Business Planning Workshop

(1)

Facilitators:

Roy Crosby Business Adviser, CEIS

Alex Rooney Business Adviser, CEIS

Today's Session. . .

• Will identify some tools & techniques that might work in your organisation

• Demonstrate a process – 4 questions to consider ‐ when developing a business plan

• Identify a Business Plan template structure

• Bring your knowledge, experience and ideas to the discussion

(2)

Programme

• Introduction & where are we now?

• Where do we want to be?

• What needs to be done?

• How do we know when we get there?

Why develop a business plan?

And who is it for?

Why have a Plan?

• Articulate your vision and define your strategy

• Communicate your ideas to staff, Board, stakeholders, partners, funders

• Provide a basis to make decisions and clarifies your actions

• Establish your targets and gives you a baseline for improving performance

• Project necessary resources, costs & income levels

(3)

Business Plan Format

1. Front Cover/Company Information Page/Contents 2. Executive summary

3. Introduction – what is the plan for 4. Vision, Mission, Values & Objectives

5. Strategic Framework – policies & agenda affecting your business

6. Service Provision – what are you delivering & how?

7. Markets/marketing/USP/research/evidence of need/promotion/customers/clients

8. Management & personnel 9. Finance – Summary

10. Appendix (full financial projections, detailed action plans)

Business Planning Cycle

• 5‐10 years+ Vision, Mission & Values

• 3 Year Business Planning Horizon

• Update Annually

• Review performance quarterly

• Fit with other cycles: financial, funding, performance management, staff survey, customer evaluations

• Exceptional review for major changes in operating environment

Business Planning Summary

Today

• The business plan is a bridge between your organisation as it is today and its vision for tomorrow

• The bridge is built on a number of key pillars, all detailed within your plan

• The business plan details the build plan for your bridge, what pillars are needed, how you will fund it, who will build it and when you will complete

Staff Equipment Funding Assets Customers Vision

Services

(4)

Business Planning – A Four Stage Process

Where are we now?

Where do we want to be?

How do we know when we get there?

What needs to be done?

Business Planning Process Phase 1:

Where are we now?

Some tools to consider:

Tool Purpose Benefit

PESTLE Analysis Examining broader operating environment

Early warning system

Sector Analysis Examining an organisation’s market

Establishing advantage/

disadvantage Scenario Planning Anticipate possible futures

for major impact/ high uncertainty factors

Aids long‐term planning

Internal Audit Assessment of current resources and performance

Evidence of performance rather than opinion

Boston Matrix Assessment of service performance and potential

Aids decision‐making for resource allocation SWOT Analysis Summarise an

organisation’s ‘current

Basis for identifying critical issues

*

(5)

Political Economic

• What legislation does or will impact on you?

• What activities are allowed or not allowed?

• Is there increasing/decreasing political support for your activities?

• What is happening to funding?

• What is your own funding/income position?

• How is demand for your service/activity changing with the economic situation?

• Is there pressure for cost cutting?

Social Technological

• Is your topic ‘hot’ or ‘not’ and how does that impact?

• Are the numbers of your target market increasing or decreasing and why?

• Is your target market changing in terms of sector, economic circumstances etc?

Legal

• Are you affected by Health & Safety law?

• What are the implications of employment law?

• Are you impacted by EU legislation?

• How does the internet and other technologies impact on your work?

• Are technological changes in your field altering your ability to work?

• Do changes in technology mean a rise or fall in demand for your services?

Environmental

• Are you impacted by environmental controls, e.g. noise levels, pollution controls, etc?

PESTLE Analysis ‐ EXAMPLE

External FactorsInternal Factors

Positive Negative

Strengths

• Staff?

• Range of services?

• Financial position?

• Quality of service?

• Strong community links?

• Good marketing presence?

Weaknesses

• Absence of important skills?

• Poor service provision?

• Lack of staff commitment?

• Management direction?

• Financial position?

• Lack of resources/facilities?

Opportunities

• New legislation/policy?

• Poor provision by statutory agencies?

• Increasing demand in specific areas?

• Potential funding sources?

Threats

• Poor perception with funders?

• Competitors?

