A successful financial planning practice does not happen without effort. It is the result of a good idea, implemented in a systematic way, over a period of time, according to the pre-conceived plan or schedule. This is the case whether the practice is being started from scratch, or whether it is an older practice entering a new phase of activity and growth. This is also the case regardless of practice location and competition.
A good business plan reflects the owners’ personal preferences and ambitions. It accommodates private lives (of the owner) and, by anticipating expected problems, helps to reduce future stress levels. If there is a plan for what is going to be done and why, the chances are it will be implemented more successfully and with much less angst. For example, a good business plan will cater for peak workloads through strategies such as introducing new support staff well before the peak workload arises.
Sometimes the plan is in the owners’ heads. They have strong views on what will work and they set about doing it in a determined way. That is commendable and there are many examples where this has worked well and has produced good results. However, the prospects of good results are greatly increased, and the prospects of bad results are greatly decreased, if the plan is documented. This should be done in a disciplined and structured way, identifying what should be done and what should not be done, who will do it, and why.
This is the case even if the written business plan is only to be seen by the business owner. There is something about seeing the plan on paper that makes it more concrete – and which also allows gaps or inadequacies in the plan to be identified and fixed.
It is a good idea to analyse and check the plan regularly. How regularly depends on circumstances. For established practices experiencing little growth once a year may be appropriate. For practices that are experiencing great change the business plan may be reviewed more frequently. In each case monitoring and up-dating the business plan is an intrinsic part of developing and maintaining a successful practice.
Owners can choose to develop their own business plan or they can seek the help of a consultant. The following table lists out the advantages and disadvantages for both of these options:
|Creating your own plan||Seeking assistance|
Of course, a combination of both options could be viable.
Successfully executed, a business plan should maximise practice profit. This will, in turn, maximise the goodwill in the practice.
Start with a vision. Planning cannot occur without one. Formalising the process can help turn abstract concepts and ideas into a practical reality. Formal statements about the visions and plans of the practice are often developed; this enables owners to more easily communicate their plan, which in turn allows them to better manage performance and outcomes. This formal statement is called a “vision statement” and is usually kept short and simple to best-express the core ideas about the future direction the practice intends taking.
To assist with creating a vision statement, owners should first establish a set of principles and values that will underpin their practice.
Once the principals, beliefs and values of the practice have been developed the meaning of each value needs to be reflected upon. Questions should be asked such as:
- what each value is about and what it really means;
- whether it is fully understood by staff and clients; and
- what other ideas are associated with each value.
The values can then be translated into a set of principles and standards of behaviour within the practice and incorporated into the vision statement.
Thinking about the clients
An ethos of client care and support should dominate the plan. If this occurs the practice should flourish under all measures of success, especially client service and practice profitability.
The owner will need to define the demographics of the practice. The planning process should then be developed around meeting the needs of the type of clients it will be serving. Identifying the potential client base is an important factor when thinking about the type of services that will be provided.
Thinking about the owner
A good business plan reflects the personal preferences and ambitions of the owners. Apart from setting goals and selecting strategies, the good plan also accommodates private lives.
The process of preparing a business plan allows the owners to identify what is important to them and allows their preferred lifestyle to be considered. For example, the needs of a young family may dictate the hours the practice is open: Saturday morning sport makes this time unavailable to the business.
The business plan process often presents a good opportunity for reflection on the priorities of the practice owners – and for thereby ensuring congruence between personal and professional goals.
What a business plan looks like
There is not one standard format. A business plan is not a precise formula to be strictly adhered to no matter what the circumstances of the owners are. It is a document with some opportunity for flexibility, reflecting the needs of the people who created it and use it.
Nevertheless, some broad guidelines can be set out to assist in preparing business plans. Within common sense limits, a business plan can be as short or as long as one wishes it to be. It can be filled with detail, or devoted solely to the big picture. The plan should reflect the unique needs of the practice. As it is their document the plan should be written by the owners, using outside assistance if required. Using a template or a precedent can assist in developing a logical and consistent strategy for conducting the practice in both the short and long terms. This is particularly the case if a third party, such as a potential partner or a bank, is going to view the document.
One suggestion for a business plan is set out in the table below.
|1. Background Information||
1.1 Purpose of Report
1.2 Structure of Plan
1.3 History of Organisation and Organisation Profile
|3. Practice Position||
3.1 Market Overview
|4. Organisational Strength||
4.2 Management Control
4.3 Human Resources
4.4 Construction/Operation Technology
|5. Strategic Audit||
5.1 Situation Analysis Summary
|6. Grand Strategy||
6.1 Mission Review
6.2 Basis for Growth
6.3 Sustainable Competitive Advantage
|7. Functional Strategies||
7.1 Alternative Strategies Available
7.2 Recommended Strategy
7.3 Operations Strategy
7.4 Finance Strategy
7.5 Marketing Strategy
7.6 Resources Strategy
8.1 Implementation Strategy
8.2 Contingency Factors
This is an overview of the business plan. Although it comes at the start of the document, it is usually prepared after the body of the plan has been drafted. It sets out the reasons for undertaking the process and highlights the main points by placing them into context.
The summary sets out the basic information required for the business plans’ audience. This section should also contain an overview of the key activities of the practice and the variety of services offered. It should include an overview of the target markets of the practice, who the competitors are and what competitive advantages it has over them. Then it should determine the projected profits from these services, what the capital needs are, who will be contributing these, and what security will be offered.
The mission statement should provide a succinct outline of the practice’s purpose. It defines the practice’s goals, objectives and values. A well-written mission statement should clearly communicate the fundamental business objectives and goals and how it will achieve these in accordance with the business’s core values.
