and sales plan can be broken into different parts: your positioning statement, pricing, promotion, packaging, advertising, public relations, content marketing, social media, and strategic alliances.

Your Positioning Statement

Your positioning statement is the first part of your marketing and sales plan. It refers to the way you present your company to your customers.

Are you the premium solution, the low-price solution, or are you the intermediary between the two extremes in the market? What do you offer that your competitors do not that can give you leverage in the market?

Before you start writing your positioning statement, you need to spend some time evaluating the current market conditions. Here are some questions that can help you to evaluate the market

• What are the unique features or benefits that you offer that your competitors lack?
• What are your customers’ primary needs and wants?
• Why should a customer choose you over your competition? How do you plan to differentiate yourself from the competition?
• How does your company’s solution compare with other solutions in the market?

After answering these questions, then you can start writing your positioning statement. Your positioning statement does not have to be in-depth or too long.

All you need to explain with your positioning statement are two focus areas. The first is the position of your company within the competitive landscape. The other focus area is the core value proposition that sets your company apart from other alternatives that your ideal customer might consider.

Here is a simple template you can use to develop a positioning statement.

For [description of target market] who [need of target market], [product or service] [how it meets the need]. Unlike [top competition], it [most essential distinguishing feature].

For example, let’s create the positioning statement for fictional accounting software and QuickBooks alternative , TBooks.

“For small business owners who need accounting services, TBooks is an accounting software that helps small businesses handle their small business bookkeeping basics quickly and easily. Unlike Wave, TBooks gives small businesses access to live sessions with top accountants.”

You can edit this positioning statement sample and fill it with your business details.

After writing your positioning statement, the next step is the pricing of your offerings. The overall positioning strategy you set in your positioning statement will often determine how you price your products or services.

Pricing is a powerful tool that sends a strong message to your customers. Failure to get your pricing strategy right can make or mar your business. If you are targeting a low-income audience, setting a premium price can result in low sales.

You can use pricing to communicate your positioning to your customers. For example, if you are offering a product at a premium price, you are sending a message to your customers that the product belongs to the premium category.

Basic Rules to Follow When Pricing Your Offering

Setting a price for your offering involves more than just putting a price tag on it. Deciding on the right pricing for your offering requires following some basic rules. They include covering your costs, primary and secondary profit center pricing, and matching the market rate.

• Covering Your Costs: The price you set for your products or service should be more than it costs you to produce and deliver them. Every business has the same goal, to make a profit. Depending on the strategy you want to use, there are exceptions to this rule. However, the vast majority of businesses follow this rule.
• Primary and Secondary Profit Center Pricing: When a company sets its price above the cost of production, it is making that product its primary profit center. A company can also decide not to make its initial price its primary profit center by selling below or at even with its production cost. It rather depends on the support product or even maintenance that is associated with the initial purchase to make its profit. The initial price thus became its secondary profit center.
• Matching the Market Rate: A good rule to follow when pricing your products or services is to match your pricing with consumer demand and expectations. If you price your products or services beyond the price your customer perceives as the ideal price range, you may end up with no customers. Pricing your products too low below what your customer perceives as the ideal price range may lead to them undervaluing your offering.

Pricing Strategy

Your pricing strategy influences the price of your offering. There are several pricing strategies available for you to choose from when examining the right pricing strategy for your business. They include cost-plus pricing, market-based pricing, value pricing, and more.

• Cost-plus Pricing: This strategy is one of the simplest and oldest pricing strategies. Here you consider the cost of producing a unit of your product and then add a profit to it to arrive at your market price. It is an effective pricing strategy for manufacturers because it helps them cover their initial costs. Another name for the cost-plus pricing strategy is the markup pricing strategy.
• Market-based Pricing: This pricing strategy analyses the market including competitors’ pricing and then sets a price based on what the market is expecting. With this pricing strategy, you can either set your price at the low-end or high-end of the market.
• Value Pricing: This pricing strategy involves setting a price based on the value you are providing to your customer. When adopting a value-based pricing strategy, you have to set a price that your customers are willing to pay. Service-based businesses such as small business insurance providers , luxury goods sellers, and the fashion industry use this pricing strategy.

After carefully sorting out your positioning statement and pricing, the next item to look at is your promotional strategy. Your promotional strategy explains how you plan on communicating with your customers and prospects.

As a business, you must measure all your costs, including the cost of your promotions. You also want to measure how much sales your promotions bring for your business to determine its usefulness. Promotional strategies or programs that do not lead to profit need to be removed.

There are different types of promotional strategies you can adopt for your business, they include advertising, public relations, and content marketing.

Advertising

Your business plan should include your advertising plan which can be found in the marketing and sales plan section. You need to include an overview of your advertising plans such as the areas you plan to spend money on to advertise your business and offers.

Ensure that you make it clear in this section if your business will be advertising online or using the more traditional offline media, or the combination of both online and offline media. You can also include the advertising medium you want to use to raise awareness about your business and offers.

Some common online advertising mediums you can use include social media ads, landing pages, sales pages, SEO, Pay-Per-Click, emails, Google Ads, and others. Some common traditional and offline advertising mediums include word of mouth, radios, direct mail, televisions, flyers, billboards, posters, and others.

A key component of your advertising strategy is how you plan to measure the effectiveness and success of your advertising campaign. There is no point in sticking with an advertising plan or medium that does not produce results for your business in the long run.

Public Relations

A great way to reach your customers is to get the media to cover your business or product. Publicity, especially good ones, should be a part of your marketing and sales plan. In this section, show your plans for getting prominent reviews of your product from reputable publications and sources.

Your business needs that exposure to grow. If public relations is a crucial part of your promotional strategy, provide details about your public relations plan here.

Content Marketing

Content marketing is a popular promotional strategy used by businesses to inform and attract their customers. It is about teaching and educating your prospects on various topics of interest in your niche, it does not just involve informing them about the benefits and features of the products and services you have,

Businesses publish content usually for free where they provide useful information, tips, and advice so that their target market can be made aware of the importance of their products and services. Content marketing strategies seek to nurture prospects into buyers over time by simply providing value.

Your company can create a blog where it will be publishing content for its target market. You will need to use the best website builder such as Wix and Squarespace and the best web hosting services such as Bluehost, Hostinger, and other Bluehost alternatives to create a functional blog or website.

If content marketing is a crucial part of your promotional strategy (as it should be), detail your plans under promotions.

Including high-quality images of the packaging of your product in your business plan is a lovely idea. You can add the images of the packaging of that product in the marketing and sales plan section. If you are not selling a product, then you do not need to include any worry about the physical packaging of your product.

When organizing the packaging section of your business plan, you can answer the following questions to make maximum use of this section.

• Is your choice of packaging consistent with your positioning strategy?
• What key value proposition does your packaging communicate? (It should reflect the key value proposition of your business)
• How does your packaging compare to that of your competitors?

Social Media

Your 21st-century business needs to have a good social media presence. Not having one is leaving out opportunities for growth and reaching out to your prospect.

You do not have to join the thousands of social media platforms out there. What you need to do is join the ones that your customers are active on and be active there.

Businesses use social media to provide information about their products such as promotions, discounts, the benefits of their products, and content on their blogs.

Social media is also a platform for engaging with your customers and getting feedback about your products or services. Make no mistake, more and more of your prospects are using social media channels to find more information about companies.

You need to consider the social media channels you want to prioritize your business (prioritize the ones your customers are active in) and your branding plans in this section.

Strategic Alliances

If your company plans to work closely with other companies as part of your sales and marketing plan, include it in this section. Prove details about those partnerships in your business plan if you have already established them.

Strategic alliances can be beneficial for all parties involved including your company. Working closely with another company in the form of a partnership can provide access to a different target market segment for your company.

The company you are partnering with may also gain access to your target market or simply offer a new product or service (that of your company) to its customers.

Mutually beneficial partnerships can cover the weaknesses of one company with the strength of another. You should consider strategic alliances with companies that sell complimentary products to yours. For example, if you provide printers, you can partner with a company that produces ink since the customers that buy printers from you will also need inks for printing.

Steps Involved in Creating a Marketing and Sales Plan

1. Focus on Your Target Market

Identify who your customers are, the market you want to target. Then determine the best ways to get your products or services to your potential customers.

2. Evaluate Your Competition

One of the goals of having a marketing plan is to distinguish yourself from your competition. You cannot stand out from them without first knowing them in and out.

You can know your competitors by gathering information about their products, pricing, service, and advertising campaigns.

These questions can help you know your competition.

• What makes your competition successful?
• What are their weaknesses?
• What are customers saying about your competition?

3. Consider Your Brand

Customers' perception of your brand has a strong impact on your sales. Your marketing and sales plan should seek to bolster the image of your brand. Before you start marketing your business, think about the message you want to pass across about your business and your products and services.

4. Focus on Benefits

The majority of your customers do not view your product in terms of features, what they want to know is the benefits and solutions your product offers. Think about the problems your product solves and the benefits it delivers, and use it to create the right sales and marketing message.

Your marketing plan should focus on what you want your customer to get instead of what you provide. Identify those benefits in your marketing and sales plan.

5. Focus on Differentiation

Your marketing and sales plan should look for a unique angle they can take that differentiates your business from the competition, even if the products offered are similar. Some good areas of differentiation you can use are your benefits, pricing, and features.

Key Questions to Answer When Writing Your Marketing and Sales Plan

• What is your company’s budget for sales and marketing campaigns?
• What key metrics will you use to determine if your marketing plans are successful?
• What are your alternatives if your initial marketing efforts do not succeed?
• Who are the sales representatives you need to promote your products or services?
• What are the marketing and sales channels you plan to use? How do you plan to get your products in front of your ideal customers?
• Where will you sell your products?

You may want to include samples of marketing materials you plan to use such as print ads, website descriptions, and social media ads. While it is not compulsory to include these samples, it can help you better communicate your marketing and sales plan and objectives.

The purpose of the marketing and sales section is to answer this question “How will you reach your customers?” If you cannot convincingly provide an answer to this question, you need to rework your marketing and sales section.

7. Clearly Show Your Funding Request

If you are writing your business plan to ask for funding from investors or financial institutions, the funding request section is where you will outline your funding requirements. The funding request section should answer the question ‘How much money will your business need in the near future (3 to 5 years)?’

A good funding request section will clearly outline and explain the amount of funding your business needs over the next five years. You need to know the amount of money your business needs to make an accurate funding request.

Also, when writing your funding request, provide details of how the funds will be used over the period. Specify if you want to use the funds to buy raw materials or machinery, pay salaries, pay for advertisements, and cover specific bills such as rent and electricity.

In addition to explaining what you want to use the funds requested for, you need to clearly state the projected return on investment (ROI) . Investors and creditors want to know if your business can generate profit for them if they put funds into it.

Ensure you do not inflate the figures and stay as realistic as possible. Investors and financial institutions you are seeking funds from will do their research before investing money in your business.

If you are not sure of an exact number to request from, you can use some range of numbers as rough estimates. Add a best-case scenario and a work-case scenario to your funding request. Also, include a description of your strategic future financial plans such as selling your business or paying off debts.

Funding Request: Debt or Equity?

When making your funding request, specify the type of funding you want. Do you want debt or equity? Draw out the terms that will be applicable for the funding, and the length of time the funding request will cover.

Case for Equity

If your new business has not yet started generating profits, you are most likely preparing to sell equity in your business to raise capital at the early stage. Equity here refers to ownership. In this case, you are selling a portion of your company to raise capital.

Although this method of raising capital for your business does not put your business in debt, keep in mind that an equity owner may expect to play a key role in company decisions even if he does not hold a major stake in the company.

Most equity sales for startups are usually private transactions . If you are making a funding request by offering equity in exchange for funding, let the investor know that they will be paid a dividend (a share of the company’s profit). Also, let the investor know the process for selling their equity in your business.

Case for Debt

You may decide not to offer equity in exchange for funds, instead, you make a funding request with the promise to pay back the money borrowed at the agreed time frame.

When making a funding request with an agreement to pay back, note that you will have to repay your creditors both the principal amount borrowed and the interest on it. Financial institutions offer this type of funding for businesses.

Large companies combine both equity and debt in their capital structure. When drafting your business plan, decide if you want to offer both or one over the other.

Before you sell equity in exchange for funding in your business, consider if you are willing to accept not being in total control of your business. Also, before you seek loans in your funding request section, ensure that the terms of repayment are favorable.

You should set a clear timeline in your funding request so that potential investors and creditors can know what you are expecting. Some investors and creditors may agree to your funding request and then delay payment for longer than 30 days, meanwhile, your business needs an immediate cash injection to operate efficiently.

Additional Tips for Writing the Funding Request Section of your Business Plan

The funding request section is not necessary for every business, it is only needed by businesses who plan to use their business plan to secure funding.

