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Starting a Business - Sample Business Plan

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Sample Business Plan


(A Fictitious Company)
  • Title Page
  • Executive Summary
  • Table of Contents
  • The Business Venture
  • The Company
  • Management
  • The Product
  • The Market Place
  • Market Size
  • The Competition
  • Sales Plan
  • Sales Forecast
  • Sources of Market Information
  • Product Development
  • Production
  • Product Cost
  • Gross Profit
  • Financial Requirements
  • Pro Forma Income Statements
  • Cash Flow Projections



Prepared By:

Light-Guard Manufacturing Ltd.
55 Broad Street
York, NY 10001

Fax: (212)123-2345
E Mail:

Contact: Mr. I.M. Bright


This business plan has been prepared to obtain financing in the amount of $310,000 to complete the product development, set up manufacturing and implement an aggressive sales and marketing program.

Light-Guard Manufacturing Ltd. is a new company which has developed an automatic electronic light control product called Light-Guard for consumer, commercial and industrial applications with a potential market of over $150 million over the next 5 years.

Light-Guard Manufacturing Ltd. will be profitable within the first year of operations and conservatively expects to achieve sales of almost $3 million with net profits of over $1 million by the end of the third year.

The company will be self-sustaining by the end of the first year.

The major markets for the new product are throughout North America.

An extensive market survey has revealed that no other product presently on the market compares with Light-Guard in terms of features, benefits and low price.

Full production can begin within 3 months after financing has been arranged and the first 1000 production units will be available for the market within 5 months after financing.

Light-Guard Manufacturing Ltd. is prepared to offer equity return for investment in the Company. The Company will also consider other arrangements to obtain the necessary finances.

No guarantees are expressed or implied regarding the success of the venture described in this business plan.



1. The Business Venture
2. The Company
3. Management
4. The Product
5. The Market Place
6. Market Size
7. The Competition
8. Sales Plan
9. Sales Forecast
10. Sources of Market Information
11. Product Development
12. Production
13. Product Cost
14. Gross Profit
15. Financial Requirements
16. Pro Forma Income Statements
17. Cash Flow Projections


This business plan has been prepared in order to raise the financing necessary to further develop, to manufacture and to distribute a new electronic product that has wide spread industrial, commercial and consumer applications.

The new product, which is called "Light-Guard" will automatically turn lights on and off when the ambient light in a room reaches a predetermined level.

The increasing concerns about security, personal safety, energy conservation and the general trend towards automation has created a market for devices which reduce or eliminate the problems associated with manual control of lighting systems.

Homes, offices, factories, hospitals, schools, public buildings and construction sites are only a few of the more obvious applications.

Light-Guard will be particularly valuable in remote or unattended locations.

The idea for the product was conceived by Mr. Bright as a result of numerous inquiries received by Mr. Bright's present employer for a simple, automatic light control device. Mr. Bright's employer is not involved in the lighting or light control marketplace and is not interested in developing a product or entering the marketplace because of other commitments and business priorities.

Mr. Bright has received permission from his employer to pursue the development of the product as a private venture providing that the venture does not interfere with the employer's business.

Mr. Bright has contacted various prospective users of the product to determine product requirements and develop specifications.

An engineering prototype of the product has been developed to date. The prototype was developed by Mr. Bright in his spare time with limited resources.

$310,000 is required to complete the development of the product, to set up manufacturing and to establish a sales and marketing program.

The $310,000 will be supplemented by revenue generated from sales of the product to cover the total financial requirements for the first year of operation. The business will be self-sustaining by the end of the first year of operations.

Light-Guard Manufacturing Ltd. is prepared to offer common (voting) shares in return for the investment.

Light-Guard Manufacturing Ltd. is also prepared to consider other forms of financing such as debentures, preferred shares or other arrangements.


Light-Guard Manufacturing Ltd. was incorporated in New York on June 1, 19xx.

The Company's business address is:

55 Broad Street
York, NY 10001

Telephone (212) 123-1234
Fax: (212) 123-1234
E Mail:

Light-Guard Manufacturing Ltd. was established to develop and manufacture a specialty electronic light control product.