This section determines where the practice stands in relation to its competitors. It uses an integrated approach to assess the competitive advantages and disadvantages that the practice may face. It closely examines the client profiles through the use of demographic and other relevant information and enables the practice to make informed decisions about future actions. It also looks at the competitors’ profiles.
Market research of both the competitor‘s and the practice‘s current clients may be used. Where it is, this information must be relevant, accurate, and objective. It should enable decisions to be made relating to the following areas:
- how to promote the practice;
- what pricing structure to use, and what fees the competitors are charging etc;
- what extra services to offer;
- whether the clients live locally or cover a wide geographical area; and
- changes that might enable these services to be established.
As a general proposition, Dover urges caution regarding the use of external market researchers. They can be expensive. They also cannot substitute for the practice owner who knows his clientele and knows how best to meet the needs of that clientele.
Having examined the practice position, it now time for the business plan to examine what is happening in the rest of the world. The idea is to determine where the practice may have strengths. These strengths may or may not be factors that are controlled by the practice,They can include, for example, technological advances, the economic climate, the availability of specific skills, client preferences, etc.
Many external factors cannot be controlled. Such factors may include:
- legislation and political/legal requirements – ASIC compliance requirements, property titles and leases, employment law, zoning and parking restrictions etc;
- economic factors – interest rates and their effect on spending, economic policies, etc;
- demographic factors – trends in client behaviour, aging population, etc; and
- business to business (microeconomic) factors – reliability of IT infrastructure, leasing arrangements, etc.
Most internal factors, however, can be controlled. These could include:
- physical resources – the number of staff to be employed, expected client numbers, workflow, client service policies, staff appraisals, etc;
- financial resources – the amount of working capital required, whether there will be adequate cash flow, access to finance, etc; and
- business capabilities – available space for increasing the number of owners, experience and expertise of practical and non-practical staff, ongoing educational needs, recruitment and selection policies, staff morale and communication.
having completed the above analyses, it is time to determine whether the practice will be able to operate within this environment, and if so what makes the practice special or different from its competitors. This is when a SWOT analysis should be undertaken. This gives the owners the chance to review the Strengths, Weaknesses, Opportunities and Threats that will affect the practice.
Questions that could be asked include:
- whether the practice will have the capacity to operate successfully in this market, considering the competitor analysis and client profile;
- whether enough cash is available to set up practice without compromising client services;
- whether employees can be successfully attracted to work in the practice; and
- have all regulations been observed.
By identifying weaknesses and threats, strengths can be built upon and opportunities will present themselves allowing the practice to change direction if needed. The SWOT analysis allows the practice to identify what critical success factors are required to enable it to have a competitive advantage. The three main critical success factors are:
- resources – appropriate premises to operate from, adequate funds to operate successfully, and skilled staff to undertake the work, etc;
- processes and systems – feedback systems, procedures and policies, operating systems, accounting systems, appropriate client relationship protocols, client confidentiality processes, etc; and
- services being offered, including prices and promotion of these services.
It is now time to develop the strategies to meet the aims of the practice. Each strategy should follow the SMART principle:
|Specific||The strategy states precisely what will be achieved;|
|Measurable||The strategy can be monitored or measured;|
|Achievable||The strategy is actually achievable;|
|Realistic||The successful implementation of the strategy must be achievable;|
|Time||The strategy should identify a definite time in which it will be achieved.|
The person/s responsible for implementing the strategy also needs to be identified.
Common strategies identified and articulated at this stage include:
- an operating strategy – how the practice is going to run, keeping in mind the resources and processes identified earlier;
- a financial strategy – budgets are drawn up for expected income and expenditures, spread sheets for costs, how much clients will be charged, whether they will be charged on on-going basis, whether it is appropriate to consider a second or even third owner, fixed costs compared to variable costs, breakeven point etc;
- a marketing strategy – signage, advertising in local papers, word of mouth, website, community involvement; and
- a resources strategy – how many owners will work, how many support staff will be required, what alternative services will be offered, what awards staff will work under and similar matters.
Having identified all the activities and tasks required to achieve the goals set, it is time to put it all into operation.
A simpler alternative
The template above can be used to create a very detailed business plan for a financial planning practice. Many practices prefer something less formal and rigid – a more basic, simpler alternative..
In developing a simpler plan, ensure that Einstein’s maxim is followed: “things should be as simple as possible, but no simpler.”
A basic business plan should (at a minimum) address the following basic themes:
- confirm where the practice is currently;
- consider where the practice could be;
- examine how to get there; and
- discover when you have arrived.
Where the practice is now
For existing practices, it is important to confirm the current situation. This will entail confirming what the practice’s past record, strategy and focus was.
It can then reflect on whether it has done as well as it should have, having regard to the purpose or vision of the practice. If it has not, then establishing why outcomes have not been achieved will help in future planning? Important areas for any business to consider include:
- management, direction and control;
- human resources;
- quality of management; and
- other strengths and weaknesses.
Where the practice could be
Think about the big picture. It is OK to be a little idealistic here, as everything begins with an idea.
That said, be realistic. We once heard a man in a suburban cafe tell his co-diner that his ‘biggest competitor is Bill Gates.’ Time to switch competitions – you are never going to win that one.
How to Get There
Given the current situation of the practice, the plan will need to include ways of achieving its identified goals, and how to become the practice of its vision. This is the sharp end of the business plan. It is here the real detail sets in and actual tactical plans and proposed actions are formulated. This section sets out the key issues of who, when, what and how.
Are we there yet?
Make sure you can identify the success of the practice, having regard to the objectives set for it. These signposts should include financial and non-financial criteria.
The Australian Government has quite a useful business planning tool on its business website. It can be downloaded here.