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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
Learn how to create a sound, profitable business plan that will take your business to the next level
Whether you're starting a new business or you’re looking to revitalise your strategy, Creating a Business Plan For Dummies covers everything you need to know. This step-by-step guide shows you how to figure out whether your business idea will work. With Dummies, your business plan can be a simple process that you tackle in stages. You’ll identify your strategic advantage, discover how to gain an edge over your competitors and transform your ideas to reality using the latest tools (including AI!).
No matter what type of business you have — products or services, online or bricks-and-mortar — you’ll learn how to create a start-up budget and make realistic projections. How will you predict and manage your expenses? When will your business break even? Dummies will help you assemble a financial forecast that leaves you confident in your calculations! Learn how to review potential risk, experiment with different scenarios to see if you’re on the right track and hone your mindset for a better work-life balance.
- Establish a smart business model that really works
- Identify your edge, get ahead of competitors and win the game
- Create an elevator pitch and a one-page business plan to woo investors
- Demystify financial projections, build a budget and create cashflow
- Work smarter by taking advantage of the latest AI and online business tools
Having a good plan is the first step to success for any business. Getting it right can mean the difference between big trouble and big profits. Creating a Business Plan For Dummies gives you the detailed advice you need to guide your business all the way from concept to reality.
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Seitenzahl: 469
Veröffentlichungsjahr: 2025
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Creating a Business Plan For Dummies®
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Table of Contents
Cover
Title Page
Copyright
Introduction
About This Book
Foolish Assumptions
Icons Used in This Book
Where to Go from Here
Part 1: Getting Started
Chapter 1: Letting Your Plan Take Flight
Getting Your Feet Wet
Scoring Your Business out of 10
Structuring Your Plan
Planning for Continuous Change
Getting Beyond First Base
Hoodwinking Yourself into Actually Creating a Plan
Chapter 2: Figuring Out What’s So Special about You (And Your Business)
Gaining the Edge
Understanding Risk, Gain and Pain
Justifying Why You Can Succeed
Developing Your Strategic Advantage Statement
Using AI to Generate More Ideas
Part 2: Looking to the World Outside
Chapter 3: Sizing up the Competition
Understanding Why Competitor Analysis is Important
Figuring Out Who Your Competitors Really Are
Engaging in Cloak-and-Dagger Tactics
Summarizing Your Competitive Strategy
Preparing an Elevator Speech
Chapter 4: Separating Yourself from Your Business
Deciding What Path You Want to Take
Wearing Different Hats
Building a Business with a Life of its Own
Appreciating the Limitations of Your Business
Planning for People
Chapter 5: Exploiting Opportunities and Avoiding Threats
Taking an Eagle-Eye View
Rating Your Capabilities
Identifying Opportunities and Threats
Doing a SWOT Analysis
Creating a Plan for Change
Part 3: Laying the Groundwork
Chapter 6: Developing a Smart Marketing Plan
Laying Down the Elements of Your Plan
Providing the Background
Defining Your Target Market
Setting Sales Targets
Deciding on Your Marketing Strategies
Connecting the Dots
Chapter 7: Budgeting for Start-Up Expenses
Creating a Start-Up Budget
Separating Start-Up Expenses from Operating Expenses
Figuring Out How Much is Enough
Securing the Funds You Need
Calculating Likely Loan Repayments
Chapter 8: Figuring out Prices and Predicting Sales
Choosing a Pricing Strategy
Building a Hybrid-Pricing Plan
Forming Your Final Plan of Attack
Building Your Sales Forecast
Creating Your Month-by-Month Forecast
Chapter 9: Calculating Costs and Gross Profit
Calculating the Cost of Each Sale
Understanding Gross Profit
Analyzing Margins for Your Own Business
Building Your Gross Profit Projection
Chapter 10: Managing Expenses
Concentrating on Expenses
Fine-tuning Your Worksheet
Using AI to Secure Business Intelligence
Thinking about Taxes and Loan Repayments
Keeping the Wolf from the Door
Part 4: Checking Your Idea Makes Financial Sense
Chapter 11: Assembling Your First Financial Forecast
Understanding More About Spreadsheets
Building Your Profit & Loss Projection
Analyzing Net Profit
Using AI to Assess the Risk Involved
Chapter 12: Calculating Your Break-Even Point
Identifying Your Tipping Point
Changing Your Break-Even Point
Looking at Things from a Cash Perspective
Chapter 13: Creating Cashflows and Building Budgets
Understanding Why Cash Is Different from Profit
Looking at Cashflow Coming In
Thinking about Outgoing Cashflow
Predicting the Bottom Line
Building Your First Budget
Creating Balance Sheet Projections
Part 5: Joining the Dots and Writing a Plan
Chapter 14: Managing — and Taking Advantage of — Risk
Balancing Innovation and Risk-taking
Assembling a Risk Matrix
Identifying Different Kinds of Risks
Bringing Out Your Inner Meerkat
Talking About Risk in Your Business Plan
Chapter 15: Perfecting the Final Pitch
Exploring Different Formats
Building a Cohesive Narrative
Showing Where the Money’s At
Using AI for What It’s Good At
Part 6: The Part of Tens
Chapter 16: Ten Questions to Ask before You’re Done
Does Your Difference Leap off the Page?
How Thorough is Your Competitor Analysis?
How Robust are the Numbers?
Do Different Elements Align?
Do You Play to Your Strengths?
Have You Made Any Assumptions You Can’t Justify?
Is Your Target Market Spot On?
What’s Your Plan for Getting Out?
How Do You Feel?
What Do Others Think?
