Business Plans Kit For Dummies®, 5th Edition
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Everyone who wants to start a business — or grow one — usually starts with the same question. What’s the key to success? Well, you need a good idea, of course. And you have to have a smart strategy to carry it out. But just as important, you need a solid business plan, one that lays out exactly what you hope to do and how you plan to do it. A good business plan sets your course and prepares you for the challenges that inevitably lie ahead in today’s fiercely competitive world.
Today, companies large and small face the challenge of change like never before. New business models have transformed whole industries. Innovative technologies have completely altered the way business is done. Opportunities abound. But so do tough challenges. That’s why the fifth edition of Business Plans Kit For Dummies is packed with fresh advice for navigating marketplace disruptions and finding a successful course through turbulent times. Along the way, you’ll find practical advice on how to put a promising business idea to the test, how to recognize your own strengths and weaknesses, how to craft a successful competitive strategy, how to find funding, and much more.
This book doesn’t tell you how to develop your business plan; it shows you how, walking you through the process with step-by-step action plans, examples, and do-it-yourself forms throughout the book, along with more than 100 additional forms online, which you can download at www.dummies.com/go/businessplanskit.
So whether you’re planning to launch a brand-new business, kick-start an idling enterprise, run a successful nonprofit, or take a going concern to new heights, this book makes the planning process straightforward, easy, rewarding — and yes, even fun.
Plenty of books out there offer business-planning theories and principles. This one is different. It cuts through the academics and steers clear of the jargon to provide an easy-to-grasp, step-by-step approach to putting a business plan together. It also offers dozens of forms to make the task easier and includes examples from all kinds of businesses — from freelancers and small retailers to online marketers and nonprofit organizations. It even provides a template to guide you as you assemble the right parts and pieces into a business plan that addresses your target audience, business goals, and one-of-a-kind situation.
We’ve updated every chapter of this new edition — and added two brand new chapters — to help steer you toward success in today’s business environment, where start-ups abound and established businesses are transforming to adapt to the rapidly changing world around them.
We’ve added loads of tips on everything from structuring new businesses and business models to adopting the latest technology and social media resources to find, reach, interact with, and develop loyalty from customers. An all-new Chapter 8 helps you explore ways to find funding for your business. A brand new Chapter 12 zeroes in on planning and running a virtual organization. We’ve expanded our coverage of business models and the increasingly essential role of the Internet. On almost every page, you’ll find fresh tips on pricing, promoting, and controlling costs and driving profits in today’s business environment. With more people going out on their own or looking for opportunities to start small businesses, we’ve expanded advice on how to start a new business, raise cash, build brands, and overcome entry barriers. And with more and more nonprofit organizations doing good in the world, we’ve also updated Chapter 14 with advice on reaching potential donors and snaring grant money.
You’ve picked up this book, so we can safely assume that you’re probably starting or growing a business. Chances are it’s a small- to medium-size business because that’s how most companies start. You may be a sole proprietor planning a one-person business, or you may be planning a company with a staff of dozens of people. Who knows, you may even be part of a very large company and writing a plan for your department or division. No matter what brings you to this book, we guarantee you will find a ton of helpful advice. Whether your company is big or small, whether you’re just starting out or working for a long-established business, the basics of business planning are the same.
We also assume that you’re probably approaching the planning process with more than a little anxiety, which is true of most of the people we work with in our day jobs as business consultants. But guess what: As soon as most business planners get going, they discover that planning isn’t just challenging and interesting — it’s even fun.
One last note: You don’t need previous business experience to make your way through this book, although people with experience will also find plenty of good advice.
What would a For Dummies book be without the margin icons alerting you to all sorts of useful stuff? Here are the icons you find in this book:
Tried-and-true approaches to help save you time or trouble. This tip icon also points out forms and resources that we describe in this book. You can find them online at www.dummies.com/go/businessplanskit.
This icon marks business-planning essentials you don’t want to forget.
Here are common problems or pitfalls to avoid.
These real-life examples provide useful lessons on business planning.
The book you hold in your hand is chock-full of all the information you need to develop and implement a killer business plan — one that will help turn your very good idea into a very successful business. But there’s more. Online resources associated with this edition of Business Plans Kit For Dummies contain a wealth of forms that can help guide you, including a template that describes each of the sections your business plan should have, with pointers on where to find advice on developing them within the book.
To view this book’s Cheat Sheet, simply go to www.dummies.com and search for “Business Plans Kit For Dummies Cheat Sheet” in the Search box. It offers additional bits of information to refer to as you put together your plan. You can access this material again and again as you need it.
You don’t have to begin with the first page and end on the last (although you’re certainly welcome to read straight through the book). People turn to business planning for all kinds of reasons and with all kinds of goals in mind, so we organized this book to make it easy to roam around and find exactly what you need. Wherever you start, remember that you can use the handy index to jump quickly to the exact information you need at any time.
If you need some help locating exactly the information you need, flip to the table of contents or the index, find the topic that interests you, and turn to that chapter to start putting your business plan together.
Part 1
IN THIS PART …
Recognize the all-important value of business planning, establish your business-planning starting point, and get an overview of the business-planning process that will lead to an effective plan.
