Business Plans For Canadians For Dummies®, 2nd Edition
Table of Contents
About This BookConventions Used in This BookWhat You’re Not to ReadFoolish AssumptionsHow This Book Is OrganizedPart I: Knowing Where You Want to GoPart II: Describing Your MarketplacePart III: Weighing Your Company’s ProspectsPart IV: Looking to the FuturePart V: Putting Your Business Plan into ActionPart VI: The Part of TensIcons Used in This BookWhere to Go from Here
Chapter 1: Preparing to Do a Business PlanIdentifying Your Planning ResourcesHitting the corner bookstoreSurfing the InternetUsing installed or cloud-based business-planning softwareSeeking professional helpFinding friendly adviceAssembling Your Planning TeamSetting the ground rulesDelegating responsibilityPutting Your Plan on PaperExecutive summaryCompany overviewBusiness environmentCompany descriptionCompany strategyFinancial reviewAction planChapter 2: Understanding the Importance of a Business PlanBringing Your Ideas into FocusLooking forwardLooking backLooking aroundTaking the first stepThe Planning behind the PlanPlanning: Art or science?Planning versus tacticsWhy planning mattersSatisfying Your AudienceVenture capital and angelsBankers and other backersChapter 3: Setting Off in the Right DirectionCreating Your Company’s Vision StatementUnderstanding Why Values MatterFacing tough choicesApplying ethics and the lawGetting caught lost and unpreparedUnderstanding the value of having valuesClarifying Your Company ValuesFocusing on existing beliefs and principlesPutting together your values statementFollowing through with your valuesChapter 4: Charting the Proper CourseCreating Your Company’s Mission StatementGetting startedCapturing your business (in 50 words or less)Introducing Goals and ObjectivesWhy bother?Goals versus objectivesEfficiency versus effectivenessMinding Your Own Business: Setting Goals and ObjectivesCreating your business goalsLaying out your objectivesMatching goals and objectives with your missionAvoiding business-planning pitfallsTiming is everything
Chapter 5: Examining the Business EnvironmentUnderstanding Your BusinessAnalyzing Your IndustrySolidifying the structureMeasuring the marketsRemembering the relationshipsFiguring out the financesComing up with supporting dataRecognizing Key Success FactorsAdopting new technologiesGetting a handle on operationsHiring human resourcesMinding your organizationSpicing up your servicesLooking for a great locationMoving on with marketingDealing with distributionGetting along with government regulationPreparing for Opportunities and ThreatsEnjoying the clear sailing aheadWatching for dark clouds on the horizonChapter 6: Slicing and Dicing MarketsSeparating Customers into GroupsIdentifying Market SegmentsWho buysWhat customers buyWhy customers buyFinding Useful Market SegmentsIs the segment the right size?Can you identify the customers?Can you reach the market?Becoming Market-DrivenResearching your marketDefining personality typesChapter 7: Getting Better Acquainted with CustomersKeeping Track of the Big PictureChecking Out Your CustomersDefining your good customersHandling your bad customersScoping out the other guy’s customersDiscovering the Ways Customers BehaveUnderstanding customer needsDetermining customer motivesFiguring Out How Customers Make ChoicesRealizing perceptions are realitySetting the five steps to adoption in motionServing Your Customers BetterTaking a look at the lost customerCatering to the loyalty effectLooking at a Special Case: Business CustomersFilling second-hand demandDecision making as a formal affairKnowing the forces to be reckoned withChapter 8: Checking Out Your CompetitionUnderstanding the Value of CompetitorsIdentifying Your Real CompetitorsConsidering competition based on customer choicePaying attention to product usage and competitionSpotting strategic groupsFocusing on future competitionTracking Your Competitors’ ActionsDetermining competitors’ capabilitiesAssessing competitors’ strategiesPredicting Your Competitors’ MovesFiguring out competitors’ goalsUncovering competitors’ assumptionsCompeting to WinOrganizing facts and figuresChoosing your battles