Chapter 17: Ten Suggestions for a Plan that’s Not Shaping Up
Ensure You’re Still Legal
Find Ways to Take the Pressure Off
Experiment with Margins
Return to Competitor Analysis
Involve Your Team
Actively Seek Expert Advice
Find a Business Partner
Know When to Call it a Day
Try to Sell Your Idea
Take the Lessons with You
Index
About the Author
Connect with Dummies
End User License Agreement
List of Tables
Chapter 1
TABLE 1-1 Rating a Business that’s Been Done Before
TABLE 1-2 Rating a Niche Business or New Invention
Chapter 2
TABLE 2-1 Rating Businesses According to Potential Strategic Advantage
Chapter 3
TABLE 3-1 Rating Head-to-Head Competitors
Chapter 4
TABLE 4-1 Moving from a Small Business to a Big Business
Chapter 5
TABLE 5-1 Industry Analysis Example
TABLE 5-2 Rating Your Capabilities
TABLE 5-3 Summarizing Opportunities and Threats
Chapter 6
TABLE 6-1 Strategic Advantage versus Unique Selling Proposition
TABLE 6-2 Different Kinds of Goals and How to Reach ’Em
Chapter 7
TABLE 7-1 Start-up Expenses Budget
TABLE 7-2 First Four Weeks Budget for Retail Business
TABLE 7-3 Start-up Expenses versus First Four Weeks Operating Expenses
Chapter 8
TABLE 8-1 Calculating Maximum Billable Hours per Year
TABLE 8-2 Initial Sales Estimates
Chapter 9
TABLE 9-1 Variable Costs Examples for Service Businesses
TABLE 9-2 Calculating True Costs and Margins
TABLE 9-3 Cost of Producing One Bottle of Pickle
TABLE 9-4 Cost of Producing Children's Dungarees
TABLE 9-5 Calculating Gross Profit and Gross Profit Margin
Chapter 10
TABLE 10-1 Using Business Benchmarks
TABLE 10-2 Categorizing Different Kinds of Personal Expenses
Chapter 13
TABLE 13-1 Differences between a Profit & Loss Projection and a Cashflow Project...
Chapter 14
TABLE 14-1 Example Risk Matrix Assessing Financial Risks
List of Illustrations
Chapter 1
FIGURE 1-1: The marketing planning cycle.
FIGURE 1-2: The financial planning cycle.
Chapter 2
FIGURE 2-1: An example statement of strategic advantage.
Chapter 3
FIGURE 3-1: Building a dossier for each key competitor.
FIGURE 3-2: Using your strategic advantage, competitor analysis and competitive...
Chapter 5
FIGURE 5-1: The principles of a SWOT analysis.
FIGURE 5-2: Plotting business strategy using a SWOT analysis.
Chapter 7
FIGURE 7-1: Excel provides a simple loan repayment template you can use at any ...
Chapter 8
FIGURE 8-1: A monthly sales projection.
Chapter 9
FIGURE 9-1: Identifying variable costs for your business.
FIGURE 9-2: Building a gross profit projection for a service with employees or ...
FIGURE 9-3: Building a gross profit projection for a business selling a small n...
FIGURE 9-4: Building a gross profit projection for a business selling lots of d...
Chapter 10
FIGURE 10-1: Forecasting expenses for the months ahead.
FIGURE 10-2: Looking at expense percentages is part of the benchmarking process...
Chapter 11
FIGURE 11-1: Renaming the first two worksheets in Excel.
FIGURE 11-2: Entering data into the Sales Detail worksheet.
FIGURE 11-3: The Paste Link command appears in the bottom-left of the Paste Spe...
FIGURE 11-4: Naming cells makes your worksheets easier to understand.
FIGURE 11-5: Total sales form the first line of your Profit & Loss Projection.
FIGURE 11-6: Cost of sales and gross profit show below total sales on your Prof...
FIGURE 11-7: Your completed Profit & Loss Projection.
Chapter 12
FIGURE 12-1: Calculating business break-even point.
FIGURE 12-2: Calculating break-even point to cover both business and personal e...
FIGURE 12-3: Understanding break-even enables you to plan ahead for changes in ...
FIGURE 12-4: Calculating what you need to do in order to break even in the firs...
Chapter 13
FIGURE 13-1: A Cashflow Projection predicts the closing balance of your bank ac...
FIGURE 13-2: A Balance Sheet Projection.
Chapter 14
FIGURE 14-1: Assessing risk levels by considering both the likelihood of a risk...
Guide
Cover
Table of Contents
Title Page
Copyright
Begin Reading
Index
About the Author
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Creating a Business Plan For Dummies®, 2nd Edition
Published by
John Wiley & Sons, Australia Ltd
Level 4, 600 Bourke Street
Melbourne, Vic 3000
www.dummies.com
Copyright © 2025 John Wiley & Sons Australia, Ltd
The moral rights of the author have been asserted.
ISBN: 978-1-394-23730-2
All rights reserved. No part of this book, including interior design, cover design and icons, may be reproduced or transmitted in any form, by any means (electronic, photocopying, recording or otherwise) without the prior written permission of the Publisher. Requests to the Publisher for permission should be addressed to the Legal Services section of John Wiley & Sons Australia, Ltd, Level 4, 287 Lonsdale Street, Melbourne, Vic 3000, or email [email protected].
