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Business Plans For Dummies®, 3rd Edition

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Table of Contents

Business Plans For Dummies®, 3rd Edition

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About the Authors

Paul Tiffany is the managing director of Paul Tiffany & Associates, a Santa Rosa, California-based firm that has offered management training and consulting services to organisations throughout the world for the past fifteen years. In addition, he has taught business planning courses at some of the top business schools in the country, including Stanford, Wharton and The Haas School of Business at the University of California, Berkeley, where he currently serves as adjunct professor. He holds an MBA from Harvard University and a Ph.D. from Berkeley. He can be reached by e-mail at .

Steven Peterson is a senior partner and founder of Home Planet Technologies, a management training company specialising in hands-on software tools designed to enhance business strategy, business planning and general management skills. He is the creator and designer of The Protean Strategist, a state-of-the-art computer-based business simulation. The simulation creates a dynamic business environment where participants run companies and compete against each other in a fast-changing marketplace. Each management team in the simulation is responsible for developing its own strategy, business plan and program to make the plan work.

Steven has used The Protean Strategist to add excitement, hands-on experience, teamwork and a competitive challenge to corporate training programmes around the world. He has worked with both large and small companies on products and services in industries ranging from telecommunications to financial services and from high technology to consumer goods and industrial equipment. He can be reached by e-mail at peterson@HomePlanetTech.com.

When he’s not planning his own business, Steven is planning to remodel his 80-year old house or to redesign the garden. And he confesses that of the three, the garden proves to be the most difficult. Steven holds advanced degrees in mathematics and physics, receiving his doctorate from Cornell University. He teaches part-time at the Haas School of Business, University of California at Berkeley, and lives in the Bay Area with his long-time companion, Peter, and their long-lived canine, Jake.

Colin Barrow was until recently Head of the Enterprise Group at Cranfield School of Management, where he still teaches on entrepreneurship on programmes. He is also a visiting professor at business schools in the US, Asia, France and Austria. His books on entrepreneurship and small business have been translated into twenty languages including Arabic, Russian and Chinese. He worked with Microsoft to incorporate the business planning model used in his teaching programmes into the software program, Microsoft Business Planner, now bundled with Office. He is a regular contributor to newspapers, periodicals and academic journals such as the Financial Times, The Guardian, Management Today and the International Small Business Journal.

Thousands of students have passed through Colin’s start-up and business growth programmes, raising millions in new capital and going on to run successful and thriving enterprises. He held non-executive director appointments in two venture capital funds, is on the board of several small businesses and has served on a number of Government Task Forces.

Dedication

Paul Tiffany:

For the thousands of students and executives whom I have taught in the past, and who have provided me with constant inspiration and insight about the challenges facing management in the modern world.

Steven Peterson:

To my parents, Mary and Pete, for always being there to encourage and support me in whatever path I chose to pursue. Your love and devotion to each other and our family are beyond measure. And to my sister, Susie, for her deep and constant friendship, and for giving me the chance to be a big brother and an uncle.

Authors’ Acknowledgements

I would like to thank everyone at John Wiley & Sons, Inc. for the opportunity to write this book and Claire Ruston, Jo Jones and Kim Vernon for making my writing infinitely more readable. Without their help, encouragement, feedback and tireless work this book would not have happened.

— Colin

First we would like to express our gratitude to Peter Jaret for the many hours he spent reading, editing, asking questions and making suggestions. His insights were always on the mark, and the book reflects his own immense talents as a writer. We would also like to thank Rick Oliver for his care in reviewing the book, and for all his astute comments and advice. His continued enthusiasm for the book is gratifying and greatly appreciated.

Special thanks go out to three of our editors. To Barb Terry for starting us out on the right track. And to Tere Drenth and Colleen Rainsberger for keeping us on course and on schedule. While we didn’t always show it at the time, we really appreciate all their energy and hard work.

We are grateful to John Kilcullen and Kathy Welton, our publishers, for giving us the chance to write the book in the first place, and for allowing us the extra time to make it as good as it is.

