Writing a business plan when a business is in severe difficulties may seem like a luxury and an unaffordable waste of time, but it is an absolutely critical part of business restructuring.
Plans help you stay organised and help you coordinate your efforts. Developing plans is difficult. For most small business owners, their preference is to look at the detail and not the big picture.
I think the main reason they don’t develop and follow a plan is because they are afraid of failure. “What would happen if I have a big, hairy, audacious goal and didn’t reach it? What would people think?”
When I work with business owners, I first assure them the goals of their business are their goals, and no one else cares if they achieve their goals or not. I’ve never had a client ask me what my goals are, and I don’t expect I ever will – they just don’t care about my goals.
Second, I tell them that not setting a goal or plan is like turning up at the airport without a ticket and not knowing their destination. I ask them, ‘What will you do?’ and ‘How will you do it?’ and ‘With whom’ and ‘What do you want out of the trip?’
Third, I assure them they are more likely to get close to their goal if they first set one. Remember when you were saving up for a car or a house deposit? I bet you had regular savings goals and stuck to a budget. By knowing how much you needed to put away each week or each month, you were more likely to achieve your goal than if you had no goal or plan at all.
What is in a business plan?
1. An executive summary
A summary and overview of the important aspects of the plan covering the purpose of the plan, a brief description of the company, the history and marketplace, highlights of the financial projections and the proposed restructuring, funding requirements, and strategies.
2. Operational analysis and action plans
A SWOT analysis of each core business process and each major support function, then a detailed series of initiatives that address the weaknesses and opportunities – operationalising the restructuring strategies into a series of actionable, measurable and quantifiable steps.
3. Financial projections
These include the basis of any refinancing, financial restructuring, or negotiations for ongoing support from stakeholders. Financial projections set out the financial implications of the restructuring strategies and detailed operational actions, which in narrative form provide the core of the plan.
4. Implementation process
There should be a description of the whole implementation process including milestones, key performance indicators, reporting timetable and an internal communication program to roll the plan throughout the business.
5. Risk assessment
An assessment of risk is critical for all stakeholders when deciding whether to support the restructuring plan.
6. Review process
Plans must be reviewed regularly. They are a living, working document. A restructuring plan should outline when and how the restructuring plan will be reviewed, and by whom. The reviews should involve a restructuring advisor, especially if you are relying on safe harbour provisions.
I regularly get asked to write restructuring plans at the start of an engagement, but this is something I push back on a bit. Under safe harbour provisions, the Board and senior management should write the plan. Their involvement generates ownership of and commitment to achieving the plan throughout the organisation. Without this buy-in, the plan will ultimately fail. While advisors can play a useful support role and bring specialist advice, it is vital that the plan is ‘owned’ by the Board and management.