The product is still under development.

At present, the Company does not have any full time employees.

The Company is presently operating out of the residence of one of the principals .

The two principals of the Company are:

Mr. I.M. Bright, President and original developer of the product.

Mr. N.0. Howe, Secretary of the Company, responsible for production.

The two principals each own 50% of Light-Guard Manufacturing Ltd.

Any questions relating to the business plan are to be directed to Mr. I.M. Bright.


The current members of the management group are the principals of Light-Guard Manufacturing Ltd.

Mr. Bright is a graduate from the NYU. Mr. Bright has 7 years industrial experience progressing from a technician to the supervisor of an engineering test laboratory with a local manufacturer of electronic equipment.

Mr. Howe also graduated from the NYU and has over 10 years industrial experience in electrical components and electronics manufacturing. He is currently employed as the production manager with the same electronics firm as Mr. Bright.

Mr. Bright is responsible for technical development and Mr. Howe will be responsible for production and project management.

Mr. Bright and Mr. Howe each own 50% of Light-Guard Manufacturing Ltd.

The sales and marketing functions will be the responsibility of an individual who is currently employed as a sales manager for a home entertainment distribution company. The sales manager has over 15 years sales and marketing experience in the home entertainment industry.

All three individuals are prepared to resign their present positions and make a full time commitment to Light-Guard when financing has been arranged.

Initially, the accounting and financial control functions will be handled on a part-time basis by a senior member of a firm of chartered accountants. The CA is prepared to work for modest compensation until the product has been developed and is ready for manufacturing.

Detailed resumes of the management team members are available to serious investors.


Light-Guard is an automatic electronic switch for controlling electric lights.

The complete assembly is the same size and shape as a standard wall-type electric light switch and is designed to replace the wall switch using the same standard mounting screws and electrical wiring. No modifications to the mounting or wiring is required.

Light-Guard consists of an optical sensor which detects the amount of light in the room and an electronic circuit which operates a sensitive relay for turning the lights on and off.

The sensitivity of the light detecting circuit can be set to one of three preset levels depending upon the type of application (i.e. to maintain a minimum acceptable light level for normal vision in an office; to turn the lights on under partially subdued ambient light conditions; or to switch the lights on only under extremely low light levels).

The adjustment control is easily accessible on the face plate of Light-Guard.

A manually operated switch is also available on the face plate of Light-Guard to disable the automatic control and enable Light-Guard to be used as a standard manual on/off light switch.

A unique feature in Light-Guard is the extremely sensitive and reliable light sensing circuit.

The Light-Guard product is not patented. However, a detailed description of the product and design drawings have been witnessed and dated by a notary public and two independent electronic engineers.


The primary markets for Light-Guard at this time which provide the greatest sales potential in a relatively short period of time are in the United States and Canada.

Consumer, commercial and industrial users are all prospective customers for the product. The major potential market in the consumer sector will be accessed through the large retailers of small appliances, lighting fixtures and electrical hardware such as:

  • Major department stores
  • Hardware store chains
  • Retail lighting outlets
  • Mail order houses

The primary customers in the commercial and industrial sector will be electrical engineering firms, electrical contractors, industrial plant and commercial building maintenance departments, security companies and public buildings. The target markets are easily accessible and identifiable.

Considerable interest in the product has already been expressed by the following:

  1. Happy Harry's Hardware Chain in the U.S.
  2. Wonderful Wally's emporium in Canada.
  3. The Federal Government.
  4. Hydro Generating Companies in the US.
  5. Solvent Sol's Electrical Distributors in the U.S.
  6. Several large engineering and architectural firms in Canada and the U.S.
  7. 2 major department store chains in the US

All of the above feel that there will be a demand for Light-Guard because of the practical value of the product, and because there is no other product currently available which provides the features and low price of Light-Guard.

