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Part 2: Describing Your
PART 4: LOOKING TO THE FUTURE
Introduction
So, you were searching the web for something about business start-ups, or maybe you were assigned to honcho a hot new project at the office, and up pops a promo for this book. You clicked “buy now.” Sweet, we like you already! Great minds must think alike because while you may not know how to construct a business plan yet, you’re savvy enough to have surmised that a plan is important — which is exactly what we know. From years of working with numerous organizations both large and small, old and new, profit or nonprofit, local or global in scope, we concluded that a business plan is more than just another factor for goal achievement — indeed, it’s usually the single most important task prior to actually jumping in there and getting started!
Some people visualize a business plan as something they have to put together to raise money for a new venture or convince the higher-ups to sign off on for some upcoming project — at best, a formality with lots of splashy PowerPoints in which all graph curves streak upward; at worst, a waste of everyone’s precious time and effort. But you don’t create a business plan just to secure funding or check a bureaucratic box; au contraire! Rather, you should embrace and own your plan as a powerfully performative tool — one that makes your organization a better place at which to work and your business a more successful operation for everyone it touches.
Is a business plan a guarantee? Hardly. In today’s “VUCA” world (Volatility, Uncertainty, Complexity, Ambiguity), it’s increasingly hard to tell what even tomorrow will bring. But prediction is not the point of planning. Rather, planning is in fact a matter of process. A business plan works because it forces you to stop and think about what you’re doing. It prompts you to figure out what you want your company to become in the future and how you intend to make that future happen. Your plan acts as a template, guiding you through the steps required to meet your goals. And by engaging in this planning process, you are going to not only learn much more about what you’re trying to do but will also dramatically enhance your ability to both survive and thrive when the inevitable unknowns and pitfalls emerge. For example:
» A business plan requires you to look carefully at your market, your customers, and the competition to determine what your real opportunities are and what threats you face.
» A business plan takes a good hard look at your organization so that you can honestly and objectively recognize your capabilities and resources, your strengths and weaknesses, and your true advantages as well as the problem areas that need repair.
» A business plan coaxes a financial analysis, a forecast, and a budget out of you so that you know where you stand today and what the future will require in terms of cash and other financial resources.
» A business plan prepares you for potential uncertainties by encouraging you to come up with alternative business strategies to increase your chances of success down the road if and when those unknowns pop up.
About This Book
This book helps you create your business plan step by step. Along the way, you’ll discover things about your business that you never realized — information that just may help you beat the competition. Heck, we even throw in a few laughs as well — no joke.
Business Plans For Dummies, 3rd Edition, can help your business succeed no matter who you are or what your job description says, whether you’re part of a large corporation or a one-person show. Depending on your situation, you may find yourself dipping into and out of the book in different ways:
» If business plans are new to you, you may want to start at the beginning and let us be the guide by your side. We take you from your company mission all the way through to making your business plan work, and we keep your head above water the whole way.
» If you have more experience, we’ll be your sage on the stage; you may want to head for one of the more interesting chat rooms (or chapters as they’re called), such as how to recognize the critical success factors in your business, or where to look for your company’s strengths and weaknesses. After dropping in somewhere, you may discover yet another section where you want to spend time and do a deeper dive.
Just remember — no matter where you are, it’s never too late to start a business plan, and it’s never too late to make the one you have even better. In each case, you can find what you’re looking for between these bright yellow covers.
Note that you don’t have to read all the sidebars scattered throughout the book. Just because we find these little facts and fables fascinating doesn’t mean you will. You can pass over the text accompanied by the Technical Stuff icon, too. The text marked with this icon gives some fascinating but nonessential information about business plans. And you won’t hurt our feelings if you don’t read this book from cover to cover (well, maybe a little; we just love those little sidebars!). Whatever, feel free to skip around; pick and choose what you’re really interested in, and then go for it.
One last thing: Within this book, you may note that some web addresses break across two lines of text. If you’re reading this book in print and want to visit one of these web pages, simply key in the web address exactly as it’s noted in the text, pretending as though the line break doesn’t exist. If you’re reading this as an e-book, you’ve got it easy — just click the web address to be taken directly to the web page.