We would also like to thank the talented staff at our publisher for taking care of all the important details. To Kathy Simpson for copy editing and Donna Love for assisting with several chapters. To Joyce Pepple and Heather Dismore for dealing with all the permissions. And to Ann Miller for seeing that the bills got paid.

Paul would also like to thank his family for their support during this project – for Janet, and for his children, Ann, Rafael, Roland, Brandon, and Mariah.

— Paul and Steven

Publisher’s Acknowledgements

We’re proud of this book; please send us your comments at . For other comments, please contact our Customer Care Department within the U.S. at 877-762-2974, outside the U.S. at 317-572-3993, or fax 317-572-4002.

Some of the people who helped bring this book to market include the following:

Commissioning, Editorial, and Media Development

Project Editor: Jo Jones
       (Previous Editions: Daniel Mersey, Amie Tibble, Simon Bell)

Commissioning Editor: Claire Ruston

Assistant Editor: Ben Kemble

Copy Editor: Kim Vernon

Production Manager: Daniel Mersey

Publisher: David Palmer

Cover Photo: © iStock/Talaj

Cartoons: Ed McLachlan

Composition Services

Senior Project Coordinator: Kristie Rees

Layout and Graphics: Jennifer Creasey, Christin Swinford

Proofreader: Dwight Ramsey

Indexer: Estalita Slivoskey

Publishing and Editorial for Consumer Dummies

Kathleen Nebenhaus, Vice President and Executive Publisher

Kristin Ferguson-Wagstaffe, Product Development Director

Ensley Eikenburg, Associate Publisher, Travel

Kelly Regan, Editorial Director, Travel

Publishing for Technology Dummies

Andy Cummings, Vice President and Publisher

Composition Services

Debbie Stailey, Director of Composition Services

Introduction

So you pulled this book off the shelf and decided to give us a try. Good move. You’ve come to the right place. Believe it or not, we don’t need to read tea leaves to know a bit about your background. In fact, we’d go so far as to suggest that you probably find yourself in one of the following situations:

check.png You’ve a great idea for a brand-new gadget and can’t wait to get your own company up and running.

check.png Your boss just turned over a new leaf and wants a business plan from you in three weeks.

check.png You’ve always run the business without a business plan, and you’re the one who turned over the new leaf.

check.png You thought you had a business plan for the company, but it doesn’t seem to be doing the job that it should.

check.png The business and economic climate looks a whole lot more hostile than the last time you thought about writing a business plan and you want to be doubly sure of getting it right.

Are we close? Whatever your situation, you’re not going to need those tea leaves to make a business plan, just read this book instead. 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 with you every step of the way.

Why You Need This Book

You may not know how to make a business plan just yet, but you’re smart enough to know that a plan is important. We know, from years of working with companies large and small, that a business plan is crucial – your plan is the only way that you can get where you want to go.

This book helps you create your business plan step by step. Along the way, you may discover things about your business that you never realised – things that just may help you beat the competition. We even throw in a few laughs as well.

Sure, for some of you, a business plan is something that you’re required to put together to raise money for a startup company. At best, it’s a formality; at worst, a real pain in the neck. But a business plan isn’t just there to raise money; it can also be a powerful tool – one that’s bound to make your company a better place to work and your business a more successful operation.

Is a business plan magic? No – no sorcery here. 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 be in the future and how you intend to make the future happen. Then your plan acts as a template, guiding you through the steps required to meet your goals. For example:

check.png A business plan requires you to look carefully at your industry, your customers and the competition to determine what your real opportunities are and what threats you face.

check.png A business plan takes a good hard look at your company as well, so that you can honestly and objectively recognise its capabilities and resources, its strengths and weaknesses and its true advantages.

check.png A business plan coaxes a financial report, a forecast and a budget out of you, so that you know where you stand today and what the future holds.

check.png A business plan prepares you for an uncertain future by encouraging you to come up with business strategies and alternatives to increase your chances of success down the road.

