Creating a Business Plan For Dummies

383 Pages·2006·21.92 MB·English

by  Curtis V.

Creating a
Business
Plan
by Veechi Curtis
Creating a Business Plan For Dummies®
Published by
Wiley Publishing Australia Pty Ltd
42 McDougall Street
Milton, Qld 4064
www.dummies.com
Copyright © 2014 Wiley Publishing Australia Pty Ltd
The moral rights of the author have been asserted.
National Library of Australia
Cataloguing-in-Publication data:
Autho: Curtis, Veechi
Title: Creating a Business Plan For Dummies / Veechi Curtis
ISBN: 9781118641224 (pbk.)
9781118641255 (ebook)
Notes: Includes index
Subjects: Business planning
Dewey Number: 658.4012
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Contents at a Glance
Introduction ................................................................ 1
Part I: Getting Started ................................................. 7
Chapter 1: Letting Your Plan Take Flight ........................................................................9
Chapter 2: Figuring Out What’s So Special about You (and Your Business) ............27
Chapter 3: Sizing up the Competition ...........................................................................39
Part II: Doing the Groundwork .................................... 57
Chapter 4: Budgeting for Start-Up Expenses ................................................................59
Chapter 5: Figuring out Prices and Predicting Sales ...................................................77
Chapter 6: Calculating Costs and Gross Profit .............................................................97
Chapter 7: Planning for Expenses ................................................................................119
Part III: Checking Your Idea Makes Financial Sense ... 145
Chapter 8: Assembling Your Profit & Loss Projection ...............................................147
Chapter 9: Calculating Your Break-Even Point ...........................................................169
Chapter 10: Creating Cashflows and Building Budgets .............................................179
Part IV: Transforming Your Idea into Reality .............. 199
Chapter 11: Separating Yourself from Your Business ................................................201
Chapter 12: Developing a Strong Marketing Plan ......................................................219
Chapter 13: Staying One Step Ahead ...........................................................................243
Chapter 14: Managing Risk ...........................................................................................259
Chapter 15: Pulling Together Your Written Plan ........................................................275
Part V: The Part of Tens ............................................ 295
Chapter 16: Ten Tips for Using Excel in Your Business Plan ....................................297
Chapter 17: Ten Ideas for a Well-Presented Plan .......................................................309
Chapter 18: Ten Questions to Ask before You’re Done .............................................319
Appendix: Sample Business Plan .................................................................................327
Index ...................................................................... 349
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Creating a Business Plan For Dummies
Table of Contents
Introduction ................................................................. 1
About This Book ..............................................................................................2
Foolish Assumptions .......................................................................................2
Icons Used in This Book .................................................................................3
Beyond the Book .............................................................................................4
Where to Go from Here ...................................................................................4
Part I: Getting Started .................................................. 7
Chapter 1: Letting Your Plan Take Flight . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Getting Your Feet Wet and Having Fun .......................................................10
Deciding who this plan is for ..............................................................10
Choosing your dance partners...........................................................11
Looking at different online planning tools ........................................12
Scoping the Nature of Your Plan ..................................................................14
Structuring your plan ..........................................................................14
Setting aside enough time ...................................................................15
Deciding how far into the future you want to go .............................18
Understanding Why Your Plan Needs Constant Love and Attention ......18
Going for rhythm with financial planning .........................................19
Keeping everything on track with your marketing cycle................21
Conjuring Up a One-Page Business Plan .....................................................22
Scoring Your Business out of 10 ..................................................................25
Chapter 2: Figuring Out What’s So Special about You (and Your
Business) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Understanding Strategic Advantage ............................................................28
Looking at examples of strategic advantage ....................................28
Focusing on real-life examples ...........................................................30
Understanding How Risk Relates to Gain ...................................................31
Justifying Why You Can Succeed .................................................................32
Uncovering your inner mojo ..............................................................32
Asking three key questions for each of your advantages ...............33
Rating how you score ..........................................................................34
Developing Your Strategic Advantage Statement ......................................35
Drafting your statement ......................................................................35
Growing your advantages over time .................................................36
Making sure a demand really exists ..................................................37
Looking Around for More Ideas ...................................................................37
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Creating a Business Plan For Dummies
Chapter 3: Sizing up the Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Why Analysing Competitors Is a Big Deal ..................................................40
Figuring Out Who Your Competitors Really Are ........................................41
Organising competitors into groups .................................................41