Cover image: © rh2010/Adobe Stock Photos
Typeset by Straive
LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: THE PUBLISHER AND THE AUTHOR MAKE NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE CONTENTS OF THIS WORK AND SPECIFICALLY DISCLAIM ALL WARRANTIES, INCLUDING WITHOUT LIMITATION, WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. NO WARRANTY MAY BE CREATED OR EXTENDED BY SALES OR PROMOTIONAL MATERIALS. THE ADVICE AND STRATEGIES CONTAINED HEREIN MAY NOT BE SUITABLE FOR EVERY SITUATION. THIS WORK IS SOLD WITH THE UNDERSTANDING THAT THE PUBLISHER IS NOT ENGAGED IN RENDERING LEGAL, ACCOUNTING, OR OTHER PROFESSIONAL SERVICES. IF PROFESSIONAL ASSISTANCE IS REQUIRED, THE SERVICES OF A COMPETENT PROFESSIONAL PERSON SHOULD BE SOUGHT. NEITHER THE PUBLISHER NOR THE AUTHOR SHALL BE LIABLE FOR DAMAGES ARISING HEREFROM. THE FACT THAT AN ORGANISATION OR WEBSITE IS REFERRED TO IN THIS WORK AS A CITATION AND/OR A POTENTIAL SOURCE OF FURTHER INFORMATION DOES NOT MEAN THAT THE AUTHOR OR THE PUBLISHER ENDORSES THE INFORMATION THE ORGANISATION OR WEBSITE MAY PROVIDE OR RECOMMENDATIONS IT MAY MAKE. FURTHER, READERS SHOULD BE AWARE THAT INTERNET WEBSITES LISTED IN THIS WORK MAY HAVE CHANGED OR DISAPPEARED BETWEEN WHEN THIS WORK WAS WRITTEN AND WHEN IT IS READ.
Trademarks: Wiley, the Wiley logo, For Dummies, the Dummies Man logo, A Reference for the Rest of Us!, The Dummies Way, Making Everything Easier, dummies.com and related trade dress are trademarks or registered trademarks of John Wiley & Sons, Inc. and/or its affiliates in the United States and other countries, and may not be used without written permission. All other trademarks are the property of their respective owners. John Wiley & Sons Australia, Ltd is not associated with any product or vendor mentioned in this book.
Introduction
Igrew up in Scotland, where the winters can be wild, wet and cold. My father was a self-employed landscape gardener and, each year, as the days grew shorter, he would start hatching entrepreneurial plots to see the family through the scant earnings of the winter months. Handmade garden furniture, barrels from the local brewery scrubbed back and filled with violets, gold-leaf mirror restoration and beach-scavenged scallop shells were but a few of the ill-fated ventures that would transform our Victorian flat into a hive of industry for a few fleeting months of each year.
I started my first business at the age of 26 and have been in business ever since, oscillating in a manner not unlike my father’s between the more stable income of business consulting and the somewhat precarious existence of writing and publishing.
Yet when working on this book, I realized something quite fundamental. While I’ve been steadily successful for more than 20 years, all too often the sensible-cardigan-wearing-accountant side of me wins out against the risk-taking-creative-why-don’t-we-try-this side of me. Possibly due to the rather feast-and-famine finances of my childhood, I typically spend more time analyzing profit margins than I do thinking of creative new products; I focus more on managing risk than being a trendsetter. If you’ve been in business before, I’m sure you too have experienced this natural tension between your entrepreneurial side and the inner voice of ‘reason’.
One challenge for me in writing this book has been to find ways to encourage dreams to flourish while simultaneously exploring the somewhat sobering process of writing a business plan. I’m writing this introduction having just finished the last chapter of this book and, happily, I think that the process has worked on me. I’m itching with impatience to begin my next business venture, and feel utterly optimistic about its prospects. (I remain my father’s daughter, after all.)
I hope you have a similar experience with this book, and that I share enough inspiration for your inner entrepreneur to thrive while at the same time providing unshakeable feet-on-the-ground practicality.
About This Book
I like to think that this book is a bit different from other business planning books, not least because this book is part of the For Dummies series. Dummies books aren’t about thinking that you’re a ‘dummy’ — far from it. What the For Dummies series is all about is balancing heavyweight topics with a lightweight mindset, and sharing a ‘can-do’ attitude that encourages anyone — no matter how young or old, how inexperienced or how veteran — to give the subject at hand a go.
I like to think that the Dummies way of thinking has helped me to bring a fresh approach to the subject of business planning. I’ve tried not to get bogged down in the same old stodgy discussions of mission statements, values and organizational charts; instead, I’ve focused more on working with others, being creative and thinking of your business as something that’s unique and separate from yourself.
You may be surprised by the fact that I devote seven whole chapters to the topic of finance (you’ll only find one finance chapter in most business planning books). I’m a real advocate of the importance of financial planning and, in this book, I try to break the topic down into bite-sized chunks that anyone can understand, even if they haven’t done any bookkeeping or accounting before.
I also understand that most people who’ve worked in business end up with knowledge that’s patchy. You may know heaps about marketing but nothing about finance, or vice versa. The beauty of Dummies books is that you can just leap in, find the chunk of information that addresses your query, and start reading from there.
One more thing. Throughout this book you’ll see sidebars — text that sits in a separate box with grey shading. Think of sidebars as the nut topping on your ice-cream: Nice to have, but not essential. Feel free to skip these bits.
Foolish Assumptions
When writing this book, I make no assumptions about your prior experience. Maybe you’ve been in business all your life or maybe you’ve never been in business before. It could be that you’re a tech geek or it’s possible that you hate computers. Maybe you love numbers or — much more likely — you may have a somewhat queasy feeling when it comes to math.
I also make no assumptions about the age of your business, and realize that for many people reading this book, your business is still a seedling waiting to be watered. (For this reason, I include practical advice such as how to budget for personal expenses while you’re building your business, and why things such as your relationships and family situation are all part of the picture.)
Last, I don’t try to guess where you live in the world. After all, the principles of business planning are universal, whether you’re in the snowdrifts of Alaska, the stone country of Australia or the kilt-swaying highlands of Scotland.
Icons Used in This Book
Tie a knot in that elephant’s trunk, pin an egg timer to your shirt but, whatever you do, don’t forget the pointers next to this icon.
