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Business Plans KitFORDUMmIES‰2NDEDITIONby Steven Peterson, PhD,Peter E. Jaret,and Barbara Findlay Schenck

Business Plans Kit For Dummies, 2nd EditionPublished byWiley Publishing, Inc.111 River St.Hoboken, NJ 07030-5774www.wiley.comCopyright 2005 by Wiley Publishing, Inc., Indianapolis, IndianaPublished by Wiley Publishing, Inc., Indianapolis, IndianaPublished simultaneously in CanadaNo part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form orby any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior writtenpermission of the Publisher, or authorization through payment of the appropriate per-copy fee to theCopyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600.Requests to the Publisher for permission should be addressed to the Legal Department, Wiley Publishing,Inc., 10475 Crosspoint Blvd., Indianapolis, IN 46256, 317-572-3447, fax 317-572-4355, or online at http://www.wiley.com/go/permissions.Trademarks: Wiley, the Wiley Publishing logo, For Dummies, the Dummies Man logo, A Reference for theRest of Us!, The Dummies Way, Dummies Daily, The Fun and Easy Way, Dummies.com and related tradedress are trademarks or registered trademarks of John Wiley & Sons, Inc. and/or its affiliates in the UnitedStates and other countries, and may not be used without written permission. All other trademarks are theproperty of their respective owners. Wiley Publishing, Inc., is not associated with any product or vendormentioned in this book.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 WITHOUTLIMITATION 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 THEUNDERSTANDING THAT THE PUBLISHER IS NOT ENGAGED IN RENDERING LEGAL, ACCOUNTING, OROTHER PROFESSIONAL SERVICES. IF PROFESSIONAL ASSISTANCE IS REQUIRED, THE SERVICES OF ACOMPETENT PROFESSIONAL PERSON SHOULD BE SOUGHT. NEITHER THE PUBLISHER NOR THEAUTHOR SHALL BE LIABLE FOR DAMAGES ARISING HEREFROM. THE FACT THAT AN ORGANIZATIONOR 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 ORGANIZATION OR WEBSITE MAY PROVIDE OR RECOMMENDATIONS IT MAY MAKE.FURTHER, READERS SHOULD BE AWARE THAT INTERNET WEBSITES LISTED IN THIS WORK MAY HAVECHANGED OR DISAPPEARED BETWEEN WHEN THIS WORK WAS WRITTEN AND WHEN IT IS READ.For general information on our other products and services, please contact our Customer CareDepartment within the U.S. at 800-762-2974, outside the U.S. at 317-572-3993, or fax 317-572-4002.For technical support, please visit www.wiley.com/techsupport.Wiley also publishes its books in a variety of electronic formats. Some content that appears in print maynot be available in electronic books.Library of Congress Control Number: 2005927614ISBN-13: 978-07645-9794-7ISBN-10: 07645-9794-9Manufactured in the United States of America1098762B/RV/QZ/QV/IN54321

About the AuthorsSteven Peterson and Peter Jaret wrote the first edition of Business Plans KitFor Dummies, which was released in 2001.Steven Peterson is founder and CEO of Strategic Play, a management trainingcompany specializing in software tools designed to enhance business strategy, business planning, and general management skills. He’s the creator of theProtean Strategist, a business simulation that reproduces a dynamic businessenvironment where participant teams run companies and compete againsteach other in a fast-changing marketplace. He holds advanced degrees inmathematics and physics and received his doctorate from Cornell University.For more information, visit www.StrategicPlay.com.Peter Jaret has written for Newsweek, National Geographic, Health, Men’sJournal, Reader’s Digest, and dozens of other magazines. He’s the author of InSelf-Defense: The Human Immune System and Active Living Every Day. He hasdeveloped brochures, white papers, and annual reports for the ElectricPower Research Institute, Lucas Arts, The California Endowment, WebMD,BabyCenter, Stanford University, Collabria, Home Planet Technologies, andothers. In 1992, he received the American Medical Association’s first-placeaward for medical reporting. In 1997, he won the James Beard Award for foodand nutrition writing. He holds degrees from Northwestern University andthe University of Virginia.Barbara Findlay Schenck built upon the great work of Peterson and Jaret asshe wrote this second edition of Business Plans Kit For Dummies, which isupdated throughout to include current business planning advice and all-newemphasis on the topics of greatest concern to today’s entrepreneurs, businessowners, CEOs, and investors. She’s a successful business owner, marketingconsultant, author of Small Business Marketing For Dummies, and co-writer ofthe Edgar Award-nominated memoir Portraits of Guilt. She has worked internationally in community development, served as a college admissions directorand writing instructor in Hawaii, founded an advertising agency in Oregon,and has helped organizations large and small to plan and manage successfulmarketing and management programs. You can contact her at BFSchenck@aol.com.

