Originally published in Manufacturer, ARB’s Manufacturing Industry newsletter.
While the large market fluctuations seen during the COVID-19 pandemic are in the rearview mirror, uncertainties about geopolitical risks, inflation, interest and employment rates, and cyberattacks are still present. Because of these unknowns, the need for financial assistance may still exist for some manufacturers. Every manufacturing company should take the time to create — or update — a business plan. An accurate business plan reflects your company’s strategies and growth expectations.
Keep It Simple
The first section of your business plan should generally contain an executive summary and a business description. Don’t forget to include an overview of your management team.
From there, you can move on to your industry and marketing analysis. Then, most important, have a separate section for your company’s financials. Conclude your business plan with a section discussing how you intend to implement the plan.
Small or midsize manufacturers might balk at compiling a comprehensive business plan. But it’s an essential part of the loan application process for start-ups. It’s also key when a company needs financing for a major capital expenditure or is contemplating bankruptcy.
Remember, the best plans can be quite simple. You don’t want to bury management’s message in a long-winded plan. For a small business, the executive summary shouldn’t exceed one page, and the maximum number of pages should generally be fewer than 40.
Define Your Vision
Business planning involves long-term vision. Determine where the company is now and where it wants to be in six months, the next year, or three, five or 10 years.
Lenders tend to look at executive summaries first, but they’re the last page management should write. It’s better to start with historic financial results. From there, identify key benchmarks that management wants to achieve. These assumptions will drive the financials.
Outline Your Financials
After reviewing the executive summary, lenders will dive into a business plan’s financials section. Management’s goals are fleshed out in its budgets and financial forecasts. The financials section outlines how much financing your company needs, how it plans to use those funds and when you expect to repay the loans.
For example, suppose a company with $4 million in sales in 2024 expects to double that figure over a five-year period. How will the borrower get from Point X ($4 million in 2024) to Point Y ($8 million in 2029)? Many roads may lead to the desired destination.
Let’s say the management team decides to double sales by hiring two new salespeople and acquiring the assets of a bankrupt competitor. These assumptions will drive the forecasted income statement, balance sheet and cash flow statement.
When forecasting the income statement, management makes assumptions about fixed and variable costs. Salaries and rent are generally fixed. Direct materials are generally considered variable. But some fixed costs can be variable over the long term. For example, rent may become variable if the company has a lease that’s about to expire and management decides to relocate to a different facility to accommodate changes in size.
Balance sheet items, such as receivables, inventory, payables and so on, generally grow in tandem with revenue. In a business plan, management makes assumptions about its minimum cash balance, then debt increases or decreases to keep the balance sheet balanced. Remember, your bank will be expected to fund any cash shortfalls that take place as the company grows. This makes cash flow forecasts among the most significant for lending purposes.
Make Adjustments
Be sure to provide reasonable and well-founded data and analyses in your business plan. A realistic business plan will help you and those who want to help you. And it’s not a one-and-done endeavor — adjust your plan as needed for changes in your business and economic conditions.
This publication is distributed with the understanding that the author, publisher and distributor are not rendering legal, accounting or other professional advice or opinions on specific facts or matters, and, accordingly, assume no liability whatsoever in connection with its use. ©2025
Manufacturing Team Spotlight
John Hadwen is a Principal at ARB. He specializes in providing individuals and businesses with comprehensive
tax compliance and consulting services related to closely-held business, manufacturing, construction & real estate, and professional services firm taxation. Prior to joining ARB, John was a Tax Principal at a large, regional CPA firm.
