Excerpts for Business Plans Kit for Dummies


Business Plans Kit For Dummies


By Steven D. Peterson Peter E. Jaret Barbara Findlay Schenck

John Wiley & Sons

Copyright © 2010 John Wiley & Sons, Ltd
All right reserved.

ISBN: 978-0-470-43854-1


Chapter One

Starting Your Planning Engine

In This Chapter

* Understanding the contents, use, and value of a business plan

* Identifying the people who will read your plan

* Setting your business time frame and milestones

* Launching the business-planning process

The fact that you're holding this book means the task of writing a business plan has made it onto your to-do list. Now come the questions. What exactly is business planning? What should it include? Where do you start the process of writing your business plan?

Well, that's exactly what this first chapter of Business Plans Kit For Dummies, 3rd Edition, is all about. It confirms your hunch that business planning is essential - when you start your business and at every growth stage along the way. Plus, it helps you think clearly about why you need a business plan, whom your business plan is for, what key components you need to include, and what kind of time frame is reasonable.

Writing a business plan is a big task, but this book makes it manageable. This chapter provides a quick and easy overview to get you oriented and on your way to business-planning success.

Understanding Your Starting Position

No two businesses are exactly alike, and no two business plans are precisely the same, either. Every business comes to the planning process with different issues and goals. Most start-up businesses understand the importance of business planning. Without a plan, they usually can't get funding.

But even businesses with plenty of cash can get into big trouble without a well-thought-out plan. Business planning is an ongoing process for all businesses - or at least it should be. Effective planning keeps established companies on track. It serves as a guide for companies that plan to launch a new product or service or introduce a new marketing program to seize new business opportunities. A plan is also essential for companies in trouble who want to chart an effective turnaround. Even companies that are looking to go out of business need a plan if they intend to put themselves up for sale or merge with another business. The purpose and the process of business planning, in other words, are different, depending on your starting position. The following sections describe some of the most common starting positions.

Planning for a start-up

A start-up company begins with a new idea and high hopes. A business plan helps these new ventures evaluate their new idea, potential market, and competition. The critical questions that a business plan for a start-up must address are

  •   Does this new venture have a good chance of getting off the ground?

  •   How much money will the business need to get up and running?

  •   Who are our customers, and what's the best way to reach them?

  •   Who are our competitors, and what's the best way to outrun them?

  •   Why will customers choose our new product or service instead of our competitors'?

    Planning to address changing conditions

    Especially during rocky economic times, many existing businesses are trying to retool themselves. The critical questions a business plan must address are

  •   What are the economic realities we face?

  •   How can we reshape the company and its products or services to compete in the new economic environment?

  •   What steps do we need to take to reach the goal of achieving those changes?

    Planning to seize growth opportunity

    Even successful companies can't rest on their laurels. To remain successful, they have to continue to compete. For many, that means recognizing and seizing opportunities to grow their businesses. For companies charting a strategy to grow, a business plan must address several key questions:

  •   Where do the best opportunities for growth lie?

  •   Who are our competitors in this new market?

  •   How can we best compete to grab new market share?

    Committing to the Business-Planning Process

    With a thousand issues clamoring for the precious hours in your day, committing time to plan your company's future isn't easy. But operating without a plan is even harder - and even more time-consuming in the long run. We can give you dozens of good reasons to plan.

    Two steps can help you get started. The first is to define your business situation and how a business plan can help you move your business from where it is to where you want it to be. The second is to list the ways that a business plan can heighten your company's odds of success. The next two sections lead the way.

    Defining your business-planning situation

    To get your business where you want it to go, you need a map to follow, which is what your business plan is all about. It starts with a description of your current situation; describes your future plans; defines your opportunities; and details the financial, operational, marketing, and organizational strategies you'll follow to achieve success.

