WHY IS IT SO MANY COMPANIES ARE WITHOUT A FORMAL BUSINESS PLAN?
So many of the companies I’ve taken on don’t have an ongoing business plan. They may have had one once, possibly when they took on external investors or other refinancing, but have since drifted away from having a proper plan that sets out exactly how the business will be taken forward. It amazes me that external investors such as private equity firms allow this situation. What I can tell you is that every single troubled company I have taken on has been without a current business plan!
A business plan for each fiscal period is an absolute must in my view. No company under my care will be without a deep and comprehensive roadmap. Business is like any journey. If you don’t have a map with specific directions and milestones you will likely end up somewhere you don’t want to be.
It’s not the job of investors to insist on a business plan. It’s management’s duty to provide one. A duty also to themselves, the business itself and the staff who all depend upon clarity of thinking and planning for the way forward, so not just to investors.
Writing a worthy business plan is not a breeze. It’s long and hard work to get a quality plan together. A business plan is a test and challenge of your strategic thinking and the writing of the plan force you to rethink or re endorse the validity of your business choices and activities.
It requires considerable discipline to write a good plan. I’ve seen business plans that wouldn’t qualify to be on the back of a cigarette packet. What use are they to anyone other than to demonstrate you haven’t the first clue how you are going to build the business. A good plan is your chance to demonstrate your grasp over market opportunities, your strategic thinking and discipline of business execution. It is also a powerful tool for getting investors onside and co-owning the way forward. Importantly, a business plan provides the performance criteria upon which success or failure is measured or judged.
I have coached and mentored many a CEO through the building of a business plan and helped them do the same down the line helping staff to contribute well to this important process. When the plan is complete, everyone has the same hymn sheet, investors, management and key staff. Everyone knows what is expected of them and why. Despite the intense work involved I have never had anyone say it was of dubious value. Quite the contrary, without exception, everyone has agreed the huge benefits of the process.
Below is a framework I generally follow for writing a business plan:
- Confidentiality statement
- Description of business and history
- Profile on management team, current structure and method of operating
- Markets and competition
- Top level summary of historic financial performance
- Customer base profile, trading history by account, individual analysis on top customers, security of revenue stream and potential for new sales
- In-depth analysis/assessment of current new sales pipe-line
- Assessment/Forecast for coming periods
- Products/Services – state of play on products and R&D programme
- SWOT analysis, special considerations and conclusions
- Mission and vision for the business
- Key goals and objectives
- Top level summary of financial goals
- Method of accomplishment – strategy and key underpinning programmes and initiatives (Specifics and substance)
- Sales strategy and organisation
- Human resources plan and organisation chart
- Board structure
- Exit strategy
- Financial plans (Spreadsheets – P&L, Balance Sheet & Cash Flow)