Foolish Assumptions
Believe it or not, we don’t need to consult a fortune teller to know a bit about your background. In fact, we can assume that you’re probably in one of the following situations:
» You have a great idea for some radically disruptive new online service and can’t wait to get your own company up and running and start cryptoing the cash.
» Your boss just turned over a new leaf and wants a business plan from you in three weeks.
» You’ve always run your business without a business plan, and you’re the one who turned over the new leaf.
» You thought you had a business plan for the company, but it isn’t doing the job that it should.
» You’re taking a course in management somewhere and have come to realize that your textbook is great on theory but lacking in practicality.
Are we close? Whatever your situation, you don’t need that crystal ball to make a business plan; just read this book. We can’t tell you the future of your business. But the business plan that we help you put together prepares you for the future. And we’re here with you every step of the way.
Icons Used in This Book
To guide you through your business plan preparation, we include icons in the left margins of the book. Here’s what they mean:
This icon flags situations that apply mostly to large companies, but that may help small companies with their business plans as well.
Ouch; you may get burned unless you heed these warnings.
Don’t forget these timely tips about business plans.
This icon flags information that delves a little deeper than usual. These bits of text are interesting but nonessential to your understanding of business plans.
Beyond the Book
In addition to the material in the print or e-book you’re reading right now, this product comes with some access-anywhere goodies on the web. Check out the free Cheat Sheet for info on the elements of a business plan, a checklist of planning essentials, and much more. To get this Cheat Sheet, simply go to www.dummies. com and search for “Business Plans For Dummies Cheat Sheet” in the Search box.
Where to Go From Here
Take a minute or two to thumb through the book and get comfortable with what’s inside. Pick out a couple of chapters whose topics you’ve pondered in the past but never had the time to dive deeper. Better yet, turn to a chapter that covers a subject you think you already know about. Or if you’re really daring, just turn the page and start at the beginning.
Don’t forget to use the table of contents for a chapter-by-chapter breakdown. The index is also an excellent place to turn to find a specific topic right away. Meanwhile, good luck and may your business dreams come true!
1 Getting Started with Business Plans
IN THIS PART . . .
We start by looking at what a business plan is all about. We convince you of the importance of a plan, just in case you’re still undecided.
After you’re sold on the idea, we identify some really useful planning resources. And to help you get your own plans underway, we outline a planning process for you and review the major pieces of a business plan.
We point out why values and ethics are so important to your company and show you how you can make practical use of them in your planning. We look at how a vision for your company gives you something to aim for and a direction to take.
Finally, we look at how to establish a mission for your company and develop effective business goals and objectives to fulfill that mission.
IN THIS CHAPTER
» Getting your planning resources together
» Figuring out who needs to work on the plan
» Laying down some planning ground rules
» Checking out what the written plan looks like
Chapter 1
Preparing to Do a Business Plan
Planning is serious business. For many companies, a solid business plan is the difference between success and failure. Many people going into business for the first time want to rush right in, create a website or hang up a sign, and start making money — a natural response for anyone excited about a new business idea. But taking time up front to prepare can pay off in many ways down the line, especially when it comes to writing a business plan. And face it: After your company is up and running, you may not have all the time you need to devote to the major pieces of your plan. So, first lesson learned: A business plan is not an expense of either time or money; it’s a necessary investment for a profitable future!
But all that being said, we also want to make something else abundantly clear to you: We live in volatile times! In fact, it’s hard to find anything in the recent past of business and economic life that hasn’t been as disruptive as the present — a revolution in communications technology, globalization, a potentially “new world order” emerging, financial market gyrations, artificial intelligence (AI) and robotics, breakthroughs in neural science, environmental disasters, and on and on. So how can you plan when who knows what might come next?
Fair question. But before you get started on this admittedly lengthy journey, we want to let you in on a little secret: Planning is not about prediction. Nope. What it’s actually about is a rational process of understanding — your market, your customer, your competitors, your organization, and yourself. That is, serious planning forces you to consider exactly and precisely what’s going on out there today. Where you go after that all depends; some things do have a higher probability of occurring than others. But by knowing the realities of the present, you are going to be far better prepared to quickly pivot when those pesky unknowns pop up — and trust us, they will. They always do; that’s life.