Homing in on head-to-head competitors ..........................................42
Thinking about future competitors ...................................................43
Engaging in Cloak-and-Dagger Tactics ........................................................45
Doing a competitor profile ..................................................................45
Mirror, mirror on the wall . . . .............................................................46
Choosing your competitive strategy .................................................48
Matching your competitive strategy to your
strategic advantage ..........................................................................50
Summarising Your Competitive Strategy ....................................................50
Joining the dots ....................................................................................50
Measuring up the risks ........................................................................52
Preparing an Elevator Speech ......................................................................52
Saying what you do in 30 seconds or less ........................................53
What to avoid with your elevator speech ........................................53
Practice makes perfect ........................................................................54
Part II: Doing the Groundwork .................................... 57
Chapter 4: Budgeting for Start-Up Expenses . . . . . . . . . . . . . . . . . . . . . . 59
Creating a Start-Up Budget ...........................................................................60
Purchasing materials and inventory .................................................60
Listing your start-up expenses ...........................................................61
Including expenses paid for out of personal funds .........................63
Adding enough to live on ....................................................................63
Separating Start-Up Expenses from Operating Expenses .........................64
Dealing with initial start-up expenses ...............................................65
Putting theory into practice ...............................................................65
Assessing How Much You Really Need .......................................................68
Calculating Likely Loan Repayments ..........................................................69
Estimating loan repayment schedules ..............................................70
Calculating interest ..............................................................................72
Thinking about whether you can really service this loan ..............72
Understanding Different Finance Options ..................................................73
Getting into bed with the bank...........................................................73
Offering up collateral ...........................................................................74
Seeking equity partners ......................................................................75
Borrowing from family ........................................................................76
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Table of Contents
Chapter 5: Figuring out Prices and Predicting Sales . . . . . . . . . . . . . . 77
Choosing a Pricing Strategy .........................................................................78
Setting prices based on costs.............................................................78
Setting prices based on competitors ................................................78
Setting prices based on perceived value ..........................................79
Building a Hybrid-Pricing Plan .....................................................................80
Offering a premium product or service ............................................80
Cutting back the frills ..........................................................................81
Getting creative with packages ..........................................................82
Charging different prices for the same thing ....................................83
Forming Your Final Plan of Attack ...............................................................84
Monitoring and Changing Your Price ..........................................................85
Building Your Sales Forecast ........................................................................86
Calculating hours in a working week .................................................86
Increasing sales with extra labour .....................................................88
Predicting sales for a new business ..................................................89
Predicting sales for an established business ...................................91
Creating Your Month-by-Month Forecast ...................................................92
Chapter 6: Calculating Costs and Gross Profit . . . . . . . . . . . . . . . . . . . 97
Calculating the Cost of Each Sale ................................................................97
Identifying your variable costs ..........................................................98
Costing your service............................................................................99
Costing items that you buy and sell ................................................100
Adding import costs ..........................................................................101
Creating product costings for manufacturers ................................102
Understanding Gross Profit ........................................................................104
Calculating gross profit .....................................................................104
Figuring gross profit margins ...........................................................105
Looking at margins over time ...........................................................106
Analysing Margins for Your Own Business ...............................................106
Calculating margins when you charge by the hour .......................107
Calculating margins when you sell products .................................108
Calculating margins if you do big projects .....................................109
Building Your Gross Profit Projection .......................................................109
If you have a service business with no employees and
no variable costs ............................................................................110
If you have a service business and you use employee or
subcontract labour ........................................................................110
If you buy and sell a small number of products.............................112
If you sell many different products or your variable costs
are a percentage of sales ...............................................................114
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Creating a Business Plan For Dummies