If you are adding the funding request section to your business plan, provide an itemized summary of how you plan to use the funds requested. Hiring a lawyer, accountant, or other professionals may be necessary for the proper development of this section.

You should also gather and use financial statements that add credibility and support to your funding requests. Ensure that the financial statements you use should include your projected financial data such as projected cash flows, forecast statements, and expenditure budgets.

If you are an existing business, include all historical financial statements such as cash flow statements, balance sheets and income statements .

Provide monthly and quarterly financial statements for a year. If your business has records that date back beyond the one-year mark, add the yearly statements of those years. These documents are for the appendix section of your business plan.

8. Detail Your Financial Plan, Metrics, and Projections

If you used the funding request section in your business plan, supplement it with a financial plan, metrics, and projections. This section paints a picture of the past performance of your business and then goes ahead to make an informed projection about its future.

The goal of this section is to convince readers that your business is going to be a financial success. It outlines your business plan to generate enough profit to repay the loan (with interest if applicable) and to generate a decent return on investment for investors.

If you have an existing business already in operation, use this section to demonstrate stability through finance. This section should include your cash flow statements, balance sheets, and income statements covering the last three to five years. If your business has some acceptable collateral that you can use to acquire loans, list it in the financial plan, metrics, and projection section.

Apart from current financial statements, this section should also contain a prospective financial outlook that spans the next five years. Include forecasted income statements, cash flow statements, balance sheets, and capital expenditure budget.

If your business is new and is not yet generating profit, use clear and realistic projections to show the potentials of your business.

When drafting this section, research industry norms and the performance of comparable businesses. Your financial projections should cover at least five years. State the logic behind your financial projections. Remember you can always make adjustments to this section as the variables change.

The financial plan, metrics, and projection section create a baseline which your business can either exceed or fail to reach. If your business fails to reach your projections in this section, you need to understand why it failed.

Investors and loan managers spend a lot of time going through the financial plan, metrics, and projection section compared to other parts of the business plan. Ensure you spend time creating credible financial analyses for your business in this section.

Many entrepreneurs find this section daunting to write. You do not need a business degree to create a solid financial forecast for your business. Business finances, especially for startups, are not as complicated as they seem. There are several online tools and templates that make writing this section so much easier.

Use Graphs and Charts

The financial plan, metrics, and projection section is a great place to use graphs and charts to tell the financial story of your business. Charts and images make it easier to communicate your finances.

Accuracy in this section is key, ensure you carefully analyze your past financial statements properly before making financial projects.

Address the Risk Factors and Show Realistic Financial Projections

Keep your financial plan, metrics, and projection realistic. It is okay to be optimistic in your financial projection, however, you have to justify it.

You should also address the various risk factors associated with your business in this section. Investors want to know the potential risks involved, show them. You should also show your plans for mitigating those risks.

What You Should In The Financial Plan, Metrics, and Projection Section of Your Business Plan

The financial plan, metrics, and projection section of your business plan should have monthly sales and revenue forecasts for the first year. It should also include annual projections that cover 3 to 5 years.

A three-year projection is a basic requirement to have in your business plan. However, some investors may request a five-year forecast.

Your business plan should include the following financial statements: sales forecast, personnel plan, income statement, income statement, cash flow statement, balance sheet, and an exit strategy.

1. Sales Forecast

Sales forecast refers to your projections about the number of sales your business is going to record over the next few years. It is typically broken into several rows, with each row assigned to a core product or service that your business is offering.

One common mistake people make in their business plan is to break down the sales forecast section into long details. A sales forecast should forecast the high-level details.

For example, if you are forecasting sales for a payroll software provider, you could break down your forecast into target market segments or subscription categories.

Your sales forecast section should also have a corresponding row for each sales row to cover the direct cost or Cost of Goods Sold (COGS). The objective of these rows is to show the expenses that your business incurs in making and delivering your product or service.

Note that your Cost of Goods Sold (COGS) should only cover those direct costs incurred when making your products. Other indirect expenses such as insurance, salaries, payroll tax, and rent should not be included.

For example, the Cost of Goods Sold (COGS) for a restaurant is the cost of ingredients while for a consulting company it will be the cost of paper and other presentation materials.

2. Personnel Plan

The personnel plan section is where you provide details about the payment plan for your employees. For a small business, you can easily list every position in your company and how much you plan to pay in the personnel plan.

However, for larger businesses, you have to break the personnel plan into functional groups such as sales and marketing.

The personnel plan will also include the cost of an employee beyond salary, commonly referred to as the employee burden. These costs include insurance, payroll taxes , and other essential costs incurred monthly as a result of having employees on your payroll.

3. Income Statement

The income statement section shows if your business is making a profit or taking a loss. Another name for the income statement is the profit and loss (P&L). It takes data from your sales forecast and personnel plan and adds other ongoing expenses you incur while running your business.

Every business plan should have an income statement. It subtracts your business expenses from its earnings to show if your business is generating profit or incurring losses.

The income statement has the following items: sales, Cost of Goods Sold (COGS), gross margin, operating expenses, total operating expenses, operating income , total expenses, and net profit.

• Sales refer to the revenue your business generates from selling its products or services. Other names for sales are income or revenue.
• Cost of Goods Sold (COGS) refers to the total cost of selling your products. Other names for COGS are direct costs or cost of sales. Manufacturing businesses use the Costs of Goods Manufactured (COGM) .
• Gross Margin is the figure you get when you subtract your COGS from your sales. In your income statement, you can express it as a percentage of total sales (Gross margin / Sales = Gross Margin Percent).
• Operating Expenses refer to all the expenses you incur from running your business. It exempts the COGS because it stands alone as a core part of your income statement. You also have to exclude taxes, depreciation, and amortization. Your operating expenses include salaries, marketing expenses, research and development (R&D) expenses, and other expenses.
• Total Operating Expenses refers to the sum of all your operating expenses including those exemptions named above under operating expenses.
• Operating Income refers to earnings before interest, taxes, depreciation, and amortization. It is simply known as the acronym EBITDA (earnings before interest, taxes, depreciation, and amortization). Calculating your operating income is simple, all you need to do is to subtract your COGS and total operating expenses from your sales.
• Total Expenses refer to the sum of your operating expenses and your business’ interest, taxes, depreciation, and amortization.
• Net profit shows whether your business has made a profit or taken a loss during a given timeframe.

4. Cash Flow Statement

The cash flow statement tracks the money you have in the bank at any given point. It is often confused with the income statement or the profit and loss statement. They are both different types of financial statements. The income statement calculates your profits and losses while the cash flow statement shows you how much you have in the bank.

5. Balance Sheet

The balance sheet is a financial statement that provides an overview of the financial health of your business. It contains information about the assets and liabilities of your company, and owner’s or shareholders’ equity.

You can get the net worth of your company by subtracting your company’s liabilities from its assets.

6. Exit Strategy

The exit strategy refers to a probable plan for selling your business either to the public in an IPO or to another company. It is the last thing you include in the financial plan, metrics, and projection section.

You can choose to omit the exit strategy from your business plan if you plan to maintain full ownership of your business and do not plan on seeking angel investment or virtual capitalist (VC) funding.

Investors may want to know what your exit plan is. They invest in your business to get a good return on investment.

Your exit strategy does not have to include long and boring details. Ensure you identify some interested parties who may be interested in buying the company if it becomes a success.

Key Questions to Answer with Your Financial Plan, Metrics, and Projection

Your financial plan, metrics, and projection section helps investors, creditors, or your internal managers to understand what your expenses are, the amount of cash you need, and what it takes to make your company profitable. It also shows what you will be doing with any funding.

You do not need to show actual financial data if you do not have one. Adding forecasts and projections to your financial statements is added proof that your strategy is feasible and shows investors you have planned properly.

Here are some key questions to answer to help you develop this section.

• What is your sales forecast for the next year?
• When will your company achieve a positive cash flow?
• What are the core expenses you need to operate?
• How much money do you need upfront to operate or grow your company?
• How will you use the loans or investments?

9. Add an Appendix to Your Business Plan

Adding an appendix to your business plan is optional. It is a useful place to put any charts, tables, legal notes, definitions, permits, résumés, and other critical information that do not fit into other sections of your business plan.

The appendix section is where you would want to include details of a patent or patent-pending if you have one. You can always add illustrations or images of your products here. It is the last section of your business plan.

When writing your business plan, there are details you cut short or remove to prevent the entire section from becoming too lengthy. There are also details you want to include in the business plan but are not a good fit for any of the previous sections. You can add that additional information to the appendix section.

Businesses also use the appendix section to include supporting documents or other materials specially requested by investors or lenders.

You can include just about any information that supports the assumptions and statements you made in the business plan under the appendix. It is the one place in the business plan where unrelated data and information can coexist amicably.

If your appendix section is lengthy, try organizing it by adding a table of contents at the beginning of the appendix section. It is also advisable to group similar information to make it easier for the reader to access them.

A well-organized appendix section makes it easier to share your information clearly and concisely. Add footnotes throughout the rest of the business plan or make references in the plan to the documents in the appendix.

The appendix section is usually only necessary if you are seeking funding from investors or lenders, or hoping to attract partners.

People reading business plans do not want to spend time going through a heap of backup information, numbers, and charts. Keep these documents or information in the Appendix section in case the reader wants to dig deeper.

Common Items to Include in the Appendix Section of Your Business Plan

The appendix section includes documents that supplement or support the information or claims given in other sections of the business plans. Common items you can include in the appendix section include:

• Additional data about the process of manufacturing or creation
• Additional description of products or services such as product schematics
• Additional financial documents or projections
• Articles of incorporation and status
• Backup for market research or competitive analysis
• Bank statements
• Business registries
• Client testimonials (if your business is already running)
• Copies of insurances
• Credit histories (personal or/and business)
• Deeds and permits
• Equipment leases
• Examples of marketing and advertising collateral
• Industry associations and memberships
• Images of product
• Intellectual property
• Key customer contracts
• Legal documents and other contracts
• Letters of reference
• Links to references
• Market research data
• Organizational charts
• Photographs of potential facilities
• Professional licenses pertaining to your legal structure or type of business
• Purchase orders
• Resumes of the founder(s) and key managers
• State and federal identification numbers or codes
• Trademarks or patents’ registrations

Avoid using the appendix section as a place to dump any document or information you feel like adding. Only add documents or information that you support or increase the credibility of your business plan.

Tips and Strategies for Writing a Convincing Business Plan

To achieve a perfect business plan, you need to consider some key tips and strategies. These tips will raise the efficiency of your business plan above average.

1. Know Your Audience

When writing a business plan, you need to know your audience . Business owners write business plans for different reasons. Your business plan has to be specific. For example, you can write business plans to potential investors, banks, and even fellow board members of the company.

The audience you are writing to determines the structure of the business plan. As a business owner, you have to know your audience. Not everyone will be your audience. Knowing your audience will help you to narrow the scope of your business plan.

Consider what your audience wants to see in your projects, the likely questions they might ask, and what interests them.

• A business plan used to address a company's board members will center on its employment schemes, internal affairs, projects, stakeholders, etc.
• A business plan for financial institutions will talk about the size of your market and the chances for you to pay back any loans you demand.
• A business plan for investors will show proof that you can return the investment capital within a specific time. In addition, it discusses your financial projections, tractions, and market size.

2. Get Inspiration from People

Writing a business plan from scratch as an entrepreneur can be daunting. That is why you need the right inspiration to push you to write one. You can gain inspiration from the successful business plans of other businesses. Look at their business plans, the style they use, the structure of the project, etc.

To make your business plan easier to create, search companies related to your business to get an exact copy of what you need to create an effective business plan. You can also make references while citing examples in your business plans.

When drafting your business plan, get as much help from others as you possibly can. By getting inspiration from people, you can create something better than what they have.

3. Avoid Being Over Optimistic

Many business owners make use of strong adjectives to qualify their content. One of the big mistakes entrepreneurs make when preparing a business plan is promising too much.

The use of superlatives and over-optimistic claims can prepare the audience for more than you can offer. In the end, you disappoint the confidence they have in you.

In most cases, the best option is to be realistic with your claims and statistics. Most of the investors can sense a bit of incompetency from the overuse of superlatives. As a new entrepreneur, do not be tempted to over-promise to get the interests of investors.

The concept of entrepreneurship centers on risks, nothing is certain when you make future analyses. What separates the best is the ability to do careful research and work towards achieving that, not promising more than you can achieve.

To make an excellent first impression as an entrepreneur, replace superlatives with compelling data-driven content. In this way, you are more specific than someone promising a huge ROI from an investment.

4. Keep it Simple and Short

When writing business plans, ensure you keep them simple throughout. Irrespective of the purpose of the business plan, your goal is to convince the audience.

