Business plans for the 21st century

Business Plan Premier

Previous articles in this series have looked at the whys and whats of business plans. John Stokdyk and the AccountingWEB team complete the series by looking at how people compile their plans and ask why they have proved so resistant to technological change.

The content, structure and composition of business plans have changed relatively little over the past decade. And the same could be said of the techniques used to create them.

The web and other technologies such as tablets and smartphones offer a wealth of new ways to both create and communicate business plans. But the tools most people used 10 years ago - Microsoft Word, PowerPoint and Excel - are just as ubiquitous in 2014.

As FD Works founder Jon Gaunt said of Excel 2013 in a recent blog, “Nothing comes close for business planning.”

During the research for this article, a clear picture emerged of three different market segments for business planning tools: the corporate end where planning and budgeting are integrated into reporting processes; the middle market dominated by Excel where the vast majority of business managers and practising accountants reside; and small company owner/managers who don’t have time to devote themselves to constructing beautiful plans - they want to capture their ideas quickly or put together a loan application or prospectus for investors.

While acknowledging these realities, this article concludes our series on business planning by exploring all the options for creating and using business plans, including Excel and its more sophisticated variants. And if change is ever going to come in this market, some of the tools being developed to cater for small business users are the most likely to shake up the Excel-based status quo.

Geoff Bristow is well qualified to assess the business planning landscape. In the 1990s he set up Decision Curve, the company that developed the Excel-based Cashflow Wizard forecasting and planning engine. The mechanism was developed more than 10 years ago with quite a bit of input from AccountingWEB members and allows users to create almost any kind of plan or forecast by completing an online questionnaire. Within minutes, the central server will send back an Excel template with all the necessary worksheets, headings, dates and formulae in place. You just add the numeric data.

In spite of Cashflow Wizard’s success, Bristow is acutely aware of the inroads web and non-Excel tools are making into the market and is currently hatching an app-based planning tool for less sophisticated needs.

As Bristow explains, “The owner-manager/numerate non-accountant market is huge, and bigger than the market of professional accountants who do modelling. Traditionally it was served by out-of-the-box business planning software such as Business Plan Pro, and now it’s going web or app.”

But an accountant doing an in-depth financial plan would very quickly get frustrated using any of the currently available web-based modelling tools or apps, he said. “You wouldn't be able to model a complex revenue recognition policy, or a detailed loan schedule that varies with performance, or any of the other details that accountants have to worry about.”

The monitoring challenge

The question posed in the first article of this series was how to ensure the business follows through on the plan and uses it to monitor progress and performance. The first hurdle to achieving this was getting the team to buy into the plan; the second was tracking performance back to the original numbers.

Printed business plans worked up in Microsoft Office create all the usual problems of version control and inconsistency and often end up forgotten in somebody’s bottom drawer. But technology offers potential solutions for these problems.

Collaborative preparation is now feasible for Microsoft users via Office 365, or using Google Drive and Applications, Dropbox or other online file stores and web portal systems. And if people in the business have a hand in shaping the plan, they’re much more likely to commit to carrying it out.

On the second point, comparing forecasts and plans against actual numbers does happen in the corporate world, where some organisations use integrated planning tools such as Hyperion, Cognos or web-based challengers such as Adaptive Planning alongside ERP and accounting systems.

These systems allow users to model planning scenarios and carry over the forecasts to compare against actual results. But the cost of these tools tends to put them beyond the reach of all but the largest firms of practising accountants. And the corporate market appears to be almost as resistant to changes as practitioners - and just as strongly wedded to Excel.

A few years ago Adaptive Planning launched a social media environment for planning and budgeting processes. It sank without trace. Now that the hype has died down, there are signs that collaborative planning and rolling forecasts are quietly becoming the norm in some established businesses, but they are still some way off for the entrepreneurs who make up the bulk of the business planning market for practising accountants.