• Changing environment – social, legal, political?

SWOT Analysis : Example

Business Planning Process Phase 2: Where do we want to be?

(6)

Where do we want to be?

Some tools:

Vision Statement of the future Motivation and Inspiration

Mission Describes how you will achieve the Vision

Communication and understanding

Values An organisation’s way of doing things

Underpins all that you do

Aims Describe a desired end

result

Milestones between present and the future

*

Vision & Mission

Why Both? What's the difference?

• A mission is what an organisation does, its action; a vision is what an organisation would like to happen as a result of the action that it does.

• Mission equals the action; vision is the ultimate result of the action.

• Mission answers the question “What would not happen if we were not here as an organisation?” Or more positively, “What change is achieved because we exist?

• Vision answers the question: “What are the results, the ends, the consequences of our action?”

• Vision looks forward; mission looks at today.

Why Both?

• Vision without action is merely a dream

• Action without vision just passes the time

• Both Vision & Mission together can bring about change

(7)

Vision

• A vision statement outlines what an organisation wants to be, its ultimate goal – it answers the BIG question – WHY are you doing what you are doing?

• It focuses on tomorrow, the future

• It is a description as to what drives the business ‐ It is inspirational

• It provides clear decision‐making criteria – in other words if in doubt about developing a new service think back to whether is supports the vision

Vision – Things to Consider

• It is a message that clearly signals to others what they can expect from you.

• A vision statement needs to about the future you want to create from the perspective of accomplishing as much community impact as possible, now and in the future

• An effective vision statement will therefore tell the world what change you wish to create for the future of your community/client group/service users etc

• For example: Our vision is a community where_______________.

• Our vision is a community that_______________.

‘If you don’t know where you are going it doesn’t matter which way you go’

Example Visions

“A world where people with a learning disability are valued equally, listened to and included”

Mencap

“Our vision is of a society where all children are supported to achieve their full potential. “

NCH (National Children’s Home)

'No more victims.' (Victim Support Scotland)

‘To make people happy’ (Disney)

(8)

Mission

• An organisation’s mission statement is typically focused on its present business scope of what you do to get where you want to be

• The mission is to articulate how you will we achieve the Vision – the mission is the DOING bit

• Like the Missionary the mission statement will turn the vision into practice – the mission is the doing part in other words “Mission Accomplished”

Developing a Mission Statement

• What, who, where, how, why

To bring our vision to reality we

do_______________________ for _________ in the______________________ area.

• Again keep it simple – be clear about what you do

Mission Statement Examples

• Save the Children

‘Save the Children fights for children in the UK and around the world who suffer from poverty, disease, injustice and violence. We work with them to find lifelong answers to the problems they face.’

• Victim Support Scotland

‘Supporting individuals and communities, helping to rebuild lives and keeping people affected by crime at the heart of justice in Scotland’

(9)

Strategic Aims

• Strategic aims are statements of the results required in order to ensure the survival, future viability and progress of the organisation

• once identified strategic aims can be turned into an action plan in the next part of the business planning process

• Strategic Aims have a number of qualities without which they become vague and unattainable. Therefore good aims &

objectives are both SMART. Strategic aims describe how you will deliver the mission.

S specific

M measurable

A agreed

R realistic

T timebound

Strategic Aims

• This is about taking the Vision and the Mission…

• …using the information gathered in the SWOT &

PESTLE as a guide

• .. to establish the 5 or 6 critical issues that must be delivered to achieve the Business Vision/Mission

Setting Objectives

• Each strategic aim is broken down into a number of more specific objectives.

• The objectives are a series of steps to be taken in order to achieve the aim

• Objectives should be SMART and should support your overall broad aims

(10)

Aim & Objective Example

Aim 4: Recruit new people/skills onto the Management Committee Objectives:

4.1 Advertise through organisation’s resources:

a. Newsletter b. Questionnaire c. Web‐site

d. Noticeboards within current premises 4.2 Advertise externally:

a. Local Newspapers b. Local Library c. External web‐sites

4.3 Establish links with local Volunteer Centre 4.4 Raise issue with Parents’ Forum

4.5 Identify Management Committee training needs

Business Planning Process Phase 3: What needs to be done?