So put aside any starry-eyed thoughts you might have about this book being your magical little crystal ball to gaze into the future. It isn’t. But it is your realistic guide to comprehensively analyze a potential business venture and undertake a deeply detailed review of what needs to be done to get that venture off the ground. And if something totally unexpected jumps up to bite you? By rigorously internalizing what we cover in this book, you’ll be far better prepared than anyone else to respond quickly and proactively to get back on the road to success. That, dear reader, is our solemn commitment to you. Now let’s buckle up and get started!
Identifying Your Planning Resources
Having the right resources at the right time can make business planning easier and more successful. Fortunately, you can now find more useful and usable business-planning resources than ever before, from websites, books, seminars, and real, live experts. Of course, you may also find plenty of stuff that isn’t worth looking at — much less paying for. And just as you can’t always judge people by their resumes, you can’t evaluate a site simply by its likes.
As you begin to put together your business plan, you may discover that you need some additional tools — an online tutorial in marketing, for example, or business-planning software that can help you create and refine your written document. Don’t be afraid to use these — they can help!
But let’s also recognize the obvious: You are the single best resource for your business planning efforts — your creativity, persistence, and willingness to dig in and do the heavy lifting. No pain, no gain.
Checking out the variety of sources out there
Obviously, you’ve already selected one of the best hands-on business-planning sources around (all right, the best, in our humble opinion). But admittedly, you can also find other useful business-planning tools out there — particularly ones that concentrate on specific areas, such as how to do digital marketing, the ins and outs of start-up financing, or others that focus on particular kinds of businesses, such as not-for-profits or selling on eBay. Hey, we even have a slew of these alternative sources available within the For Dummies series — check ’em out!
While you can’t always tell a book by its cover, you can find out a lot by reading through its table of contents. You should also try dipping into the first chapter. If you’re browsing on the web, booksellers like Amazon.com often include a detailed table of contents, along with the first chapter, directly on their website. Readers’ reviews and ratings that you can find online can also help steer you toward other particularly useful books. And don’t forget to ask colleagues, business advisers, family and friends, or investors to list their favorite business-planning go-to sources. The results may surprise you.
The basic principles of business planning may be timeless, but certain subjects — where and how to acquire funding, for example — change rapidly. An unrevised three-year-old site may already be ancient history. If you want to find timely information, such as details about tax considerations for a small business, be sure to check the source’s original posting or publication date.
For the timeliest info, turn to relevant blogs, podcasts, social media, chat rooms, magazines, newspapers, and journals. For a broader and deeper sweep of trends and events, read the books. They offer a terrific way to keep up on what’s happening in the world of business in general — and your industry in particular. The business press also provides an efficient way to routinely scan the business environment for trends or new developments that may affect your business plan. If you’re not sure what online or print sources focus on your particular industry or your geographic region, do a quick search on the Internet (see the next section for more details).
Surfing the Internet
Today, countless numbers of websites offer information on business planning. Some are free; others tease you with a sample of what they have to offer and then charge you for more detailed data via “freemium” options. In our experience, some of the freebies can be just as helpful as the pay-now sites, so we suggest that you first check the no-cost offers before surrendering your credit card data. In
INTERNET HOTSPOTS FOR BUSINESS-PLANNING INFO
A treasure trove of business-planning information and resources is available online. To help you sort through all the riches, we’ve put together a list of popular sites that provide useful and reliable tips, tools, and examples — including dozens of real-life business plans:
• www.sba.gov: The Small Business Administration (SBA) site is far and away the best source of information about planning, funding, starting, and running a small business. You find useful FAQs, as well as counseling help and shareware software programs that you can download for a nominal fee.
• www.irs.gov/smallbiz: A great site if you run a small business or are selfemployed. The IRS provides all kinds of useful industry and profession-specific information. The site also includes links to other helpful non-IRS business resources on the web.
• www.nfib.com: The National Federation of Independent Business (NFIB) calls itself the largest advocacy organization to represent small and independent businesses in the United States. Its website features a set of tools and tips that small business owners may find useful.
