The Importance of a Business Plan
The Importance of a Business Plan
One of the main reasons many businesses, including franchises, fail is because they either do not undertake enough planning before they start, or they do not maintain a solid planning- review process as their business grows and matures.
It is vital for the survival of your franchise to take the time to develop your business plan. Your business plan should outline your goals, your strategies, your prospects, and also the method by which you will achieve these.
Each business should have its own and unique plan. While it’s good (and often much easier) to work from a template, start out the right way by making sure that you delete any headings which do not specifically apply to your individual business. Don’t consider this as homework, but instead as a serious analysis of how your franchise business will work. Your plan will not only help you to test your ideas, but also to decide on strategies to reach your goals.
It’s all about quality. Your business plan doesn’t need to be as long as War and Peace. In fact, the more concise and straight to the point it is, the better it’s likely to be. A five-page document can be sufficient, if it’s five pages of solid content and strategy. You do need to make sure that you cover all areas of your business and that your plan is manageable and contains enough flexibility to be revised as conditions which affect your business change.
Your plan should reflect your business life cycle – whether you are starting up, supporting a business-loan application or providing ongoing management. For example, a business plan prepared to accompany a bank-loan application should show the loan requirements, describe how the borrowed money will be used, list what collateral will be provided, and propose the repayment plan.
Your business plan is your roadmap to success. It needs to be fluid and flexible, and it needs to be reviewed and revised at regular intervals throughout the business year. If at any time you are forced to diverge from your strategy, your business plan will help you find your way back to more familiar ground.
Suggested structure for your Business Plan
• The Executive Summary: A summary of the highlights and main points of your plan. Write this last.
• About The Business: This section should include detail about the location you will be operating from; the history of the franchise systems; facilities and equipment you will be using; as well as the legal structure, set-up costs, funding, and insurances you will choose. This section paints a picture of your business and describes the legal entity and ownership structure, while also giving an overview of start-up costs and initial funding.
• Industry and Market Analysis: Here is where you describe the products or services you offer. Make sure you emphasise why buyers will purchase those things, and what benefits they will receive by doing so. Show how much it costs to deliver what you’re selling. You should also review current trends in the wider industry or sector, and assess your competition.
• Strategies: Here you need to document your overall mission strategy, objectives, and milestones. You can also include your marketing strategy, outlining any plans for advertising and promotions as well as a sales forecast and the cost of sales. It’s a good idea to detail your distribution method/s and plans for growth as well. You should also describe the target market and segment you will be focusing on, including market demographics, market growth, trends and forecast. Finally, describe the nature of your industry and sector as well as your competition, and fine tune your milestones with dates, budgets, and specific responsibilities.
• Management Structure: Outline staff positions, costs, and facilities and also include an organisation chart. You should identify and describe the key members of your team, list management- team gaps (if any) and show how they will be addressed.
• Financials: The key element of this section is your financial plan and needs summary. Other components of this section should include sales forecasts, assumptions, annual income expenditure, a profit-and-loss statement (P&L), a cash flow statement, and a balance sheet.
• Information Systems & Controls: This is a summary outlining the operational aspects of your business. Here you should define the systems, processes and controls which have (or will be) put in place. Also, identify any gaps and plans for the future.
• SWOT Analysis: This helps you define your Strengths (for example, reputation, latest technology, good location), your Weaknesses (lack of experience; difficulty finding staff, high overheads), any Opportunities (local market growth, an unfilled niche in market, the possibility of a joint venture), and any Threats (a competitor opening up, over-reliance on one supplier, raw-material costs rising).
• Exit Strategy: Knowing how and when to exit your business is as important as knowing how to start it. Many owners build their business to sell when the time is right. If this is your strategy, make sure that you understand how to do this. There are many books available which explain the details; or you can speak with your accountant, solicitor, or bank.
Other considerations and water-cooler topics:
- Share your business plan with your staff and summarise it into a one or two-page document. You need their commitment to help you get there!
- Share performance outcomes with your staff regularly. Highlight key successes and learnings, and pinpoint where results are not on track to focus everyone’s attention.
- Demonstrate key performance measures graphically; a picture really is worth a thousand words.
- Consider outsourcing and obtaining professional assistance during all stages of the planning process.
- Ensure the analysis is ‘non-emotive’, particularly in terms of what has been achieved to date and the successes and reasons for this. These reasons may not necessarily work into the future.
- Update your plan every quarter. Even if the final outcome is that there are no changes required, the discipline of holding quarterly planning-review meetings is important.
- Set key milestones which identify what you intend to achieve in set time periods. For example, the first six months, the second six months, second year, and so on.
- Business plans are as important for new companies as they are for established businesses which have been trading for ten years. Would you invest in a business that had no plan?
- Your business may require you to share the plan with shareholders and other stakeholders at monthly board meetings - perhaps even prospective investors.
Westpac has supported the franchise sector in Australia for over 20 years. The growth of a specific franchise system is supported by providing streamlined processes for lending, as well as access to other lending transactional solutions. The bank also has a national network of franchise specialist business bankers who are able to deal with specific day to day needs of the franchise customer.
Ian Watt is the Senior Business Development Manager – Franchising, NSW & ACT at Westpac. He specialises in the franchise sector, working closely and assisting many franchise brands grow and maintain their network. He holds a Bachelor of Business degree and is a qualified CPA.
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