This icon points to ways to give your business plan that extra spark.
Real-life stories from others who’ve been there and done that.
A pitfall for the unwary. Read these warnings carefully.
Where to Go from Here
Creating a Business Plan For Dummies, 2nd edition, is no page-turning thriller (probably a good thing given the subject matter) and doesn’t require you to start at the beginning and follow through to the end. Instead, feel free to jump in and start reading from whatever section is most relevant to you:
New to business and you’ve never created a business plan before? I suggest you read Chapters 1, 2 and 3 before doing much else. Chapter 1 provides a road map for creating your plan, and Chapters 2 and 3 help you to consolidate your business concept. From here, you’re probably best to read the chapters in the order that I present them, because these chapters follow the same sequence as the topics within a business plan.
If business strategy is more your concern, Chapters 2 to 5, 11 and 14 are the place to be.
Are financial projections a source of woe? Chapters 7 to 13 are here to help.
For advice on creating a plan that can’t fail to impress prospective lenders or investors, Chapter 15 explains how to pull your plan together, and Chapter 16 offers handy suggestions to make sure your plan is as good as can be. And, finally, Chapter 17 provides advice and encouragement if things aren’t looking as good as you’d hoped.
Part 1
Getting Started
IN THIS PART …
Explore the whole idea of business planning, and take a moment to consider the psychology behind this process.
Establish what’s different about you and your business.
Chapter 1
Letting Your Plan Take Flight
IN THIS CHAPTER
Getting started without another moment’s hesitation
Applying a scorecard to your business idea
Deciding what elements to include in your plan
Revisiting and checking your plan
Understanding why business planning is harder than it looks
Tricking yourself into doing the deed
Abusiness plan is as much a way of thinking as it is a document. Some of the most important elements of a business plan can be done while talking with colleagues, walking along the beach or taking time out over a cup of coffee.
Key to a business planning mindset is a willingness to be objective about strategy, the ability to think of your business as something that’s separate from you, and the discipline to analyze your financials (even if you’re not naturally good with numbers).
Importantly, a business plan doesn’t necessarily require days or weeks of your time. I often recommend to people they approach their plan in bite-sized chunks, whether this be redesigning pricing strategies, spending time researching competitors, or experimenting with different pricing models.
In this chapter, I talk about who a business plan is for, what goes into a plan, and how you might start thinking about your business model. I also explain why it can be hard to be objective and motivated about planning for your business, and share a few insights into how to keep yourself on track.
Getting Your Feet Wet
In Creating a Business Plan For Dummies, 2nd edition, I place less emphasis on the importance of creating a written plan and more on why planning is best viewed as a frame of mind. The neat thing about this way of thinking is that you can start with your plan at any time, even if you know you have only one hour free this week and you’re flying overseas for a holiday the next.
Planning can even be fun once you get started. Some of my best business ideas have come to me while lying in the hammock on holidays, digging up weeds in the garden or having a quiet coffee.
Thinking about success and failure
I’m sure you’ve heard of the adage that if you spend time working on your business — rather than just working in your business — you have a better chance of realizing success. However, I was talking with some friends the other day about this book, and one of them asked me just how much difference a business plan makes to the success or failure of that venture. Later, because I couldn’t help myself, I spent many hours going down the rabbit hole of studies people have done on this topic. After all those hours, all I could confirm was that a neat, definitive answer on this question does not exist.
One reason such an answer is elusive is that the very definition of success or failure is fraught. Relatively few business owners go bankrupt or lose their life savings when their business idea goes wrong. Similarly, few business owners achieve private-helicopter-mega-wealth success. Instead, most businesspeople land somewhere in the middle, working pretty hard to achieve a reasonable, but not exceptional, standard of living.
However, even if lottery-like luck isn’t on your side, my observation is that the disciplined thinking a business plan engenders provides you with an edge over others. Maybe you won’t join the ranks of the mega-rich just yet, but you’ll likely make higher profits than those of your peers who are without a plan.
Choosing your dance partners
Unless you’ve run a business before, creating a business plan almost certainly needs a little help from outside. The good news is that all you have to do is ask. Consider the following sources:
Business planning courses: In my opinion, a structured course spread over several weeks or even months is the very best possible way to accumulate basic planning skills. Not only do you have the discipline of working on your plan at least once a week, but you also usually receive expert mentoring from the teacher or teachers, as well as peer support from other people in a similar position to you.
Business advisory centers:
Depending on where you are in the world, business advisory centers have different names and structures. However, most state and federal governments fund some form of free advisory centers.
Business consultants:
While I warn against delegating the whole planning process to outsiders, expert consultants can be a great resource, especially if you retain control and ownership of your plan.
Your accountant:
I strongly recommend that you do your own financial projections, rather than delegating this task to a bookkeeper or accountant. (I explain just how in
Chapters 7
through to
13
.) However, after you have made your best attempt, consider asking your accountant to review your figures, and help you to identify anything that doesn’t make sense or seems unrealistic.
Your lawyer:
In
Chapter 14
, I talk about managing risk, including protecting your name and your brand, and limiting liability through company structures. Your lawyer is an excellent source of advice for this part of the planning process.
Friends and family:
Not only is the advice of friends and family usually free, but these people also understand you like nobody else. Support and encouragement from friends and family is invaluable on those doubtful days when you think you (and your new business idea) may be crazy.
Your spouse/life partner:
Last but not least. Need I say more?
Even if you don’t have all of the skills required to create a plan, you won’t find a better motivator for acquiring these skills than the feast-and-famine of your business venture. Experience is a generous teacher.