Explore ways to hatch new business ideas, put them to the test, refine your choices, and find opportunities best suited to your personal traits, strengths and weaknesses, and marketplace realities.
Know where you want your business to go by giving your business its mission and vision, setting goals and objectives, putting principles into practice, and then designing a business model capable of turning your company into a profit powerhouse.
Lay the groundwork for developing a business plan that’s grounded in the reality of market conditions and tailored to the wants, needs, tastes, and trends of your precisely targeted prospective customers. Whether you’re launching a start-up, orchestrating a turnaround, or taking a business to new heights, this part helps you make sure you have the basics in place to begin creating a plan that keeps your business a step ahead of competitors and changing conditions.
Chapter 1
IN THIS CHAPTER
Recognizing the value of a business plan
Setting your planning starting point
Understanding what goes into a plan
Establishing your business planning time frame and milestones
The fact that you’ve opened this book means the idea of writing a business plan has made it onto your to-do list. That’s a big step in the right direction. Now come the questions. What exactly is a business plan? What should it include? How should it be organized? And do you really need one?
This first chapter of Business Plans Kit For Dummies, 5th Edition, answers all those questions and more. It offers plenty of reasons why business planning is essential — when you start your business and at every growth stage along the way. It helps you think about the audience for your plan, what its key components should be, and how to go about putting it together. It also updates you on changes and challenges facing business planners in today’s rapidly transforming business arena.
We won’t pretend that writing a business plan is a breeze. It takes time and thought. But we wrote this book to make the process manageable and even fun. The fact that it’s in its fifth edition, with hundreds of thousands of copies worldwide, suggests that a lot of readers have found it useful.
Now it’s time to get going. This chapter gets you oriented and on the way to success.
Nearly all business experts agree on one thing: the importance of drafting a business plan. Yet plenty of business leaders plunge into the competitive arena without a formal plan. Why? We’ve heard plenty of excuses posing as reasons. We’ve also heard from entrepreneurs so carried away by their enthusiasm that they figure their passion and optimism are enough to build a successful company. Others say they were just too busy to develop a formal business plan. But operating without a plan can prove even more time-consuming in the long run. These sections clarify in plain English the importance of having a business plan.
Some of the benefits you can gain from business planning include
The many benefits of having a business plan should be enough to convince you. But in case you’re still wavering, consider what can go wrong if you don’t take time to plan. You risk
Take our word for it: Time spent putting together a solid business plan is time well spent. Don’t be overwhelmed by the task you’re launching. The basic components of a business plan are fairly simple and the benefits are many.
Business planning sets the course that you intend 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 turn an idea into a business success or to make a business run at peak performance.
Business planning is also your chance to anticipate bumps or sharp turns that may lie ahead, including economic uncertainties, competitors on the same racetrack, new technologies and innovations, and the way your particular strengths and weaknesses prepare you for the risks and opportunities ahead. Business planning forces you to detail the costs, resources, and timelines required to introduce a business, launch a new product or service, open a new market area, or implement a proposed strategy for growth or business turnaround. Many companies end up retooling their product, service, or strategy as a result of the business planning process.
Business plans are as varied as the companies that compile them. Some run dozens of pages. Others barely fill a few sheets. The next sections introduce the basic components that you can adapt to create a plan to meet your needs.
Although business plans come in all sizes and formats, they typically share a similar framework. The following components, presented in the order they generally appear, are the elements you’ll choose from as you build your plan:
For a business plan checklist, go to www.dummies.com/go/businessplanskit to download Form 1-1. It features the preceding lineup of business plan components. As you write your plan, use the list to tick off major components as you complete them.
Keep in mind: There is no single format for a written business plan. For that reason, we don’t provide any rigid business-plan models in this book. Instead, in the following chapters you can find information on how to develop each of the major components, advice for how business plans tend to work for different kinds of businesses, and plenty of real-world examples to follow, including model mission statements, goals and objectives, financial statements, and business models. Then, in Chapter 16, we introduce a customizable business plan template that helps you bring together all the planning information referenced throughout this book. The result: a self-tailored business plan for your unique business-planning situation.
If you’re like most people who are launching the business-planning process, the following questions are on your mind:
Do you really need to include all these sections? Nope. Your business plan should include only what’s important to you and your company. If your plan is short — or written mostly for your own purposes — you can skip the executive summary and table of contents, for example. Or if it’s a one-person business, you may not need to describe its organization (unless you need a little help in getting organized!).
For most businesses, however, all the other sections are important. By putting your mission, vision, values, product offering, goals, and competitive advantages into words, you clarify and strengthen ideas about what you really plan to do with your business. That exercise can be extremely valuable for any company, no matter how big or small.
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.
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 voyage’s cost. It describes the weather and sea conditions you’re likely to encounter 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. After you assess your current situation, you need to define where you want to arrive and what financial, operational, marketing, and organizational strategies you’ll follow to achieve success. The next sections lead the way.
