Business Planning Revisited – 3 Major Components to Address

“Good business planning is 9 parts execution for every 1 part strategy.” ~Tim Berry

The mere idea of a business plan can be polarizing.  Some business owners live by their business plan while others see it as an unnecessary formal document that is often done once and stuffed in a drawer.  As a financial planner, I always encourage my clients to embrace the concept of planning and see it as a tool that helps them achieve their goals and use their resources in the most efficient and effective way possible.  Financial planning is a process that does not end with an initial analysis.  It is an ongoing process and the plan evolves as our circumstances change and our lives become more complex.  I see business planning in a similar way.  Business planning goes beyond a static document.  It is a strategic planning process and the business plan serves as a guide to help you accomplish your goals and grow your business.  When written properly, a business plan is manageable, practical, and can influence your day-to-day activities.  Just like a financial plan, a business plan should be reviewed regularly and adjusted over time.

There is no one-size-fits-all approach to business planning, as every business is different.  While the approach can vary, the components of a business plan are generally the same.  Similar to a financial plan for clients, a business plan answers three questions:

1.    Where are you now?

Think about the types of clients you serve and the services you provide.  In addition, what are your sources of revenue and how much time are you spending on each client relative to the revenue each client generates?  What works well for you and your staff and what would you like to change?

2.    Where do you want to be?

Think about your ideal business model and your revenue goals.  Beyond financial goals, think about “soft” goals such as your ideal work environment, values, and what role you would like to play in your business.

3.    How will you get there?

You have probably heard that a goal without a plan is just a wish.  All plans must have “SMART” goals followed by specific tactics that can help you achieve your goals.  Your goals should be well defined, communicated, and influence your daily decisions.

Now that you have identified the questions that your business plan should answer, there are three major components that your business plan should address.  These components will help you answer the first two questions and serve as a guideline for answering the third question.

The first is your business model.  Think about the type of firm that you would like to have and what environment you would like to create.  Some advisors are only interested in being solopreneurs and building a lifestyle practice.  Other advisors like the idea of collaboration and working with a team of their peers, and this growth could be organic or by joining with other firms.  Either way, having an idea of the end goal can help you create a plan for your existing business.  Once you determine the type of firm you want, look at other firms that have the same model.  See what works, what doesn’t work, and what you can do better.  Finally, think about the types of clients you would like to serve.  Do you have a particular area of expertise that can help a specific market?  Are there certain personality types or age groups that you enjoy working with the most?  Having a niche market can make it easier to define and offer the best level of service to your clients.  This can also be the base of building a marketing plan and service models.  Once you have determined your business model and niche market, the next component to establish is the management model.

The way your practice is managed largely depends on your strengths and preferences.  Think about your personal values, what you enjoy doing most, and what you would ideally like to delegate to others.  Also, consider your strengths and what personality types and technical skills complement those strengths.  Finally, think about the lifestyle you would like to have and how much you would like to be involved with the day-to-day management of your business.  Your business model and management model determine what combination of staff is needed for your business to operate efficiently and effectively.  You can also build an operations plan around this information.

The last major component of a business plan is a continuity or succession plan.  Depending on your business model, the idea of selling and exiting your business at some point may not be your end goal.  Even if this is not the case, you should consider how your business would continue in the event of a natural disaster, death, or disability for the sake of your clients.  Earlier this year, the North American Securities Administrators Association (NASAA) implemented a rule which requires that advisors adopt a “Business Continuity and Succession Plan” for their business.  While this only applies for state-registered investment advisors, the SEC has recently announced it is considering a parallel rule for SEC-based RIA firms.  This rule highlights the importance of ensuring continuity of client service and the business itself in the presence of an untimely event.

Once you’ve considered all of these areas, you should be able to clearly answer “Where am I?” and “Where do I want to be?”.  The answers to these questions can lead you to the final phase of figuring out “How do I get there?”.  You can start with big picture goals and work your way backwards to create quarterly, monthly, and even weekly milestones that help you achieve your vision.  As part of the business planning process, you should allocate specific time to focus on business planning activities.  This could be as often as once a week or once a month; it really depends on the size of firm and the goals to be achieved.  It is also a great idea to engage your staff by communicating your goals, defining their roles and expectations with respect to these goals, and creating an environment that encourages feedback and open sharing of ideas.

Just as financial advisors encourage their clients to embrace the financial planning process, business owners should do the same with the business planning process.  Having a clear vision for your business allows you to create an action plan that can help you make the most of your time, talent, and resources.

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