One way to achieve this goal is to make them understand your proposal. Therefore, it would be best if you avoid the use of complex grammar to express yourself. It would be a huge turn-off if the people you want to convince are not familiar with your use of words.

Another thing to note is the length of your business plan. It would be best if you made it as brief as possible.

You hardly see investors or agencies that read through an extremely long document. In that case, if your first few pages can’t convince them, then you have lost it. The more pages you write, the higher the chances of you derailing from the essential contents.

To ensure your business plan has a high conversion rate, you need to dispose of every unnecessary information. For example, if you have a strategy that you are not sure of, it would be best to leave it out of the plan.

5. Make an Outline and Follow Through

A perfect business plan must have touched every part needed to convince the audience. Business owners get easily tempted to concentrate more on their products than on other sections. Doing this can be detrimental to the efficiency of the business plan.

For example, imagine you talking about a product but omitting or providing very little information about the target audience. You will leave your clients confused.

To ensure that your business plan communicates your full business model to readers, you have to input all the necessary information in it. One of the best ways to achieve this is to design a structure and stick to it.

This structure is what guides you throughout the writing. To make your work easier, you can assign an estimated word count or page limit to every section to avoid making it too bulky for easy reading. As a guide, the necessary things your business plan must contain are:

• Table of contents
• Introduction
• Product or service description
• Target audience
• Market size
• Competition analysis
• Financial projections

Some specific businesses can include some other essential sections, but these are the key sections that must be in every business plan.

6. Ask a Professional to Proofread

When writing a business plan, you must tie all loose ends to get a perfect result. When you are done with writing, call a professional to go through the document for you. You are bound to make mistakes, and the way to correct them is to get external help.

You should get a professional in your field who can relate to every section of your business plan. It would be easier for the professional to notice the inner flaws in the document than an editor with no knowledge of your business.

In addition to getting a professional to proofread, get an editor to proofread and edit your document. The editor will help you identify grammatical errors, spelling mistakes, and inappropriate writing styles.

Writing a business plan can be daunting, but you can surmount that obstacle and get the best out of it with these tips.

Business Plan Examples and Templates That’ll Save You Tons of Time

1. hubspot's one-page business plan.

The one-page business plan template by HubSpot is the perfect guide for businesses of any size, irrespective of their business strategy. Although the template is condensed into a page, your final business plan should not be a page long! The template is designed to ask helpful questions that can help you develop your business plan.

Hubspot’s one-page business plan template is divided into nine fields:

• Business opportunity
• Company description
• Industry analysis
• Target market
• Implementation timeline
• Marketing plan
• Financial summary
• Funding required

2. Bplan’s Free Business Plan Template

Bplans' free business plan template is investor-approved. It is a rich template used by prestigious educational institutions such as Babson College and Princeton University to teach entrepreneurs how to create a business plan.

The template has six sections: the executive summary, opportunity, execution, company, financial plan, and appendix. There is a step-by-step guide for writing every little detail in the business plan. Follow the instructions each step of the way and you will create a business plan that impresses investors or lenders easily.

3. HubSpot's Downloadable Business Plan Template

HubSpot’s downloadable business plan template is a more comprehensive option compared to the one-page business template by HubSpot. This free and downloadable business plan template is designed for entrepreneurs.

The template is a comprehensive guide and checklist for business owners just starting their businesses. It tells you everything you need to fill in each section of the business plan and how to do it.

There are nine sections in this business plan template: an executive summary, company and business description, product and services line, market analysis, marketing plan, sales plan, legal notes, financial considerations, and appendix.

4. Business Plan by My Own Business Institute

My Own Business Institute (MOBI) which is a part of Santa Clara University's Center for Innovation and Entrepreneurship offers a free business plan template. You can either copy the free business template from the link provided above or download it as a Word document.

The comprehensive template consists of a whopping 15 sections.

• The Business Profile
• The Vision and the People
• Home-Based Business and Freelance Business Opportunities
• Organization
• Licenses and Permits
• Business Insurance
• Communication Tools
• Acquisitions
• Location and Leasing
• Accounting and Cash Flow
• Opening and Marketing
• Managing Employees
• Expanding and Handling Problems

There are lots of helpful tips on how to fill each section in the free business plan template by MOBI.

5. Score's Business Plan Template for Startups

Score is an American nonprofit organization that helps entrepreneurs build successful companies. This business plan template for startups by Score is available for free download. The business plan template asks a whooping 150 generic questions that help entrepreneurs from different fields to set up the perfect business plan.

The business plan template for startups contains clear instructions and worksheets, all you have to do is answer the questions and fill the worksheets.

There are nine sections in the business plan template: executive summary, company description, products and services, marketing plan, operational plan, management and organization, startup expenses and capitalization, financial plan, and appendices.

The ‘refining the plan’ resource contains instructions that help you modify your business plan to suit your specific needs, industry, and target audience. After you have completed Score’s business plan template, you can work with a SCORE mentor for expert advice in business planning.

6. Minimalist Architecture Business Plan Template by Venngage

The minimalist architecture business plan template is a simple template by Venngage that you can customize to suit your business needs .

There are five sections in the template: an executive summary, statement of problem, approach and methodology, qualifications, and schedule and benchmark. The business plan template has instructions that guide users on what to fill in each section.

7. Small Business Administration Free Business Plan Template

The Small Business Administration (SBA) offers two free business plan templates, filled with practical real-life examples that you can model to create your business plan. Both free business plan templates are written by fictional business owners: Rebecca who owns a consulting firm, and Andrew who owns a toy company.

There are five sections in the two SBA’s free business plan templates.

• Executive Summary
• Company Description
• Service Line
• Marketing and Sales

8. The $100 Startup's One-Page Business Plan

The one-page business plan by the $100 startup is a simple business plan template for entrepreneurs who do not want to create a long and complicated plan . You can include more details in the appendices for funders who want more information beyond what you can put in the one-page business plan.

There are five sections in the one-page business plan such as overview, ka-ching, hustling, success, and obstacles or challenges or open questions. You can answer all the questions using one or two sentences.

9. PandaDoc’s Free Business Plan Template

The free business plan template by PandaDoc is a comprehensive 15-page document that describes the information you should include in every section.

There are 11 sections in PandaDoc’s free business plan template.

• Executive summary
• Business description
• Products and services
• Operations plan
• Management organization
• Financial plan
• Conclusion / Call to action
• Confidentiality statement

You have to sign up for its 14-day free trial to access the template. You will find different business plan templates on PandaDoc once you sign up (including templates for general businesses and specific businesses such as bakeries, startups, restaurants, salons, hotels, and coffee shops)

PandaDoc allows you to customize its business plan templates to fit the needs of your business. After editing the template, you can send it to interested parties and track opens and views through PandaDoc.

10. Invoiceberry Templates for Word, Open Office, Excel, or PPT

InvoiceBerry is a U.K based online invoicing and tracking platform that offers free business plan templates in .docx, .odt, .xlsx, and .pptx formats for freelancers and small businesses.

Before you can download the free business plan template, it will ask you to give it your email address. After you complete the little task, it will send the download link to your inbox for you to download. It also provides a business plan checklist in .xlsx file format that ensures you add the right information to the business plan.

Alternatives to the Traditional Business Plan

A business plan is very important in mapping out how one expects their business to grow over a set number of years, particularly when they need external investment in their business. However, many investors do not have the time to watch you present your business plan. It is a long and boring read.

Luckily, there are three alternatives to the traditional business plan (the Business Model Canvas, Lean Canvas, and Startup Pitch Deck). These alternatives are less laborious and easier and quicker to present to investors.

Business Model Canvas (BMC)

The business model canvas is a business tool used to present all the important components of setting up a business, such as customers, route to market, value proposition, and finance in a single sheet. It provides a very focused blueprint that defines your business initially which you can later expand on if needed.

The sheet is divided mainly into company, industry, and consumer models that are interconnected in how they find problems and proffer solutions.

Segments of the Business Model Canvas

The business model canvas was developed by founder Alexander Osterwalder to answer important business questions. It contains nine segments.

• Key Partners: Who will be occupying important executive positions in your business? What do they bring to the table? Will there be a third party involved with the company?
• Key Activities: What important activities will production entail? What activities will be carried out to ensure the smooth running of the company?
• The Product’s Value Propositions: What does your product do? How will it be different from other products?
• Customer Segments: What demography of consumers are you targeting? What are the habits of these consumers? Who are the MVPs of your target consumers?
• Customer Relationships: How will the team support and work with its customer base? How do you intend to build and maintain trust with the customer?
• Key Resources: What type of personnel and tools will be needed? What size of the budget will they need access to?
• Channels: How do you plan to create awareness of your products? How do you intend to transport your product to the customer?
• Cost Structure: What is the estimated cost of production? How much will distribution cost?
• Revenue Streams: For what value are customers willing to pay? How do they prefer to pay for the product? Are there any external revenues attached apart from the main source? How do the revenue streams contribute to the overall revenue?

Lean Canvas

The lean canvas is a problem-oriented alternative to the standard business model canvas. It was proposed by Ash Maurya, creator of Lean Stack as a development of the business model generation. It uses a more problem-focused approach and it majorly targets entrepreneurs and startup businesses.

Lean Canvas uses the same 9 blocks concept as the business model canvas, however, they have been modified slightly to suit the needs and purpose of a small startup. The key partners, key activities, customer relationships, and key resources are replaced by new segments which are:

• Problem: Simple and straightforward number of problems you have identified, ideally three.
• Solution: The solutions to each problem.
• Unfair Advantage: Something you possess that can't be easily bought or replicated.
• Key Metrics: Important numbers that will tell how your business is doing.

Startup Pitch Deck

While the business model canvas compresses into a factual sheet, startup pitch decks expand flamboyantly.

Pitch decks, through slides, convey your business plan, often through graphs and images used to emphasize estimations and observations in your presentation. Entrepreneurs often use pitch decks to fully convince their target audience of their plans before discussing funding arrangements.

Considering the likelihood of it being used in a small time frame, a good startup pitch deck should ideally contain 20 slides or less to have enough time to answer questions from the audience.

Unlike the standard and lean business model canvases, a pitch deck doesn't have a set template on how to present your business plan but there are still important components to it. These components often mirror those of the business model canvas except that they are in slide form and contain more details.

Using Airbnb (one of the most successful start-ups in recent history) for reference, the important components of a good slide are listed below.

• Cover/Introduction Slide: Here, you should include your company's name and mission statement. Your mission statement should be a very catchy tagline. Also, include personal information and contact details to provide an easy link for potential investors.
• Problem Slide: This slide requires you to create a connection with the audience or the investor that you are pitching. For example in their pitch, Airbnb summarized the most important problems it would solve in three brief points – pricing of hotels, disconnection from city culture, and connection problems for local bookings.
• Solution Slide: This slide includes your core value proposition. List simple and direct solutions to the problems you have mentioned
• Customer Analysis: Here you will provide information on the customers you will be offering your service to. The identity of your customers plays an important part in fundraising as well as the long-run viability of the business.
• Market Validation: Use competitive analysis to show numbers that prove the presence of a market for your product, industry behavior in the present and the long run, as well as the percentage of the market you aim to attract. It shows that you understand your competitors and customers and convinces investors of the opportunities presented in the market.
• Business Model: Your business model is the hook of your presentation. It may vary in complexity but it should generally include a pricing system informed by your market analysis. The goal of the slide is to confirm your business model is easy to implement.
• Marketing Strategy: This slide should summarize a few customer acquisition methods that you plan to use to grow the business.
• Competitive Advantage: What this slide will do is provide information on what will set you apart and make you a more attractive option to customers. It could be the possession of technology that is not widely known in the market.
• Team Slide: Here you will give a brief description of your team. Include your key management personnel here and their specific roles in the company. Include their educational background, job history, and skillsets. Also, talk about their accomplishments in their careers so far to build investors' confidence in members of your team.
• Traction Slide: This validates the company’s business model by showing growth through early sales and support. The slide aims to reduce any lingering fears in potential investors by showing realistic periodic milestones and profit margins. It can include current sales, growth, valuable customers, pre-orders, or data from surveys outlining current consumer interest.
• Funding Slide: This slide is popularly referred to as ‘the ask'. Here you will include important details like how much is needed to get your business off the ground and how the funding will be spent to help the company reach its goals.
• Appendix Slides: Your pitch deck appendix should always be included alongside a standard pitch presentation. It consists of additional slides you could not show in the pitch deck but you need to complement your presentation.

It is important to support your calculations with pictorial renditions. Infographics, such as pie charts or bar graphs, will be more effective in presenting the information than just listing numbers. For example, a six-month graph that shows rising profit margins will easily look more impressive than merely writing it.