Every business planner begins with a different set of issues and goals. You’re likely beginning the planning process at one of these starting points:
To define your current business situation, download Form 1-2 at www.dummies.com/go/businessplanskit. It lists many of the situations that companies face as they embark on the planning process. Check off the situations that apply to your circumstances. Your business plan essentially will map the route you’ll follow from your starting point to the goals you want to reach.
Setting out your priorities in the form of a business-planning wish list can help you focus your efforts.
Check out Form 1-3 for a list of top priorities shared by many businesses embarking on the planning process. Place a check mark beside the items that are on your wish list or use the provided space to enter your own unique desired outcomes. After completing 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 can help you stay on track to meet your planning goals.
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. Two steps can help you get started. The first is to define your planning objective, whether it’s to start or grow a business, launch a product, pivot to new strategies, or orchestrate a turnaround to get your business from where it is to where you want it to be. The second is to realize the ways that a business plan can heighten the odds of success for businesses in all stages.
Every new business — whether a tech start-up or new business in a long-standing arena — begins with a new idea and high hopes. A business plan helps you evaluate your new idea, potential market, and competition, addressing these critical questions:
Count on Chapter 11 as you develop the plan for launching and growing a small business.
Millions of people work for themselves in businesses called sole proprietorships. They range from accountants and attorneys to app developers, artists, and musicians. Many never consider drafting a business plan, which is too bad. A business plan helps zero in on key questions:
Chapter 2 includes a section on turning a side gig into a business, and Chapter 10 provides valuable information for planning, building, and running a one-person business.
No business today is immune to change. New technologies, disruptive innovations, and global, economic, and political turbulence prompt many established businesses to plan how to retool themselves. In fact, one of the main reasons we’ve updated the book is to include new strategies for anticipating and dealing with change. The critical questions a business plan must address are as follows:
Every chapter of this book helps you plan around the changes facing your business. Plus, Chapter 15 focuses entirely on proactively planning for change as a fundamental step in business planning. It helps you identify the drivers of change in your business arena so you can anticipate the likely impact and devise strategies to avert trouble and gain competitive advantage.
Successful companies can’t rest on their laurels. To remain successful, they have to maintain their competitive edge. And to grow, they need to seize new opportunities, whether by introducing products, expanding into new locations or market segments, improving efficiencies and profitability, or embracing new innovations. For companies charting a strategy to grow, a business plan must address several key questions:
Turn to Chapters 5, 6, and 13 for advice as you plan to strengthen business capabilities and chart strategies to achieve your business growth goals.
Your business plan is the blueprint for how you plan to reach your business goals. 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 your plan 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.
After you know whom you want to reach with your business plan, you can focus on what those readers need to know and what messages you want them to receive. These sections help you define your audience and your messages before you begin to assemble your plan.
All the people who have an interest in or who can help you succeed in your business venture — from investors and lenders to employees, customers, and suppliers — represent 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:
Check out Form 1-4 for a checklist of the most common audiences for a business plan.
After you target the audiences for your plan, the next step is to focus on the key messages you want each group to receive. For example:
Take time to clarify the primary messages you need to convey to your key audiences. Refer to Form 1-4 for samples of messages that various audiences are likely to consider important. Then, use Form 1-5 as a worksheet as you identify the three most important audiences you intend to address with your business plan and the key points you want to convey to each.
For more advice on targeting and talking to 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, head to Chapter 16.
Your time frame represents how far into the future you want your business plan to reach. You want your business to grow successfully for years and years into the future, but each business plan covers a unique planning period. Some are designed to get a company to a defined sales level, a funding objective, or the achievement of some other business goal. All good plans should span a time frame that has a realistic start and finish, with a number of measurable checkpoints in between. The sections that follow help you determine how far into the future your plan should extend and the milestones that you can use to chart your progress.
How far out your planning horizon should span depends on the kind of business you’re in and the pace at which your industry is moving. Some ventures have only six months to prove themselves. At the other end of the spectrum, organizations with substantial endowments, such as nonprofits, are in for the long haul with business plans that look at five- or ten-year horizons. Typical business plans, however, tend to use one-year, three-year, or five-year benchmarks.
Business planning is an ongoing process. At least annually — and sometimes more often — most companies review, revise, and even completely overhaul their plans. As you establish your time frame, don’t cast it in cement. Instead, think of your schedule as something you commit to follow unless and until circumstances change and you make a conscious decision to revise it.
Establishing goals and establishing measurable objectives is a critical part of business planning. (Take a look at Chapter 3 to find out more about setting goals and objectives.) But knowing your goals and objectives isn’t enough. You also need to establish and hold yourself accountable to a schedule that includes specific milestones to reach along the way to success.
Figure 1-1 shows how a retail store specializing in digital equipment answered five questions in order to establish a reasonable time frame for its expansion plans. Based on their answers, the owners determined that the business would need one year to open new stores and achieve profitability. Over that yearlong planning period, they defined a number of milestones:
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FIGURE 1-1: These questions, included in the downloadable Form 1-6, help determine your business plan time frame and milestones.
Download and answer the planning questions in Form 1-6. Then use your responses to establish your business plan time frame, along with key milestones that take into account your business trends and cycles and the competitive and financial realities of your business.