    TIP

    Imagine that your company is a ship about to set sail on an ocean voyage. Your business plan defines your destination and the route that you'll follow. It details the supplies and crew you have on board as well as what you still need to acquire. It forecasts the cost of the voyage. It describes the weather and sea conditions you're likely to encounter along the way and anticipates the potential dangers that may lurk over the horizon. Finally, your business plan identifies other ships that may be attempting to beat you to your destination.

    The same kind of planning is necessary back on dry land. To navigate a new course for your company, you need to start with an assessment of where your business is right now. You may be putting your business together for the first time. Or your business may be up and running but facing new challenges. Or perhaps your business is doing well and about to launch a new product or service. Once you assess your current situation, you need to define where you want to arrive and what strategies you'll follow to get there.

    FORM

    To define your current business situation, use Form 1-1 on the CD-ROM. It lists some of the many situations that companies face as they embark on the planning process. Take a few minutes to check off the situations that apply to your circumstances.

    Buying into the value of business planning

    The time you invest in your business plan will pay off many times over. Some of the most obvious benefits you'll gain from business planning include

  •   A clear statement of your business mission and vision

  •   A set of values that can help you steer your business through times of trouble

  •   A blueprint you can use to focus your energy and keep your company on track

  •   Benchmarks you can use to track your performance and make mid-course corrections

  •   A clear-eyed analysis of your industry, including opportunities and threats

  •   A portrait of your potential customers and their buying behaviors

  •   A rundown of your major competitors and your strategies for facing them

  •   An honest assessment of your company's strengths and weaknesses

  •   A road map and timetable for achieving your goals and objectives

  •   A description of the products and services you offer

  •   An explanation of your marketing strategies

  •   An analysis of your revenues, costs, and projected profits

  •   A description of your business model, or how you plan to make money and stay in business

  •   An action plan that anticipates potential detours or hurdles you may encounter

  •   A handbook for new employees describing who you are and what your company is all about

  •   A résumé you can use to introduce your business to suppliers, vendors, lenders, and others

    Making a wish list for your business plan

    Setting out your priorities in the form of a business-planning wish list can help you focus your efforts. With a completed plan in hand, you can return to this list to make sure that it achieves everything on your list of priorities.

    FORM

    To create your own wish list for business planning, use Form 1-2 on the CD-ROM. It lists some of the items that top the list for businesses embarking on the planning process. It also allows you to fill in items of your own. Place a check mark beside the items that are on your wish list. After you've completed the form, assign a priority (low, medium, or high) to the items you've checked. Keeping this form handy as you go through the planning process will help you stay on track to meet your planning goals.

    Identifying Target Audiences and Key Messages

    Your business plan is the blueprint for how you plan to build a successful enterprise. It's a comprehensive document that covers a lot of territory and addresses all sorts of issues. To help focus your efforts, consider which groups of people will have the greatest impact on your success. Those groups will be the primary audiences for your business plan.

    For example, if you need capital investment, investors will be your primary audience. If you need to build strategic alliances, you want to address potential business partners. You and your team are another key audience for the plan, of course, because it will serve as your guide. Be sure to keep that fact in mind as you fine-tune the messages you want to convey.

    After you know who you want to reach with your business plan, you can focus on what those readers will want to know and what message you want them to receive. This section helps you define your audience and your message before you begin to assemble your plan.

    Your audience

    All the people who have an interest in your business venture - from investors and lenders to your employees, customers, and suppliers - represent different audiences for your business plan. Depending on the situation you face and what you want your company to achieve through its plan, certain audiences will be more important than others:

  •   If your company seeks investment capital, your all-important target audience is likely to be filled with potential investors.

  •   If your plan includes the introduction of stock options (possibly in lieu of high salaries), your current and prospective employees will be a primary target audience.

  •   If you're launching a business that needs clients, not cash, to get up and running - the sooner the better - potential customers will comprise your plan's primary audience.

    FORM

    Form 1-3 presents a list of the most common audiences for a business plan. Check off the groups that you think will be most important to your business success, given your current situation.