Lastly, since a pitch deck is primarily used to secure meetings and you may be sharing your pitch with several investors, it is advisable to keep a separate public version that doesn't include financials. Only disclose the one with projections once you have secured a link with an investor.

Advantages of the Business Model Canvas, Lean Canvas, and Startup Pitch Deck over the Traditional Business Plan

• Time-Saving: Writing a detailed traditional business plan could take weeks or months. On the other hand, all three alternatives can be done in a few days or even one night of brainstorming if you have a comprehensive understanding of your business.
• Easier to Understand: Since the information presented is almost entirely factual, it puts focus on what is most important in running the business. They cut away the excess pages of fillers in a traditional business plan and allow investors to see what is driving the business and what is getting in the way.
• Easy to Update: Businesses typically present their business plans to many potential investors before they secure funding. What this means is that you may regularly have to amend your presentation to update statistics or adjust to audience-specific needs. For a traditional business plan, this could mean rewriting a whole section of your plan. For the three alternatives, updating is much easier because they are not voluminous.
• Guide for a More In-depth Business Plan: All three alternatives have the added benefit of being able to double as a sketch of your business plan if the need to create one arises in the future.

Business Plan FAQ

Business plans are important for any entrepreneur who is looking for a framework to run their company over some time or seeking external support. Although they are essential for new businesses, every company should ideally have a business plan to track their growth from time to time.  They can be used by startups seeking investments or loans to convey their business ideas or an employee to convince his boss of the feasibility of starting a new project. They can also be used by companies seeking to recruit high-profile employee targets into key positions or trying to secure partnerships with other firms.

Business plans often vary depending on your target audience, the scope, and the goals for the plan. Startup plans are the most common among the different types of business plans.  A start-up plan is used by a new business to present all the necessary information to help get the business up and running. They are usually used by entrepreneurs who are seeking funding from investors or bank loans. The established company alternative to a start-up plan is a feasibility plan. A feasibility plan is often used by an established company looking for new business opportunities. They are used to show the upsides of creating a new product for a consumer base. Because the audience is usually company people, it requires less company analysis. The third type of business plan is the lean business plan. A lean business plan is a brief, straight-to-the-point breakdown of your ideas and analysis for your business. It does not contain details of your proposal and can be written on one page. Finally, you have the what-if plan. As it implies, a what-if plan is a preparation for the worst-case scenario. You must always be prepared for the possibility of your original plan being rejected. A good what-if plan will serve as a good plan B to the original.

A good business plan has 10 key components. They include an executive plan, product analysis, desired customer base, company analysis, industry analysis, marketing strategy, sales strategy, financial projection, funding, and appendix. Executive Plan Your business should begin with your executive plan. An executive plan will provide early insight into what you are planning to achieve with your business. It should include your mission statement and highlight some of the important points which you will explain later. Product Analysis The next component of your business plan is your product analysis. A key part of this section is explaining the type of item or service you are going to offer as well as the market problems your product will solve. Desired Consumer Base Your product analysis should be supplemented with a detailed breakdown of your desired consumer base. Investors are always interested in knowing the economic power of your market as well as potential MVP customers. Company Analysis The next component of your business plan is your company analysis. Here, you explain how you want to run your business. It will include your operational strategy, an insight into the workforce needed to keep the company running, and important executive positions. It will also provide a calculation of expected operational costs.  Industry Analysis A good business plan should also contain well laid out industry analysis. It is important to convince potential investors you know the companies you will be competing with, as well as your plans to gain an edge on the competition. Marketing Strategy Your business plan should also include your marketing strategy. This is how you intend to spread awareness of your product. It should include a detailed explanation of the company brand as well as your advertising methods. Sales Strategy Your sales strategy comes after the market strategy. Here you give an overview of your company's pricing strategy and how you aim to maximize profits. You can also explain how your prices will adapt to market behaviors. Financial Projection The financial projection is the next component of your business plan. It explains your company's expected running cost and revenue earned during the tenure of the business plan. Financial projection gives a clear idea of how your company will develop in the future. Funding The next component of your business plan is funding. You have to detail how much external investment you need to get your business idea off the ground here. Appendix The last component of your plan is the appendix. This is where you put licenses, graphs, or key information that does not fit in any of the other components.

The business model canvas is a business management tool used to quickly define your business idea and model. It is often used when investors need you to pitch your business idea during a brief window.

A pitch deck is similar to a business model canvas except that it makes use of slides in its presentation. A pitch is not primarily used to secure funding, rather its main purpose is to entice potential investors by selling a very optimistic outlook on the business.

Business plan competitions help you evaluate the strength of your business plan. By participating in business plan competitions, you are improving your experience. The experience provides you with a degree of validation while practicing important skills. The main motivation for entering into the competitions is often to secure funding by finishing in podium positions. There is also the chance that you may catch the eye of a casual observer outside of the competition. These competitions also provide good networking opportunities. You could meet mentors who will take a keen interest in guiding you in your business journey. You also have the opportunity to meet other entrepreneurs whose ideas can complement yours.

Exlore Further

• 12 Key Elements of a Business Plan (Top Components Explained)
• 13 Sources of Business Finance For Companies & Sole Traders
• 5 Common Types of Business Structures (+ Pros & Cons)
• How to Buy a Business in 8 Steps (+ Due Diligence Checklist)

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Martin loves entrepreneurship and has helped dozens of entrepreneurs by validating the business idea, finding scalable customer acquisition channels, and building a data-driven organization. During his time working in investment banking, tech startups, and industry-leading companies he gained extensive knowledge in using different software tools to optimize business processes.

This insights and his love for researching SaaS products enables him to provide in-depth, fact-based software reviews to enable software buyers make better decisions.

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How to Write a Customer Analysis Section for Your Business Plan

Free Customer Analysis Template

Ayush Jalan

• February 12, 2024

A successful business idea equips customers with the tools necessary to help them reach their goals and fulfill their needs—professional or personal. To create such products and services that meet (and exceed) your customers’ expectations, you need to study their personas via customer analysis.

Customer analysis is a vital part of your business plan that helps you identify, define, and understand your customer base. Analyzing your customers is also crucial for creating a successful marketing plan, as it helps you communicate better with your customers.

In this article, you will learn how to conduct a customer analysis section for your business plan paired with a customer analysis example to help you create customer personas to study their personality traits, goals, challenges they face, and more.

What Is Customer Analysis?

Customer analysis is a comprehensive understanding of your customer base. It helps identify and describe your ideal customer. Through this in-depth analysis, you determine their needs, challenges, goals, and other important considerations. Given this info, it then helps you understand how effectively your products cater to them.

It further helps you optimize your strategic marketing process to create targeted advertisements, customize and prioritize specific features during product development, and make adjustments in your current business plan to align with your customer’s ever-changing demands.

How to Write a Customer Analysis Section

Writing a customer analysis includes extensive research and collecting data from various sources. This data consists of qualitative and quantitative aspects which help you write an accurate customer analysis for your business plan.

Writing a customer analysis has four main steps:

Step 1: Identify your customers

The primary step is to identify your potential customers and define their specific characteristics about them. The attained factual information is segmented into the following categories:

• Demographic: Age, gender, income
• Geographic: Location, type of area (Rural, suburban, urban)
• Psychographic: Values, interests, beliefs, personality, lifestyle, social class
• Technographic: Type of technology the buyer is using; tech-savviness
• Behavioral: Habits, frequent actions, buying patterns
• Industry (For B2B): Based on the industry a company belongs to.
• Business size (For B2B): Size of the company

To obtain the above data, a great place to start for established businesses is your customer database. If you aim to expand this information, you can use your existing communication channels to gather further details through surveys.

If you are a startup, conducting an audience analysis  might seem impossible as you don’t have an existing customer base. Fortunately, there are numerous ways through which you can study your potential customers. A few of them are:

• Identifying who would benefit from your product/service
• Analyzing your competitors to understand their target customers
• Using social media to prompt potential buyers to answer questionnaires

Want to create a Customer Persona in Easy Steps?

Generate valuable customer insights in minutes with Free Customer Persona Generator .

Step 2: Define the needs of your Customers

Now that you have identified your customers, the next step is to understand and specify their needs and challenges. This is the step where you need to go hands-on with your research. Getting to know your customers’ needs helps you determine whether or not your product or service hits the mark.

To understand the needs of your customers, you can adopt the following approaches:

1. Engage directly with potential Customers

A very reliable way to get to know your customers is to simply ask them, either in person or on a call. You can reach out to your customers, conduct one-on-one interviews, create focus groups, and invite buyers to test your new products. You can collect an ample amount of data through these techniques.

However, we recommend prioritizing accuracy over the quantity of data.

A technique that can help you get a deeper insight into your customer’s needs and opinions is the five whys technique . While practicing so, be mindful of the way you conduct the interview. It is essential to keep the customers in a comfortable and conversational environment to attain accurate answers.

2. Collect data from your Customer support

Customer support is the place where you can find feedback and criticism given by your customers. Analyzing this data helps you understand the pain points of your customers. You can further elaborate on this data by interacting with the customers who had issues with your products.

3. Run surveys and mention statistics

Talking to your customers helps you get qualitative information that you can use to alter your product or services according to your customers. The next part is to attain quantitative information, in other words, presenting numbers to support the previous data.

Conducting surveys is one of the commonly used methods for quantifying information. You can conduct in-app surveys, post-purchase surveys, or link surveys in email and apps, etc.

The second method is by collecting statistical data to support your conclusions from the interviews. These include stating studies related to customer choices, results from popular surveys, etc.

Step 3: Create a Customer Persona

Now, it’s time you present the information using a customer persona. A customer persona is a representation of a segment of customers with similar traits. Creating customer personas helps you process the data more efficiently.

You can use customer persona templates that are available online. To help get you started, we have created a customer persona example.

Customer Persona Example

Customer profile example of an internet service provider:

• About: A lot of customers remain at home and have a minimal and easy-going lifestyle. They need high-speed, interruption-free internet access.
• Demographics: Age is between 30 and 40, has a laid-back lifestyle, lives in suburban areas, and the income range is between $10,000 to $40,000.
• Professional role: Shop owners, employees, freelancers, etc.
• Identifiers/Personality traits: Introverts, like routines, makes schedules prefer online shopping, and stick with the companies they trust.
• Goals: Wants easily available service, and 24×7 customer support, prefers self-service technologies and chatbots over interacting with representatives.
• Challenges: Fluctuating internet connection while working or consuming media. Not enough signal coverage.

Step 4: Explain the product alignment to the Customer’s Needs

You’ve gathered info and created customer personas. The final step is to explain how your product or service caters to the needs of your customers. Here, you specify the solution you offer to your customers to tackle the challenges they face.

Mention the USPs of your product and its features, and they benefit the customer. Here, you also mention how your offerings make your customers’ lives better.

Create Better Solutions with Customer Analysis

Understanding your customers inside out helps you assist them better in solving their problems while also achieving success. Analyze your customers as often as required to stay updated about their ever-changing needs.

This helps you create better offerings to consistently fulfill their expectations. As a result, this builds up loyalty over time with each success.

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About the Author

Ayush is a writer with an academic background in business and marketing. Being a tech-enthusiast, he likes to keep a sharp eye on the latest tech gadgets and innovations. When he's not working, you can find him writing poetry, gaming, playing the ukulele, catching up with friends, and indulging in creative philosophies.

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Updated on September 02, 2023

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Table of contents, financial plan overview.

A financial plan is a comprehensive document that charts a business's monetary objectives and the strategies to achieve them. It encapsulates everything from budgeting and forecasting to investments and resource allocation.

For small businesses, a solid financial plan provides direction, helping them navigate economic challenges, capitalize on opportunities, and ensure sustainable growth.

The strength of a financial plan lies in its ability to offer a clear roadmap for businesses.

Especially for small businesses that may not have a vast reserve of resources, prioritizing financial goals and understanding where every dollar goes can be the difference between growth and stagnation.

It lends clarity, ensures informed decision-making, and sets the stage for profitability and success.

Understanding the Basics of Financial Planning for Small Businesses

Role of financial planning in business success.

Financial planning is the backbone of any successful business endeavor. It serves as a compass, guiding businesses toward profitability, stability, and growth.

With proper financial planning, businesses can anticipate potential cash shortfalls, make informed investment decisions, and ensure they have the capital needed to seize new opportunities.

For small businesses, in particular, tight financial planning can mean the difference between thriving and shuttering. Given the limited resources, it's vital to maximize every dollar and anticipate financial challenges.

Through diligent planning, small businesses can position themselves competitively, adapt to market changes, and drive consistent growth.

Core Components of a Financial Plan for Small Businesses

Every financial plan comprises several core components that, together, provide a holistic view of a business's financial health and direction. These include setting clear objectives, estimating costs , preparing financial statements , and considering sources of financing.

Each component plays a pivotal role in ensuring a thorough and actionable financial strategy .