They are primarily interested in a product which is fully automatic, highly reliable, can be adjusted for different light levels, is U/L approved in the United States and will have a retail price of less than $125 U.S. Letters of intent have been received from three large retailers in the U.S. for trial orders totalling 1500 units. The purchases are subject to the product meeting all specifications. An industrial distributor in Canada has issued a purchase order for 1000 units subject to successful demonstration of the prototype unit.


Approximately 200,000 products similar to Light-Guard were sold in 1983 and approximately 280,000 were sold in 1984.

The market is expected to grow at an annual rate of 40% over the next 5 years.

The following market values are based on an average wholesale selling price by Light-Guard Manufacturing of: $70 CAD / $55 USD

  • Estimated size of the total U.S. market over the next 5 years: 2,000,000 units
  • Total U.S. market sales volume potential over next 5 years: $110,000,000 USD
  • Estimated size of the total Canadian Market over next 5 years: 200,000 units
  • Total Canadian market sales volume potential over next 5 years: $14,000,000 CAD
  • The suggested retail price (end user price) will be $128 CAD ($98 USD ).


There are three known competitors in North America for products that are in part, similar to the proposed Light-Guard product. The three competitors are:

  1. Glow Worm Industries
  2. Light and Lively Enterprises Inc.
  3. Shadows Unlimited Inc.

1. Glow Worm Industries

Glow Worm Industries is a small manufacturer located in the Mid West United States which sells primarily to the farming industry. The product is not easily adaptable to other applications. They do not have a distribution network and they sell directly to the end user. The reported selling price of the product is $220 U.S.

Glow Worm Industries currently has approximately 20% of the present market.

2. Light and Lively Enterprises Inc.

Light and Lively is located in the South Western United States and manufacturers a very simple, low cost device which is capable of controlling only external desk or table lamps, etc. The device is plugged into a standard wall outlet and the lamp to be controlled is then plugged into the device. The unit sells for $125 U.S. retail and is widely distributed throughout the United States and Canada. Tests on the product indicate that the device will only sense an extreme change in light conditions (i.e. from very bright to very dark). Because of the limited applications and operation of the product, it is not considered to be a serious threat to the marketability of Light-Guard.

Light and Lively presently has approximately 30% of the present market.

3. Shadows Unlimited Inc.

Shadows Unlimited is located in Eastern Canada and has a product similar to Light-Guard but which sells for almost twice Light-Guard's projected retail selling price. The product is sold direct to the end user by Shadows Unlimited.

Shadows Unlimited has approximately 40% of the market share.

The Light-Guard Advantage

The cost of Light-Guard will be substantially lower than the Shadows Unlimited product because of Light-Guard's superior design and use of more advanced and lower cost technology.

The balance of the market is shared by 4 or 5 small U.S. manufacturers and 2 imports. None of the products are considered to be reliable and are sold through mail order catalogues only.

Light-Guard combines low cost, high reliability and adaptability to a wide range of applications. Light-Guard will be CSA approved for sale in Canada and U/L approved for sale in the United States.

Light-Guard will also be sold through an effective distributor and dealer network and will be adaptable to a wide range of industrial, commercial and consumer needs.


The sales program for the first year will concentrate on developing the US market place.

The Canadian sales program will commence within six months after the product is available on the US market.

The sales organization will be divided into two groups: - Consumer sales
- Commercial/Industrial sales

The consumer sales group will concentrate on developing a dealer network (retailer) that will sell the product to the consumer.

The initial sales efforts will concentrate on the national department store chains, national lighting outlets, hardware store chains and a major international mail order house.

In general, each of the above retailers uses a central purchasing department for all outlets in the US and Canada.

The purchasing decisions are generally made by merchandising managers who are responsible for small electrical appliances and other similar hard goods.

Initially, the consumer sales group will require two full time sales people to develop the US consumer market.

The commercial/industrial sales group will also require two full time sales people to concentrate initially on developing a wholesale distributor network with a least 10 to 12  distributors in the US and 6 distributors in Canada.

The distributors will have access to the major electrical contractors, engineering firms and electrical suppliers in their respective areas.

