Business Plans are STUPID…

Posted by Andrewmillet on Fri, 23/09/2011 - 06:44 in Blogs 924 5 comments | report

Generally when I ask my clients about what they have done about a business plan they come back with two answers: i) “haven’t had time yet”; or ii) “we expect and want a 5% growth on last year”. Well this is just daft management and as we know success comes from careful planning.

Company’s need to start to consider next year and what that may or could look like (for company’s that have a year end of 31 Dec). The sort of questions and considerations might be:

What would be acceptable to my shareholders
What is achievable without any additional resources
What regulatory matters do I need to consider
Will my key staff stay on next year and what may I need to do to encourage this
Are my staff able to cope with growth
What are the competition doing
Are their any market trends that need to be considered
Is there anything new in terms of market that would be a natural extention to what we currently do
Are the current systems and processes in place adequate
What are the key risks associated with next year (economic as well as specific to my business)

Management will know where the existing business is heading and will be a good position to now judge next years growth.

Management may then want to have a number of brainstorming sessions where all opportunities are discussed and prioritised based on the reward, risk and resource needed, with the list of 10 things above considered. Hopefully at the end of the exercise management will know what they want to do next year in terms of new projects.

This all then needs to translated into both a financial and written plan. Of course it is likely that the first run will be unacceptable in terms of perhaps growth or requirement on cash and it will then be up to management to iterate their thoughts until they come up with a plan that is optimum in terms of reward, risk and resource.

So I will revert to my opening comment that Business Plans are STUPID…when management do not follow a planning process. At www.wisteriabusinessplans.co.uk we have worked with hundreds of companies and although I do not have the empiracal evidence, there is a very strong correlation between companies that plan well and those that succeed.

Comments

the questions are pertinent

listerramjet | Fri, 23/09/2011 - 11:33 | Permalink

but surely they are questions which require continual evaluation, rather then restricted to a planning round.

I think you're right Andrew but .... 1 thanks

kfosborne | Fri, 23/09/2011 - 11:51 | Permalink

..... how do you know if there's a strong correlation if you don't have the empirical evidence? Research is full of examples where the empirical evidence runs counter to expectation. I'd be delighted to see the evidence supporting your claims though.

Absolutely right! 1 thanks

eddybee | Fri, 23/09/2011 - 12:32 | Permalink

Andrew

I agree with everything you've said. A business plan also provides a benchmark for monitoring performance which provides a focus for staying on track (or taking alternative action) < that together with the "standing back and looking at the big picture" are, in my view, the reasons for the improved performance.

I would add that the better the management information and the understanding of the key profit and cash drivers - the more effective planning will be.

As well as risks I would say that opportunities should be highlighted. In both cases this should trigger action points to mitigate/monitor risks and try and take advantage of opportunities.

David Lewis

www.camroseconsulting.co.uk

Financial management support for ambitious businesses

I agree that ideally planning

Andrewmillet | Sat, 24/09/2011 - 12:30 | Permalink

I agree that ideally planning is a continuous activity. But the reality is that most management teams need to define a time in the year (once or twice) when they are going to focus on planning as opposed to day to day. Many thanks Andrew

Hi - from the hundreds of

Andrewmillet | Sat, 24/09/2011 - 12:33 | Permalink

Hi - from the hundreds of corporate clients that we act for - the ones that plan and keep an eye on the future tend to be the businesses that are successful. Those that do not plan meander along (and often fail). Thanks Andrew

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Andrew Millet BA FCA MBA is a Director of Wisteria Chartered Accountants, Tax & Business Advisers. He specialises as a business consultant and part-time finance director for a number of Wisteria's clients, which involves writing business plans, implementing systems and discipline, financial control work, cash management, reporting to the board, providing management information, liaising with investors and fund raising.

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