Business plans – they’re your friend!

Whenever I meet a business owner, I’m always interested to hear what their long-term plans for their business are.

Whatever the answer is (and I’ve heard everything from “no idea” through to “treble sales within three years, then sell up” to simply “retire”!) I always ask whether they have a strategic business plan in place to help them achieve their goal.

“No” seems to be most the common answer, for a variety of reasons:

• Don’t have time to write a business plan
• How can sales or profit in five years time be predicted?
• Too many things will change over the next few years
• Don’t want to be stuck with a plan if a competitor starts doing something else

I find it amazing that someone who knows they want to treble sales in three years are unable to say how they’re going to achieve it.

The plan doesn’t need to be pages long.  At the very least, every business owner or MD should have a one page summary to remind them of the goals they’ve set their business, and how they’d like to achieve them.

Writing a business plan doesn’t need to take a great deal of time.  The more complex, and bigger, the business the longer the exercise should take but I’ve seen MD’s of multi million pound business quickly scribble down very brief long-term goals, as accountants, to quickly interpret the “wish list” and produce the business plan.

It’s very difficult, if not impossible, to set accurate sales or profit targets five years into the future.  Many business do, however, set budgets for the next 12 to 18 months (a whole new blog topic!) and then write commentary about how they’d expect/like trading to continue from 18 months onwards.

As we all know, things change all the time in business – a new competitor might enter the market, an existing competitor might disappear, a key employee may leave, a new product might be introduced – whatever the reason, routes to the final goal may change, or the final goal itself might change.

For this reason, business plans must be seen as flexible documents, easily adaptable to changing circumstance.  The only constant thing about business plans are that they continue to support & guide their intended reader.

I write this as someone who has just revised the original business plan we wrote a year ago.  A conscious decision of the management made midway through this year has drastically changed the next three years of trading of the business (for the better!).  The ultimate goal remains the same, but the route we take to achieve it has changed.

Martin

www.mymanagementaccountant.co.uk

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