Planning for a new generation

According to Amy Harris, the founder of Xero add-on developer Crunchboards, the business planning software market is beginning to change, driven by a new generation of tech-savvy entrepreneurs. Now poised for its international launch, Crunchboards is designed to cater for emerging companies in creative, high tech industries where the owners are very mobile and comfortable using new online tools. “These firms are leading the way,” she said.

Crunchboards is based around reporting boards and cards. For creating business plans, the templates include full profit & loss, balance sheet and cashflow forecasts. The core reports are typically linked back to the user’s chart of accounts (in an online accounts system such as Xero or QuickBooks Online), but the boards are entirely flexible and can be used to model all kinds of scenario - from the number of starters consumed at a restaurant, to the company’s bank account, gross profit or corporation tax liabilities.

“Because it’s all in-app, you can create mini-scenarios around each item on a mobile phone, for example if you missed the bus.” And unlike a paper report, the business’s accountant can come in and collaborate on the boards to test and refine the plan. 

Spreadsheets are a blank canvas, which is what makes them so flexible. But for a business users, she continued, “By the time you put it in, the data is out of date and it’s not easy to share with investors, which can be quite time consuming for a business manager who’s very busy.”

Having built plans linked to figures in the underlying accounts system, Crunchboards users will be able to report on the measures that matter to them most. In contrast to Excel, Harris, claimed, “That’s what brings the data to life.”

Assembling the ingredients

This summer’s six-part business planning series was set in motion by AccountingWEB member Peternkweto who wanted to find out the main features of a business plan and what the correct format was.

To recap the advice drawn from CIMA and other sources in our earlier article, a typical plan will be anywhere from 10-20 pages and include both narrative and numerical information along these lines:

  • What the business does and how it makes its money
  • Market research and SWOT analysis
  • Explanation of why the funds are needed and how they will be used, backed with details of of how potential lenders will get their money back, plus an assessment of potential risks and how they will be countered.
  • Details and CVs of the management team
  • Financial information including three years’ trading accounts (if available), financial forecasts for the next three to five years, and a cash flow forecast for the next 2-3 years (or in the case of a start-up or turnaround, until the business moves into profit), indicating the amount of funding needed.

Excel sets the template

But how do you go about preparing and presenting this material in a coherent way, asked Glennzy in another business planning Any Answers query back in March. Most accountants in business and practice are familiar with Excel, and it has the ability to import and export the figures to and from all sorts of other applications, from accounting systems to Microsoft Word.

Typically for an accountant, Glennzy was confident working with forecasts in Excel or Sage Winforecast, but struggled when it came to dropping tables and graphs into a Word document.

The consensus view was summarised by Kent accountant, who suggested developing a master proforma in Word and tweaking to output new plans. Ric Payne of Principa went further and recommended picking up a business plan template from the Microsoft library or from other trusted sources and using them as the outline for your own templates.

This approach ensures the numbers remain consistent, by linking the P&L, balance sheet and cashflow within an Excel workbook.

But in the 21st century, one might be tempted to ask who says you have to print the plan out as a PDF or Word document. Unfortunately, business plan consumers do.

Jiten Modhiwadia, from Exact’s UK cloud solutions division, said that while business plans are vitally important as a discipline for business owners to think through and test their ideas, ultimately they are more about the audience that will see them.

“Banks drive the majority of business plans,” he said. “Because they demand plans to mitigate the risk of losing the money they’re lending.”

Banks and investors still want to see those classic, plastic-bound A4 reports. According to AccountingWEB members Admor and Glennzy, they like a bit “more than Excel”, typically padded out with professional looking graphs and pie charts that come with specialist tools such as Palo Alto's Business Plan Pro. “Bank lads love” that sort of thing, which increases the value to your client, according to Glennzy.

Seeing the plan through

As business intelligence manager at West Country accountants Milsted Langdon, Chris Downing works with a team of six who have their “hands on business plans all the time”. The types of plan will differ considerably - from the entrepreneur’s ‘what should I be focusing on for the next six months’ aide memoir to more tightly focused forecasts looking at specifics around issues such as loan requirements and repayments, or staff salaries.