Business Models

Generic Strategies Identify a basis for competitive advantage

• Positioning

• Resource allocation Market Strategies Developing products/

services and markets

• Feasibility

• Prioritisation

• Service/ market decisions Growth Strategies Developing resources and

value of delivery

• Funding method

• Pace of growth

• Degree of change Evaluation and

Selection

Compare and contrast alternative strategies

• Business case

• Decision‐making Action Planning Planning, task allocation,

review and control

• Delegation

• Manageable chunks

*

(11)

Market Strategy

• Are you clear about your product/service and what you are offering in the market place?

• Do you require any feasibility or research?

Action Planning

• This is where we take the critical few and develop a more detailed action plan

• Its about providing detailed actions, timescales, allocating responsibilities & refining resources

• This is the template that should be discussed at team meetings/Committee meetings to monitor progress

Action Planning

Objectives Recommended Action

Information Required

Resources Who?

Timescales When?

Strategic Aim:

(12)

Action Planning

Aim 4: Recruit new people/skills onto the Management Committee Objective Recommended Action Information

Required

1. Advertise through organisation’s resources:

a. Newsletter Inform parents and other providers of Management Committee needs with new information leaflet

Management Committee Roles and Responsibilities

Manager/All Staff/

Management Committee

November 2015

b. Questionnaire Draft questionnaire to determine skills of potential members

Skill requirements for Management Committee

Manager/All Staff/

November 2015

c. Web‐site Contact relevant people within web hosting company to update web‐site to include dedicated page for Management Committee with appropriate resources

Management Committee Questionnaire.

Management Committee Roles &

Responsibilities

Manager September 2015

What Needs to Be Done – Key Considerations?

• After determining both the current position of your

organisation and its future vision and aims, your next step is to convince your audience that you can bridge the gap between the two:

Today

• Your ability as an organisation to bridge this gap will depend on a number of key elements, all of which must be explored and laid out in detail within your plan

Staff Equipment Funding Assets Customers Vision

Key Considerations Cont:

• In addition to developing the vision, mission, aims & objectives your business plan will need to include additional content listed below – these areas may form separate sections or chapters within the plan

• The types of elements that need to be planned and explained in the business plan are as follows:

– Your business ‘model’

– What product or service you are offering?

– The ‘evidence of need’ for this product/service – Under what legal structure are you offering it?

– The staff, governance, volunteers that will deliver it

– The premises, vehicles and equipment required to enable your service – How you compare with the ‘competition’ and how you ‘sell’ the

product/service

– How you will finance your operation? How much it costs and how much you

(13)

Evidence of Need

• Evidence of need refers to ‘Why is this product/service needed?’

• You must consider and show:

– Who is your target market?

– Where are they located?

– What are their demographics? Age, sex, ethnicity, etc.

– What is the size of the target market?

– What evidence is there that they ‘need’ your product/service, i.e.

what gap in the market are you filling?

– Can the market support another provider?

– Have you done any initial market research to ‘test’ your idea?

• Providing evidence based answers to these questions will go a long way to determining if your organisation has a chance of success

Strategic Environment

It is important that you are able to demonstrate that a successful award will improve outcomes for the people of Scotland.

Therefore, you need to show how your project/services align with the relevant Scottish Government National Indicators.

The relevant Outcomes for the Children, Young People and Families Early Intervention Fund are:

• Our children have the best start in life and are ready to succeed

• We have improve the life chances for children, young people and families at risk

• Our young people are successful learners, confident individuals, effective contributors and responsible citizens

• We have tackled significant inequalities in Scottish

(14)

The relevant Outcomes for the ALEC Fund are:

• We are better educated, more skilled and more successful, renowned for our research and innovation

• We have strong, resilient and supportive communities where people take responsibility for their own actions and how they affect others

People – how is your service delivered?

