Business Plans For Dummies. Paul Tiffany

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

       A small company constructs a plan to make sure it has the necessary resources to survive year-in and year-out.

In fact, a small company needs a business plan most of all; unfortunately, small businesses are often the last to prepare a formal business plan. 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 chores 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.

      

When a giant corporation stumbles, it usually has the financial reserves to break the fall and get back on its feet. General Motors, for example, filed for bankruptcy not that long ago, but it’s still churning out millions of cars a year. If your resources are limited, however, a single mistake — such as exaggerating the demand for your product 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 plan to avoid such pitfalls.

      

Three-quarters of all new businesses fail within two or three years. And untold numbers never even make it off the ground. Smart business planning up front can reduce these dismal casualty rates.

      Looking back

      

A business plan paints a picture of where your company has been and how it has changed over the years. By reviewing your past performance or the track records of your newly discovered competitors, 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:

       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 well you predicted the future.

       Your plan maps out a direction in which to go and the route to take. You can use it to gauge how skillfully you accomplish what you set out to do.

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

      

Your history, as described in your business plan, teaches 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 can’t see where you’re headed.

      Looking around

      You can use your business plan to tell the world (or at least anyone out there who displays an interest) meaningful information about your company. No matter who you deal with or why, your plan has a ready-made description to back up the claims you make. Your plan comes in handy when you deal with the following constituencies:

       People you want to recruit to join your organization as staff associates

       Suppliers you want to work with on a regular basis

       Distributors interested in carrying your product or service

       Customers you want to establish long-term relationships with

       The board of directors or other advisers who want to offer their support

       Outside consultants you hire to help out with specific issues

       Bankers who decide to lend you money or shut you out

       Investors who show interest in taking a stake in your company

       The general public in your community who might have an interest in your activities

      All these constituents have their own special reasons for wanting more information about you. Each group is probably 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.

      Taking the first step

      With so many people to keep in mind and issues to think about, you may be feeling a little overwhelmed. Well, we’re not going to sugarcoat this: Business planning does take time and effort. But if you’re excited about the business you’re putting together, the process can be a lot of fun. In fact, maintaining your sense of excitement and enthusiasm and making sure you reflect it in your business plan is important.

      

Now’s the time for you to capture that can-do enthusiasm and take the first step: Get your big ideas captured either in a Word doc or on paper. Don’t worry about writing beautiful prose. Get right to the point. Devoting no more than a sentence to each of these items, explain

       What you want to do

       How you plan to do it

       Who your customers will be

       Why they should come to you and not the competition

       The number one reason you’re convinced that this business will succeed

      After you finish, be sure to drop the doc into several different files so you don’t accidentally delete it. For more information on describing your business in 50 words or less, check out Chapter 4.

Understanding the Planning behind the Plan

      Some companies think that planning is a total waste of time. They would never think of using the term in the context of their own organizations. These companies still move forward; they just don’t talk much about it ahead of time. So why does planning have such a bad reputation in certain quarters? One reason is that far too many organizations simply go through the motions rather than taking the exercise seriously: Someone high up read somewhere that having a plan looks good to an external audience, so the firm commissions one and then promptly forgets about it. More than likely, the companies that don’t plan don’t understand what it really means to plan. Planning has become such a buzzword in today’s business world that its real meaning has been lost.

      Is planning an art or science?

      Planning is both an art and a science. Putting together a serious business plan requires you to gather data, analyze the information, and then turn it into knowledge about your situation. A serious business plan requires that you think strategically. What do we mean by that? The word strategy comes to us from the

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