• www.score.org: The Service Corps of Retired Executives (SCORE) offers free consulting to start-up business owners. Along with a way to contact SCORE, their website includes updated success stories about a variety of small- and medium-sized businesses. Also useful is a list of business-related links.
• www.nolo.com: You can’t find a better place than Nolo to turn for basic information on the legal aspects of virtually any kind of business. The website also offers free advice, including info on insuring your home business, independent contractor arrangements, trademarks and copyrights, debts, bankruptcies, and employment law.
particular, the U.S. federal government offers heaps of solid information on planning, starting, and operating your own business through its Small Business Administration site (www.sba.gov). And if you reside outside the United States, you will likely find that many public institutions in your region offer similar resources; business planning, after all, is not a U.S. monopoly.
Lists of the hottest business-related websites have a way of going out of date fast — kind of like teenage fashion when you think about it. And a resource that appears hot to one would-be entrepreneur may not be suited for another. Your best bet is to scout around the web yourself, looking for useful resources. On
search engine sites, the keywords business and plan lead you to plenty of generic business-planning information; if you Google “business plan website,” you will be taken immediately to countless pages that link to sources, some that offer free advice, others that sell products. For a more efficient hunt, tailor your search by using keywords specific to your business area (technology, retail, travel, children’s games, social media influencer, ethnic beauty products, financial services, and so on) along with the words business plan and see what you come up with. Make sure to bookmark any promising sites so that you can return to explore them later in more detail. Check out the nearby sidebar “Internet hotspots for businessplanning info” for helpful website addresses.
Beyond sharing some basic business-planning tools, the Internet is also a great place to search for the latest information about competitors, markets, business trends, new technologies, you name it — all the things you need to know to put together a complete picture of your business environment. We’re constantly amazed at how much information you can find in corporate press releases, company home pages, executive bios, online business blogs or magazine articles, Securities and Exchange Commission (SEC) registrations, and thousands of other publicly available online documents.
And one last thing: Don’t be hesitant to simply email or dial up a potential source of information relevant to your search. You’d be surprised at how helpful others can be when you ask them in a polite and sincere manner. Kindness counts!
The Internet may be a gold mine of business information, but you may also find plenty of fool’s gold. Unlike typical print-based informational articles, which are typically fact-checked for accuracy, as we’ve sadly come to know much of the info on the Internet hasn’t been validated. Often the website providing the info is simply trying to sell you something or scrape and then peddle your private profile. So be cautious out there.
Follow three simple rules when you use the Internet for business research:
» Make sure the material is current. Many web documents aren’t dated, so you may not know whether what you read is the latest scoop or ancient history. Look for a date. If you can’t find one, dig a little further to make sure that the information is still relevant; you can often do this by cross-checking the facts on another website.
» Know your sources. In the wide world of the World Wide Web, you may be hard-pressed to know exactly where the stuff you read comes from. If you read a rave review of a new business-software program, and the review comes from a respected business source, you can put your faith in it (and just as true, a blatantly negative one might be from a paid troll). If it appears without a source, be suspicious. Similarly, if the grammar and spelling of the review seems odd — or clearly wrong — be on guard.
» Double-check key facts and statistics. If you use specific pieces of information — about business trends, markets, competitors, technology, and so on — as the central building blocks of your business plan, make doubly sure that they’re correct. If you build your financial projections on a forecast that the market for digital widgets will grow at 40 percent a year, for example, you better make sure that information is true and not some widget inventor’s private fantasy. And if the data is absolutely crucial to your plan, follow the advice of the old sage: If still in doubt, throw it out.
Purchasing business-planning software
Business-planning software allows you to automatically assemble all the components of a business plan, turning them into a printer-ready, spiffy-looking document. The best programs also make easy work of the financial parts of business planning — creating income statements and cash-flow statements, for example, or making financial projections. Some software programs add graphics, such as tables and charts, which provide an easy way for your audience to see what you describe in the written document.