• You may have a great product or service and the demand for it; however if you do not have experienced, knowledgeable, well‐trained, committed people in place then it is likely that you will fail in achieving your goals

• You must have the right people in place at all levels of the organisation:

–Governance –Management –Staff –Volunteers

• Do your best to ensure that the people have:

–Clear definitions of roles & responsibilities –The best training that you can afford –Competitive remuneration

• Remember, numbers of people does not equate to quality. This is as relevant at Board levels and with staff delivering frontline services

Financial Planning, Reporting &

Forecasting

(15)

Budgets

• Budgets are, quite simply, the plans of the organisation expressed in money terms.

• They are the cornerstone of any financial system.

• They enable the Board or Management Committee to carry out good financial management, which is basically comparing actual costs to budgeted costs.

Budgets

• They are a key element in establishing internal controls and making sure the organisation does what it should.

• A budget should be produced on an annual basis and regularly reviewed

Budgets

• A budget is a list of planned income and expenditure.

• This is often based on historical data with assumptions made for expected changes.

• Organisations should have detailed short term budgets (one year) and higher level longer term budgets (say 5 years).

• Ideally departmental budgets should be prepared.

(16)

Budgets

Budgets can be used to:

• Plan

• Communicate

• Control

• Monitor

Budgets

Are generally expressed in 2 ways:

1 ‐ Income & Expenditure Budget 2 ‐ Cash Budget

1 ‐ Income and Expenditure Budget

• Records the income and expenditure for a specific period in time i.e. a month, a quarter or a year.

• Main categories in an income and expenditure account are income, direct costs and indirect costs.

• In the private sector it is known as Profit & Loss.

(17)

Direct Costs

Definition:

“cost that is 100% incurred in providing or manufacturing goods or services”

Examples

• Materials used in a product

• Wages incurred delivering a service

• Delivery cost incurred to receive goods you sell

• Fork lift truck rental

• Machine maintenance

Indirect Costs

Definition:

“costs of a general nature that relate to the organisation as whole”

Examples

• Premises rental

• Accountancy fees

• Legal fees

• CEO’s salary

• Telephone expenses

1 – Income & Expenditure Budget

Details when transaction’s takes place, the accumulation of which during a set time period reflects the planned financial performance of an organisation.

See the example in your handout

(18)

2 ‐ Cash Budget

• A Cash budget focuses on anticipated future movements of cash in and cash out of the organisation, usually on a monthly and cumulative basis.

• It will show if you have enough money in the bank, throughout the year, to pay the bills, e.g.

wages, suppliers, equipment, electricity, etc.

2 - Cash Budget

• A Cash Budget reflects when cash is either paid or received in an organisation.

• In some instances this could be the month(s) after the entry is made in the Income & Expenditure Account.

• Controlling cash is a vital control in all organisations.

• Likewise, forecasting cash requirements for a rolling period of up to one year will flag up potential issues that will need to be addressed.

2 – Cash Budget

(19)

Forecasting

• If a budget is in operation, updating it to produce a forecast is straightforward.

• Simply copy the budget template

• Input actual figures as they become available

• Estimate future months performance using known information and best estimates

• The result will highlight potential shortfalls

Forecasting

• Will allow an organisation to highlight issues at an early stage

• If an issue is known the organisation can take corrective action

• Without a forecast issues may remain unknown and only become apparent when it is too late to do something about it!

Reporting Results

• Results are generally reported to board and senior management in what are known as Management Accounts

• Management Accounts show the actual financial performance of an organisation compared to what was budgeted

(20)

Costing

Why Classify Costs?

• Accuracy

• Knowledge

• Control

• Meet & Measure targets

• Management

• Confidence

• Pricing

• Profitable / unprofitable services

• Profitability

Costing Structures

• Direct Costs

• Indirect Costs

Which can then be allocated between...

• Fixed Cost

• Variable Cost

(21)

Governance and Management Central Functions (HR, IT, Admin,etc.)

Premises and office costs Project/

Service A

Project/

Service B

Project/

Service C

Indirect Costs

}

} Direct Costs Full Cost of

Project A

What is the total cost of providing Project A?

Costing Structure

Full Cost Recovery

Simple definition:

“Securing funding for all the direct and indirect costs involved in providing a contract or service, including the generation of a surplus to

allow re‐investment”

Why is Pricing Important?

