My previous post discussed a number of considerations for preparing a business plan. This post discusses the remaining considerations for completing your plan.
This section deals with the operating parameters. Things considered here include, where will we locate the business, what is the anticipated facilities cost in terms of rent, space build out if required, the manufacturing plan, and research and development as applicable.
Also special considerations like “lean” processes, six sigma quality and other differentiating features of your organization should be detailed in this area. Take time to determine the metrics you want to follow and build them into the plan. This could include staffing ratios, productivity measures and other KPIs (Key Productivity Indicators).
What are the General and Administrative costs the company anticipates. Is there enough gross profit to cover these costs? Where can you hold down expenses and where do you need to invest?
What are your anticipated capital expenditures (Cap Ex)? Will technology help you contain or reduce costs? Do you need new more manufacturing equipment, transportation equipment, office equipment, computers and the like? Not only do you need to plan the purchase, but also the financing. Will you lease, purchase out of cash flow or debt finance?
Develop an organization chart for the present and future company. Determine the anticipated personnel required to grow the business and the anticipated costs. Does the business revenues and gross profit scale to cover the costs?
The financial plan should include historical and projected financial statements (budgets).
Proforma Balance Sheets, Income Statements and Cash flow statements are required to show how the financial health of the company changes as the company grows. The cash flow statement is critical in determining the amount of capital needed to grow the company according to the plan. The financial plan will need to include the anticipated source of these funds from debt and/or equity.
Avoid plans that require perfection to achieve. I call these plans” If the world was perfect”, which of course it is not. Avoid projections that look like hockey sticks when they are graphed and allow enough conservatism in the projections that if you meet the revenue, you will exceed the forecasted bottom line.
One executive I know, started his plan with how much he wanted to earn and worked backwards to determine the other metrics required to achieve that level of profitability!
Business Planning Calendar
Set out a planning calendar; assign various tasks with due dates as outlined above and hold regular update meetings to keep the momentum. Allow enough time to do it right. This may take weeks of effort and meetings, but should result in a better product through the involvement and ownership of your staff.
Follow Up and Measure
Lay out the key KPIs and other financial and operating metrics and report on these items in a quarterly meeting of the managers. This creates accountability and helps determine midterm corrective actions required to get the company back on plan. Done well, there are number of areas you can review over the course of the year to determine how where assumptions are met or exceeded or missed. This analysis is the key to continually improving the financial information and forecasts. Remember, if you can measure it, you can manage it!
Finally, what are the actions required to execute the plan. They need to be quantifiable, assign responsible parties and have time constraints.
A properly done plan will create the disciplines needed to take your business to the next level and allow the creative thought process of your management team to accelerate the company’s achievement of the stated goals and objectives.
Now’s the time, GO!