Developing a Practical Business Plan

Developing a Practical Business Plan?

By Don Matlock

www.risktakersuccessmaker.com

In starting a new business, the question of a business plan is continually raised. I have seen many plans that are too extensive for their own good and others that have very little thought or structure, while at the same time some very successful businesses have commenced without an initial written plan.

The questions that you should be asking are, do I need one at all, and if so, how extensive or developed should it be? For what initial period should it be? Can I do it myself? When do I review it, and/or renew it?

The purists will argue that you should not start a business without a business plan. In a conceptual sense that is correct, but it is the extent of the initial plan, which is the key here. Many very well developed and extensive business plans have been lavishly documented before the business starts, only to go into the top drawer of the office desk and thereafter gather dust and to never again see the light of day.

There should be an initial business plan, but only broad in structure and content, and for the first twelve months only. In my circumstances as the principal of Matlock Corporate Advisory (MCA), my business is a boutique consultancy business in the service industry, not e.g. a manufacturing business requiring possibly substantial production and office premises from day one, together with plant and equipment and an appropriate level of personnel, etc. The bigger the business is in relation to physical, personnel and financial resources, the more extensive the initial business plan and the term thereof, needs to be. However, again, for the purposes of, at least initially, a small service consultancy business, the initial business plan need only be broad, and short term, in nature.

The other fundamental reason for this approach is that in the first twelve months of your business you are not exactly sure where your endeavours, in accordance with your well thought out and documented plans, are going to take you, and thus the maximum amount of flexibility should best be allowed for to take in to account this initial period of the greater unknowns.

Although we refer to the first twelve months as above, it can also happen that your business may take on a new and significant direction at an advanced time in its history. Such was the case with MCA, where after approximately four years of operation I was asked by a multinational with whom I had a longstanding relationship, to sell a branded product for them, my first assignment of such nature. They were not in a position to do any work on the targeted buyers, so they asked me to do that on my own and review it with them.

In order to do so, I visited a major supermarket nearby to look at what other products of a like or related nature were on the supermarket shelves. Much to my amazement, when I walked into the section where I would find the appropriate products, I saw ten double supermarket isles of all forms of branded products across the categories of skin-care (the category as the product I had for sale), hair-care, toiletries, cosmetics, a myriad of over the counter (OTC) pharmaceuticals across a vast array of market segments, vitamins, veterinarial, a huge amount of household cleaning and related products – it was staggering; my immediate reaction was “wow – there is huge potential here for the ownership of many of these to change hands on a perpetual basis, i.e. there will always be brands for sale with buyers looking for them”.

I made up my mind there and then, that once I had completed the sale of the skin care product, I would go to the entire market of the ownership of all such products and present to them that MCA was prepared to be THE (and preferably the sole) advisor/broker to the total market for any and all proposed sales and purchases of any such brands.

As soon as the skin care product was sold, I sent a proposal to all such entities; approximately eighty companies in all and within the next four to five months visited approximately sixty of them and presented my credentials to support my contention.

For the last sixteen years I have been transacting such sales and purchases, a genuine niche I had on my own for some time, which of more recent years has been challenged by other advisory firms. During that time we have completed in excess of one hundred such transactions, we developed an attitude amongst the brand owners in the market that the sell/buy option in such a way was a more continually buoyant opportunity than they may have otherwise thought, and in the process of it all, we established THE basis of style of an Information Memorandum that has been copied by everyone else in the advisory business as the basis of presenting such opportunities to the market, and it is still the basis for doing so today.

The whole exercise in such a way was certainly a major change in direction at the time, but I’m glad I went that way, and it proves the point that you can never be certain where you will finish, despite your very best pre-existing and documented strategies and plans beforehand – to some extent, a case of strategic foresight at work at that precise time!

Back to the Business Plan, thus the primary content of the initial plan should be centred on the following:

• The development of your initial prospective client/information base.

• Your initial target markets, by category.

• Your initial total product offering.

• Determining which product offerings will be offered to which target categories, and then separately to which specific targets within each category.

• Compliance requirements in relation to the registration of your business, total office set up, any initial staffing requirements, all initial promotional requirements and materials, etc.

• Budget for the first twelve months, including all expected revenue sources and costs, by month and for the total year.

• Objective setting and measurement - for both business growth and financial results. Achievement against objectives should be recorded quarterly, reviewed generally each month, and reviewed in detail, quarterly.

All of the above should be appropriately documented within such a very broad but concise initial plan, with the document thereafter briefly reviewed at the end of each month of operation, or at any other interval if the need so arises.

After the business has been operating for an initial nine-month period, the business plan for the next three years, per year, should be developed and ready for introduction by the commencement of the second year. Such a plan would take into account the experience of the business so far, and importantly the specific directions it has taken despite the intentions of the initial plan.

A suggested index for a developed business plan is detailed below;

1. Executive Summary

2. Mission Statement & Objectives

2.1 Mission Statement

2.2 Objectives

3. Present Organization Structure & Operations (if existing business)

4. Proposed Future Business Structure

4.1 Direction & Focus

4.2 Ownership Equity Structure

4.3 Funding

4.4 Staffing & Operations

5. Strategic Directions of Business

5.1 Existing & Future Competitive Environment & Strategic Responses

5.1.1 General

5.1.2 Competition

5.1.3 Future Strategy, Existing & New Markets

6. Strategy Implementation for Business

6.1 Business Organization

6.2 Staffing Requirements

6.3 Marketing

6.3.1 Key Marketing Objectives

6.3.2 Target Market for Business

6.4 Product Development & Research

7. Financial Strategy

7.1 Risk Management

7.2 Financial Summary

7.2.1 Attachment - Business Financial Summary

7.2.2 Attachment - Business Estimated Balance Sheet Position

In summary, the main points for achieving a practical Business Plan are:

• The initial business plan should only be broad in structure, and short term. However, the bigger the business, the more extensive the plan and its term.

• The directions your business takes in the first twelve months may not be in strict accord with your initial business plan.

• After your business has been going for nine months, develop a more extensive plan for the next three years (per year) from the end of the first year.

• If you feel you do not have all the necessary skills to determine all of the plans features yourself, seek external help to do so.

Don Matlock has had in excess of 30 years collective experience in investment banking, including the last 20 years as the principal of Matlock Corporate Advisory, a leading boutique corporate advisory firm in relation to corporate divestment, merger or acquisition advice.

Don has recently published Risk Taker, Success Maker – Consulting for Career and Personal Growth – www.risktakersuccessmaker.com

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