• Defines how much you are going to charge your customers

• It is the primary profit determinant

• Forms part of the marketing approach

• Organisations must have clear long‐term pricing strategies

(22)

Finance ‐ Summary

• The Finance chapter of the business plan should comment on the latest set of Audited Accounts, showing your most recent financial performance

• A snapshot of your current financial position should be presented, forecasting how you think you will perform for the rest of the year

• Comment should then be presented on the projected financial position for the period of the business plan – 3 to 5 years

• A summary Income & Expenditure table should be compiled showing the Audited Accounts position, the forecast for the current year and the projections for the next 3 to 5 years

• The detailed monthly projections for Income & Expenditure and Cash Flow should be attached as appendices

Strategic Planning Process Phase 4: How do we know when we

get there?

Monitoring of Outcomes

• The Action Plan is the tool to use to monitor the progress of the Business Plan.

• This will determine whether the Aims and Objectives set for the period of the business plan have been achieved

• The Action Plan can be introduced at team meetings/Committee meetings to monitor progress

• The timescales column should be used to track progress on each objective

(23)

Action Planning

Aim 4: Recruit new people/skills onto the Management Committee Objective Recommended Action Information

Required

1. Advertise through organisation’s resources:

a. Newsletter Inform parents and other providers of Management Committee needs with new information leaflet

Management Committee Roles and Responsibilities

Manager/All Staff/

November 2015

b. Questionnaire Draft questionnaire to determine skills of potential members

Skill requirements for Management Committee

Manager/All Staff/

November 2015

c. Web‐site Contact relevant people within web hosting company to update web‐site to include dedicated page for Management Committee with appropriate resources

Management Committee Questionnaire.

Management Committee Roles &

Responsibilities

Manager September 2015

Monitoring of Outcomes

• Financial progress can be monitored by compiling a statement comparing the budgeted results to the actual results

• This statement can include a mixture of figures and narrative to explain the variances between the 2 positions

• Try and keep the statement to one page – use summarised categories of income and expenditure rather than including every figure

Budgetary Control Analysis to March 31 2010

Budget Actual

2009/10 2009/10 Variance % Variance Comments

Income

Membership 37,775.23 38,406.10 630.87 1.67% Local Authorities £410.42

Practitioner Members (£7,066.25) Practitioner Non-Members £9,657.87

Conference 124,200.00 143,129.52 18,929.52 15.24% Associate Members £12,885.91

Earned 245,000.00 91,159.89 (153,840.11) (62.79%) Project Income (£141,236.67) Training Income (£7,988.78)

Grants 63,300.00 82,801.00 19,501.00 30.81% Other Grants £19,501.00

Miscellaneous 15,000.00 24,553.64 9,553.64 63.69% Miscellaneous Income £8,590.28

Total Income 485,275.23 380,050.15 (105,225.08) (21.68%) Expenditure

Consultants 17,000.00 20,484.87 (3,484.87) (20.50%)

Other Events 8,500.00 10,516.34 (2,016.34) (23.72%)

Hotel Expenses (£6,660.14) Entertainment Expenses £2,000.00

Conference 92,600.00 98,318.10 (5,718.10) (6.18%) Miscellaneous Expenses (£1,286.11)

Client Costs 150.00 4,016.05 (3,866.05) (2577.37%) Client Printing (£3,966.05)

Staff Costs 246,904.00 170,146.46 76,757.54 31.09% Staff Salaries £63,273.73 Staff Pensions £7,751.41

Committee 12,300.00 12,961.93 (661.93) (5.38%)

Marketing £3,163.96 Miscellaneous Expenses £3,270.04

General 111,214.63 116,885.01 (5,670.38) (5.10%) Repairs & Maintenance (£8,792.23) Printing (£4,414.00)

(24)

The Business Plan:

Bringing it all together

Bringing it all together:

Business Plan Format

1. Executive summary

2. Introduction – what is the plan for 3. Vision, Mission, Values & Objectives

4. Strategic Framework – policies & agenda affecting your business

5. Service Provision – what are you delivering & how?

6. Markets/marketing/USP/research/evidence of need/promotion/customers/clients

7. Management & personnel 8. Finance – Summary

9. Appendix (full financial projections, detailed action plans)

Questions?

(25)

Thank You!