Chapter 9: Assessing Where You Stand TodayDoing Situation AnalysisIdentifying Strengths and WeaknessesKeeping frames of referenceDefining capabilities and resourcesMonitoring key success factorsAnalyzing Your Situation in 3-DGetting a glance at competitorsCompleting your SWOT analysisChapter 10: Making Money Doing What You Do BestDescribing What You Do BestLooking at the links in a value chainForging your value chainCreating your value propositionPutting Together a Business ModelWhere’s the money?How’s your timing?Making Your Business Model WorkSearching for a competitive advantageFocusing on core competenceSustaining an advantage over timeEarmarking ResourcesChapter 11: Figuring Out the Financial DetailsReading Income StatementsRendering revenueCalculating costsPondering profitsInterpreting Balance SheetsAscertaining assetsCategorizing liabilities and owners’ equityExamining Cash-Flow StatementsMoving money: Cash in and cash outWatching cash levels rise and fallEvaluating Financial RatiosMeeting short-term obligationsRemembering long-term responsibilitiesReading relative profitabilityChapter 12: Forecasting and BudgetingConstructing a Financial ForecastPiecing together your projected income statementEstimating your balance sheetForecasting your cash flowExploring Alternative Financial ForecastsMaking a BudgetLooking inside the budgetCreating your budget
Chapter 13: Managing UncertaintyDefining the Dimensions of ChangeCanadian political trendsEconomic trendsSocio-cultural trendsTechnological trendsAnticipating ChangeTrend forecastingScenario planningHedging your betsPreparing for a Changing FutureChapter 14: Thinking StrategicallyApplying Off-the-Shelf StrategiesLeading with low costsStanding out in a crowdFocusing on focusChanging Your BoundariesDoing it all — or just one thingOutsourcing and off-shoringLeading and FollowingMarket-leader strategiesMarket-follower strategiesTailoring Your Own StrategyChapter 15: Growing Up and Growing BiggerFacing Up to the Product Life CycleStarting outGrowing upMaturing in middle ageRiding out the senior stretchGauging where you are nowFinding Ways to ExpandExisting product and existing marketNew market or new productNew product and new marketManaging Your Product PortfolioUsing strategic business unitsCreating a framework
Chapter 16: Shaping Your OrganizationBringing Your Plan to LifePutting Together an Effective OrganizationChoosing a basic designFocusing on a functional modelDivvying up duties with a divisional formSharing talents with the matrix formatDealing with too many chefs in the kitchenFinding what’s right for youDeveloping Effective ProceduresDetermining which systems you needMeasuring effectivenessChapter 17: Leading the WayEncouraging Leadership RolesDeveloping Business SkillsCreating the Right CultureFollowing Through with Your Vision
Chapter 18: Ten Signs That Your Business Plan Needs RefreshingYour Business Goals Change AbruptlyYou Don’t Meet Your Plan MilestonesNew Technology Makes a SplashImportant Customers Walk AwayThe Competition Heats UpProduct Demand Falls SharplyRevenues Go Down or Costs Go UpCompany Morale SlumpsKey Financial Projections Don’t Pan OutToo Much Growth, Too FastChapter 19: Ten Questions to Ask about Your PlanAre Your Goals and Mission in Sync?Can You Point to Major Opportunities?Have You Prepared for Threats?Do You Know Your Customers?Can You Track Your Competitors?Do You Know Your Strengths and Weaknesses?Does Your Strategy Make Sense?Can You Stand Behind the Numbers?Are You Really Ready for Change?Is Your Plan Concise and Up to Date?Chapter 20: Ten Business-Planning Never-EversFailing to Plan in the First PlaceShrugging Off Vision and ValuesSecond-Guessing the CustomerUnderestimating Your CompetitionIgnoring Your StrengthsMistaking a Budget for a PlanShying Away from Reasonable RiskAllowing One Person to Dominate a PlanBeing Afraid to ChangeForgetting to Motivate and RewardAppendix: A Sample Business PlanCR-Driver, Inc. Business Plan – CONFIDENTIAL!1. CR-Driver Business Plan2. Markets and Competition3. Marketing and Sales4. The Products5. Operations6. Corporate Social Responsibility and Sustainability7. Financial DataCheat Sheet
Business Plans For Canadians For Dummies®, 2nd Edition
Business Plans For Canadians For Dummies®, 2nd Edition
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Library and Archives Canada Cataloguing in Publication Data
Tiffany, Paul
Business plans for Canadians for dummies / Paul
Tiffany, Steven D. Peterson, Nada Wagner. -- 2nd ed.
