How to Create Business Plan for your Company

By H&R Block 7 min read

There is an old saying: "If you aim for nothing, you will achieve nothing".

Every business needs to make plans, covering all aspects of the business.

A good Business Plan should cover a short-term period of 1 to 2 years and deals with the initial goals and objectives of the business; while a Strategic Plan which usually covers a longer period of 3 to 5 years and deals with the direction and objectives of the business.

The detail included in Business Plan will depend on who is going to see it. For example, if it is to be viewed by an external party to the business (such as seeking a loan from a bank or other investors) then it will need to be more detailed. If, however, it is only for internal purposes (such as discussions between a partner or spouse, or by staff or the management team) then the Business Plan can be much simpler.

A typical business plan would normally include:

  • A Situational Analysis: outlining the current situation of the business, including:

    • The structure of the business, including legal entity

    • The products or services being sold to make money

    • The vision of the business owners and its goals

    • Advantages the business has over others; i.e. its "unique selling points"

    • Ownership, with background and skills the owner/s provide to the business

    • The business' high-level strategies

  • Customer and Market analysis: defining the target market of the business, including:

    • An analysis of the industry and markets the business operates in

    • Customers and target markets, both now and in the future

    • Marketing plans to establish and grow the business

    • Charges and/or fee structure, outlining how much is charged

    • A review of your competitors and what they are doing

  • Strategies: describing the action plans to achieve the business' goals; including:

    • Goals and objectives, with the time-frame in which you want to achieve them

    • Success factors to satisfy your customer, and how these would be measured

    • Milestones, with a 90-day plan to get started, then the first few years

    • How the business will operate, including what staff you may need

    • Supplier arrangements

    • Strategic partners and alliances you will work with

    • Facilities and equipment you will need to operate your business

  • A Financial Plan: outlining financial expectations and requirements of the business, including:

    • Key financial assumptions

    • A cost analysis, to run the business

    • A break-even analysis, analysing what income is required to cover costs

    • A projected profit and loss

    • Budgets and an analysis of cash flow requirements

    • Capital required maintaining or expanding the business, as well as potential financing requirements

Business Plans should not be static, as markets and conditions are not static and continually change. They therefore need to be living documents. They should be regularly reviewed and updated. And they should be written down.

A way to review your business and understand how to achieve its goals and objectives is by asking the questions of 'Why', 'What', 'Who', Where', 'When' and 'How'.

Furthermore, Business planning requires business owners to ask 3 basic questions:

  1. Where are we now? (Current Situation)

  2. Where do we want to be? (Goals and Objectives)

  3. How do we get there? (Action Plans)

Exit & Succession Plans

Another type of plan is an Exit or Succession Plan, as all business at some stage will change ownership in some for or other; whether it is from selling the business, closure or transferring the business to another person or persons. This event can occur at any stage within the business cycle.

Sometimes the change in business ownership and timing may be known by the owner or owners well in advance while at other times it may be on short notice, depending on circumstances. Business owners should, however, in the life cycle of their business, plan and prepare for the time that they intend to exit their business or pass the ownership to the next successor, as a succession plan.

Often a business owner's wealth is tied up in the value of their business, so for most owners extracting as much value as their can when they exit the business is absolutely imperative for them.

To ensure the process of ownership succession is done to the level of satisfaction of all parties, i.e. the buyer and the seller, it is important that the current owner selling their business is able to demonstrate to the buyer of that business that the business can successfully function after the sale without the previous owner. The more this situation is actually in-place, the more valuable the business. Details relating to the sale or passing on of a business should be planned in advance.

An exit and succession plan should be able to be summarised as a one-page document on what the owner is trying to achieve; including:

  • How much the business is worth now

  • What the business could be worth in the future

  • The preferred timing of the sale

  • The preferred purchaser of the business

From a personal perspective, the level of personal readiness of the business owner is key to the decision to exit the business. This includes:

  • Proper tax planning, to help reduce tax obligations

  • Estate planning, to provide for a family in case of death or serious accident

  • Wealth management strategies pre and post exit

  • Personal wellness and health

When planning to sell a business, it is important for a business owner to consult with external specialist advisors so that they have information on their options; in areas such as tax planning, business valuations and personal wealth strategies. Once a business owner has this information they will be in a much better position to make decisions around exit options and timing.

H&R Block can assist with you with your Business Plans, including the preparation of financial reports to support them.

Need assistance? Enquire Now

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