NEW BUSINESS - PROJECT CHECKLIST:

(What Lenders Will Require, and Management Needs, In The Business Plan)

Copyright by Kelly Associates, 1996

The following checklist is one of the tools that Kelly Associates has developed to ensure the qualilty of the business planning and other professional services that are provided to clients. To conserve space, only the section 2 has the details included. For anyone interested in further information, please contact Kelly Associates at mgtsuccess@aol.com. We will be pleased to discuss your specific needs and advise whether we can assist or whether we know of others that are more appropriate for serving your particular needs.

Markets:

Competitors:

• Competitors named and analyzed,

Competitive analysis of strengths and weaknesses, including:

• Product and service quality,

Costs of production, including:

• Raw material costs,
• Economies of scale,

Technology,

Synergies with other strategic partners or related companies,

Transportation and total logistics costs,

Competitors response to a new entrant analyzed, including past experience,

Trend in industry amongst competitors - consolidation or other trends, (is industry structure different or changing?)

Characteristics of key managers in key competitors

Plant Site:

Infrastructure and services including:

• Roads,
• Rail service,
• Natural gas,
• Water,
• Sewer services,
• Waste disposal,
• Environmental protection,
• Geological survey,
• Topographic survey,

Plant Equipment:

Conceptual process design and value engineering to estimate costs +/- 15 to 25 % in early stages,

Detail engineering in later stages,

Review and compare to market analysis to ensure production technology and equipment will produce to meet market requirements,

Develop staffing requirements,

Inventory management plan and systems designed,

Production capacity determined,

Maintenance costs,

Typical life of equipment,

Tendering/sourcing of equipment package,

Review completeness of equipment supply contract,

Develop contracts for engineering, design, procurement of all components, construction and management of the construction project, (lender may want turn-key project),

Building:Size and specifications,

Load bearing capacities of floor,

Shipping area,

Receiving area,

Storage of raw materials and supplies,

Fire control,

Services including:

• Electricity,
• Water,
• Natural gas,
• Sewer,

Weigh scale,

HVAC,

Dust and environmental controls,

Building code constraints,

Office area,

Special features,

Ancillary systems,

Mechanical systems,

Electrical systems,

Process control,

Raw Material Supply:

• Sources,
• Costs,
• Availability,
• Consistency of supply, price, quality, and other specifications,

Analysis versus competitors,

Risk of shortages,

price variability, quality, etc.,

Environmental Approvals:

• Siting,
• Manufacturing practices, e.g. hazardous materials,

Type and quality of emissions & mitigation strategies, including:

• Air,
• Water,
• Dust,
• Odour,
• Etc.,

Type and quantity of noise generated and mitigation strategies,

Traffic impact,

Application for environmental licences, Provincial only or Federal also,

Public reaction, or opposition and potential for added reviews, public hearings, and delays,

Organization and Management Structure:

• Business structure,
• Shareholders / partners agreement,
• Share ownership & voting control,

Dividend policy,

Tax issues,

Key management positions and qualifications of each,

Timing of sourcing General Manager and key expertise,

Training package and timing of hiring,

Strategic Alliances:

• Confirm compatibility of key people on each side,
• Confirm compatibility of organizational cultures and values,
• Confirm objectives of each party,
• Determine main benefits,
• Determine responsibility of each party and key areas of co-operation,
• Identify duration of alliance and termination procedures,
• Key resources / strengths provided by strategic alliance,
• Develop joint venture or other agreement, contract, investment, etc. terms and conditions,
• Develop relationships and establish process to maintain them,

Financing Sources:

Identify equity requirements, sources, and marketing plan to obtain,

including:

• Regulatory approval process (Securities Commission, Registrar of Co-ops, etc.),
• Level of approval required (exemption, offering memorandum, prospectus, etc.),
• Resources required for regulatory approval (legal and other costs),
• Audit process (if required),
• Broker or marketing resources and related costs,
• Identify debt requirements, sources,

Develop financing proposal and marketing plan to obtain, including:

• Due diligence process and resource requirements (engineers, consultants, etc.),
• Due diligence fees to lenders,

Critical Success Factors

Key aspects of the industry and this business which give strategic advantages or disadvantages relative to the competition,

Financial Projections:

(lenders will require the following)

Sources and Uses of Funds Statement for the project:.

1 Capital costs:-

• equipment,-
• land and building and all renovations or additions including leased-
• freight, installation, zoning, regulatory approvals, etc, -
• electrical, mechanical, etc controls and services,-
• interest during construction,-
• overhead business costs during construction, including management etc.-
• construction period cashflow projection will be required.

2 Development costs:-

• consulting, legal, engineering, environmental, accounting, bank fees, etc..

3 Commissioning costs:-

• all costs from time installation is complete until equipment is debugged and able to produce saleable quality product..

4 Working capital:-

• raw material, work-in-process, finished goods, and supplies inventories, (if seasonal or if customers demand short delivery times, large inventories may be required, thus using large amounts of cash),-
• accounts receivable,-
• prepaid expenses.

5 Initial operating losses (if any):-

• it may be that the business will not be immediately profitable, thus, initial operating losses will need to be financed. Often this occurs as the market is being developed and initial discounts have to offered to get the first orders.

6 Contingency:-

• usually 10% even after all prices are fixed and contracted

Uses is the total of the six items above. It is the total that must be financed. Sources of financing are required for this total. May be equity, grants, loans, leases, etc.

Five year financial projections:.

1 Income Statements.

2 Balance Sheets.

3 Statements of Change in Cash.

4 Sensitivity Analysis of Key Risk Factors

Every assumption of units sold, prices, expenses, volumes, production rates, etc., will be required to be documented, from a reliable source, confirming why they are reasonable. All the documentation will have to be included in appendices in the business plan. All the documentation will have to be summarized into schedules that will be part of the financial projections and which will show all relevant assumptions that affect the financial statements. These schedules will then be summarized into the financial statements, which will show Income Statements, Balance Sheets, and Statements of Change in Cash. These will be monthly (for the first 12 months) and then annually for the next four years. These are to be presented on an accrual basis, using generally accepted accounting principles. These projections will include staffing and management resource requirements. Key to all estimates is the projected sales (units and dollars) which will show volume and prices. From this sales projection, estimates of the revenue and the costs of operation can be developed. Without sales projections, the balance of the financial plans can not be developed.

Sensitivity analysis is required for adverse conditions for 3 to 5 of the key risk factors.

Stages of New Startup Business Project

(stages are not necessarily all in this order and overlap in duration)-

• pre-feasibility study-
• feasibility study-
• business plan -
• marketing equity and membership financing -
• market development -
• negotiating financing and "due diligence"-
• regulatory approval-
• closing financing-
• engineering-
• procurement-
• construction-
• commissioning-
• sales & operations commence

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