Includes index.
Issued also in electronic format.
ISBN 978-1-118-34912-0
1. Business planning—Canada. I. Peterson, Steven
(Steven D.) II. Wagner, Nada III. Title.
HD30.28.T576 2012 658.4’012 C2012-904313-3
ISBN: 978-1-118-38746-7 (ebk); ISBN: 978-1-118-38747-4 (ebk); ISBN: 978-1-118-38748-1 (ebk)
Printed in the United States
1 2 3 4 5 RRD 16 15 14 13 12
About the Authors
Paul Tiffany, Ph.D.: Paul Tiffany is a Senior Lecturer at the Haas School of Business at the University of California, Berkeley, and an Adjunct Professor of Management at The Wharton School of the University of California. He teaches courses in strategic management, global strategy, and business and its environment to students in the graduate program as well as to participants in executive education programs. Dr. Tiffany is also a Visiting Professor at Sasin, the graduate school of business administration at Chulalongkorn University in Bangkok, Thailand, and CEIBS, the graduate school of business in Beijing, China. He received an MBA from Harvard University and a Ph.D. from the University of California, Berkeley. In addition, he has provided management training programs to firms throughout the United States and the world. He can be reached at tiffany@haas.berkeley.edu.
Steven D. Peterson, Ph.D.: Steven Peterson is founder and CEO of Strategic Play, a management training company specializing in hands-on software tools designed to enhance business strategy, business planning, and general management skills. He is the creator and developer of the Protean Strategist, a business simulation that reproduces a dynamic business environment where participant teams run companies and compete against each other in a fast-changing marketplace. Each team is responsible for developing a business plan along with the strategies and programs to put it to work. For more information, check out the website at www.StrategicPlay.com.
Steven has worked with both large and small companies around the world on strategy and business planning, strategic marketing, new product development, and product management. He uses the Protean Strategist simulation to help managers improve their skills in teamwork and collaboration across functional areas and even across cultures. Prior to founding Strategic Play, Steven served for many years as a consultant to companies in the United States and abroad. He holds advanced degrees in mathematics and physics and received his doctorate from Cornell University.
Nada Wagner, MBA: Nada Wagner is a consultant, an entrepreneur, and a professor at The Business School at Humber Institute of Technology and Advanced Learning in Toronto, Ontario. She consults on business and market planning and teaches courses on strategy, business policy, entrepreneurship, and marketing. Nada assisted numerous start-up ventures with business planning and implementation over the past fifteen years. Nada earned an MBA from the Ivey School of Business, University of Western Ontario. She can be reached at nada.wagner@sympatico.ca.
Authors’ Acknowledgments
Paul Tiffany: I would like to thank the executives and students who have used this book and offered wise counsel in how it could be improved. I would like to acknowledge the many insights and suggestions provided by Dr. Tamara St. Claire, one of the first people to read the U.S. edition of this book and utilize it to create a winning business plan for a successful start-up firm.
Steven Peterson: Many people helped us in the writing of this book. I especially want to thank our U.S. editors at Wiley, Sherri Pfouts and Josh Dials, for all of the time, effort, and hard work they put in.
Nada Wagner: Many thanks go to my gifted colleagues who have generously shared their insights and wisdom. There are a number of people at Wiley I would like to acknowledge. I especially want to thank our Canadian editor Anam Ahmed for her direction and encouragement; Elizabeth McCurdy for her project management; and Andrea Douglas for her eagle eyes. Special thanks to technical editor Sandie Heirwegh for double-checking the integrity of the content and to Erika Zupko and Denise Koch for their enthusiasm and professionalism in bringing this book to the marketplace. It has been wonderful to work with such a committed and capable group.