How to Use This Book

Business Plans For Dummies, 3rd Edition will help your business succeed no matter who you are or what your job description is, 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:

check.png If business plans are new to you, you may want to start at the beginning and let us be your guides. 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.

check.png If you’re a little more experienced, you may want to head straight for one of the more interesting watering holes: how to recognise the critical success factors in your business, for example, or where to look for your company’s strengths and weaknesses. After dipping in anywhere along the way, you’ll most likely discover yet another section where you want to spend some time.

Just remember – no matter where you find yourself, you’re never too late to start a business plan, and never too late to make the one that you have even better. In each case, you can find what you’re looking for between these bright-yellow covers.

How This Book Is Organised

Business Plans For Dummies is divided into six parts, based on the major elements of your business plan. You don’t have to read all the parts, however, and you certainly don’t have to read them in order. Each chapter is devoted to a particular business-planning topic, and you may need some chapters more than you do others. Feel free to skip around; pick and choose what you’re really interested in.

Part I: Determining Where You Want to Go

When putting together a business plan, you have to decide where you want to end up in the future. This part helps you get on track right away by establishing a mission for your company, along with business goals and objectives. Then we help you examine your company’s values and your vision for the future.

Part II: Sizing Up Your Marketplace

To make a useful plan for your business, you have to know something about the market you’re going after. In this part, we help you examine your industry and figure out what it takes to be successful by identifying where your opportunities and threats come from. We also help you analyse your customers, so that you can understand who they are, what they need and how you can group them to better serve them. Finally, we help you scope out your competition, trying to determine exactly what you need to win.

Part III: Weighing Up Your Company’s Prospects

In this part, we turn our full attention to your company. We help you look as objectively as you can at your capabilities and resources, identifying the strengths that you can count on and the weaknesses that you need to deal with. We also help you zero in on what you do best, enabling you to figure out the real value that you provide for your customers and the true advantage that you have over your competitors. Finally, we guide you through your finances and help you put together a financial forecast and a budget.

Part IV: Looking to the Future

The main reason why you make a business plan in the first place is to get ready for what lies ahead for your business. Part IV helps you look into your future and prepares you for change. We introduce several standard alternatives and show you how you can use them to come up with strategies of your own. And we consider the different directions that you can take as your company grows bigger.

Part V: A Planner’s Toolkit

Your business plan is no good if you can’t put it to work. In this part, we help you shape your company to be as efficient and effective as it can be. We also help you prepare the people in your company so that they’ve the skills they need to accomplish the goals set out in your plan. Finally, we show you a sample of a real business plan, so that you know – start to finish – what you’re aiming for.

Part VI: The Part of Tens

The Part of Tens is a collection of reminders, hints, observations and warnings about what to do – and not to do – as you work through your business plan. These chapters focus on the big picture, so look at them whenever you need a little perspective on where you stand and where you’re headed, especially if the road ahead starts to look a little bumpy.

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:

aheadofthepack_consulting.eps This icon indicates tips to put you way ahead of the competition.

jargonalert.eps Wherever you see this icon, you find definitions of business-guru terms.

example_smallbus.eps This icon calls your attention to illuminating examples from the business world.

managerstip.eps This icon flags situations that apply mostly to large companies, but that may help small companies as well.

warning_bomb.eps Ouch!, you may get burned unless you heed these warnings.

remember.eps This icon serves as a friendly reminder that the topic at hand is important enough for you to note down for the future.

online.eps This icon lets you know about websites from which you can download free financial spreadsheets, tables and other useful goodies. These can help take the grunt and groan out of number-crunching cashflow forecasts, ‘what if’ projections and other tedious but vital repetitive calculations, as well as keep you up-to-date on important rules and regulations.

Where to Go from Here

Take a minute to thumb through this book and get comfortable with what’s inside. Then pick out one or two chapters that tickle your fancy. Better yet, turn to a chapter that you already know something about. Or, if you’re really daring, 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.