For small businesses, these components often need a more granular approach. Given the scale of operations, even minor financial missteps can have significant repercussions.

As such, it's essential to tailor each component, ensuring they address specific challenges and opportunities that small businesses face, from initial startup costs to revenue forecasting and budgetary constraints.

Setting Clear Small Business Financial Objectives

Identifying business's short-term and long-term financial goals.

Every business venture starts with a vision. Translating this vision into actionable financial goals is the essence of effective planning.

Short-term goals could range from securing initial funding and achieving a set monthly revenue to covering startup costs. These targets, usually spanning a year or less, set the immediate direction for the business.

On the other hand, long-term financial goals delve into the broader horizon. They might encompass aspirations like expanding to new locations, diversifying product lines, or achieving a specific market share within a decade.

By segmenting goals into short-term and long-term, businesses can craft a step-by-step strategy, making the larger vision more attainable and manageable.

Understanding the Difference Between Profitability and Cash Flow

Profitability and cash flow, while closely linked, are distinct concepts in the financial realm. Profitability pertains to the ability of a business to generate a surplus after deducting all expenses.

It's a metric of success and indicates the viability of a business model . Simply put, it answers whether a business is making more than it spends.

In contrast, cash flow represents the inflow and outflow of cash within a business. A company might be profitable on paper yet struggle with cash flow if, for instance, clients delay payments or unexpected expenses arise.

For small businesses, maintaining positive cash flow is paramount. It ensures that they can cover operational costs, pay employees, and reinvest in growth, even if they're awaiting payments or navigating financial hiccups.

Estimating Small Business Startup Costs (for New Businesses)

Fixed vs variable costs.

When embarking on a new business venture, understanding costs is paramount. Fixed costs remain consistent regardless of production levels. They include expenses like rent, salaries, and insurance . These are predictable outlays that don't fluctuate with business performance.

Variable costs , conversely, change in direct proportion to production or business activity. Think of costs associated with materials for manufacturing or commission for sales .

For a startup, delineating between fixed and variable costs aids in crafting a more dynamic budget, allowing for adaptability as the business scales and evolves.

One-Time Expenditures vs Ongoing Expenses

Startups often grapple with numerous upfront costs. From purchasing equipment and setting up a workspace to initial marketing campaigns, these one-time expenditures lay the foundation for business operations.

They differ from ongoing expenses like utility bills, raw materials, or employee wages that recur monthly or annually.

For a small business owner, distinguishing between these costs is critical. One-time expenditures often demand a larger chunk of initial capital, while ongoing expenses shape the monthly and annual budget.

By categorizing them separately, businesses can strategize funding needs more effectively, ensuring they're equipped to meet both immediate and recurrent financial obligations.

Funding Sources for Small Businesses

Personal savings.

This is often the most straightforward way to fund a startup. Entrepreneurs tap into their personal savings accounts to jumpstart their business.

While this method has the benefit of not incurring debt or diluting company ownership, it intertwines the individual's personal financial security with the business's fate.

The entrepreneur must be prepared for potential losses, and there's the evident psychological strain of putting one's hard-earned money on the line.

Loans can be sourced from various institutions, from traditional banks to credit unions . They offer a substantial sum of money that can be paid back over time, usually with interest .

The main advantage of taking a loan is that the entrepreneur retains full ownership and control of the business.

However, there's the obligation of monthly repayments, which can strain a business's cash flow, especially in its early days. Additionally, securing a loan often requires collateral and a sound credit history.

Investors, including angel investors and venture capitalists , offer capital in exchange for equity or a stake in the company.

Angel investors are typically high-net-worth individuals who provide funding in the initial stages, while venture capitalists come in when there's proven business potential, often injecting larger sums. The advantage is substantial funding without the immediate pressure of repayments.

However, in exchange for their investment, they often seek a say in business decisions, which might mean compromising on some aspects of the original business vision.

Grants are essentially 'free money' often provided by government programs, non-profit organizations, or corporations to promote innovation and support businesses in specific sectors.

The primary advantage of grants is that they don't need to be repaid, nor do they dilute company ownership. However, they can be highly competitive and might come with stipulations on how the funds should be used.

Moreover, the application process can be lengthy and requires showcasing the business's potential or alignment with the specific goals or missions of the granting institution.

Preparing Key Financial Statements for Small Businesses

Income statement (profit & loss).

An Income Statement , often termed as the Profit & Loss statement , showcases a business's financial performance over a specific time frame. It details revenues , expenses, and ultimately, profits or losses.

By analyzing this statement, business owners can pinpoint revenue drivers, identify exorbitant costs, and understand the net result of their operations.

For small businesses, this document is instrumental in making informed decisions. For instance, if a certain product line is consistently unprofitable, it might be prudent to discontinue it. Conversely, if another segment is thriving, it might warrant further investment.

The Income Statement, thus, serves as a financial mirror, reflecting the outcomes of business strategies and decisions.

Balance Sheet

The Balance Sheet offers a snapshot of a company's assets , liabilities , and equity at a specific point in time.

Assets include everything the business owns, from physical items like equipment to intangible assets like patents .

Liabilities, on the other hand, encompass what the company owes, be it bank loans or unpaid bills.

Equity represents the owner's stake in the business, calculated as assets minus liabilities.

This statement is crucial for small businesses as it offers insights into their financial health. A robust asset base, minimal liabilities, and growing equity signify a thriving enterprise.

In contrast, mounting liabilities or dwindling assets could be red flags, signaling the need for intervention and strategy recalibration.

Cash Flow Statement

While the Income Statement reveals profitability, the Cash Flow Statement tracks the actual movement of money.

It categorizes cash flows into operating (day-to-day business), investing (buying/selling assets), and financing (loans or equity transactions) activities. This statement unveils the liquidity of a business, indicating whether it has sufficient cash to meet immediate obligations.

For small businesses, maintaining positive cash flow is often more vital than showcasing profitability.

After all, a business might be profitable on paper yet struggle if clients delay payments or unforeseen expenses emerge.

By regularly reviewing the Cash Flow Statement, small business owners can anticipate cash crunches and strategize accordingly, ensuring seamless operations irrespective of revenue cycles.

Small Business Budgeting and Expense Management

Importance of budgeting for a small business.

Budgeting is the financial blueprint for any business, detailing anticipated revenues and expenses for a forthcoming period. It's a proactive approach, enabling businesses to allocate resources efficiently, plan for investments, and prepare for potential financial challenges.

For small businesses, a meticulous budget is often the linchpin of stability, ensuring they operate within their means and avoid financial pitfalls.

Having a well-defined budget also fosters discipline. It curtails frivolous spending, emphasizes cost-efficiency, and sets clear financial boundaries.

For small businesses, where every dollar counts, a stringent budget is the gateway to financial prudence, ensuring that funds are utilized judiciously, fostering growth, and minimizing wastage.

Strategies for Reducing Costs and Optimizing Expenses

Bulk purchasing.

When businesses buy supplies in large quantities, they often benefit from discounts due to economies of scale . This can significantly reduce per-unit costs.

However, while bulk purchasing leads to immediate savings, businesses must ensure they have adequate storage and that the products won't expire or become obsolete before they're used.

Renegotiating Vendor Contracts

Regularly reviewing and renegotiating contracts with suppliers or service providers can lead to better terms and lower costs. This might involve exploring volume discounts, longer payment terms, or even bartering services.

Building strong relationships with vendors often paves the way for such negotiations.

Adopting Energy-Saving Measures

Simple changes, like switching to LED lighting or investing in energy-efficient appliances, can lead to long-term savings in utility bills. Moreover, energy conservation not only reduces costs but also minimizes the environmental footprint, which can enhance the business's reputation.

Embracing Technology

Modern software and technology can streamline business processes. Automation tools can handle repetitive tasks, reducing labor costs.

Meanwhile, data analytics tools can provide insights into customer preferences and behavior, ensuring that marketing budgets are used effectively and target the right audience.

Streamlining Operations

Regularly reviewing and refining business processes can eliminate redundancies and improve efficiency. This might mean merging roles, cutting down on unnecessary meetings, or simplifying supply chains. A leaner operation often translates to reduced expenses.

Outsourcing Non-core Tasks

Instead of maintaining an in-house team for every function, businesses can outsource tasks that aren't central to their operations.

For instance, functions like accounting , IT support, or digital marketing can be outsourced to specialized agencies, often leading to cost savings and access to expert skills.

Cultivating a Culture of Frugality

Encouraging employees to adopt a cost-conscious mindset can lead to collective savings. This can be fostered through incentives, regular training, or even simple practices like recycling and reusing office supplies.

When everyone in the organization is attuned to the importance of cost savings, the cumulative effect can be substantial.

Forecasting Small Business Revenue and Cash Flow

Techniques for predicting future sales in a small business, past sales data analysis.

Historical sales data is a foundational element in any forecasting effort. By reviewing previous sales figures, businesses can identify patterns, understand seasonal fluctuations, and recognize the effects of past initiatives.

This information offers a baseline upon which to build future projections, accounting for known recurring variables in the business cycle .

Market Research

Understanding the larger market dynamics is crucial for accurate forecasting. This involves tracking industry trends, monitoring shifts in consumer behavior, and being aware of potential market disruptions.

For instance, a sudden technological advancement can change consumer preferences or regulatory changes might impact an industry.

Local Trend Analysis

For small businesses, localized insights can be especially impactful. Observing local competitors, understanding regional consumer preferences, or noting shifts in the local economy can offer precise data points.

These granular details, when integrated into a larger forecasting model, can enhance prediction accuracy.

Customer Feedback

Direct feedback from customers is an invaluable source of insights. Surveys, focus groups, or even informal chats can reveal customer sentiments, preferences, and potential future purchasing behavior.

For instance, if a majority of loyal customers express interest in a new product or service, it can be indicative of future sales potential.

Moving Averages

This technique involves analyzing a series of data points (like monthly sales) by creating averages from different subsets of the full data set.

For yearly forecasting, a 12-month moving average can be used to smooth out short-term fluctuations and highlight longer-term trends or cycles.

Regression Analysis

Regression analysis is a statistical tool used to identify relationships between variables. In sales forecasting, it can help understand how different factors (like marketing spend, seasonal variations, or competitor actions) relate to sales figures.

Once these relationships are understood, businesses can predict future sales based on planned actions or expected external events.

Understanding the Cash Cycle of Business

The cash cycle encompasses the time it takes for a business to convert resource investments, often in the form of inventory, back into cash.

This involves the processes of purchasing inventory, selling it, and subsequently collecting payment. A shorter cycle implies quicker cash turnarounds, which are vital for liquidity.

For small businesses, a firm grasp of the cash cycle can aid in managing cash flow more effectively.

By identifying bottlenecks or delays, businesses can strategize to expedite processes. This might involve renegotiating payment terms with suppliers, offering discounts for prompt customer payments, or optimizing inventory levels to prevent overstocking.

Ultimately, understanding and optimizing the cash cycle ensures that a business remains liquid and agile.

Preparing for Seasonality and Unexpected Changes

Seasonality affects many businesses, from the ice cream vendor witnessing summer surges to the retailer bracing for holiday shopping frenzies.

By analyzing historical data and market trends, businesses can prepare for these cyclical shifts, ensuring they stock up, staff appropriately, and market effectively.

Small businesses, often operating on tighter margins , need to be especially vigilant. Beyond seasonality, they must also brace for unexpected changes – a local construction project obstructing store access, a sudden competitor emergence, or unforeseen regulatory changes.

Building a financial buffer, diversifying product or service lines, and maintaining flexible operational strategies can equip small businesses to weather these unforeseen challenges with resilience.

Securing Small Business Financing and Capital

Role of debt and equity financing.

When businesses seek external funding, they often grapple with the debt vs. equity conundrum. Debt financing involves borrowing money, typically via loans. While it doesn't dilute ownership, it necessitates regular interest payments, potentially impacting cash flow.

Equity financing, on the other hand, entails selling a stake in the business to investors. It might not demand regular repayments, but it dilutes ownership and might influence business decisions.

Small businesses must weigh these options carefully. While loans offer a structured repayment plan and retained control, they might strain finances if the business hits a rough patch.

Equity financing, although relinquishing some control, might bring aboard strategic partners, offering expertise and networks in addition to funds.

The optimal choice hinges on the business's financial health, growth aspirations, and the founder's comfort with sharing control.

Choosing Between Different Types of Loans

A staple in the lending arena, term loans offer businesses a fixed amount of capital that is paid back over a specified period with interest. They're often used for significant one-time expenses, such as purchasing machinery, real estate , or even business expansion.

With predictable monthly payments, businesses can plan their budgets accordingly. However, they might require collateral and a robust credit history for approval.