Downing and his colleagues adopt a horses-for-courses approach to planning. Many of their clients use Sage accounting software, so it makes sense for them to work up fairly simple budgets and payment plans with Sage Forecasting. “It will produce a report on your expected cash outflow in an Excel template that you can import to your accounts system at the headline level. They can also bring in their own P&L and report back against predetermined targets,” he explained.

Because it works as an add-on to the Sage 50 Accounts program, but can also bring in information from other applications, Sage Forecasting allows the user to operate in a single environment, linked to Excel. “If at future they want to take the forecasting on themselves they can do it relatively inexpensively,” Downing said.

AccountingWEB member rawa363 is a regular user of the module and endorsed this view of Sage Financial Forecasting’s capabilities and ease of use: “I have had numerous comments from bank managers about the professional quality, presentation of the figures and comprehensiveness.”

For more complicated scenarios the Milsted Langdon team will turn to Winforecast, a Sage product that is nearing the end of its official lifecycle.

The Winforecast reporting suite doesn’t rely so extensively on Excel, and can generate Word, PDF and spreadsheet files. Winforecast is particularly good if you want to do consolidated forecasts showing the effect of inter-company transactions between holding and trading companies at group level. Although it’s not very widely publicised, if you ask Sage nicely, they will still sell you a copy, Downing said.

But when it comes to more tightly focused forecasts and models around specific proposals and projects, Downing admitted that his team will return to the accountant’s best friend: “We go the Excel route.”

Milsted Langdon runs a high-powered, specialist planning team with skills that are beyond the reach of most businesspeople. According to Jiten Modhiwadia, the big frustration for less experienced entrepreneurs who want to refine their plans is “asking lots of questions and not getting results because they’re having to learn technology and software that are quite restrictive”.

But the demand for more accessible business planning tools is rising and is driving the growth of a host of online planning tools and smartphone apps.

“We are in an attention economy,” said Modiwhadia. “We expect delivery of information in a dynamic way without wasting too much time.”

Amy Harris from Crunchboards echoes this view. “There’s a mindshift for everybody. Investors and everyone handing out the money want to look at actual results - as you need to as the business owner. The old style methods made life difficult. Accounts had stuff they would use to do your bookkeeping a 6-8 week timescale. That’s not how you run a business in today’s society.

“Technology has changed things. You can do them in real time. It’s about empowering people with the information they need to run the business, and not making them run a marathon to get it.”

Integrated corporate planning & reporting

Product

Notes

Cost

Adaptive Planning

Cloud planning tool links to most GLs

POA

Advanced Collaborative Planning

Web-based collaborative plans & budgets

POA

IBM Cognos 8 Planning

Enterprise planning, budgeting & forecasts

£10k

Oracle Hyperion Planning

Enterprise performance management suite

$12k

SAP Business Objects

Enterprise performance management suite

POA

Excel tools and templates

Product

Notes

Cost

Cashflow Wizard

Original Q&A-driven template engine

£195

FD4cast

Similar to Cashflow Wizard

£199

Microsoft Excel

Vast library of templates available

£59

Desktop business plan tools

Product

Notes

Cost

Business Plan Pro

Palo Alto’s market-leading program

£130

FD4cast

Similar to Cashflow Wizard

£199

Sage 50 ForecastingSage 50-compatible tool; replaced... 

Sage Winforecast

Versatile standalone application, no longer officially supported

n/a

Cloud business plan tools

Product

Notes

Cost

Brixx.com

Original Q&A-driven template engine

£250pa

Crunchboards

Flexible online modelling & reporting

£39mo

Enloop

Freemium modelling and drafting tools

$40mo

FigureWizard.comOnline tool crunches forecasts for you£20pa

LivePlan

Online tool from the Palo Alto stable

£144pa

Strategyzer

Web-based model-building

$299pa

Smartphone and tablet apps

Product

Notes

Cost

Business Model Toolbox

iPad app from Strategyzer.com developer

£20.99

Business Plan & Start Startup

Drafting app: printing available for £1.99

Free

Business Plan Premier

Plan drafting app that can output to Word/PDF

£6.99

Business Profitability Analyst

Pricing scenario app

£1.99

How to write a business plan

Tutorial app with videos and templates

Free

StartPad

Online tool from the Palo Alto stable

£144pa

The 5 Minute Business Plan

Android Q&A produces a plan in 5mins

Free

Further reading

This article forms part of a comprehensive Business planning series  sponsored by Exact. For further advice on constructing a compelling business plan, also see:

