The one-page business plan
A good finance plan drives the business towards its specified goals by addressing activities, accountabilities, resources and timescales, all within a framework of explicit assumptions. However, you’ve been putting it off because you don’t have time.
Same old approach. Developing the plan tends to begin with setting a timetable that starts in the last quarter of the year and ends in the last month of the year in which the board would approve a final budget for the next year. Key managers feed into it before a final position is reached.
Waste of time? The criticisms of this traditional budget process include that it takes up too much time; it takes so long to produce that it is overtaken by events by the time it is approved; the plan is so lengthy that it is not referred to during the year; too many initiatives are introduced, and it is difficult to track progress; the level of detail required obscures the big picture; and it encourages “gaming” where department heads attempt to have easy to achieve targets agreed.
Tip. More detail does not equate to better budgeting accuracy and the same applies to the business plan. Passing the sense check and covering key elements is more important. The plan doesn’t have to run to more than one page.
The best way to record a one-page business plan which will incorporate numbers and words is to use an Excel template. As you are only giving yourself one page, be prepared to make compromises on detail. For example, rather than showing all months the plan can show quarters; the profit and loss on the business plan can be shown at a high level rather than all the detail. So have a line for sales, one for cost of sales, one for premises costs, etc.
Detail. You will still need a detailed budget showing all months and lines of the profit and loss account, but this can be created once the plan is approved.
Tip. To keep the one-page business plan as uncluttered as possible, work in round thousands if that makes sense for your business. The aim of the business plan is to capture the major initiatives during each quarter against each of the summarised profit and loss lines.
Tip. To avoid an overload of initiatives and encourage focused ones, allow for a maximum of three initiatives for each summarised profit and loss line.
Tip. Ensure that there is room in the template for the person responsible for each initiative to be identified.
Tip. Record the impact on the prior year’s profit and loss account that each quarterly initiative will make. Example. Last year’s sales are £800,000 and a new product will be introduced in Q3. Record on the sales line the extra Q3 and Q4 sales of, for example, £30,000 and £40,000, so in the absence of other initiatives total sales budgeted will be £870,000.
Tip. By sticking to a few major initiatives, the plan becomes much easier to digest, e.g. it’s easy to see whether any dependencies have been planned for, such as new staff required for that Q3 launch.