Lines of Credit

Unlike term loans that provide funds in a lump sum, a line of credit grants businesses access to a pool of funds up to a certain limit.

Businesses can draw from this line as needed, only paying interest on the amount they use. This makes it a versatile tool, especially for managing cash flow fluctuations or unexpected expenses. It serves as a financial safety net, ready for use whenever required.

As the name suggests, microloans are smaller loans designed to cater to businesses that might not need substantial amounts of capital. They're particularly beneficial for startups, businesses with limited credit histories, or those in need of a quick, small financial boost.

Since they are of a smaller denomination, the approval process might be more lenient than traditional loans.

Peer-To-Peer Lending

A contemporary twist to the traditional lending model, peer-to-peer (P2P) platforms connect borrowers directly with individual lenders or investor groups.

This direct model often translates to quicker approvals and competitive interest rates as the overheads of traditional banking structures are removed. With technology at its core, P2P lending can offer a more user-friendly, streamlined process.

However, creditworthiness still plays a pivotal role in determining interest rates and loan amounts.

Crowdfunding and Alternative Financing Options

In an increasingly digital age, crowdfunding platforms like Kickstarter or Indiegogo have emerged as viable financing avenues.

These platforms enable businesses to raise small amounts from a large number of people, often in exchange for product discounts, early access, or other perks. This not only secures funds but also validates the business idea and fosters a community of supporters.

Other alternatives include invoice financing, where businesses get an advance on pending invoices, or merchant cash advances tailored for businesses with significant credit card sales.

Each financing mode offers unique advantages and constraints. Small businesses must meticulously evaluate their financial landscape, growth trajectories, and risk appetite to harness the most suitable option.

Small Business Tax Planning and Management

Basic tax obligations for small businesses.

Navigating the maze of taxation can be daunting, especially for small businesses. Yet, understanding and fulfilling tax obligations is crucial.

Depending on the business structure—whether sole proprietorship , partnership , LLC , or corporation—different tax rules apply. For instance, while corporations are taxed on their earnings, sole proprietors report business income and expenses on their personal tax returns.

In addition to income taxes, small businesses may also be responsible for employment taxes if they have employees. This covers Social Security , Medicare , federal unemployment, and sometimes state-specific taxes.

There might also be sales taxes, property taxes, or special state-specific levies to consider.

Consistently maintaining accurate financial records, being aware of filing deadlines, and setting aside funds for tax obligations are essential practices to avoid penalties and ensure compliance.

Advantages of Tax Planning and Potential Deductions

Tax planning is the strategic approach to minimizing tax liability through the best use of available allowances, deductions, exclusions, and breaks.

For small businesses, effective tax planning can lead to significant savings.

This might involve strategies like deferring income to a later tax year, choosing the optimal time to purchase equipment, or taking advantage of specific credits available to businesses in certain sectors or regions.

Several potential deductions can reduce taxable income for small businesses. These include expenses like rent, utilities, business travel, employee wages, and even certain meals.

By keeping abreast of tax law changes and actively seeking out eligible deductions, small businesses can optimize their financial landscape, ensuring they're not paying more in taxes than necessary.

Importance of Hiring a Tax Professional or Accountant

While it's feasible for small business owners to manage their taxes, the intricate nuances of tax laws make it beneficial to consult professionals.

An experienced accountant or tax consultant can not only ensure compliance but can proactively recommend strategies to reduce tax liability.

They can guide businesses on issues like whether to classify someone as an employee or a contractor, how to structure the business for optimal taxation, or when to make certain capital investments.

Beyond just annual tax filing, these professionals offer year-round counsel, helping businesses maintain clean financial records, stay updated on tax law changes, and plan for future financial moves.

The investment in professional advice often pays dividends , saving businesses from costly mistakes, penalties, or missed financial opportunities.

Regularly Reviewing and Adjusting the Small Business Financial Plan

Setting checkpoints and milestones.

Like any strategic blueprint, a financial plan isn't static. It serves as a guiding framework but should be flexible enough to adapt to evolving business realities.

Setting regular checkpoints— quarterly , half-yearly, or annually—can help businesses assess whether they're on track to meet their financial objectives.

Milestones, such as reaching a specific sales target, launching a new product, or expanding into a new market, offer tangible markers of progress. Celebrating these victories can bolster morale, while any shortfalls can serve as lessons, prompting strategy tweaks. F

or small businesses, where agility is an asset, regularly revisiting the financial plan ensures that the business remains aligned with its overarching financial goals while being responsive to the dynamic marketplace.

Using Financial Ratios to Monitor Business Health

Financial ratios offer a distilled snapshot of a business's health. Ratios like the current ratio ( current assets divided by current liabilities ) can shed light on liquidity, indicating whether a business can meet short-term obligations.

The debt-to-equity ratio , contrasting borrowed funds with owner's equity, offers insights into the business's leverage and potential financial risk.

Profit margin , depicting profitability relative to sales, can highlight operational efficiency. By consistently monitoring these and other pertinent ratios, small businesses can glean actionable insights, understanding their financial strengths and areas needing attention.

In a realm where early intervention can stave off major financial setbacks, these ratios serve as vital diagnostic tools, guiding informed decision-making.

Pivoting Strategies Based on Financial Performance

In the ever-evolving world of business, flexibility is paramount. If financial reviews indicate that certain strategies aren't yielding anticipated results, it might be time to pivot.

This could involve tweaking product offerings, revising pricing strategies, targeting a different customer segment, or even overhauling the business model.

For small businesses, the ability to pivot can be a lifeline. It allows them to respond swiftly to market changes, customer feedback, or internal challenges.

A robust financial plan, while offering direction, should also be pliable, accommodating shifts in strategy based on real-world performance. After all, in the business arena, adaptability often spells the difference between stagnation and growth.

Bottom Line

Financial foresight is integral for the stability and growth of small businesses. Effective revenue and cash flow forecasting, anchored by historical sales data and enhanced by market research, local trends, and customer feedback, ensures businesses are prepared for future demands.

With the unpredictability of the business environment, understanding the cash cycle and preparing for unforeseen challenges is essential.

As businesses contemplate external financing, the decision between debt and equity and the myriad of loan types, should be made judiciously, keeping in mind the business's health, growth aspirations, and risk appetite.

Furthermore, diligent tax planning, with professional guidance, can lead to significant financial benefits. Regular reviews using financial ratios allow businesses to gauge their performance, adapt strategies, and pivot when necessary.

Ultimately, the agility to adapt, guided by a well-structured financial plan, is pivotal for businesses to thrive in a dynamic marketplace.

Creating a Small Business Financial Plan FAQs

What is the importance of a financial plan for small businesses.

A financial plan offers a structured roadmap, guiding businesses in making informed decisions, ensuring growth, and navigating financial challenges.

How do forecasting revenue and understanding cash cycles aid in financial planning?

Forecasting provides insights into expected income, aiding in budget allocation, while understanding cash cycles ensures effective liquidity management.

What are the core components of a financial plan for small businesses?

Core components include setting objectives, estimating startup costs, preparing financial statements, budgeting, forecasting, securing financing, and tax management.

Why is tax planning vital for small businesses?

Tax planning ensures compliance, optimizes tax liabilities through available deductions, and helps businesses save money and avoid penalties.

How often should a small business review its financial plan?

Regular reviews, ideally quarterly or half-yearly, ensure alignment with business goals and allow for strategy adjustments based on real-world performance.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .

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Most companies will be required to report government and court orders penalizing them for consumer protection violations.

By Stacy Cowley

The Consumer Financial Protection Bureau on Monday finalized a plan to create a public registry of nonbank businesses that have been penalized for violating consumer protection laws, a roster some have called a “rap sheet” for companies.

The goal, the consumer bureau said, is to make it easier for consumers, watchdogs and government prosecutors to identify patterns and recurrences.

“Too many American families and businesses have been harmed by repeat offenders in a rinse-and-repeat cycle of illegal activity,” Rohit Chopra, the bureau’s director, said at a news conference. “When companies believe that violating the law is more profitable than following it, this totally undermines public trust and harms businesses who are playing by the rules.”

The bureau estimates that at least 1,500 and as many as 7,750 companies will be subject to inclusion in the registry. The database will compile orders from state, federal and local governments and courts against companies that have faced sanctions for lawbreaking.

It will also capture those subject to consent orders, a common outcome of settlement deals. That means companies that legally resolved issues without admitting wrongdoing will be included in the registry.

The consumer bureau said it would omit banks and credit unions — a frequent target of regulatory fines and penalties — from the registry because the four federal regulators who cover that industry already publicly publish their consumer protection orders. But it may cover some bank holding companies.

Business lobbyists forcefully opposed the plan, which the bureau first proposed in late 2022. Six trade groups, including the U.S. Chamber of Commerce, sent a letter to the bureau last year criticizing the proposed registry as burdensome and unnecessary.

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Supporters argued that such a registry would help people evaluate the companies they do business with. Public Citizen, an advocacy group, said a “public rap sheet for corporations” would help consumers “see if a particular company is worth the risk.”

The database will operate as something of a companion to the consumer bureau’s popular complaints database , which lets people file public grievances about inaccurate bills, illegal fees, improper overdraft charges and other issues. Bureau officials said they expected the public portions of the new offender registry to go online sometime next year.

Public information on nonbank companies tends to be scattershot, bureau officials said. Covered companies will include debt collectors, credit bureaus, and payday and mortgage lenders. Starting in January, they will be required to annually report agency orders and court judgments to the consumer bureau, and to have a senior executive affirm in writing that the company is complying.

“Including law enforcement orders from across many jurisdictions will help the C.F.P.B. ensure one-time offenders do not become repeat offenders, and that repeat offenders do not continue violating the law,” Mr. Chopra said.

Stacy Cowley is a business reporter who writes about a broad array of topics related to consumer finance, including student debt, the banking industry and small business. More about Stacy Cowley

Inside the Biden Administration

Here’s the latest news and analysis from washington..

Immigration:  President Biden is expected to sign an executive order allowing him to temporarily seal the U.S. border with Mexico to migrants  when crossings surge, a move that would suspend longtime protections for asylum seekers.

Israel-Hamas War:  Declaring Hamas no longer capable of carrying out a major terrorist attack on Israel, Biden said that it was time for a permanent cease-fire in Gaza  and endorsed a new plan .

Russia-Ukraine War:  The president, in a major shift pressed by his advisers and key allies, has authorized Ukraine to conduct limited strikes inside Russia with American-made weapons .

Carbon Offsets:  The Biden administration laid out for the first time a set of broad government guidelines around the use of carbon offsets  in an attempt to shore up confidence in the much-criticized method for tackling global warming.

Live Nation:  The Justice Department is suing Live Nation Entertainment , the owner of Ticketmaster, asking a court to break up the company over claims it illegally maintained a monopoly in the live entertainment industry.

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Money blog: Emirates boss says Heathrow is like a 'Second World War airport'

The president of Emirates airlines has said Heathrow Airport is "not good enough" and looks like a Second World War airport. Read this and the rest of today's consumer and personal finance news below - and leave your thoughts in the comments box.

Tuesday 4 June 2024 12:29, UK

• Heathrow is like a Second World War airport, says Emirates boss
• Gas prices hit highest level since December
• Earnings of M&S and Sainsbury's bosses revealed
• Glitch that delayed 500,000 benefit payments 'fixed', HMRC says

Essential reads

• The five different types of shopping addict
• How much are student loans, when do you start paying back and what is the interest?
• Your rights when deliveries or returns don't arrive - and why leaving instructions could jeopardise them
• Think twice before buying your holiday clothes from Zara
• Where is all the money going? Here's who is really responsible for concert tickets going crazy
• Would tourist tax put you off visiting Scotland?
• Best of the Money blog - an archive

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Just 18% of companies in the UK are led by women, a nd while data suggests female entrepreneurs are on the rise, men still receive more funding and are entrusted with higher average loans to get them started.  

In a new series every Tuesday,  Money blog reporter  Jess Sharp  speaks to women who are bossing it in their respective fields - hearing their stories, struggles and advice for those who want to follow in their footsteps. 

This week, she has spoken to Jenn McGarrigle, the co-founder and chief executive of Cyd Connects. 

"I look back and I'm like, 'What was I thinking?'"

The beginning of Jenn McGarrigle's entrepreneur journey wasn't exactly conventional. 

"I was pregnant at the time and leaving a full-time job."

The mother-of-two officially set up her women-led sustainability consultancy company in late 2020, while seven months pregnant.

"We kind of started and did a few projects, and then we properly kicked off after I had my baby and went on maternity leave," she tells the Money blog. 

The 40-year-old had spent most of her career working in the health and beauty industry, dealing with brand strategy and communications for some of the biggest names in the business, including Clarins and Liz Earle. 