Chapter 7: Planning for Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Concentrating on Expenses ........................................................................120
Separating start-up expenses and variable costs from
ongoing expenses ...........................................................................120
Thinking of what expenses to include.............................................121
Building a 12-month projection ........................................................124
Finetuning Your Worksheet ........................................................................127
Recognising relationships .................................................................127
Allowing for irregular payments ......................................................128
Playing with the 10 per cent rule .....................................................128
Staying Real with Benchmarks ...................................................................128
Locating benchmarks for your business ........................................129
Using benchmarks as part of your plan ..........................................130
Thinking about Taxes and Loan Repayments ..........................................133
Allowing for personal and company tax .........................................134
Understanding where other taxes fit in ..........................................134
Dealing with loan repayments and interest ....................................135
Factoring Personal Expenses into the Equation ......................................135
Identifying income .............................................................................136
Figuring how much you need to live ...............................................137
Setting goals and budgets .................................................................142
Recognising why personal and business budgets connect ..........143
Seeing where you can scrimp and save ..........................................144
Part III: Checking Your Idea Makes Financial Sense .. 145
Chapter 8: Assembling Your Profit & Loss Projection . . . . . . . . . . . . 147
Understanding More About Spreadsheets ...............................................148
Naming worksheets within a single workbook ..............................148
Linking one worksheet to another ...................................................150
Using names to identify important cells .........................................151
Building Your Profit & Loss Projection .....................................................153
Step one: Insert your projected sales forecasts .............................153
Step two: Bring across variable costs .............................................154
Step three: Add your expenses budget ...........................................155
Step four: Look at the bottom line ...................................................158
Step five: Think about tax .................................................................158
Checking you’ve got it right..............................................................159
Analysing Net Profit .....................................................................................160
Calculating net profit margins ..........................................................160
Assessing whether your net profit is reasonable, or not ..............160
Thinking ahead further than 12 months .........................................161
Looking at your rate of return ..........................................................162
Measuring Risk and Your Comfort Factor ................................................163
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Table of Contents
Chapter 9: Calculating Your Break-Even Point . . . . . . . . . . . . . . . . . . 169
Identifying Your Tipping Point ...................................................................169
Calculating business break-even ......................................................170
Factoring personal expenses into the equation.............................171
Calculating break-even for your business ......................................172
Changing Your Break-Even Point ...............................................................174
Looking at Things from a Cash Perspective .............................................176
Chapter 10: Creating Cashflows and Building Budgets . . . . . . . . . . . 179
Understanding Why Cash Is Different from Profit ...................................180
Five reasons your projections may look rosy, but
cash could be tight .........................................................................180
Five reasons your projections may look grim, but
cash could be flowing ....................................................................181
Summarising what’s Different about a Cashflow Report ........................182
Looking at Cash Coming In .........................................................................184
Calculating cash collected versus sales made ...............................184
Thinking about loans and other sources of funds .........................185
Thinking about Cash Flowing Out .............................................................186
Allowing for the purchase of new equipment (or other
start-up items) ................................................................................186
Looking at payment for stock versus cost of sales .......................187
Deciding where to show tax payments ...........................................188
Factoring in loan repayments ...........................................................189
Predicting the Bottom Line ........................................................................190
Setting up a worksheet in Excel .......................................................190
Making a pre-emptive strike .............................................................191
Calculating sustainable growth ........................................................192
Building Your First Budget .........................................................................193
Allocating budgets in detail ..............................................................194
Comparing budgets against actuals ................................................195
Creating Balance Sheet Projections ..........................................................196
Part IV: Transforming Your Idea into Reality .............. 199
Chapter 11: Separating Yourself from Your Business . . . . . . . . . . . . 201
Deciding What Path You Want to Take ......................................................202
Doing the thing you love to do .........................................................202
Getting help and delegating what you can .....................................204
Building a business that’s separate from you ................................205
Creating a way of doing business ....................................................206
Wearing Different Hats ................................................................................207