Business-planning software programs can sometimes make the job of business planning too easy. With all their bells and whistles, they may trick you into skipping the serious (that is, difficult) work of creating and writing an effective plan. Keep in mind that the best software-planning tools guide you through the important aspects of business planning and then keep track of your words, sentences, and paragraphs. But they don’t think for you. You still need to do the serious mental work yourself.
Investors, and bankers who make a living reviewing and funding business plans, are all too familiar with the look and feel of the most popular software-generated business-planning documents. If you use one of these programs, make sure you customize your plan to make it unique. The last thing you want is for your business plan to look exactly like a hundred others that cross a VC’s (venture capitalist) desk every month.
Seeking professional help
No one knows the ins and outs of planning and running a business better than people who have done it. And most businesspeople are happy to share their experience and expertise, as long as you don’t plan on becoming a competitor! Many are even willing to mentor first-time entrepreneurs. Don’t be afraid to turn to a seasoned veteran for advice if you run into questions you can’t answer or run out of ideas to get your business off the ground.
Finding expert advice is surprisingly easy. The first place to look is in your own contact list. You may have an easier time getting help from someone you already know on a personal level. Ask your friends and colleagues for suggestions. Other good places to look for help are the local Chamber of Commerce, a nearby college or university (the local junior college might have an evening course on business start-ups), or the business section of your favorite news source. And don’t forget one other invaluable location that we should all hope never disappears: your friendly local library. The pros there can usually point you to a mass of relevant data specific to your inquiry. These sources are not limited to the United States; like nearly everything else, mentoring has gone global. For example, in the UK the British Library has excellent help for folks seeking start-up advice; see www. bl.uk/business-and-ip-centre/about
Of course, you may end up paying for expert advice. Nothing odd about that — in fact, there’s a whole industry out there ready and willing to help. When you really need a lifeline, the advice could be well worth it. Later on, your advisers may pay you back by becoming your mentors or advocates, cheering on your business as you search for funding or those elusive first customers.
Choose experts with experience in a business similar to the one you’re planning. After you identify a person, decide exactly what kind of assistance you need. You can’t ask someone to plan your whole business for you, after all. But you can ask them to fine-tune the look of your web page, for example, or review and critique your financial projections.
Retired businesspeople represent a rich — and underused — source of expertise. By default, they have more experience than almost anyone else, and they often look for ways to use their experiences to help others. Contact the Service Corps of Retired Executives (SCORE), a nationwide organization that works with the Small Business Administration (SBA) to provide help to business owners. SCORE (www. score.org) has a free online newsletter and provides free email counseling. The group also has local chapters around the country, with retired businesspeople ready and willing to help.
Finding friendly advice
Many local communities have organizations of businesspeople who convene to share ideas, exchange contacts, help each other out, and just plain socialize. Lots of research shows that Americans especially seem to love this sort of clubbiness, but it’s definitely not limited to one demographic. Some groups consist of folks who’ve worked in the same industry or firm in the past or share mutual interests, and other organizations focus on helping specific groups like women, recent immigrants, people of color, LGBTQ people, or freelancers. Thanks to the Internet, you can find business groups that regularly schedule either online or inperson support meetings.
Business networking organizations are an invaluable resource for help in planning and running your business. For information about what’s available in your community, check with your local Chamber of Commerce. There’s nothing better than talking to someone who’s been there, done that, so you don’t fall into avoidable traps. Ask whether they have a mentoring program. Because websites change so fast, the best way to find a networking organization is through a detailed and thorough search using keywords.
Assembling Your Planning Team
The first step in creating a business plan is realizing that creating a plan is vital (see Chapter 2 if you’re still wavering). The first question you come across after your realization is this: Who’s supposed to put the darn thing together? In some sense, the answer depends on how big your company is — a new start-up or small and medium enterprise, or an established larger organization:
» A new start-up: If your business is just out of the blocks or about to launch, then there’s no question that the key founder(s) has to do the work. That means you. But don’t fret: Who better to create a view of the future and set business goals and objectives than the person responsible for reaching the goals and making the future happen?
» Small businesses: If your business is only yourself and a couple of other colleagues, making a plan for the company is your responsibility. You might have one or more trusted insiders or external mentors who can offer wisdom, but in reality, something as critical as a business plan can’t be outsourced. Own it.