Want to make your business plan look great, or need some hands on support? Go to fordummies to find tips and advice on shaping up your business plan. You can also download a glossary from here to get your head around the business jargon.

Part I

Determining Where You Want to Go

9781119941187-pp0101.eps

In this part . . .

No matter what you’d like to finish, from wallpapering the bedroom to hooking up the new router, it’s awfully easy to pass over all the preliminary stuff and jump right into the thick of the project. Let’s face it, the preliminaries are a bit boring. But for the really important things in life – and in business – preparation is everything. So preparing to do your business plan ranks right up there in importance with each of the other major steps as you create a plan.

In this part, we help you prepare to plan by looking at what a business plan is all about. First, we look at how to establish a mission for your company and develop business goals and objectives with all your stakeholders in mind. We also point out why values are so important to your company, and show you how you can use your company’s values. Finally, we look at how a vision for your company gives you something to aim for and a direction to take.

Chapter 1

Starting Your Business Plan

In This Chapter

arrow Getting the most out of your plan

arrow Using your plan as a record of the past and a guide to the future

arrow Making your plan function as your company description

arrow Figuring out how to address your different readership

arrow Checking out what the written plan looks like

Most of us go through life thinking ahead. We plan to paint the house, plan to go back to university, plan to take a holiday and plan for retirement – we always have a plan or two in the works. Why do we plan so much? We certainly can’t predict what’s going to happen, so why bother? Certainly, none of us knows the future. But each of us knows that tomorrow will be different from today, and today isn’t the same as yesterday. Planning for those differences is one way to move forward and face things that are unfamiliar and uncertain. Planning is a strategy for survival.

Companies make business plans for many of the same reasons. Planning is a strategy to improve the odds of success in a business world that’s constantly changing. Business plans are not a guarantee, of course. Business planning isn’t a science that offers you right and wrong answers about the future. But business planning is a process that gets you ready for what’s to come. And making a plan increases the likelihood that down the road, your company will be in the right place at the right time.

In this chapter, we explore what planning is all about, how you can use your business plan and why having a plan is so important. We talk about your business plan as a guide to your company’s future, as well as a record of where you’ve been and how you’ve done. Because your plan is a ready-made description of your company, we also talk about the kinds of people who may be interested in seeing your business plan. Then we help you get a handle on who needs to be involved in putting your plan together, depending on how big your company is. Finally, we show you what your business plan should look like on paper.

Getting the Most Out of Your Plan

A plan originally meant only one thing: a flat view of a building, viewed from above. If you’ve ever had a house built or remodelled, you know that this kind of plan is still around (and still expensive). Over the centuries, however, the meaning of the word plan has expanded to include time as well as space. A plan in the modern sense also refers to a view of the future, seen from the present. You make plans for a birthday party next week or a business trip next month.

tip.eps A business plan is a particular view of your company’s future, describing the following things:

check.png What your industry will look like.

check.png What markets you’ll compete in.

check.png What competition you’ll be up against.

check.png What products and services you’ll offer.

check.png What value you’ll provide customers.

check.png What long-term advantages you’ll have.

check.png How big and profitable your company will become.

To create a detailed view of the future, you have to make a lot of predictions about what’s going to happen down the road. If your company manufactures crystal balls, of course, you’re in luck. If not, you have to find other ways to make basic business assumptions about the future, which we share with you throughout this book.

aheadofthepack_consulting.eps In the end, your business plan is only as good as all the assumptions you put into it. To make sure that your assumptions make sense, much of your planning should involve trying to understand your surroundings today – what’s going on right now in your own industry and marketplace. By making these assumptions, you can better predict your business and its future. Will your predictions actually come true? Only time will tell. Fortunately, the planning process makes you better prepared for whatever lies ahead.

