Developing a business plan

Article by Pat Sutton Partner for Sunday Business Post 19th April 2015

Business Plans may be required by many third parties like banks, government grant agencies, equity investors, potential buyers of your business, senior management or the next generation coming into the business. The plan should set out a clear strategy and vision, with well documented goals and objectives. Identify the best opportunities, and establish a budget to set about delivering this. From your strategy you can develop tactics and implement them. No one can predict the future but one thing is for sure, if you don’t have a plan you dramatically reduce your chances of achieving the success you want. Strategy is equally critical in sport, war and business.

The importance of strategyAbraham_Lincoln_November_1863

A self-taught strategist with no combat experience, Abraham Lincoln saw the path to victory more clearly than his generals, in 1862 historian T. Harry Williams wrote “Lincoln stands out as a great war president, probably the greatest in our history, and a great natural strategist, a better one than any of his generals.” One of my favourite quotes by Abraham Lincoln “if I had nine hours to chop down a tree, I’d spend the first six sharping my axe”.

In one the greatest flights of the 20th century Muhammad Ali beat George Foreman in Manilla in 1974. Ali later claimed they devised a cunning strategy to defeat the hot favourite Foreman by letting Foreman punch himself out which allowed Ali to come back late in the flight to claim a famous victory. The strategy termed ‘rope-a-dope’ was later deemed to be a brilliant piece of advance planning.

Jack Welch ex CEO of General Electric said “Strategy is not a lengthy action plan, it is the evolution of a central idea through continually changing circumstances”. He claimed the process of coming up with the plan is what’s most important and not the plan itself.

The Plan

There’s your internal working strategy document which needs to be a live vibrant document that has to respond to changes: both internal and external. This document is not often more than 5 pages and will be driven by a measurable action programme with responsibilities and deadlines.

Then there’s the typical business plan in a standard format required by outside parties. This will include an executive summary, business description including its objectives, goals and strategies, product and service analysis, operational and management team, market strategies, supplier details, competitor analysis, capital required and financial and cashflow forecasts with underlying assumptions. Whilst the plan may be shared with third parties to secure funding it should be principally for the business owners own use.

A business plan will start with a very strong, clear and insightful executive summary outlining what promoter is trying to achieve. This is perhaps the most important element of the plan as many readers won’t go past the executive summary if it doesn’t capture their attention. The executive summary should get the reader excited about the business proposition, it must grab their attention. It should not be any more than one page and completed at the end of the planning exercise. Many business plans presented to investors or financing houses fail at the executive summary stage as the reader doesn’t have the interest in reading at further.

A business plan guidance sheet has been developed by the fours accountancy bodies (CCAS-I) and the Irish Bankers Federation to help SME’s develop their business plan. This guidance can be found on any of the bank websites. There are many pro format business plans available on line so you will have no problem identifying the various headings required.

The standard business plan format required by external funding parties includes an executive summary, business description including its objectives, goals and strategies, product and service analysis, operational and management team, market strategies, supplier details, competitor analysis, capital required and financial forecasts. Whilst the plan may be shared with third parties to secure funding it should be principally for the business owners own use. A business plan will start with a very strong and clear executive summary outlining what promoter is trying to achieve. This is perhaps the most important element of the plan as many readers won’t go past the executive summary if it doesn’t capture their attention.

A business plan guidance sheet has been developed by the fours accountancy bodies (CCAS-I) and the Irish Bankers Federation to help SME’s develop their business plan. This guidance can be found on any of the bank websites. There are many pro format business plans available on line so you will have no problem identifying the various headings required.

The Planning Process

Our recommended process to develop and articulate strategy, from top down is as follows:

Guilding MITS’s (most important things)

  • What’s the most important things to you about being in business. Particularly with partners its important to be on the same page. In our strategic development process we cover personal and business objectives. These should be revisited annually.

Primary Strategic Objectives

These are the three to five year long term most important things. These objuectives form the basis of your annual road map.

Projects

Necessary to implement your business plan and keep you on track. This will vary from year to year , as to where to focus and prioritise and these could include (1) owners wealth creation (2) profit improvement (3) revenue growth (4) team and culture (5) risk management (6) succession and exit.

Actions

As part of each project, rolling and focused outcomes are supported by regularly refreshed action plans. These actions are strategic objective and project lead, and have allocated authority and accountability with completion dates. These actions are regularly reviewed, measured and refreshed.
In conclusion, we know you cannot predict the future but significantly improving your choices and chances has to be a good thing and worth the effort. If you know where your going you might just get there!

Patrick Sutton FCCA, Managing Partner of O’KellySutton, Chartered Accountants and Business Advisors, Kildare Town. Pat blogs frequently on matters of interest to start-ups. Email Pat on patrick.sutton@okellysutton.ie.