Q&A: 7 Tips for writing business plans

Hugo Glasser of North Sydney, New South Wales asks:

The new financial year is on us and one of my investors said I really should revise my business plans. I brought him in two years ago when I started on the basis of a plan which I haven’t updated. Looking at this original with hindsight and now armed with historicals, a new business plan will need to be rewritten completely if it’s to be any good. You’ve done this before. I’d be grateful for your ideas and any tips.

Kenelm Tonkin, Chairman, Tonkin Corporation answers:

Up-to-date business plans are vital. There are seven important principles to consider.

  1. Dream. As the controlling owner, describe what you want. Articulate your vision-points. Factor-in financial and life goals. Make this personal. Drive it. Make it yours.
  2. Review or create business plans annually. Budgets should express current market conditions, whether revenues, expenses, asset valuations or taxation liabilities.
  3. If you have employed managers with P&L responsibility, allow the business plans to come from them. As the numbers and assumed behaviours percolate in the planning process, participants will feel ownership. The world moves when staff feel the entrepreneur’s sense of ownership.
  4. Develop cash flow projections against these P&L aspirations. Look at the closing balances for each month. Will you sleep well with this level of cash? If not, you will need to raise capital or scale-down your growth ambitions.
  5. Use accountants. Whether owner or employee managed, managers need the deft-touch of a crackerjack financial modeller. Good number-crunchers are also an insurance policy against the irrational exuberance which managers sometimes exhibit. With an accountant, you will end with conservative, fair and achievable projections.
  6. Fiscal discipline is everything, nearly. The plan must be followed. Expenditure limits are set. However, unforeseen opportunities arise and a degree of flex is required. This is ‘procedural flexibility’, the creation of a process to vary plan authorisation limits. Board approval at quarterly meetings is advisable.
  7. Be realistic. Planned launches and expansions require patience and deep pockets. Expect to contribute more capital than you want and a decent return in five years not one.
Dreams, motivation, anxiety, exuberance, freedom, responsibility and patience: these very human matters are the real currency of business plans.
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