Looking to the future

A business plan provides a view of the future. Whether your company is large or small, whether you’re just starting a business or are part of a seasoned company, you still need some sort of planning process to point you in the right direction and guide you along the way. For example:

check.png A brand-new company makes a business plan to get its bearings and often uses the plan to get funding.

check.png An up-and-running company uses a plan to be better prepared.

check.png A large company needs a plan so that everybody sees the same view ahead.

check.png A small company makes a plan if it wants to make sure that it survives those crucial first two years.

In fact, a small company needs a business plan most of all. If you own or manage a small business, you already know that you’re the jack-or-jill-of-all-trades. You hardly have enough time to get your daily business tasks done, much less plan for next week, next month or next year. But because you run a small business, you simply can’t afford not to plan.

warning_bomb.eps When a giant company stumbles, it usually has the financial reserves to break the fall and get back on its feet. If your resources are limited, however, a single mistake – such as exaggerating the demand for your products or underestimating how long you have to wait to get paid – can spell the end of everything you’ve invested in and worked so hard to achieve. A business plan points out many dangers, alerting you to the hazards and obstacles that lie ahead, so that you can avoid such pitfalls. Remember: two-thirds of all new businesses cease trading within their first two or three years.

Accounting for your history

A business plan paints a picture of where your company has been and how it has changed over the years. By reviewing past performance, particularly from your accounts and sales reports, you can use your plan to figure out what worked and what didn’t. In effect, your business plan offers you an opportunity to keep score, allowing you to set goals for your company and then keep track of your achievements. For example:

check.png Your plan creates a view of the future. In years to come, you can use old copies of your plan to look back and determine just how good you are at seeing what lies ahead.

check.png Your plan maps out a direction to go in and the route to take. You can use it to gauge how skilful you are at accomplishing what you set out to do.

check.png Your plan forecasts where you want to be. You can use it to check out how close you have come to your targets for the industry, your market and your finances.

warning_bomb.eps Your history, as described in your business plan, has given you important lessons about the business you’re in – so you aren’t doomed to make the same mistakes over and over. If you can’t remember exactly where your company has been, you probably won’t see where it’s headed.

Anticipating your different audiences

You can use your business plan to tell the world (or at least anyone out there who’s interested) all about your company. No matter who you’re dealing with or why, your plan has a ready-made description to back up the claims you make. Your plan comes in handy when you’re dealing with the following people:

check.png Suppliers you are asking to extend you credit and offer you terms.

check.png Distributors who want to add your product or service to their line-ups.

check.png Big customers who hope to establish long-term business relationships with you.

check.png The board of directors or other advisers who want to offer support.

check.png Outside consultants you bring in to help out with specific issues.

check.png Bankers who decide on whether or not to lend you money.

check.png Investors who are interested in taking a stake in your company.

All these people have their own special reasons for wanting more information about you, and each probably is interested in a different part of your plan. A well-written business plan satisfies all these groups and makes your company stronger in the process. Preparing a business plan:

remember.eps check.png Improves your company’s chances of success.

check.png Shows you where your company has been and how it has changed.

check.png Provides a blueprint for the future.

check.png Is an ongoing process.

Steering clear of the hard sell

A business plan is a professional document, and though its primary purpose is to ’sell’ your proposition to someone, it is not a sales advertisement. Look at these two statements from Tesco PLC:

check.png In order to reflect changing consumer needs and the increasingly global nature of our business we’ve evolved our strategy. The strategy now has seven parts and applies to our five business segments – the UK, Asia, Europe, the United States and Tesco Bank.

check.png So when you use your Clubcard Credit Card to pay at Tesco, not only will you get one point for every £4 you spend, you will also collect standard points from Clubcard!

The first is from Tesco’s corporate website (), while the second is from the selling arm of their bank (). If you feel that the second statement seems more puffed up you’re right. The marketing message is that using this card in Tesco gives your savings points a significant boost. But as its normal loyalty card pays eight points per £4 anyway, the credit card only adds one extra point. You actually only gain a quarter of a point per pound spent. Well, as Tesco says, ‘Every little helps’.

warning_bomb.eps However competently constructed, sales literature leaves the reader with the feeling that they’re being steered, or perhaps even pushed, in a direction where their best interests are not necessarily the main purpose of the communication.