» Medium-size companies: If your company is a bit bigger, the process of creating your written plan requires more organization — and more people. Putting together a plan is a big job, and involving all your key people has a certain advantage: Everyone involved in the plan has a stake in making sure that your company succeeds. And they will appreciate the inclusion.
» Large corporations: If you’re part of a big company, you may need to bring in people who work on business planning full-time, if they’re not already there. Make certain, however, that you don’t create an independent planning staff: You don’t want your plan to take on a life of its own and get completely divorced from what’s happening with your business and those who make the day-to-day decisions. You have to make sure that your planners don’t create the plan all by themselves. Your planning staff should always work alongside the managers and owners who actually have to execute the business plan.
(See Chapters 16 and 17 for details on implementation.)
Setting the ground rules
Putting together a business plan resembles any project that involves teamwork, from building a house to running a relay race. The clearer the ground rules, the smoother the process — and the happier your team. Make sure that your ground rules do three things:
» Identify key steps. Typically, the process of writing a business plan includes five distinct steps: research, first draft, review, revised draft, and final review. You can specify as many or as few of these steps as you think you need. Just make sure that you spell them out up front.
» Clearly assign duties. Everyone involved needs to know exactly what you expect from them. You can use the key steps you identify to create separate sets of tasks, and then you assign each task to members of your team (see the next section).
» Establish a schedule. Although writing up a business plan is a big job, the process doesn’t need to be a long and drawn-out affair. A business plan has to be timely, responding to the current business environment — not the way it looked six months ago. After you complete the preliminary research, the rest of the steps are fairly straightforward. To keep your project on track, set specific due dates for each component of the plan and each step in the process. Assign the members of your team as much time as they reasonably need, but no more, and be fair but forceful in having them meet deadlines.
Delegating responsibility
If your company is large enough to boast a management team, you should divvy up the work involved in putting together your written business plan. We’re not suggesting that you delegate responsibility just to make your job easier (although it certainly does). Different people bring different insights to your plan. With a team in place, you have a wider array of people and perspectives ready to read and review drafts, offer suggestions, and fine-tune the document to make it as good as you possibly can.
We can’t give you a simple formula for putting together your team. Every business is different. We can’t even tell you the ideal number of people to choose — that depends on the size of your company and the complexity of your plan. But here are a few tips that can help you create an efficient and effective team:
» Keep your team lean and mean. Too many planners are like too many chefs in the kitchen — they get in each other’s way. A bloated team can mean endless meetings and too many points of view. Involve only the number of people you think you really need to get the job done.
» Appoint people who want the job. Sure, you may have trouble finding volunteers who jump up and down at the chance to work on a business plan. But you need to make sure that whoever you choose is at least willing and able to complete the task. To spark your people’s enthusiasm, take time to explain why creating a written business plan is so important. See Chapter 2 if you need help convincing your team of the importance of a plan.
» Organize your team around the plan. By accomplishing this, you make sure that your people know the purpose of their task and how their work fits into the larger picture. Some of the assignments are straightforward. Your financial person takes charge of the financial review. Your marketing head puts together the customer segmentation section. However, if certain pieces of the plan are more complex than others or require tight coordination among units, think about assigning a small group to work on them.
» Put one person in charge. Keeping track of the whole process can be a job in itself, especially if you have a large team or a complicated plan. Name one person as the project director to manage the team and ensure that employees complete tasks on schedule. Make sure every person on the team understands that the person you choose has the ultimate authority.
» Appoint a wordsmith. A business plan is a written document. If you’re lucky, you have someone on your team who enjoys writing — or at least has the talent to put words down on paper with clarity. Pick a lucky person to be in charge of writing key sections of your plan, such as the executive summary. They can also serve as senior plan editor, checking grammar and spelling and making sure that the writing style is clear and consistent throughout the plan.
Putting Your Plan on Paper or in Cyberspace
When you first set out to create a business plan, the task seems overwhelming. Right off the bat, you need to answer fundamental and sometimes difficult questions about your company and what you see for the future. You have to decide what targets to aim for as you look ahead and set specific business goals and objectives. To succeed, you have to take the time to know your
