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Business planning for practitioners

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7th Jul 2014
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Having a business plan is not only beneficial for small businesses, but for practitioners too. Rachael Power talks to Ric Payne about what a good plan and sound business model can bring to a firm.  

In an earlier webinar series on the 21st century client-accountant relationship, Payne, founder of Principa discussed the merits of business models and plans for practitioners

Having a road-map for a firm setting out a measurable route to guide practitioners where they wanted to go - whether in terms of growth, client value or simply to remain where they are - was key. Knowing how to do it and how to implement a plan not only benefits the practice, the skills gained mapping out your own path to success can be deployed as added-value services for business clients (see box, below right).

Planning in practice

Devising and monitoring clients’ business plans is characteristic of many firms shortlisted for Practice Excellence Awards in recent years. Here are some of the ways in which accountants have helped their clients:

● Quarterly reviews are part of a business planning service offered by Murray Associates in Glasgow that regularly deliver better business performance. “Lots of good ideas spring from our discussions,” said one happy client.

● York-based CGA puts considerable effort into business plans, cash flow forecasts and budgets for clients. Regular management account meetings help them understand what their numbers mean. Part of the planning service is designed to tie clients’ personal goals to their business objectives.

● Rickaby & Co helped a client company crystallise its plans for growth and a move to new premises. The carefully costed expansion plan helped the company increase turnover 43% and profits by 19% by the end of the financial year.

● Derby-based Accountancy Advantage worked on a business plan to help a charity client work through the implications of launching a TV channel, and decide against it. “We showed that this would cripple the charity,” said partner Shahbaz Husain.

But, Ric Payne notes, simply coming up with a plan isn't enough. Accountants need to have a solid business model in place in the first instance.

Value of business planning 

Recent research by Principa found a strong correlation between firms that engage in business planning, and high performance. "Firms that have the discipline to engage in robust internal planning tend to be firms that carry that throughout their entire business. As a result, they tend to be more successful," he said. 

Preparing business plans doesn't automatically bring about success, but following the disciplines and management control process involved can be an organisational catalyst.

"The mere act of planning doesn’t make firms any better," said Payne. "That’s why I think so many people often prepare a plan and then it goes and sits in a bottom drawer, because there’s no discipline around it." 

One firm that caught Payne's eye as a Practice Excellence Awards judge was Telford Associates, shortlisted for the new firm prize in 2012. 

Founder Mark Telford explains that business planning formed part of his core business model, stemming from 16 years working as a commercial accountant in large businesses. He subsequently spent two years providing financial director (FD) services to smaller firms.  

“One of the reasons I started my practice was that I saw many small firms getting a poor service from their accountants - one of these things being no advice on how to run their business,” he said. 

Providing services such as management accounts, cashflow forecasts, business plans and remuneration strategies have helped to fuel 60-70% growth rates in Telford Associates' first few years.

Business planning is an optional extra for most clients, who can range from those who need 'hand holding' on the basics, to those who are more confdient, but like having a safety net to fall back on if they struggle.

“Listen to what the client wants, what his issues are with his business,” said Telford. The need for detailed business plans will enter the conversation if the business is looking to grow or buy a business, or perhaps to improve cash flow if the time is coming to think about selling the business.

Cloud accounting is a big advantage in providing business planning services as all the relevant numbers are immediately to hand.

“It gives the opportunity for you to check their accounts throughout the year and if you do spot an issue, then offer support,” said Telford.

How to develop and deliver business plans 

As with any journey, you need to know where the business owner wants to go and how the business is likely to get there before planning the route. Otherwise, you'll just be driving down roads aimlessly, hoping they'll lead you to the right destination. 

Payne classifies three different elements of success: the business model, strategy and plan. To clarify the overall picture that will underpin any business plan, the following questions need to be answered: 

  • What are the governance principles going to be involved?
  • Do you really want to be running this business?
  • What are you going to do, why do you want to do it?
  • Who will do it?
  • How and to what timescale is it going to be done?  Where?
  • What is the likely outcome going to be?

"The mere act of planning isn’t going to produce any results, it's going to begin in the execution," said Payne. "This has to start with the way in which you’re going to run the business and in turn you need to have absolute clarity as to what your business model is going to look like." 

Business modelling is as important a skill as being able to construct a detailed business plan. The business model should describe how the organisation is going to create, distribute and 'capture' value, all of which starts with the customer or client. For practitioners, other considerations will include key activities such as tax planning, final accounts, tax returns and so on,  what kind of alliances will be in place, and what resources are available to in terms of staff, partners, and infrastructure.

Resources will drive the cost structure, Payne said.

In the business world, the high-tech, high spec CitizenM Hotel chain is a good example of how a sound business can drive success. "They haven't made it profitable by putting together a business plan. Instead they put together a model that resulted in an operational plan," he said. 

"It's the model that has created the value." 

If you nail down a workable model, the operational plan will follow.

Making your plan a reality

Keeping track of business plans is essential to ensure the effort that goes into them isn't wasted. Have annual goals, and cascade them down into quarterly targets, and down again into a monthly activity plan. Having a chance to review your progress on a monthly basis gives you 12 opportunities to revitalise your business in a year. With yearly planning, you've got just the one chance, and at that stage it might be too late to address some of the issues that have occurred, Payne said. 

As part of ensuring those targets are met, you could even hire someone such as a business mentor or external adviser to hold the business accountable for implementing the plan. Having an experienced person on hand to make sure you stay on track could be worth the investment, given the value having a plan can bring to firms. 

Working with clients on their business plans

Helping clients with business plans is one of simplest, but most value-adding service you can offer, according to Payne.

But before launch into a client's plan, work on developing their business model if they don't already have one in place. 

It's in your interest, as an accountant, that your client's business succeeds and thrives. It makes sense for you to help them with their plans, and if you do so they will see the value you bring, and attribute some of their success to you. Having helped build the foundations for their success, you are likely to hold on to them for longer, and bring more fees in.

Exact senior sales executive and former practitioner Jiten Modhwadia used to offer a six-monthly cycle business planning and reviews to clients when he worked in practice.

His tips for good business planning include:

  • Look at the business’ vision. Is it a lifestyle business or does it want to be the next big thing? How are they going to do their finances?

  • A business plan is not simply an A-to-B bridge; it should be a measure of where you want to be in six months' time

  • Turn the long-term goal into shorter, more manageable chunks; six months is easier to plan for than three years down the line.

Developing planning skills 

Like marketing and sales, business modelling and planning may not come naturally to accountants. But if can be something you can develop as part of your CPD efforts. There are numerous business planning workshops and seminars, along with books such as Mastering the Rockerfeller Habits by Verne Harnish, the man behind the 'one-page business plan'.

Business plan templates provide a solid outline from which to work, Payne advised. Or, you can take advantage of the range of business planning software packages out there - for both you and/or your clients. Payne recommends Business Plan Pro but there are many other options, which will be covered in a further article in this series.

    Given the level of recurring fees at stake, business planning is a practice that will always bring its own rewards.

    "The beautiful thing is that the accountant will have an opportunity to create an ongoing revenue stream. The client will need to have the accountant to hold them accountable to implement the plan," said Payne.

    For more in this series, see: 

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