Deciding who this plan is for
The easy answer to the question of who your plan is for is you, of course. Your plan is an ongoing process, not a massive document that you create every year or so. When you create a business plan for your own use only, you can pick a structure, time and format that work well for you.
Of course in real life, the impetus for most business plans is to seek capital, either from an investor or via a bank loan. In Chapter 15, I explain how to frame your plan according to your audience: Investors are typically more interested in a high rate of return and the excitement of a clever business idea; banks are usually more interested in collateral, consistent trading results and your personal credit rating.
Regardless of who is likely to read your plan, I strongly suggest that when it comes to the financials — sales targets, income projections, profit projections and so on — you be consistent. Don’t have one version of financials for your own purposes, and another spruced-up version for the bank.
I remember my first job after graduating, working for a small but growing company. Money was always tight and we were forever presenting new plans and cashflow projections to prospective lenders. Part of my job was to ‘massage’ the figures to show that while cash was desperate in the coming six months or so (and hence a loan was required), things would soon turn the corner and, within a couple of years, we would be awash with funds. I discovered how easy it was to manipulate figures. By adding 10 per cent to sales, trimming expenses by the same amount, and maybe increasing the gross profit a little, I could transform dire predictions into something that looked amazing. The trouble was these figures were pure fiction. The manipulated scenarios inevitably created a false sense of security, and led to some pretty poor long-term decision-making.
The moral of the tale? Don’t get hoodwinked into ‘selling’ your plan and exaggerating your likely success. Stay as realistic as possible. This tactic helps you gain respect from any likely investors and keeps you grounded as to what lies ahead.
Subscribing to a business planning app
In this book, I try to provide you with all the information you need to build your plan. You may be wondering how to use this book alongside the many business planning apps available.
Even with this book to hand, a business planning app undoubtedly makes the process easier. Apps such as Bizplan, Enloop, LivePlan and PlanGuru help you to structure each section of your plan, can offer suggested wording based on your industry, and are excellent for creating financial forecasts, particularly if numbers doesn’t come naturally to you.
I suggest you weigh up the pros and cons for yourself by subscribing to a service such as www.liveplan.com for a month or so. The monthly fee is usually fairly modest, and represents a small financial commitment for what is potentially a significant saving of your time.
I’ve written this book so it can go hand in hand with any business planning app, aiming to provide guidance as to what’s important, and what’s not. For example, almost anyone can explain the concept of strategic advantage in a few sentences, and most planning apps simply provide a definition, followed by a template where you can write your own. However, in real life, I find that strategic advantage is super tricky to understand and it’s for this reason that I devote two whole chapters to the subject (Chapters 2 and 3), highlighting how fundamental this concept is to business success.
ARE YOU READY?
I find that if someone really wants to start their own business, wild horses can’t hold them back. The idea keeps coming around and around until that person finally takes the leap and says, ‘I’m going to give it a go’.
So if you’re champing at the bit to start your new business, I have just three questions to ask you first:
Do you have experience in the kind of business you’re planning to start? For example, if you’re looking at buying a coffee van, have you actually spent a few weeks selling coffee in this way? Do you have barista or retail experience?Do you definitely have enough capital to get started? If you’re not sure, do you think you may be better saving for a while before you launch your business? (See Chapter 7 for more on budgeting for start-up expenses.)Is your partner/spouse/family supportive of this venture?If your answer to any of these questions is ‘no’, I suggest that you try to temper your enthusiasm just a little. And if you still can’t wait, hey, I completely understand — but perhaps check out the nearby section ‘Scoring Your Business out of 10’ for a touch of reality.
Scoring Your Business out of 10
Are you still at the stage of thinking about your business idea and wondering if it’s worth you even doing a plan? Maybe your business idea is still a glint in the eye but you’re raring to go, or maybe you’ve been mooching along half-heartedly with a new business for a little while now and don’t know where you’re headed. Just for a bit of fun (this is Chapter 1, after all), why not take a few minutes and see how you and your business idea rate?
Use the scorecard in Table 1-1 if yours is a business that’s been done before. By ‘done before’, I mean a business selling a service or product that many others already provide, such as a gardening business, general store, physiotherapist, or restaurant. Alternatively, if your business or business idea is a niche business or a new invention, use the scorecard in Table 1-2. For each question, a score of 1 is bad, and a score of 10 is good.
TABLE 1-1 Rating a Business that’s Been Done Before
Ask yourself…
Score (1 to 10)
Can you think of something that will make your product or your service different from your competitors?
Can you do something that will allow you to deliver a better product or service than your competitors?
Have you got a skill, design or tool that enables you to be cheaper than your competitors?
Do you love the day-to-day activity that this business demands?
Do you know for sure that demand exists for your product or service?
Do you (or someone in your team) have strong marketing skills?
If your business is place-based, do you have a strong community network?
Do you have enough start-up capital to give your business the best possible chance of success?
Are you good with money, and able to understand budgets and stick to them?
Is your vision for your business to build something that can ultimately run without your day-to-day attention?
Does your family support you in this venture?
TABLE 1-2 Rating a Niche Business or New Invention
Ask yourself…
Score (1 to 10)
How unique is your product?
If your idea is unique, do you have some way of safeguarding this idea from a competitor who might steal it?
Do you know for sure that demand exists for your product or service?
Do you have a clear strategy for launching your product or service?
Can you do something that will allow you to deliver a better product or service than your competitors?
Do you have enough start-up capital to give your business the best possible chance of success?
Do you (or someone in your team) have strong marketing skills?
Are you comfortable in the online environment (social media, e-commerce platforms, and so on)?
Is a window of opportunity emerging due to a change in the business environment, such as changing regulations, government grants, or new technology?
Does your family support you in this venture?
Wondering what a niche business is? A niche business is one that specializes in a small market segment. (I came across a quirky example of a niche business just today, where the company specializes in ‘divorce gifts’, each one designed with a generous serve of humor.)