Publisher’s AcknowledgmentsWe’re proud of this book; please send us your comments through our Dummies online registrationform located at www.dummies.com/register/.Some of the people who helped bring this book to market include the following:Acquisitions, Editorial, and MediaDevelopmentSenior Project Editor: Tim GallanAcquisitions Editor: Stacy KennedyCopy Editors: Michelle Dzurny, Josh DialsTechnical Editor: Ann BastianelliMedia Development Specialist: Angela DennyEditorial Manager: Christine Meloy BeckMedia Development Manager:Laura VanWinkleComposition ServicesProject Coordinator: Adrienne MartinezLayout and Graphics: Carl Byers, Andrea Dahl,Joyce Haughey, Stephanie D. Jumper,Clint Lahnen, Barry Offringa,Melanee Prendergast, Heather Ryan,Julie TrippettiProofreaders: TECHBOOKS ProductionServices, Leeann Harney, Jessica Kramer,Joe Niesen, Carl William PierceIndexer: TECHBOOKS Production ServicesEditorial Assistants: Nadine Bell, David Lutton,Hanna ScottCartoons: Rich Tennant(www.the5thwave.com)Publishing and Editorial for Consumer DummiesDiane Graves Steele, Vice President and Publisher, Consumer DummiesJoyce Pepple, Acquisitions Director, Consumer DummiesKristin A. Cocks, Product Development Director, Consumer DummiesMichael Spring, Vice President and Publisher, TravelKelly Regan, Editorial Director, TravelPublishing for Technology DummiesAndy Cummings, Vice President and Publisher, Dummies Technology/General UserComposition ServicesGerry Fahey, Vice President of Production ServicesDebbie Stailey, Director of Composition Services

Contents at a GlanceIntroduction .1Part I: Laying the Foundation for Your Plan .5Chapter 1: Starting Your Planning Engine .7Chapter 2: Generating a Great Business Idea .25Chapter 3: Defining Your Business Purpose .43Part II: Developing Your Plan’s Components .67Chapter 4: Understanding Your Business Environment .69Chapter 5: Charting Your Strategic Direction .95Chapter 6: Describing Your Business and Its Capabilities .115Chapter 7: Crafting Your Marketing Plan .133Chapter 8: Deciphering and Presenting Your Financial Situation .151Part III: Tailoring a Business Planto Fit Your Needs .175Chapter 9: Planning for a One-Person Business .177Chapter 10: Planning for a Small Business .193Chapter 11: Planning for an Established Business .203Chapter 12: Planning for a Nonprofit Organization .219Chapter 13: Planning for an E-Business .233Part IV: Making the Most of Your Plan .249Chapter 14: Putting Your Plan Together .251Chapter 15: Putting Your Plan to Work .271Part V: The Part of Tens .289Chapter 16: Ten Signs That Your Plan Might Need an Overhaul .291Chapter 17: Ten Ways to Evaluate a New Business Idea .297Chapter 18: Ten Ways to Fund Your Business Plan .301Chapter 19: Ten Things to Know about Venture Capital .305Chapter 20: Ten Ways to Use Your Business Plan .311Appendix: About the CD .315Index .321

Table of ContentsIntroduction .1About This Book .1Why This Book Is for You .1Conventions Used in This Book .2How This Book Is Organized .2Part I: Laying the Foundation for Your Plan .2Part II: Developing Your Plan’s Components .3Part III: Tailoring a Business Plan to Fit Your Needs .3Part IV: Making the Most of Your Plan .3Part V: The Part of Tens .3Icons Used in This Book .4Where to Go from Here .4Part I: Laying the Foundation for Your Plan .5Chapter 1: Starting Your Planning Engine . . . . . . . . . . . . . . . . . . . . . . . .7Committing to the Business-Planning Process .7Defining your business-planning situation .8Buying into the value of business planning .11Identifying Target Audiences and Key Messages .12Your audience .12Your message .13The Anatomy of a Business Plan .15Business-plan contents from beginning to end .15Frequently asked business-plan questions .17Establishing Your Plan’s Time Frame .18Committing to a schedule .18Defining milestones .19Preparing for the Real World .19Locating informative resources .20Seeking expert advice .21Sharing the load .22Staying on track .23Forms on the CD-ROM .24Chapter 2: Generating a Great Business Idea . . . . . . . . . . . . . . . . . . . .25Brainstorming Business Ideas .25Using the do-it-yourself idea blender .26Inspiring team creativity (with or without donuts or bagels) .29Finding business ideas within your work environment .32

xBusiness Plans Kit For Dummies, 2nd EditionIdentifying Business Opportunities .33Putting your business ideas through a first test .33Narrowing your choices .34Doing Your First Reality Check .37Getting a second opinion .37Conducting a self-appraisal .38Forms on the CD-ROM .41Chapter 3: Defining Your Business Purpose . . . . . . . . . . . . . . . . . . . . .43Knowing What Business You’re Actually In .44How would I describe my business? .44Where’s the money? .46Giving Your Company Its Mission .47Asking basic questions .47Framing your mission .48Crafting your mission .50Putting your mission to work .51Setting Goals and Objectives .53Approach #1: Tying goals to your mission .55Approach #2: Using goal-setting ACES .56Approach #3: Covering all the bases .56Making final choices .58Exploring Values and Vision .59Uncovering values you already hold .61Writing a values statement .61Writing a vision statement .64Putting Your Principles into Practice .65Forms on the CD-ROM .66Part II: Developing Your Plan’s Components .67Chapter 4: Understanding Your Business Environment . . . . . . . . . . . .69Zooming In on Your Industry .70Seeing your industry’s big picture .70Paying the price of admission .71Defining Your Customers .73Developing your customer profile .74Conducting customer research .76Sharpening your customer focus .80Describing your ideal customer .82Segmenting your customers into buyer groups .84Doing business with business customers .85Sizing Up Your Competition .86Using cloak-and-dagger methods .88Identifying your stealth competitors .89Staying a step ahead .91Forms on the CD-ROM .93