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Introduction
So, you picked up this book and decided to give us a try. Wise move. You’ve taken a good first step. You may not know how to build a business plan just yet, but you’re smart enough to know that a plan is really important. We know from working with organizations large and small, from start-up to ongoing concerns, that a business plan is vital for success — and following it is the only way that you can get where you want to go.
Some people think business planning is just an exercise to please a banker or another financial investor. On the contrary — you don’t create a business plan just to raise money. That’s the least of it! View the business plan as your personal, powerful business tool — one that can make your company a more successful venture and a better place to work.
Is a business plan magic? Nope. But it does dispel a lot of the unknowns facing your business. A business plan works because it makes you take stock and think about what you’re doing and where you’re going. It presses you to picture what you want your venture to be in the future and decide how you intend to make it happen. You become the architect of your destiny; you mould the parts and pieces, and decide how they fit together to act as the blueprint — or, at the very least, a model of your future. For example, a business plan
Requires you to look carefully at your industry, your customers, and the competition to determine what your real opportunities are and what threats you face
Allows you to take a good hard look at your company so that you can honestly and objectively recognize your capabilities and resources, your strengths and weaknesses, and your true advantages
Coaxes a financial report, a forecast, and a budget out of you so that you know where you stand today and what the future holds
Prepares you for an uncertain future by encouraging you to come up with business strategies and alternatives to increase your chances of success down the road
About This Book
Business Plans For Canadians For Dummies, 2nd Edition, lays out a series of stepping stones that can help you create your business plan. You find out information about your business that can help you position it competitively and play to your strengths.
This book can help your business succeed, no matter who you are or what your job description says, whether you have an existing enterprise or are just starting up, whether you’re part of a large conglomerate or are a one-person show. Depending on your circumstances, you may find yourself exploring the book in different ways:
If business plans are new to you, you may want to start at the beginning and let us be your guides. We take you from determining your company’s mission all the way through to making your business plan work, and we keep on route the whole way.
If you have a little more experience, you may want to head straight for one of the more interesting pit stops: how to recognize the key success factors in your business, for example, or where to look for your company’s strengths and weaknesses. After dropping in anywhere along the way, you may discover yet another section where you want to spend some time.
No matter where you are in your business development, it’s never too late to start a business plan, and it’s never too late to make the plan that you have even better. In each case, you can find what you’re looking for between these bright yellow covers.
Throughout this book, we provide many examples of successful — and not so successful — Canadian businesses. We also relate stories of some well-known multinational companies. Hopefully, those stories can inspire you to look into foreign business opportunities. After all, with the right plan, just about anything is possible.
Conventions Used in This Book
To help you navigate your way through Business Plans For Canadians For Dummies, 2nd Edition, we use the following conventions:
Italics are used for emphasis and to highlight new words or terms that are defined.
Boldfaced text indicates keywords in bulleted lists or the action part of numbered steps.
What You’re Not to Read
You don’t have to read the sidebars scattered throughout the book. Just because we find these little facts and tidbits fascinating doesn’t mean you will. And you won’t hurt our feelings if you don’t read Business Plans For Canadians For Dummies, 2nd Edition, from cover to cover. Feel free to skip around; pick and choose what you’re really interested in.
Foolish Assumptions
Believe it or not, we don’t need to be psychic to know a bit about your background. In fact, we can assume that you’re probably in one of the following situations:
You have a great idea for a brand-new whatsit and can’t wait to get your own company up and running.
Your boss just turned over a new leaf and wants a business plan from you in three weeks.
You’ve always run the business without a business plan, and you’re the one who turned over the new leaf.
You thought you had a business plan for the company, but it doesn’t seem to be doing the job that it should.
Are we close? Whatever your situation, you don’t need a sixth sense to make a business plan; just read this book and follow our guidance. We can’t tell you the future of your business. But the business plan that we can help you put together prepares you for the future. And we’re here with you every step of the way.