What score are you looking for? Overall, you probably want to get a score of 35 or more, although don’t be dismayed if you score less than this. Chapters 2 through to 5 provide lots of inspiration for developing your business ideas, Chapters 7 to 13 help you consolidate your financial skills, and Chapter 6 helps with the marketing side of things. You can return to this scorecard later in the planning process and see if your score improves.
Structuring Your Plan
The best business plan format for a company with a turnover of $100 million and 200 employees is going to be utterly different from the best format for a start-up business with no employees. For this reason, you can find as many possible formats for a business plan as recipes for Bolognese sauce.
What most formats have in common, however, is certain key elements, although the sequence of these elements varies:
A cover page and table of contents.
An Executive Summary.
I explain how to write this in
Chapter 15
.
Your point of difference and strategic advantage (usually but not always part of your Executive Summary
). For more on these topics, see
Chapters 2
and
3
.
Your vision for the future.
Although I devote most of a chapter to this topic (see
Chapter 3
), the aim is to distil this vision into a sentence or two, either as part of your Executive Summary, or part of your pitch for funding.
A PESTEL analysis (optional) and SWOT analysis (expected in most business plan formats).
I cover these topics in
Chapter 5
.
A competitor analysis and marketing plan.
Chapter 3
talks about competitor analysis and competitive strategy, and
Chapter 6
provides a complete summary of how to construct a marketing plan. I talk about the marketing cycle later in this chapter (see ‘
Responding quickly to the market
’).
A people plan. A business isn’t anything without the people who run it, and your skills, entrepreneurialism, and natural abilities are as much a part of the mix as anything else, as are the skills of the people you choose to involve in your business. This part of your plan needs to outline the people element of your business: Who does what, and why they’re the best choice for the job.
Even if you don’t have any employees yet, you can still include details about any consultants, advisers, mentors, or professionals who you plan to involve in your business. These details help to establish credibility for anybody else reading your plan, and prompt you to think further outside the business than just yourself.
Chapter 2 touches on this topic, while Chapter 4 explores the people side of your plan in more depth. (People planning doesn’t necessarily take a huge amount of time at first, but is something that can be a huge time-waster if you don’t get it right.)
A risk-management plan, if appropriate.
As I explain in
Chapter 14
, the more risk in your business, the more important it is to include a risk-management strategy in your plan.
A summary of operations, if appropriate.
I talk about how to write this summary in
Chapter 15
.
Financial reports. For most new businesses, the financial part of your plan may be as simple as a Profit & Loss Projection for the next 12 months. Established businesses may include projections for 24 or 36 months ahead, as well as historical Profit & Loss reports and Balance Sheets for the previous year or years. Financials often also include break-even analysis, Cashflow Projections and budgets.
For more on creating a Profit & Loss Projection, see Chapters 8 through to 11, for break-even analysis see Chapter 12, and for cashflows and budgets, see Chapter 13.
For new or growing businesses that require a certain sales volume before the model becomes profitable, I suggest you extend your projections for at least a couple of years to demonstrate the long-term viability of your concept.
The ask.
I talk more about asking for money in
Chapter 15
.
If you feel daunted by the preceding list, I suggest you start with the basics: Your point of difference, a SWOT analysis, a marketing plan and a Profit & Loss Projection for the next 12 months. With these elements in place, you can return to complete more details in your plan as soon as you have the stamina.
LOOKING INTO THE FUTURE
In this book, I emphasize the importance of including financial projections in your business plan, rather than reporting on actual financial results. I do this for two reasons.
First, many people reading this book are going to be working on their first business plan and won’t have any results for previous months or years as yet.
Second, even if you’ve been trading for some time, you will always reap benefits from making financial projections and experimenting with different scenarios, such as what could happen if you increased profit margins by 10 per cent or decreased expenses by a similar amount.
This said, if you’ve been trading for a while, you do need to include historical figures (Profit & Loss and Balance Sheet) for the last year or two years in your business plan. These results provide a great reality check for you (or anybody else) when comparing future projections against past performance.
Planning for Continuous Change
For most businesses, the two elements within a business plan that require the most ongoing attention are your marketing plan and your financial plan. Each of these activities has its own planning cycle.
Responding quickly to the market
When you’re in business, the process of marketing never stops. By marketing, I don’t just mean advertising or sales strategies; rather, I mean everything from understanding competitors to analyzing customers, and from reviewing pricing to ensuring excellent customer service.
The pace of change in most business environments is so fast that you can’t afford to let a whole year go by without reviewing your marketing plan, sales targets, pricing strategies, marketing strategies, competitors, and more.
Figure 1-1 shows a possible marketing cycle (I explain each step of this cycle in detail in Chapter 6). Can you see how the fifth step of the marketing cycle (review pricing, rates and sales projections) is exactly the same as the second step of the financial cycle (shown in Figure 1-2 in the next section of this chapter)? That’s because setting sales targets is always the point at which the sales and marketing team and the bean counters connect.
FIGURE 1-1: The marketing planning cycle.
Reviewing your financial model
Figure 1-2 shows a typical financial planning cycle, with the review of your business model at the beginning and end of each process.
Here’s how you can work through the financial planning cycle:
Review business model and strategy.
I talk about business models and strategy in Chapters 2 to 6, including marketing plans in Chapter 6.
Review your prices, rates and sales projections.
Setting prices and sales targets (a topic I cover in Chapter 8) is both a financial and a marketing activity, and sales projections usually form part of your marketing plan.