Comments

Business Planning and Forecasting    3 thanks

redboam | | Permalink

I'm very surprised at the fact that figurewizard.com, which we have been using extensively for a year doesn't feature here. It is amazingly simple to use, returns a mass of profits, cash flow, tax and other forecasts in minutes and if the business plan needs to be amended, that can be done in seconds. Previous balance sheet summaries can be entered in short order for going concerns which are then carried forward and the whole thing only costs £20 a year. We wouldn't be without it.

carnmores's picture

i understand why Win4cast was    1 thanks

carnmores | | Permalink

so bastardised by sage so that it would link to their product range . its a pity its not still around it as the first and best of the free standing tools but thanks JS  for all the other links i shall while away a few hours fiddling with them

CJP's picture

"Model" before "plan"

CJP | | Permalink

There is clearly a large (and largely untapped) market of mid size SMEs whose owners would welcome practical and relevant support in planning their businesses. A service aimed higher than just satisfying a bank manager.  

Accountants are well placed to provide this if they develop their own skill-sets.

Which business is able to run today in the same way as it did 3 years ago?  

The irresistible advance of technology coupled with the seismic changes in economies means that all of us have to be prepared to adapt and change - the goods and services we sell and the way we structure and do business. The consultants' word is "pivoting".

I believe that in the States, VCs pay more attention to the business model - showing what you are doing and intend to do and how you have validated the business hypotheses - rather than a guess at the numbers and business financial structure in 3 year time.

Does the team have the skills and energy to adapt the business to future trading conditions is the key question to be answered.

The CIMA list of requirements for a business model starts with - "What the business does and how it makes its money".  In my view there is a case for substituting this "old" maxim with:

"What a business intends to do to make money and how it has validated its hypotheses (guesses)"(i.e. a statement of the “”Business Model”)

I have been an alpha and beta user of Strategyzer which is included in your list of Cloud applications.

This is a collaborative modelling tool to identify the 7 key aspects of any new or developing business.  It means that owners, key employees and advisers can together establish and test these aspects.

They are: Value propositions, Customer segments, Channels to market and customer relationships, key activities and resources and "partners".

This is hard but rewarding work.  Different points of view stimulate deep thought and creativity. (e.g. The current outright sale might be challenged with a subscription model - appropriate testing may show an otherwise disregarded pricing option). Then the harder work of executing the tests to validate the guesses follows.

There is a growing body of expertise that incorporates the "Lean" principles, "Customer development" and "Business modelling" and a couple of references and my own FREE business modelling course notes for those interested:

https://strategyzer.com/  based on Business Modelling Generation by Alex Osterwalder and Yves Pigneur (a seminal work)

Customer development – a mass of case models and techniques from Steve Blank (entrepreneur and professor) http://steveblank.com/

The Lean Startup by Eric Ries.  A “must read” for any business development adviser.

http://www.informview.co.uk/inform-bizdev-blog/66/free---business-modelling-course-notes

 

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Modelling needs Forecasts    2 thanks

abaco | | Permalink

Like redboam suprised at no figurewizard. We use it for most of those clients who haven't started using it themselves. We like its flexibility, one good example of that being this interactive cash flow - factoring chart which gets a complex job done in just a couple of clicks.

http://www.figurewizard.com/cash_Chart_Planner.html

Figurewizard.com

KWest | | Permalink

Actually abaco and redboam, Figurewizard is listed here.

forecast5

brent | | Permalink

Forecast 5 has been written as a replacement for Winforecast in NZ by a former reseller - worth a look - www.forecast5.com - not sure on pricing.