Along the way, and after being given the work "nobody wanted to do", she discovered a "big challenge" for brands: the need to constantly adapt their sustainability practices. 

That's where the idea for Cyd Connects came from.

How did it start? 

Jenn began feeling like she needed a change while working for a supplements brand called Liberty. 

"I was kind of hitting my ceiling in my role," she says.

"I was also six months pregnant, so I was like, gosh, what do I do here? Do I stay and get the maternity pay and then just figure it out? Or do I have another option?" 

She spent weeks going through her finances, talking to her husband and working out how much she needed to save to figure out if leaving her job was even a viable option. 

"We've been told by society that once you're pregnant you're at a disadvantage for so long that we believe it ourselves and we don't move from our careers," Jenn says.

"But saying that, we all have responsibilities. I have a mortgage to pay. I have another child. I can't just quit my job, I'm not a millionaire."

She looked at what she spent "down to the penny", calculated the minimum amount her family needed a month and saved 10 months of mortgage payments. 

"It's really important to know that because when you have a family and a mortgage, you need to manage your own life as well and when starting a business, it's really important to make sure you have all of those optics clear," she says. 

Ultimately, she decided to take the leap with her co-founders, Aisling and Mica, and the trio started hustling. 

"We were all at different crossroads in our life and wanted to do more good for the world," Jenn says.

"We wanted to help business make a better impact."

'I delivered my last project days before birth'

Jenn worked right up until she gave birth in February 2021 and after a few months, she was back full-time. 

"We set the business up in December 2020, and started our first project as a team. I was giving birth in February 2021, so I had a timeline, but I delivered my last project five days before I gave birth," she says. 

So far, the company hasn't taken any outside investment and Jenn still hasn't drawn a salary matching what she used to earn.

"We're going on a slower trajectory at the moment but finances are always tough on your business," she says. 

"You get these waves of great business, you're making money and then you have your downtime, so it's about starting and making sure you review your finances enough that you understand when those waves are going to happen."  

Four-day week and championing women

While focusing on sustainability, Cyd Connects has also centred itself on building a working environment built for women by women, and has invested in a four-day 32-hour work week for all staff. 

It also offers discounts to companies that are majority owned by women or an under-served group. 

"I faced a lot of barriers in my career because I'm an Asian woman and people don't realise they're being biased towards women," Jenn says. 

"If the majority of your workforce is women, but then all of a sudden senior leadership is not, there's a reason why that's happening.

"A lot of businesses aren't really willing to face that yet, and we really wanted to become a champion for women. It's really important for me. I have a daughter, I want things to change for the future." 

The challenges

Like any business, setting up Cyd Connects has come with its challenges, and Jenn says being a woman was part of that. 

"I think a lot of women have imposter syndrome. When I started the business, I didn't even call myself CEO at first," she says. 

"I was like, should I call myself a CEO? I really had to take that thinking away and say I am running this business. I am a CEO." 

Another obstacle came from the bias around women's financial knowledge. 

"I had worked in marketing for a long time, and I was often told by the CEOs and finance directors that I didn't understand the finances well enough," Jenn says. 

"I think women are often told that they don't know them and that is a kind of bias against us because we can understand finances as well as anyone." 

She adds: "You don't realise that it's happening in the moment... But actually, when I look back, I realise that it was just an easy thing to say to me, to not promote me into a position." 

Jenn's advice

While every woman can run a business, Jenn says, those who are successful need to have a real passion for what they're doing - and be realistic.

"It's a lot of work. It's hard and you're not getting paid for that hard work," she says.

"No one starts a business and is just making tonnes of money."

Another tip is to be prepared mentally and organised in your personal life.

"You can definitely do it, you just need to get yourself ready for it," she says. 

Lastly, part of the process means you have to just "go with the flow". 

"Things are going to go up and down. It's going to be quite a journey," she says.

"But as long as you are realise that's going to happen and you're open to it, I feel like you can really fly with starting a business."

Company records have revealed the bosses of M&S and Sainsbury's were paid about £5m each last year. 

M&S chief executive Stuart Machin received a record £4.73m payout - a 75% increase on his earnings the previous year. 

Of this, £908,000 was fixed pay while the rest was performance-related. 

Co-chief executive Katie Bickerstaffe, who has a four-day working pattern, took home a £4.41m payout. 

Her earnings were 85% higher than last year. 

The pair have overseen a successful turnaround for the retailer, which saw its profits surge by 58% in the 52 weeks to 30 March. 

Meanwhile, Sainsbury's chief executive Simon Roberts took home £4.91m in the last year - a dip of 5.8% on last year's payout. 

Mr Roberts's base salary increased by 3.8% to £933,000, but his bonus decreased. 

Sainsbury's saw its pre-tax profit rise by 1.6%. 

By Sarah Taaffe-Maguire , business reporter

Good news for motorists - the oil price has fallen again today to a low not seen since the start of February. 

The international oil price benchmark, a barrel of Brent crude, costs $77.25 - down from $92 in April. It's lowered amid speculation that major oil producing countries in the OPEC+ (the Organisation of the Petroleum Exporting Countries) group will increase exports later this year.

A pound still buys roughly the same amount of euro as it has over the past week (€1.1743) and more dollars ($1.2776) than it has in the past two months. 

The index of most valuable companies on the London Stock Exchange - the FTSE 100 - is down 0.63% this morning. One of the biggest fallers is the bank Standard and Chartered. Its share price is down more than 3% after reports that it's being accused in a New York court of funding terrorism, an accusation it denies.

The president of Emirates airlines has said Heathrow Airport is "not good enough" and looks like a Second World War airport. 

Sir Tim Clark said the airport was putting its shareholders before running a world-class business. 

"I was at Heathrow the other day and walking out of our lounge the ceiling height is awful," he said. 

"It looks like a utilitarian structure, post-Second World War. It is just not good enough." 

He argued Terminal 3, where Emirates is based, should be redesigned to make it better for passengers. 

Heathrow is "seriously lagging behind" in its customer experience, Mr Clark said. 

"It's an old airport. I'm afraid it's very difficult. You need to open up the whole terminal. Where we are based, new airports are being built employing the latest technologies to streamline the process of all the customer-facing elements. That is not the case at Heathrow."

Heathrow told The Telegraph: "Every pound we want to spend on improving airport facilities needs approval from our regulator. Despite having our proposals cut back in the current regulatory settlement, we will still invest £3.6bn upgrading our infrastructure over the next three years.

"We will continue to invest and to work with our airline partners to build an airport fit for the future."

Wholesale costs for natural gas have hit their highest levels across Europe since December last year - threatening a future spike in energy bills.

The cause is a key Norwegian export operation being shut down due to a cracked pipe.

The damage, discovered aboard the Sleipner Riser platform, prompted wider  energy  infrastructure to be halted including the Nyhamna processing plant which exports gas to the UK, pipeline operator Gassco said.

Alfred Hansen, the company's head of pipeline system operations, told the Reuters news agency: "This has big consequences from a supply perspective."

Read more on this, and how there's better new on oil prices, below ...

Yesterday we talked about the dopamine hit you get when shopping - and spoke to a psychologist about how you might learn to control it.

But what if it's gone too far? That's what we're discussing in the second of this four-part series this week.

A  piece by the Royal College of Psychiatrists , published by Cambridge University Press in 2012, said shopping addiction, often referred to as compulsive buying disorder (CBD), "was first described by the German psychiatrist Emil Kraepelin almost a century ago".

He called the disorder "oniomania" (from the Greek onios, meaning "for sale", and mania, meaning "insanity").

A hundred years on, the World Health Organisation doesn't classify shopping addiction as a mental illness, unlike gambling, video game addiction, pyromania and kleptomania - but psychologists are taking note of the subject.

According to a 2021 paper in the Journal of Behavioral Addictions, potential  symptoms  of a compulsive shopping disorder include:

• Preoccupation with shopping (an irresistible urge to buy a product);
• Reduced control over buying behaviours;
• Buying products but not using them for the purposes they were intended to serve;
• Using shopping to regulate mood;
• Negative consequences afterwards such as guilt, shame, debt, relationship problems;
• Negative mood and cognitive symptoms if attempting to stop.

Donald W Black, a prominent American psychiatrist, has written extensively on the subject. He says the "disorder has a lifetime prevalence of 5.8% in the US general population".

There has been much debate about whether CBD is a valid mental illness - amid concerns of over medicalising. However, a growing number of rehab clinics are offering treatment.

The Priory's website says: "If you are addicted to spending money, and are finding that it is affecting your finances, relationships, health and quality of life, this is just as serious as any other addiction."

The Abbey Care Foundation says signs you may have a shopping addiction include juggling multiple credit cards, hiding extravagant spending from your family, hoarding things you don't use and getting angry at anyone who tries to get in the way of your spending.

The foundation even breaks down different types of shopping addict:

• Bargain-seekers:  These people have a shopping habit of actively seeking items on sale. When they spot items for less than their perceived value, they purchase them. This behaviour makes them feel like they are winning and relieves shopping addiction. 
• Collectors:  This shopping addiction entails seeking out different versions of a particular item. The desire to collect or complete a set of similar items drives this addiction. 
• Show-offs:  The compulsive behaviour is driven by the desire to buy high-value items. In some cases, the individual's self-worth or self-esteem is attached to making such purchases. 
• Trophy-hunters:  The shopping addiction is for rare, expensive items. The individual intentionally looks for the most expensive or rarest items and gains satisfaction in buying them. 
• Shopping bulimics:  This shopping addiction is like the eating disorder known as bulimia nervosa. Individuals categorised as shopping bulimics make large, frequent purchases only to request later refunds. They do so to cushion themselves from the financial consequences of making such large purchases. 

Join us tomorrow as we speak to a woman for who this used to be all too real - leading her into £40,000 of debt.

Passengers will soon be able to book British Airways flights in a few clicks as part of a major revamp by the airline. 

The company told The Telegraph it wanted to style its website on the "three clicks and you can check out" approach of Amazon. 

British Airways said it was spending £7bn on a revamp, which would see the company's app and website relaunched. 

Other changes will include new planes, revamped seats and refurbished airport lounges. 

Customers will also be able to rebook, claim a refund and cancel flights online. 

The new website is currently being trialled by people flying from London Gatwick to Montpellier in France, Antalya in Turkey and Bari, Cagliari and Catania in Italy. 

Basically, student finance is a government-financed loan that covers university students' tuition fees and living costs for the duration of their study. 

There are two main types of loan, tuition and maintenance - we'll take each in turn. 

Tuition fees 

Undergraduate courses in England generally cost students about £9,250 a year.

That's a lot for a young person (or their family) to cover, so the government offers to pay that outright, direct to the university, on their behalf. 

This is known as your tuition loan - we'll come to how this is repaid later. 

Maintenance loans

These help students cover day-to-day costs, such as rent and food, while studying.

For the 2024-25 academic year, students can borrow anywhere between £4,327 and £13,348 for each year of study - depending on where you live, where you're going to study and your family's financial situation. 

See how much you could be entitled to by clicking here .

The various plans 

Here's where it gets more complicated. What plan you may be on is listed below... 

Why no Plan 3? The repayment plan for postgraduate loans in England and Wales is actually Plan 3.

In the UK, you pay nothing up front, and the amount you pay back each month is determined by how much you earn. 

You'll repay a percentage of your income over the threshold for your type of loan, depending on how often you get paid - see the table below for the thresholds. 

With those thresholds in mind, you'll repay either:

• 9% of your income over the threshold if you're on Plan 1, 2, 4 or 5
• 6% of your income over the threshold if you're on a postgraduate loan (Plan 3)

If you're on multiple plans, the rules are slightly different.

If you don't have a postgraduate loan, you'll repay 9% of your income over the lowest threshold out of the plan types you have.

In this scenario, you'll only have a single repayment taken each time you get paid, even if you're on more than one plan type.

But if you do have a postgraduate loan, you'll repay 6% of your income over the postgraduate loan threshold  and 9% of your income over the lowest threshold for any other plan types you have.

You don't need to worry about paying it off each month yourself if you're employed - the money will be deducted from your earnings before it hits your account, like income tax. 

Interest rates

Like any loan, you'll be paying back what you owe plus a little bit on the top - known as interest. 

With student loans, that extra on the top isn't so little right now, as it is linked to retail price rises.

• 6.25% if you're on Plan 1
• 7.8% if you're on Plan 2
• 6.25% if you're on Plan 4
• 7.8% if you're on Plan 5
• 7.8% if you're on a postgraduate loan plan (Plan 3)

Read other entries in our Basically... series...

Royal Mail's incoming owner has refused to rule out stamp price hikes under his leadership. 

In fact, Czech billionaire Daniel Kretinsky seemed to suggest there might be more increases to come. 

"I can't make unconditional commitments," he told The Times when questioned on the topic. 