    Your message

    After you target the audiences for your plan, the next step is to focus on the key messages you want each group to receive. People with different stakes in your business will read your business plan with different interests and values. For example:

  •   A person who owns shares in a company wants to read about growth plans.

  •   A banker considering a loan request wants to see proof of strong revenue and profit prospects.

  •   Employee groups want to see how they'll benefit from the company's growth and profits.

  •   Regulators focus on operational and financial issues.

    For advice on targeting and talking to your key audiences, including information on which parts of the business plan various audiences turn to first and how to address multiple audiences with a single plan, turn to Chapter 14.

    FORM

    But for now, do some preliminary planning, using Form 1-3 on the CD-ROM:

    1. Identify the three most important audiences you intend to address with your business plan.

    For help, refer to the list of common audiences in Form 1-2.

    2. Jot down key points you need to make to each target audience.

    Writing down your key points doesn't require fancy prose; just get your ideas down on paper so you can refer to them when you begin writing your business plan.

    Business planning as a test drive

    Business planning sets the course that you plan to follow. But a good business plan also functions as a kind of test drive. It allows you to think about all the parts you need to have in place to make your company run at peak performance.

    A good business plan is also your chance to anticipate bumps or sharp turns that may lie ahead - including economic uncertainties, competitors on the same racetrack, and your particular strengths and weaknesses. Many companies discover that business planning allows them to conduct a virtual test of a new product or service idea or a proposed strategy for a turnaround. Along the way, they get to work out the kinks and avoid problems that, in the real world, may have left them broken down on the shoulder of the road. Many companies end up retooling their product, service, or strategy as a result of the business planning process.

    The Anatomy of a Business Plan

    Written business plans are as varied as the companies that compile them. Some plans run almost 100 pages, whereas others barely fill a few sheets. Some plans start with executive summaries, and others plunge right into detailed descriptions of products and services. Some companies print their business plans on paper, and some publish their plans exclusively on the Web. Some plans include page after page of financial projections, and others list only anticipated costs, expected revenues, and projected profits.

    Every business plan is written for a different reason and to obtain a different outcome. Still, some plans are better than others. The following information helps you write a plan that will win high marks.

    Business-plan contents from beginning to end

    Business plans come in all shapes, sizes, formats - even colors - but they all share a similar framework. The following components, presented in the order they generally appear, are common elements in most business plans:

  •   Table of contents: This element is a guide to the key sections in your business plan and is especially useful if your plan exceeds ten pages.

  •   Executive summary: This section is a summary of the key points in your business plan. You should incorporate it if your plan runs more than ten pages and you want to convey important information upfront. You want to keep it clear, captivating, and brief - in fact, try to keep it to two pages or less.

  •   Company overview: This section describes your company and the nature of your business. It may include your company's mission and vision statements as well as descriptions of your values, your products or services, ways your company is unique, and what business opportunities you plan to seize. (Turn to Chapter 3 for help defining your business purpose and developing your company overview.)

  •   Business environment: This section includes an analysis of your industry and the forces at work in your market; an in-depth description of your direct and potential competitors; and a close look at your customers, including who they are, what they want, and how they buy products or services. It describes everything that affects your business that's beyond your control. (Count on Chapter 4 to help you zoom in on your environment and develop your analysis.)

  •   Company description: In this section, include information about your management team, your organization, your new or proprietary technology, your products and services, your company operations, and your marketing potential. (Check out Chapter 6 for help in writing your company description.)

  •   Company strategy: This section brings together the information about your business environment and your company's resources and then lays out a strategy for going forward. (As you prepare this section, you'll find Chapter 5 an indispensable resource.)

    (Continues...)



    Excerpted from Business Plans Kit For Dummies by Steven D. Peterson Peter E. Jaret Barbara Findlay Schenck Copyright © 2010 by John Wiley & Sons, Ltd. Excerpted by permission.
    All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
    Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.



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