You may wonder how you can create a marketing plan without confirming pricing, and how you can confirm your business model without completing sales projections. After all, if you haven’t set your prices, you can’t do any meaningful financial forecasts. Without financial forecasts, you don’t know if your business model has any chance at all. And without having your essential idea confirmed, what is the point of doing a marketing plan? All very chicken-and-egg in its nature, but essentially you just have to start somewhere.
Confirm the direct costs of providing your service or making your products.
I talk about costing products and services in Chapter 9, and explain how to create a Gross Profit Projection for the next 12 months.
Create a forecast for expenses.
If you’re just getting started, I suggest you create a budget both for business and personal expenses (see Chapters 7 and 10). For simple cash-based businesses, this expense forecast becomes your budget for the months ahead. For established businesses, see Chapter 10 for managing expenses.
Create a Profit & Loss Projection for the next 12 months.
In Chapter 11, I explain how to create a Profit & Loss Projection, and how to forecast your net profit over the next 12 months.
Work out your break-even point.
You can calculate your break-even point in several different ways (and Chapter 12 explains just how). Understanding this information is a powerful weapon in your business artillery.
If necessary, generate a Cashflow Projection.
Even if you’re making a profit, you may find yourself short of cash. In Chapter 13, I explain how to generate a Cashflow Projection so that you can anticipate any cash shortfalls. Note that not every business needs to go to the trouble of generating Cashflow Projections, but Chapter 13 explains when this report is advisable.
Set sales targets and expense budgets for the 12 months ahead.
Committing to budgets is one of the most important elements of the financial planning cycle. In Chapter 10, I explain the subtle difference between projections and budgets.
Continually review actual results against budgets, and tweak your pricing, strategy, and budgets accordingly.
With finances, you can’t ‘set and forget’. Instead, the trick is to monitor your actual performance and compare this against your budgets every single month. For example, if sales fall short of targets, you need to sell more, change pricing or pull back on expenses. If sales go over targets, you probably want to look at your Cashflow Projection and check that you can finance this growth.
FIGURE 1-2: The financial planning cycle.
Can you see how it really doesn’t work to create a 12-month Profit & Loss Projection as part of your business plan and then congratulate yourself on the process being finished for the year? I’ve yet to see a business where actual results are exactly the same as budgets. You will always get a difference, and you need to manage these differences on an ongoing basis.
Getting Beyond First Base
We humans often like to stick with what we know and what feels right — and business plans are no exception. In this section, I delve into the psychology of business plans, focusing on how human bias and subconscious behaviors can serve to undermine the objectivity so essential to good planning.
Guarding against your inner optimism
People often ascribe the high failure rates of venture capital to perceived levels of risk, and proof that the system is working as it should. However, I’d argue that these failure rates have more to do with the nature of what it means to be human. Specifically, we humans are an overly optimistic bunch, with subconscious instincts that often override rational decision-making.
The majority of humans are endowed with something known as optimism bias — the tendency to overestimate the likelihood of positive events, and underestimate the likelihood of negative events. And, as someone who has spent their life around entrepreneurs, I reckon the average business owner has optimism bias on steroids.
Of course, optimism is one thing, but wearing blinkers is another. How can you temper such optimism, along with other unconscious biases, to ensure your business plan is as good as can be? In this section, I consider how some innate and completely normal human behaviors might affect your ability to create a smart business plan.
Confirmation bias
Humans love confirmation bias — that inexorable pull that makes us look for evidence to validate what we already think, and disregard information supporting other points of view. (Next time you’re making a decision or expressing an opinion about something, see if you can spot your own confirmation bias. Perhaps you like to you seek out stories that confirm your political viewpoint? Or you cling to one-off customer anecdotes that validate your new idea, and dismiss negative customer reviews that suggest otherwise?)
Confirmation bias is, of course, counter-productive to creating a business plan, particularly if you’re seeking fresh ideas or wanting to assess the potential of a new business model.
When creating your business plan, be wary of placing too much emphasis on information that reinforces your existing beliefs. Try to involve outside advisers during the information-gathering stage, perhaps even seeking out those who you know are likely to challenge or disagree with you. (Chapter 5 provides some good frameworks for this information-gathering process.)
The planning fallacy
As I write this paragraph, I’m feeling very sheepish! Despite this being Chapter 1, I’m actually at the end of updating this new edition of Creating a Business Plan For Dummies. I’m already 10 weeks past my deadline, and my publisher has given up asking me for a completion date.
I could, of course, email her and inform her that I am but human, and that like 95 per cent of the population, I’ve fallen foul of the planning fallacy. A concept developed by Daniel Kahneman and Amos Tversky in 1979, the planning fallacy is about the predisposition of humans to be overly optimistic about timelines or planning outcomes, even in the face of more general knowledge or past experience that would suggest otherwise.
The planning fallacy is most likely to arise when we trust our intuition and disregard past experience. Unfortunately, because planning is inherently about the future, we’re inclined to look forward, rather than backwards, and we happily forget how often projects run over, things cost more than budgeted, or sales orders fall through. We’re also likely to forget how our competitors behave — for example, getting excited about new opportunities while simultaneously disregarding the likelihood of our competitors doing exactly the same thing.
So, how do you avoid falling foul of the planning fallacy? Similar to avoiding confirmation bias, try to involve multiple perspectives and get input from experts or external advisors of the challenges or time required. In addition, you may be able to refer to past projects or industry benchmarks to guide your estimates, rather than relying solely on gut feeling. (For more about benchmarks, see Chapter 10, and for more about budgets, see Chapter 13.)
The Dunning-Kruger effect
Humans also tend to be optimistic in their struggle to make sense of the future and its mix of certainty and uncertainty. Or, put another way, because we don’t yet know what we do not know, we tend to overestimate ourselves. This overestimation of competence, along with the inability to critically analyze our own abilities, is known as the Dunning–Kruger effect.
