Creating a business plan for a family business is often seen as an academic affair.  Quite often the small business accountant will be sent an email with a request to write a business plan and then presto!  In two weeks the document will arrive. And then stagnate.

Why a business plan is valuable

The value in creating a business plan is during the creation process.  Simply shortcutting the creation of the outcomes is of no value.  Just looking at a business plan template and then changing your details in the “blanks” is effectively worthless.  Likewise rehashing an example of a business plan off the internet, or copying a business plan example is equally worthless.

The value in a small business plan is that you challenge and ask yourself deep questions about what you are doing.  It leads into a series of probing questions as to why the business exists in the first place and what the ideal business would look like.  Ultimate the process ends up with goal setting exercise and potentially a list of action points.

So the value in creating a business plan is the formulation and emergence of ideas.  And the ideas are then moved into reality with action points with accountability measures behind them.  A great family business advisor can help accelerate the process – but the people responsible for implementing the plan must drive its creation.

A family business is different

In a family business, the fundamental stability of the business is a direct result of the stability of the family.  If the family governance is sound the business model is sound.

If say, the family is involved in warfare against each other the entire business and its inherent culture is dominated by the family conflict.  

So in a family business, the business plan must consider the business metrics and the family dynamics with the ownership group.  And the investment into the business dynamics should mirror the same level of investment into maintaining family dynamics.

If for example, the family wants to enter another family member into the business: the business might enter into new markets not because it is a strategic time for the business – but simply because it is a strategic time for the family.

If the process of writing a business plan attempts to ignore, or even extinguish, the element of family within a family business it is more often likely to fail.

A business plan is dynamic

Running a family and running a business are similar in many ways.  Sadly “life” gets in the way of the best-planned events regardless of what we plan and map out.  You can lose a major client, uncover a strategic acquisition, become divorced or have an immediate family member move to another country.

A great business plan will allow for and build in capacity to become fluid.  In an ideal world, the business plan will be looked at monthly and the strategy and actions behind that will also change.

So every family business owner is always writing a business plan.  As every day unfolds we are all changing and adapting to what life gives us.  The beauty of business plans is that the process is documented and there is a conversation about what is needed and accountability behind it.

Why a business plan is difficult

The other difficulty in writing a business plan is that it requires a choice.  If you choose to do something and you choose for actions to be taken: you are also choosing to allocate resources.  And the resources – human, financial and capital – in a family business are very tight.

However, the identification of resources to your priorities and then coupled with action points gives your team a clear idea on what you are looking to change for the near term.  Typically the resourcing decision needs to cover people, operations, innovation, finance and marketing – and that decision then has to be tied back to the overall cash flow position of the family business.

The identification of resources and allocation of those resources, with targets and accountability, is a primary area where accountants and advisors can assist a family business.  

Engaging the team

The process of engaging your team on this step is done in many ways.  However, the idea of engaging them in the formulation of your strategy and the resources behind as early as possible is the ideal.

In a large family business, it might not be practical to do this.  So the senior leadership team should be engaged on this topic.

And a family business should engage the importance of family in the business.  The steps taken to show the rest of the business team how the family are being treated to sponsor stability and sound governance should be embraced.  Too often the element family will be “removed” from the business planning process – which only effects to create an “elephant in the room” culture within the business.

A business plan has other benefits

The primary benefit of getting a great business plan is that it makes you internally better.  However, there are also other advantages.

A business plan helps you obtain finance.  In a world where banks should be viewed as business partners getting the correct impression to the bank about your overall governance is an important step in progressing your business relationship.  And that impression goes beyond the banker that you meet.

The impression needs to penetrate the banking hierarchy so that you get to impress the credit department.  The people who you typically do not get to meet. And a business plan is the ideal way to put your best face forward.

Likewise, if you are to sell your family business, or attract investors, a business plan is the first sales document an outsider will look at.  And if you are able to show iterations of a business plan over time, with board reports, financial reports and minutes documenting how the family business has set goals, and then achieved them, the ultimate sale price of the business will be significantly higher on exit.

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