Do you Need a Business Plan?

Published: Feb 21, 2022

You have determined that you need to sell your family business (which likely comprises a big part of the family enterprise) during your lifetime, and that you do not intend to set up a family office with the proceeds of sale. So what do you intend to do with the funds? And have you shared the vision with the family? Continuity planning for a family enterprise is a complex, never-ending process. 

Family enterprises need to plan in all three circles encompassing all the enterprise dynamics, including the family, business, and ownership circles. This article is focused on planning in the business circle.

Every business needs to plan, and the plan must be amended over time by all of the factors that can impact the business, including laws/regulations, technology, customer needs, supply chain considerations, inflation, employment considerations, competition and more.

Think of all the major corporate brands that have ceased to exist because they missed the telltale signs of a changing business environment, including Borders, Blockbuster Video, Ringling Bros. Barnum & Bailey Circus (founded in 1884), A&P Supermarkets (founded 1859), and many more.  Yet, among those failures are also so many success stories we are so familiar with, like Coke, IBM, and Ford to name a few.

So, what makes the difference between the failures and the success stories?  Some of the leading reasons for failure include a lack of short- and long-term planning, poor leadership, incompetent management, a failure to take measured risks, changing consumer trends/preferences, the ever-changing impact of technology and more aggressive competition.

I have prepared many business plans in my past, and can honestly say that formal business planning is not fun, but it is critically necessary to encourage (i.e. force) management to regularly re-evaluate the business and industry Strengths, Weaknesses, Opportunities and Threats, and set clear goals and action plans to keep the business relevant and successful.  As we all know, the best public companies use business planning and earnings forecasts to be measured against as being superior to their competitors when they beat expectations, and the best ones regularly do!

A formal business plan is like a roadmap.  It evaluates where you are now, where you want to end up at the end of the planning period, and the action plan to get there. 

A well thought out business plan sets sales and profit targets, and identifies what investments in manpower and property, plant and equipment are needed to attain the goals.  It forces an analysis of strategic trends, and stimulates “out of the box thinking” of solutions to pivot to achieve the goals, such as by way of strategic acquisitions and divestitures of redundant assets. 

You can break a business plan down into its sum parts further, and have a sales plan that the sales team is responsible for, a variable expense plan that the relevant expense teams are responsible for, an inventory plan that the purchasing manager can oversee, a capex plan for capital expenditures, and so forth.  Accountability is one of the key values of business planning…someone needs to be accountable and responsible to explain the variances.  It is this discipline that business planning brings to the table.

When you have developed a business plan, you are then able to measure on a monthly or quarterly basis the variances to the plan, where explanations can be lead to timely actionable changes in behavior to put the plan back on track.  It can seriously help with staff performance measurement each year.  And if the responsible party is not competent, it can be the impetus for management changes.

I have worked with many established enterprise families passing the baton to the next generation, where the next generation did not know how to prepare a 5 year strategic business plan, as they were not educated in the finance area.  They were stumped on how to prepare a strategic plan for the future.  In all of those cases, I offered constructive suggestions to help them build a business plan.  Some of the solutions included furthering education for the next gen family members using management skills training programs such as available from Crescom Leadership Training (see, recruiting a seasoned Chief Financial Officer from their external accounting firm or elsewhere to work in the enterprise on the management team, or by engaging a strategic business advisor from their accounting firm or from the BDC (Business Development Bank of Canada) which has a consulting division that can be engaged to assist the family in creating a business plan.  Building a holistic plan is important, and there are other resources available to you in the Family Enterprise Canada Resource Centre.

Simply, not planning is not an option.  There is an old saying, “if you fail to plan, you plan to fail”. 

So, no matter what family enterprise you are in, you need to know where you are headed and the actions you need to implement to get there, and understand that the formal business plan process will help you develop the roadmap you need to get you there, and keep you on track.   And while business planning is not perfect, the discipline it brings will hopefully help make better decisions to achieve your continuity plan.    

Decision Tree Question: Do you need a business plan?

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