Chapter 1
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
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!
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!
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.
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 business-planning info” for helpful website addresses.
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!
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.
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.
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.
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 in-person support meetings.
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.
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
You also have to prepare for changes you will make to this list down the road. That means thinking through other options and alternatives and being on the lookout for new ways to make your company prosper. Few business plans ever pan out according to the first cut, so the more you can build flexibility into it, the better.
To avoid becoming overwhelmed, and to keep the business-planning process in perspective, break up the plan into the basic sections that every good business plan needs to include. This should apply to both a written plan as well as a PowerPoint presentation. Take a moment to review the sections of a business plan.
Your executive summary touches on every important part of your business plan. It’s more than just a simple introduction; it’s the whole plan, only shorter. In many cases, the people who read your plan don’t need to go any further than the executive summary; if they do, however, the summary points them to the right place.
The executive summary isn’t much longer than a page or two, and you can wait until you complete the rest of the business plan before you compose it; that way, all you have to do is review the plan to identify the key ideas you want to cover.
The preceding little note might be helpful to recall if you deliver a summary of your business plan as a verbal plea to a VC (venture capitalist) or some comparable funding source. The senseis of Silicon Valley are known for requiring their acolytes to make the Big Ask as succinctly as possible, which has become known as “the elevator pitch.” (The idea being that these gurus’ time is so valuable that all you’ve got is the minute or so it takes to ride up the elevator with them to their palatial office digs.) But aside from the personal indignity involved, it’s actually not a bad idea. See whether you can boil down your concept to as simplified a version as possible — say, two or three sentences at most (but please, don’t take James Joyce as a model here). Chapter 4 gives you more on this topic.
The company overview provides a place to make general observations about the nature of your business. In the overview, you highlight the most important aspects of your industry, your customers, and the products and services you offer or plan to develop. Although you should touch on your company’s business history and major activities in the overview (if you’re an ongoing enterprise), you can leave many of the details for the later sections.
To put together a general company overview, you need to draw on several key planning documents, including the following:
To begin constructing these statements, turn to Chapters 3 and 4.
Your business environment section covers all the major aspects of your company’s situation that are beyond your immediate control, including the nature of your industry, the direction of the marketplace, and the intensity of your competition. Look at each of these areas in detail to come up with lists of both the opportunities that your business environment offers and the threats that your company faces. Based on your observations, you can describe what it takes to be a successful company.
For more information on how to explore your business circumstances and the overall environment that your company competes in, check out Part 2.
This section should go into much more detail about what your company has to offer. The description includes information about your management, the organization, new technology, your products and services, company operations, your marketing potential — in short, anything special that you bring to your industry.
In particular, look carefully and objectively at the long list of your company’s capabilities and resources. Sort out the capabilities that represent strengths from the ones that show weaknesses. In the process, try to point out where you have real advantages over your competitors.
Examining your company through your customers’ eyes helps. Today many interested observers of business organizations want to know your plans for dealing with issues of environmental sustainability, social responsibility, and creating staff inclusiveness policies. Be sure you address these. With a consumer viewpoint, you can sometimes discover customer value that you didn’t know you provide, and as a result, you can come up with additional long-term ways to compete in the market.
To start to put together all the things that your company brings to the table, flip to Chapters 9 and 10.
Company strategy brings together everything that you know about your business environment and your company to come up with future projections.
Everybody knows that the future is uncertain, so you need to talk about the ways your business world may be different in the future. List alternative possibilities for action, and in each case, describe what your company is doing to anticipate the changes and take advantage of new opportunities. Explain how your current resources might be rapidly transformed to meet new possibilities and what critical signals you will monitor to determine if and when such a pivot is necessary.
To prepare for change in your business world and to get info on how to think strategically about your company’s future, turn to Part 4.
Your financial review covers both where you stand today and where you expect to be in the future.
Describe your current financial situation by using several standard financial statements. True, these statements don’t make for the liveliest reading, but the people who are interested in the financial part of your business plan expect to see them, and some of these folks will have a magnifying glass in their hands. For everyone else, make certain that your financial statements are referenced and support the assumptions and arguments that you make in the other sections of the business plan. The basic financial statements include the following:
Your projections about your future financial situation use exactly the same kind of financial statements. But for projections, you estimate all the numbers in the statements based on your understanding of what may happen. These are called pro forma statements. Make sure to include all the assumptions you made to come up with your estimates in the first place.
To get a head start on your financial planning, flip to Chapters 11 and 12.
Your action plan lays out how you intend to carry out your business plan. It points out proposed changes in management or the organization, for example, as well as new policies or procedures that you expect to put in place. Also include any additional skills that you, your managers, and your employees may need to make the plan work. Finally, you want to talk about how you will generate excitement for your business plan inside your company, creating a culture that supports what you want to accomplish. Only then can you have real confidence that your business plan is going to succeed.
For more background on how to make your business plan work, head to Chapters 16 and 17.
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