Differing the emphasis for different readers

Inevitably a business plan is aimed at a number of different audiences who have diverse if overlapping requirements. Clearly much of the contents of the business plan need to be common to all these audiences. Your core proposition, the target markets, business strategy and operating procedures have importance to all your readers. But you may need to use the order of content, the amount of information and some of the words used on some occasions for each key reader group, to have the best chance of achieving your goal in writing up the business plan.

remember.eps Investors are most interested in hearing about exciting future prospects, bankers look for evidence of a sound foundation while a prospective key employee hopes for evidence of career opportunities. If the plan is to be pitched at a corporate venture fund (see Chapter 16 for more on VCs), they want strong evidence of valuable intellectual property (see Chapter 14 for more on IP) or some other attribute that they can leverage into their own business at some point.

aheadofthepack_consulting.eps You may also find it useful to produce a rolling business plan to include modifications in the light of events as they develop. A successful pitch to a business angel confirming commitment in principle to provide funds can be incorporated into later editions of your business plan as a material fact. The results from customer trials not available when your business plan was written first can be added as they become available.

Putting Your Plan on Paper

When you put together a business plan, your efforts take you in many directions. You face all sorts of issues related to the business that you’re in. Right off the bat, for example, you need to answer basic questions about your company and what you want it to be in the future. Then you have to decide what targets to aim for as you look ahead and set business goals and objectives.

A large part of creating a business plan requires only a dose of good common sense on your part. But if you want to make sure that your business plan succeeds, you also have to take the time to do the following:

check.png Look closely at your industry.

check.png Get to know your customers.

check.png Check out your competitors.

check.png List all your company’s resources.

check.png Note what makes your company unique.

check.png List your company’s advantages.

check.png Figure out your basic financial condition.

check.png Put together a financial forecast and a budget.

In addition, you have to be prepared for everything to change down the road. So you also need to think about other options and alternatives and be on the lookout for new ways to make your company prosper.

warning_bomb.eps You don’t want to scare people – yourself included – with a written plan that’s too long. The longer your plan is, in fact, the less likely people are to read it. Ideally, for a small or medium-sized company, your written plan should be 15 to 20 pages maximum. Remember that you can always support the main text with all the exhibits, appendixes and references that you think it needs. If you want to glance at a sample business plan, jump to Chapter 17 or check out Bplans.com () who have hundreds of free sample plans on their website.

aheadofthepack_consulting.eps To remind yourself (and other people) that your written plan is forever a work in progress, we suggest that you keep it in a three-ring binder, or its electronic equivalent. That way, you can add or delete pages and swap entire sections in or out, as your business plan changes – and we’re certain that it will change. Fortunately, however, the format you use – all the major sections of a business plan – will stay the same.

Before you get your business plan under way, take a moment to review the following sections.

Executive summary

Your executive summary touches on everything that’s important in your business plan. This summary is more than just a simple introduction; it’s the whole plan, only shorter. In many cases, the people who read your plan won’t need to go any further than the executive summary; if they do, the summary points them to the right place.

The executive summary isn’t much longer than a page or two, and you should wait until the rest of the business plan is complete before you write it. That way, all you have to do is review the plan to identify the key ideas you want to convey.

remember.eps If you want to make sure that people remember what you tell them, you have to say what you’re going to say, say it, and then say what you’ve said. The executive summary is where you say what you’re going to say.

Company overview

The company overview provides a place to make important observations about the nature of your business. In the overview, you discuss your industry, your customers and the products and services you offer or plan to develop. Although you should try to touch on your company’s business history and major activities in the overview, you can leave many of the details for the later sections.

jargonalert.eps To put together this kind of general company overview, you can draw on several key planning documents, including the following:

check.png Mission statement: A statement of your company’s purpose, establishing what that purpose and what it does.

check.png Goals and objectives: A list of all the major goals that you set for your company, along with the objectives that you have to meet to achieve those goals.

check.png Values statement: The set of beliefs and principles that guide your company’s actions and activities.

check.png Vision statement: A phrase or two that announces where your company wants to go or paints a broad picture of what you want your company to become.