I’ve observed the Dunning–Kruger effect in action more times than I care to mention and, indeed, can see how often I’ve overestimated my own abilities. I’ve been influenced by life experiences that have been ultimately quite misleading, and sometimes my intuition and business decisions have been quite unhinged from reality.
If you’re new to business, or to a particular industry, beware of the risk that you could overrate yourself and underrate others who are more experienced. While self-confidence is essential, knowledge and rational decision-making processes are key to tethering your dreams. Instead, try to surround yourself with people who know a lot about the subject, particularly if the financial or legal stakes are high. Also, if you can, try to expand your knowledge by any means you can, be this through online courses, specialist training or business coaching.
Accepting uncertainty and complexity
Unconscious biases that affect our business judgment don’t only relate to over-optimism. Consider some other patterns of behavior, and how these might affect the way you approach your business plan:
Action-oriented bias: An action-oriented bias is the tendency for people to move to action-oriented discussions too soon during the strategic planning process. I find this bias often comes from time pressures, or simply a lack of systematic thinking skills.
If you’re making a significant decision, one trick to avoid action-orientated bias is to spend almost as much time justifying what you’re not going to do as you spend justifying what you are going to do. For example, if you were to decide to purchase a factory, you might spend just as much time exploring what it would mean to lease instead, or even to outsource production.
Anchor bias and the primacy effect: An anchor bias is about depending too much on initial information (the anchor) to make subsequent judgments, and not taking time to evaluate other strategic alternatives objectively. Similar is the primacy effect, which is the tendency to consider the first information you encounter more than later information.
One of the main ways to guard against anchor bias and the primacy effect is to slow down. Doing business plans can be hard work, and you may be tempted to hurry through certain stages. Pause regularly and ask yourself whether you’ve genuinely taken enough time to consider all your options. Sometimes, just an hour or two of objectively considering all your alternatives can prevent you spending months or even years pursuing a subpar business model.
Framing effect: The framing effect is about we respond to the way information is framed. For example, if a business proposal is framed as cutting costs to prevent losses, this may seem more attractive than investing in growth despite risks.
To avoid the framing effect, always be aware about how strategic alternatives are framed. Try to reframe positive suggestions in a negative light, and vice versa, to see how that makes you feel. Alternatively, seek out external expert advice to evaluate alternatives, and ask for fresh opinions.
Hoodwinking Yourself into Actually Creating a Plan
I’d love to know how many people reading this chapter will actually go on to complete a business plan. Far be it from me to express doubt about you, dear reader, or indeed about my own abilities to write a coherent tome on this topic, but my experience is that for every ten people who intend to create a proper business plan, only one or two do.
I reckon that this reluctance is less about businesspeople lacking tenacity to see the process through, and more about the predisposition of humans to avoid thinking too far into the future, and to favor present not-so-big gains over long-term greater gains. Termed present bias by psychologists, an estimated 97 per cent of people experience this bias in day-to-day life.
Present bias explains why so many people intend to create a business plan but why so few people actually do — or, indeed, why so many people think, I’ll start working on my business plan tonight, and end up binge-watching a Nordic noir series on Netflix instead.
Present bias not only hinders the desire to spend time planning, but can also get in the way of you making good business decisions. Prioritizing immediate financial gains over longer-term returns, drawing money out of your business for personal spending rather than reinvesting profits, and setting prices low to attract immediate business are all examples of present bias in action.
If you think you too may find it hard to complete the whole business plan shindig, here are a few life hacks to help:
Don’t rely on your own willpower.
Instead, make planning into a habit, allocating a specific half-day per month, or a specific hour per week. Block out this time on your calendar.
Subscribe to a business-planning app.
I talk about apps earlier in this chapter (refer to ‘
Subscribing to a business planning app
’). Most apps make the planning process a little easier to navigate and more fun. And for some, that monthly debit for the app subscription may prove motivation in itself.
Break the planning process into small steps. Set small, actionable goals for each part of the business plan process — for example, completing a marketing plan one week, a pricing strategy review the next, and setting up financial templates the next.
Trick yourself into making the plan feel urgent.
Perhaps set a deadline to meet with an investor, nominate your business for an award, or schedule planning meetings with staff for which you need to prepare materials.
Find an accountability buddy.
Like finding a gym partner, find a friend or colleague who also needs to create a plan for their business, and agree to keep each other on track.
Spend time actively visualizing the future for your business (and you).
By making the future seem more real, you can sometimes motivate yourself into acting now.
You may be wondering why I spend so much time in the very first chapter of this book talking about how the psychology of the average human is not ideal for business planning. After all, might it not be better if I was a bit more encouraging? My hope is if you do end up finding the process a little daunting, you can take comfort from knowing that the problem isn’t personal. And, with a little understanding about the psychology of the process, you can embark on your business plan with a greater chance of success.
Good luck, dear reader!
WHEN A SIDE HUSTLE SHOULD REMAIN JUST THAT
When is a successful side hustle an indicator of the perfect business idea, and when should a side hustle remain just that?
I suggest you ask yourself two questions. Firstly, will you have enough demand for your product or service if you expand what you’re doing five- or ten-fold? For example, perhaps you have a side hustle selling products at local markets. If you seek to expand your business, you probably need to look for new channels to sell your product, and the cost of reaching additional customers (for example, renting a retail space or selling products through a distributor) may skew your business model and make it less profitable.
Secondly, do you properly cost the value of your own labor? Perhaps, for example, you make homemade jams and pickles and you find time to do the manufacture around your day-to-day life, perhaps making batches of produce in the evenings or on weekends. If you turn this side hustle into your main hustle and you need to value your time (or indeed, the time of others) at a decent hourly rate, can your pricing model sustain this adjustment?