How This Book Is Organized
We divide Business Plans For Canadians For Dummies, 2nd Edition, into six parts, based on the major elements of your business plan. You don’t have to read all the parts, however, and you certainly don’t have to read them in order. We devote each chapter to a particular business-planning topic, and you may need some chapters more than others.
Part I: Knowing Where You Want to Go
Before you can put together a business plan, you have to decide where you want to end up in the future. This part of the book starts by convincing you that planning is important when it comes to reaching your destination. We help you identify who your plan is for and how it can help you bring your great business ideas into clearer focus. We identify planning resources for you, discuss the planning process, and summarize the major pieces of a business plan. We also help you define — or redefine — your vision for the future and examine your values. Finally, we help you get on track quickly by establishing a mission for your company, along with well-defined business goals and objectives.
Part II: Describing Your Marketplace
To plan a meaningful route for your business, you have to know something about the market you want to go after. In this part, we help you analyze your customers so that you can understand who they are, what they need, and how you can group them together to better serve them. We also help you examine your industry and figure out the keys to success by identifying where your opportunities and threats come from. Finally, we help you scope out your competition to determine exactly what you need to succeed.
Part III: Weighing Your Company’s Prospects
In this part, we turn our full attention to your company. We help you look as objectively as you can at your capabilities and resources, identifying the strengths that you can count on and the weaknesses that you need to deal with. We also help you zero in on what you do best, enabling you to figure out the real value that you provide your customers and the true advantage that you have over your competitors. Finally, we help you put together a business model, and we guide you through your finances as you put together a financial forecast and a budget.
Part IV: Looking to the Future
The main reason you put together a business plan in the first place is to get ready for the uncertainties that lie ahead for your business. Part IV encourages you to look into your future and helps prepare you for change. We introduce several standard tools that can help you think strategically about the future, and we show you how you can use them to come up with alternative scenarios and strategies of your own. We also consider the different directions that you can take while your company continues to grow.
Part V: Putting Your Business Plan into Action
Too many mighty business plans sit on shelves, gathering dust, because someone neglected to act on them. In this part, we help you shape your company to be as efficient and effective as it can be. We also help you prepare the people in your company so that they have the skills they need to accomplish the goals that you set in your plan. Finally, we point you to the appendix and a sample of a real business plan, so that you know — start to finish — what you should aim for.
Part VI: The Part of Tens
The Part of Tens is a collection of reminders, hints, observations, and warnings about what to do — and what not to do — while you work through your business plan. These chapters focus on the big picture, so look at them when you need a little perspective on where you stand and where you’re headed.
Icons Used in This Book
To guide you through your business plan preparation, we include icons in the left margins of the book. Here’s what they mean:
Where to Go from Here
Take a minute to thumb through the book and get comfortable with what’s inside. Pick one or two chapters that tickle your fancy. Better yet, turn to a chapter that covers something you already know about. Or, if you’re really daring, turn the page and start at the beginning.
Remember to use the table of contents for a chapter-by-chapter breakdown. You can also turn to the index to find a specific topic right away.
Part I
Knowing Where You Want to Go
In this part . . .
No matter what task you plan to complete, from assembling book shelves to hooking up a home theatre, you may be tempted to pass over all the groundwork and sink your teeth right into the meat of the project. Fess up, the preliminaries seem bland and ho-hum. But for the really important things in life — and in business — preparation is everything. So, preparing to create your business plan ranks right up there in importance with each of the other major steps of actually creating a plan.
In this part, we take a big-picture view of a business plan. First, we lay out the blueprint for the plan. Then, we convince you of the importance of the plan, just in case you’re still undecided. We outline a planning process for you and review the major sections of a business plan. We look at how a vision for your company gives you something to aim for and a direction to take. We also point out why values and ethics are so important to your company and show you how you can make practical use of them in your planning. Finally, we look at how to establish a mission for your company as well as goals and objectives to fulfill that mission.