To begin constructing these statements, turn to Chapters 2 and 3.

Business environment

The section of your business plan that deals with your business environment needs to cover 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 then describe what it takes to be a successful company.

aheadofthepack_consulting.eps Pay special attention to how your industry operates. Describe the primary business forces that you see out there, as well as the key industry relationships that really determine how business gets done. Next, talk about your marketplace and your customers in more detail, perhaps even dividing the market into segments that represent the kinds of customers you serve. Finally, spend time on the competition, describing what those companies are, what they’re like, how they work and what they’re likely to be up to in the future.

For more information on how to explore your business circumstances and the overall environment that your company competes in, check out Chapters 4, 5, 6 and 7.

warning_bomb.eps If the economic climate looks like taking a dive, head to Chapter 15 where you can find pointers to planning for the turbulent times ahead.

Company description

In the company description, you go into much more detail about what your company has to offer. The description should include information about your management, the organisation, new technology, your products and services, company operations, your marketing potential – in short, anything special that you bring to your industry.

In particular, you need to look carefully and objectively at the long list of your company’s capabilities and resources. Sort out the capabilities that represent strengths from those that are weaknesses. In the process, try to point out where you have real advantages over your competitors.

Examining your company through your customers’ eyes helps. With this viewpoint, you sometimes can discover customer value that you didn’t know you were providing; 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 8 and 9.

Business strategy

The section on company strategy brings together everything that you know about your business environment and your own company to come up with your projections of the future.

aheadofthepack_consulting.eps You want to take time in this section to map out your basic strategies for dealing with the major parts of your business, including the industry, your markets and the competition. Talk about why the strategy is the right one, given your business situation. Describe how the strategy is to play out in the future. Finally, point out specifically what your company needs to do to ensure that the strategy succeeds.

Everybody knows that the future is uncertain, so also talk about ways in which your business world may be different in the future than it is today. List alternative possibilities, and in each case, describe what your company is doing to anticipate the changes and take advantage of new opportunities.

To begin to prepare for change in your business world and get help on how to think more strategically about your company’s future, skip to Chapters 12, 13 and 14.

Financial review

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 this part of your business plan expect to see them. The basic financial statements include:

jargonalert.eps check.png Profit and loss account: A list of numbers that adds up all the revenue that your company brings in over a month, a quarter or a year and then subtracts the total costs involved in running your business. What’s left is your bottom line – the profit that you make during the period.

check.png Balance sheet: A snapshot of your financial condition at a particular moment, showing exactly what things your company owns, what money it owes and what your company is really worth.

check.png Cash-flow statement: A record that traces the flow of cash in and out of your company over a given period, tracking where the money comes from and where it ends up. The cash-flow statement only tracks money when you actually receive it or spend it.

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’s going to happen. Because nothing is certain, make sure to include all the assumptions you made to come up with your estimates in the first place.

To get a jump start on your company’s financial planning, turn to Chapters 10 and 11.

Action plan

Your action plan lays out how you intend to carry out your business plan. This section should point out proposed changes in management or the organisation itself, 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 a bit about how you’re going to generate excitement for your business plan inside your company, so as to create a culture that supports what you’re trying to accomplish. Only then can you have real confidence that your business plan is going to succeed. The key parts of the business plans should function as follows:

remember.eps check.png The executive summary touches on all the important parts of your plan.

check.png The company overview describes the nature of your business, using your mission, values and vision statements.

check.png Your business plan should analyse your business environment.

check.png The company description identifies your company’s specific capabilities and resources.

check.png The plan should discuss your current business strategy.

check.png A financial review includes a profit and loss account, balance sheet and cash-flow statement.

For more background on how to make your business plan work after you put it all together, go straight to Chapter 16.