A secretary and a sales order clerk will provide sales support for both the consumer sales group and the commercial/industrial sales group.

A simple but effective advertising campaign will be implemented to support the sales efforts.

Consumer advertising will consist of monthly advertisements in publications such as T.V. Guide, Readers Digest and Peoples magazine.

Half page advertisements will be placed in two monthly trade publications with a large circulation to the electrical contracting and plant maintenance markets in Canada and the U.S.


The following sales forecast is considered to be an estimate based on the responses from the companies. Additional sales can be anticipated with increased market penetration and product recognition.

  Unit Sales Average Unit Selling Price ($CAD) Total Sales ($CAD)
Year 1 7,000 $70 $490,000
Year 2 17,000 $70 $1,190,000
Year 3 42,000 $70 $2,940,000

Note: Year 1 will commence approximately 5 months after financing has been arranged, and Year 3 sales will represent approximately 30% of the estimated total market (1988).

The sales over the first year will be divided approximately as follows:

35% to Western Canada
50% to Central and Eastern Canada
15% to the United States

Division of sales over the second and third years will be approximately:

20% to Western Canada
30% to Central and Eastern Canada
50% to the United States

The above estimate of sales are considered to be extremely conservative in view of the wide range of applications, the unique operating features and the low selling price of the product.


The market and sales data were collected by a combination of a market survey and research of published information.

The market survey was conducted primarily in the United States and Eastern Canada.

Information was also obtained from the following publications:

  • Light-Hearted Home Owners of America, Issue 25
  • Electrical Contractors Monthly Journal, April 1983
  • U.S. Government Report # 134297-4236A/7900-21 HR on the conservation of electrical power entitled, "Turning It Off and Turning You On".


An engineering prototype model of Light-Guard has been developed to prove the concept and basic design of the product.

The engineering prototype satisfactorily demonstrates the technical feasibility and basic operation of the product.

The following is a list of additional engineering development work that is required before the product is ready for mass production. The man hours column is the estimated number of hours to complete each task.

1. Refine design to improve operation and to reduce costs. 160
2. Build 2 engineering prototypes for tests and evaluation. 60
3. Conduct performance and reliability tests on the engineering prototypes.

Note: The performance and reliability tests will be conducted over a period of approximately 2 to 3 weeks.

4. Modify design and repeat performance tests as required. 40
5. Prepare formal engineering drawings, design packaging and establish projected manufacturing costs. 250

Special engineering test equipment will be required to conduct performance and reliability tests. The test equipment will consist of special light-sensing and measuring equipment and controlled light sources.

There are no major or critical risks that are anticipated to be able to successfully complete the engineering development.

The technical feasibility has already been proven on the engineering prototype. The balance of the engineering development program will consist primarily of refining the design to optimize the performance and reliability and to reduce manufacturing costs.

No other special facilities except the special test equipment mentioned above will be required to complete the development.

A technician will be required to assist Mr. Bright with the engineering development.


Light-Guard will be manufactured using standard electronic assembly techniques.

All electronic circuitry will be mounted on a printed circuit board which will be installed in a plastic moulded case.

The electronic printed circuit board will be manufactured under sub-contract by a local electronics manufacturing company.

Light-Guard Manufacturing will supply all materials to the sub-contractor.

The plastic case will be manufactured by a local plastics manufacturing company.

All materials and components for the product are readily available "off-the-shelf" from at least three suppliers.

Light-Guard Manufacturing Ltd. will assemble the electronic printed circuit board in the plastic case and test the product before shipping.

A total of 6 assembly personnel, plus an assembly line supervisor, will be required to assemble the product.

Two test technicians will be required to inspect and test the product before shipping.

Approximately 4,000 square feet of space will be required to store inventory, assemble and test the product.

Special semi-automated equipment will be required to test the product after assembly.

Each unit will undergo 24 hours of continuous testing before shipping to a customer.

Suitable manufacturing space has been identified in Richmond. The owners of the property are prepared to enter into a 3 year lease agreement or longer if required.