"[If] your circulation is 50% of what it was … you either need to go home, or you need to increase the unit price and hope that people will pay for it. Because if not, you are making losses.

"You can be loss-making for a year or two, but you can't be in a loss for 20 years. It's simple maths. There's no mystery to it." 

First class stamp prices have more than doubled since 2018 from 67p to £1.35. 

The businessman, nicknamed the Czech Sphinx, had his £3.6bn offer accepted by the postal service's parent company, International Distribution Services, last week. 

It said the agreement included a series of "contractual commitments" to protect public service aspects of the Royal Mail - such as its universal service obligation to "one-price-goes-anywhere" first-class post six days a week.

Many were shocked by the deal, with Royal Mail reporting losses of £1m a day in recent years. 

You can read more about the Czech Sphinx below...

A major error that meant 500,000 families did not receive their scheduled child benefit today has been "fixed", HMRC has said.

In a post on X, HMRC said affected families would get the money on Wednesday morning, two days after the payments were due...

Multiple readers have got in touch to say they had been affected by the problem, which meant almost a third of payments scheduled for today were not made.

Reader Susan1984 said: "When should we expect to receive the missing payment? This has left not just me but so many more families with kids completely stuck for food and fuel this morning."

Earlier, HMRC apologised and said it was working urgently to resolve the issue, which would not affected payments scheduled for tomorrow (see post at 14.41).

Child benefit is usually paid every four weeks on a Monday or a Tuesday at a rate of £25.60 for an eldest or only child and £16.95 for each additional child.

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Newsom unveils new homeowner's insurance plan

SACRAMENTO, Calif. - Consumer watchdog groups say insurance will become even more expensive in California, under a plan unveiled by Gov. Gavin Newsom. 

Newsom said the state needs to let insurance companies raise rates more quickly, otherwise more of them will leave the state.

The governor's  proposed changes apply to all types of insurance for homeowners, businesses and anyone who owns a car or a boat.

He sent a bill on Wednesday to state lawmakers that would allow insurance companies to raise their rates more quickly and with less time for public review.

Newsom said this will cut out red tape and make it easier for insurance companies to do business here.

But consumer advocacy groups say it's just going to make it easier for companies to increase their prices.

Under the governor's plan, state insurance officials would have just 60 days to review and approve any proposed rate hikes from insurance companies.

Right now, the process can take up to two years.

Consumer watchdog groups also warn there's nothing in the proposal to guarantee insurers provide more coverage and start offering new policies again.

"That will make it harder for the public to protest and challenge improper rates and practices," Harvey Rosenfeld, Consumer Watchdog founder, said Thursday. "People who want our elected leaders to do the job need to contact their local legislators and say enough is enough."

For months, insurance companies have been leaving California homeowners in the dark.

State Farm recently announced it would not be renewing more than 72,000 policies in the state.

The city of Orinda topped the list of cities in the state with more than 1,700 homeowners not having their state farm policy renewed this year.

More than 30 years ago, California voters passed Prop. 13, which sets limits on the amount insurance rates could go up,

The governor's office says his plan doesn't change that part of Prop. 13. But it does shorten the amount of time the state will now have, to study the impact of those proposed price increases.

Consumer advocacy groups say it will end up making all types of insurance more expensive for everyone: Homeowners, businesses and car insurance.

The governor wants state lawmakers to add his insurance plan to the overall state budget bill.

The state budget must be approved by June 15. 

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Australian government spending rose in the March quarter to make a much needed contribution to economic growth, data showed on Tuesday, helping offset a steep drag from net exports.

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How to Get the Best Car Insurance

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For a lot of people, buying car insurance is like buying sliced bread. It’s not the most exciting purchase, and the options all seem similar. So thrifty shoppers might simply reach for the cheapest thing on the shelf. But like cheap bread, cheap car insurance may leave you wishing you spent a little more on quality.

“The cheapest is not always the best,” warns Jessica McNally, an agency owner with Goosehead Insurance in Dallas. That’s because there are lots of factors that make up a car insurance company. And while price is one of them, it’s best to look at the bigger picture.

Here’s what to look for when picking the best car insurance company.

1. Choose a financially stable company

The best car insurance companies have plenty of money on hand to pay for customers’ claims. It’s important to check an insurer’s financial stability before buying a policy, especially if it’s a smaller insurer you’ve never heard of.

There are several independent agencies that evaluate the financial strength of insurance companies. One example is A.M. Best. You can use its online search tool to find an insurer’s financial strength rating. Companies with a rating of A or higher are considered to have an excellent ability to pay out customer claims.

2. Check customer satisfaction ratings and reviews

Not every insurer is customer-first. That’s why it’s important to research the customer satisfaction of insurers you’re considering.

You can turn to surveys from companies like J.D. Power to find insurers with the best customer satisfaction scores [0] J.D. Power . Auto Insurance Customer Satisfaction Plummets as Rates Continue to Surge, J.D. Power Finds . Accessed May 21, 2024. View all sources . Or, if you don’t mind doing a little detective work, you can compare customer complaints against insurers by using the National Association of Insurance Commissioners’ website . But take other people’s emotionally charged comments about companies or agents you might read online with a grain of salt, McNally advises.

3. Look for convenience

A great auto insurer should offer multiple ways to manage a policy. For example, some insurers allow customers to use a mobile app to file and track claims. But it’s hard to tell how simple it’ll be to file a claim or perform other essential tasks, like paying your premium, before becoming a customer.

Some telltale signs that an insurer will be easy to work with are high mobile app ratings, flexible customer service hours and an easy-to-use website with helpful content. Consider asking a company representative to walk you through the claims process to learn what you’ll need to do if you have to file a claim. And pay attention to how the company communicates with you. "If they don't properly communicate, well, that's a warning sign," says Michael DeLong, a research and advocacy associate for the nonprofit Consumer Federation of America.

4. Pick an affordable company

Car insurance premiums are stretching to record-breaking heights [0] U.S. BUREAU OF LABOR STATISTICS . Consumer Price Index for All Urban Consumers (CPI-U) . Accessed May 21, 2024. View all sources , and almost half of U.S. consumers shopped for a new car insurance policy in the past year, according to an April 2024 report by J.D. Power [0] J.D. Power . Half of Auto Insurance Customers Currently Shopping for New Policies, J.D. Power Finds . Accessed May 21, 2024. View all sources . The best car insurance companies offer competitive rates and a variety of potential discounts.

It’s not hard to get car insurance quotes online from many companies. Make sure you compare the same coverage options throughout the quote-gathering process. And don’t forget to look for car insurance discounts, like breaks for being a good driver, paying your premium in full or driving a new car.

More tips to find the best car insurance

When shopping for the best car insurance, keep the following tips in mind.

Assess your needs. Before buying car insurance, take a moment to reflect on what’s important to you and your family. For example, maybe you prioritize affordability and a well-polished mobile app, but don’t need accident forgiveness .  

Consider small insurers. There are lots of small insurance companies you’ve probably never heard of. These regional insurers may provide lower rates and better customer service than the big companies you see advertised on TV.

Work with an independent agent. While it may be easy to get quotes yourself, independent car insurance agents and brokers can streamline the process. These experts vet companies and compile quotes from small and large insurers on your behalf. Independent agents and brokers can especially come in handy if you have a less-than-perfect driving record and can’t find insurance on your own.

Do your research. Search online for recent mentions of a company in the news before buying a policy, recommends DeLong. If you find a company has lots of recent lawsuits against it, you may want to think twice about signing on the dotted line. “And if they've had to pay out settlements, that's an even bigger red flag,” DeLong says.

Shop around once a year. Make a practice of shopping for car insurance every year — especially if price is important to you. Insurers adjust car insurance rates regularly, so what might have been the most affordable option last year may no longer be a bargain.

On a similar note...

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Instantly compare top auto insurance companies.

GPT-4 is better than humans at financial forecasting, new study shows

• OpenAI's GPT-4 is better than humans at analyzing financial statements and making forecasts, according to a new study.
• "Even without any narrative or industry-specific information, the LLM outperforms financial analysts in its ability to predict earnings changes," the study found.
• Trading strategies based on GPT-4 also delivered more profitable results than the stock market.

OpenAI's GPT-4 proved to be a better financial analyst than humans, according to a new study.

The findings could upend the financial services industry that, like other business sectors, is racing to adopt generative AI technologies.

According to the study conducted by the Booth School of Business at the University of Chicago, the large language model did a better job of analyzing financial statements and making predictions based on those statements.

"Even without any narrative or industry-specific information, the LLM outperforms financial analysts in its ability to predict earnings changes," the study said. "The LLM exhibits a relative advantage over human analysts in situations when the analysts tend to struggle."

The study utilized "chain-of-thought" prompts that directed GPT-4 to identify trends in financial statements and calculate different financial ratios. From there, the large language model analyzed the information and predicted future earnings results.

"When we use the chain of thought prompt to emulate human reasoning, we find that GPT achieves an accuracy of 60%, which is remarkably higher than that achieved by the analysts," the study said. The human analysts were closer to the low 50% range with regard to prediction accuracy.

The large language models' ability to recognize financial patterns and business concepts with incomplete information suggests that the technology should play a key role in financial decision-making going forward, according to the study's authors.

Finally, the study found that applying GPT-4's financial acumen to trading strategies produced more profitable trading, with higher share ratios and alpha that ultimately beat the stock market.

"We find that the long-short strategy based on GPT forecasts outperforms the market and generates significant alphas and Sharpe ratios," the study said. 

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Cracker Barrel CEO says brand isn't relevant and needs a new plan. Here are 3 changes coming soon.

By Aimee Picchi

Edited By Anne Marie Lee

May 24, 2024 / 3:01 PM EDT / CBS News

Cracker Barrel has long been known for its combination of rustic charm and country dishes like biscuits and gravy. But its new CEO said that the old approach isn't working any longer — and she's planning some major changes. 

"We're just not as relevant as we once were," Cracker Barrel CEO Julie Felss Masino said on a May 16 conference call to discuss her plans to update the restaurants. 

Masino, a former Taco Bell executive who stepped into the role of Cracker Barrel CEO in August, said the company "has lost some of its shine" and needs a "transformation" to continue to appeal to its current customer base and draw new diners. Cracker Barrel's sales have flatlined, with revenue for its most recent quarter unchanged at $935.4 compared with a year earlier, while its stock has tumbled 40% so far in 2024. 

Its challenges range the gamut from prices to menu options, she added, citing a recent in-house study that compares Cracker Barrel with its competitors, based on food, experience, value and convenience. To be sure, Cracker Barrel isn't alone in struggling to keep customers coming back, as other food chains have recently reported problems with convincing inflation-weary consumers to return. But the company notes other concerns.

"[W]e are not leading in any area," Masino said. "[T]he reality is we've lost some market share, especially at dinner."

The company is now planning to make several changes to help refresh the brand and bring back its customers.

Here are three changes Masino said could soon be rolled out to all or many of Cracker Barrel's 660 locations. 

Green chili cornbread

To make itself "more relevant to guests," Masino said, the chain has been experimenting with new menu items.

In more than 10 locations, Cracker Barrel has tested 20 new items, including green chili cornbread and banana pudding, she noted. 

Based on customer feedback, Cracker Barrel plans to roll out several new dishes to all its restaurants this fall. They include: 

• Premium savory chicken and rice
• Slow-braised pot roast
• Hashbrown casserole shepherd's pie

Tweaking prices 

The chain also plans to tweak its pricing tiers, with Masino noting that prices at about 60% of its restaurants are in its lowest cost tier. But she suggested that some restaurants could be charging more. 

"For example, we have stores in metro areas with an average annual household income of $55,000 in the same pricing tier as one with $90,000," she told investors on the call. 

In some cases, however, menu prices could be trimmed, Masino added.

"I want to emphasize that optimizing our price points across the menu doesn't mean just increasing prices," she said. "In several places, it may actually mean taking the opposite approach. We understand the lower-end consumer is challenged and value is and will remain an important part of the brand and we will work vigorously to protect it."

Noticeably different, but still Cracker Barrel

The chain is piloting a remodel of its restaurants, which Masino said involves using "a different color palette, updating lighting, offering more comfortable seating and simplifying decor and fixtures."

"The goal, simply put, was to freshen things in such a way as to be noticeable and attractive but still feel like Cracker Barrel," she said, adding that customer feedback has been positive. 

Cracker Barrel plans to remodel as many 30 stores in its next fiscal year, she added. 

On top of that, the chain is planning on debuting some new locations in fall 2025 that are about 15% smaller than its current restaurant footprint, Masino noted.

"Historically, Cracker Barrel has made limited changes to our design aesthetic, and we've probably relied a little too much on what was perceived to be the timeless nature of our concept," she said.

• Cracker Barrel
• Consumer News
• Food & Drink

Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.

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