In our previous article, we have highlighted the importance of creating a business plan. In this article, we will focus on the key elements of a business plan, the sections it should contain and how a part-time CFO can help you to create your business plan and implement it.
The key elements of a business plan
The most important part of your business plan is its financial information. Your financial forecasts should include your cash flow predictions for the next 12 months or more. You’ll also need to provide monthly sales estimates and costs to prove the business has enough working capital or to show that you understand you need to arrange additional financing.
You need to explain all assumptions in the business plan, with best and worst case scenarios. Detail the risks you’re likely to face and how they will be dealt with.
The Business Plan Sections
The executive summary is usually the first section of any business plan and provides a condensed overview of what the business is and how you intend to reach your goals. If you’re seeking funding, you should detail the terms of the financing and the amount needed. It’s best to leave writing this section until after you’ve completed the rest. It should be less than 1,400 words.
This is like an extended elevator pitch. You need to explain your company history, business goals and how you satisfy the needs or wants of your market. You will also need to explain your competitive advantage.
You will also need to provide market analysis, size and expected growth as well as, industry participants, distribution patterns, competition and buying patterns, and your main competitors.
Organization and management
In this section, you need to detail your management team (and plans to fill any gaps within that team), your organizational structure, your Board of Directors, as well as a personal plan.
Service or product line
You need to describe your product or service and any associated copyright information or research and development activities.
Marketing and sales
You need to detail your marketing strategy (including pricing, promotion) and your sales strategy (including sales forecasts, programs, and techniques). Your costs, services, and support will also need to be included in this section.
This section outlines what you expect your business to achieve financially over the next three to five years. It needs to include your projected financial statements, expected cash flow and break-even analysis as well as key financial indicators and ratios. Don’t be tempted to overstate your numbers or expectations to obtain financing. It’s likely to harm rather than help you get that funding.
If you plan to ask for a loan or capital, you need to include a formal funding request as part of your business plan. You need to include details of how much money you need now and how much you’ll need in the future.
How a part-time CFO can help you to create your business plan and implement it
The CFO Centre will provide you with a highly experienced senior CFO with ‘big business experience’ for a fraction of the cost of a full-time CFO. This means you will have:
- One of Canada’s leading CFOs, working with you on a part-time basis
- A local support team of the highest caliber CFOs
- A national and internationally collaborative team of the top CFOs sharing best practice (the power of hundreds) Access to our national and international network of clients and partners
With all that support and expertise at your fingertips, you will achieve better results, faster. It means you’ll have more confidence and clarity when it comes to decision-making. After all, you’ll have access to expert help and advice whenever you need it.
In particular, your part-time CFO will work closely with you to develop your business plan and your timetable for implementation to:
- Gain a full understanding of the business and its operating
- Work through the existing strategic plan with you and make necessary changes to build a plan which clarifies how the company’s objectives can be realistically achieved.
- Agree on milestones and break down the plan into annual and quarterly targets.
- Conduct a fresh SWOT (Strengths, Opportunities, Weaknesses, Threats) analysis, bringing the plan up to date.
- Conduct a new PEST (Political, Economic, Social and Technological) analysis, bringing the plan up to date.
- Carry out a full competitor analysis to understand in detail what is and isn’t working in the market.
- Explore opportunities for effective market research to enable innovation and development of new products/ channels to market/operating procedures
- Identify key players in the business
- Identify skill gaps in the business
- Agree financial incentive structures to retain and motivate key members of the team
- Identify five key metrics for determining what the future course of the business should look like
- Agree on the exit or succession strategy
- Develop a clear, coherent message (vision/ mission/purpose) to staff and to customers
- Work with the senior team to ensure individual department goals are aligned with the big picture strategy
- Agree on a who/what/when set of objectives for all department heads
- Implement accountability protocol for every member of staff
- Determine methodology which allows the senior team to course correct periodically when a change in strategy is required
- Agree on delegation of authority to department heads to spread responsibility across the business and to free up the CEO/business owners time
- Create a feedback route so that strategic goals are regularly shared with staff
- Develop a set of relevant KPIs (Key Performance Indicators) and a system which allows for regular (daily/ weekly/monthly/annual) monitoring and reporting
- Develop a long-term efficient tax structure for the business and for key employees
- Identify key outsource suppliers/advisors and, in particular, corporate finance contacts
This process will instill a deep feeling of confidence both within the senior team and throughout the rest of the business.
Installing an up to date business plan or ‘roadmap’ in your business will allow you to experience a sense of control, which may have been absent since the day you started your company.
The business plan (and the methodology for updating the business plan) will remove a significant amount of confusion from your operating procedures. There will always be challenges contained within new projects but you will have a proper framework against which all decision-making can take place.
The plan provides the blueprint for delegating responsibility to your team and allows you to create some space in your own environment to work on growing your business, with your part-time CFO as a constant guide and sounding board.
You will move out of the chaos and into a more serene working environment where each of the gears, which make up the bigger system, is able to move in harmony.
Potential hazards will have been identified in advance and dealt with before they become unmanageable. You will be able to move from a culture of fire-fighting to a culture of fire-prevention and the benefits will be felt by each member of your team and most probably by your customers too.
The business plan is the first key to profitable growth!