Three months from the time that financing has been arranged will be required to set up manufacturing and start production of the first 1000 pieces.

The first 1000 production units will be complete within two months after the start of production.


The following is the projected production costs for one Light-Guard Unit based on an initial production run of 1,000 pieces.

Materials $15.00
Sub-contractor circuit board assembly $10.00
Assembly, inspection, testing and packaging for shipping $10.00
Total Product Cost (per unit) $35.00


The suggested retail list price for Light-Guard will be $128 Canadian ($98 US) excluding all taxes.

The discount required by the major retail outlets for the consumer market are between 40 and 50% off the list price. 45% discount has been used for purposed of determining the gross profit.

The selling price to the industrial/commercial wholesale distributor will be the same as the retail outlets and will be established at 45% below the retail list price.

Net selling price by Light-Guard Manufacturing: $70.00 (Canadian)
Cost of Sales (Product Cost) per unit: $35.00
Gross profit per unit: $35.00
Margin: 50%


Refer to the Pro Forma Income Statements and Cash Flow projections.

The design of the Light-Guard product has been completely financed to date from personal resources by Mr. Bright and Mr. Howe.

The total investment to date has exceeded $ 50,000 not including the Principals time.

Additional financing in the amount of $ 310,000 is required to complete the product development, to set up production and establish a marketing program.

The following is a summary of the projected first year total costs.

Production Development Costs 45,000
Production (including inventory) 477,000
Sales and marketing expenses 106,000
Administration and overhead 72,000
Total financial requirements for first year $700,000

The above costs include all operating expenses, manufacturing labour, materials and capital equipment for engineering and production. >The difference of $ 390,000 between the total costs ($700,000) and the additional financing required ($ 310,000) will be covered by revenue generated from the sale of the product in the first year.

The Light-Guard Manufacturing operations will be self-sustaining by the end of the first year.


  Year 1 Year 2 Year 3
Sales (Revenue) $490,000 $1,190,000 $2,940,000
Cost of Sales 245,000 595,000 1,470,000
Gross Profit 245,000 595,000 1,470,000
Sales Expenses 106,000 177,000 248,500
and Overhead
72,000 110,000 130,000
Engineering Expense *35,000 24,000 **80,000
Net Profit (Loss) $32,000 $284,000 $1,011,500
      * Excludes Equipment
      ** Includes new product development (future products)


Quarter 1 2 3 4 5 6
Sales $0 49,000 171,500 269,500 294,000 294,000
$0 24,500 122,500 245,000 294,000 294,000
($80000) (190000) (181500) (241000) (255000) (267000)
$0 (80,000) (245000) (304000) (300000) (261000)
($80000) (245000) (304000) (300000) (261000) (234000)

Quarter 7 8 9 10 11 12
Sales 294,000 294,000 490,000 637,000 833,000 980,000
294,000 294,000 392,000 588,000 784,000 882,000
(271000) (295000) (453500) (542500) (630000) (736500)
(234000) (211000) (212000) (273500) (228000) (74,000)
(211000) (212000) (273500) (228000) (74,000) 71,500


Quarter 1 2 3 4 5 6
$7,000 37,000 67,000 81,000 81,000 81,000
$13,000 10,000 6,000 11,000 6,000 6,000
$45,000 82,000 67,000 91,000 96,000 105,000
Sales $7,000 40,000 25,000 34,000 42,000 45,000
$8,000 21,000 16,000 24,000 30,000 30,000
$80,000 190,000 181,000 241,000 255,000 267,000

Quarter 7 8 9 10 11 12
81,000 103,000 165,000 210,000 240,000 330,000
6,000 6,000 27,500 22,500 15,000 15,000
105,000 105,000 163,000 206,000 270,000 285,000
Sales 45,000 45,000 62,000 65,000 60,000 61,500
34,000 36,000 36,000 39,000 45,000 45,000
271,000 295,000 453,500 542,500 630,000 736,500

NOTE: The above cash flow assumes no investment or other financing throughout the period of the projections.
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