Holiday with a business plan

Having recently been on an overseas holiday it struck me how much of the planning process mirrored that of putting a business plan together. My own approach (to a holiday or business plan) may not necessarily align with others but many of the same factors are in play between both plans, regardless of the level of risk or planning chosen.

Obviously I wanted to give my partner and myself the greatest chance of having the best possible holiday we could within our means and resources. Before doing anything else we had to articulate our strategy or vision - what it was we wanted to achieve from the holiday in terms of activities, relaxation etc.

Choosing the destination was next – we could have chosen somewhere safe and familiar or tried something completely new where English wasn’t spoken! [That is the risk profile]. In the end a destination was chosen only a couple of hours flight away but that was also quite unknown and did offer a language challenge.

Then research, research, research!! I got a guide book and used online travel sites and forums to get as much information as possible about where to go, what to do, where to stay etc. The amount of information was staggering but aligning this with our strategy helped to cut it down. Being as specific as possible with your vision helps you keep more focused but on the other hand you may want to allow scope for opportunities and possibilities that may not have been considered.

You can be armed with loads of relevant research and information but the reality can often present something unexpected or challenging. Depending on the level of risk with which you are comfortable, these unknowns can be either obstacles or opportunities.

The next decision was what, if anything, should be pre-arranged or pre-booked. We could have left this to chance and been ‘fun and spontaneous’ but my risk profile and experience told me that spontaneity can be inefficient and not necessarily the best way to get the most out of limited time and resources.

There was a domestic flight where I wanted to be sure of getting seats as there weren’t too many alternatives – similarly I didn’t want to find out that all the good hotels were sold out. So the decision was to pre-book flights and accommodation (only) and to be pre-armed with as much other information as possible. This then allowed for a fair degree of flexibility and spontaneity – within parameters that we controlled.

So when we landed the first challenge was to get from the airport to the hotel – about 50km. The most popular method for tourists was a shuttle but my research told me there was also a public bus for a fraction of the cost, which was comfortable enough but required allowing a bit more time and a bus change. This fitted our strategy so we took this – and had the added benefit of seeing more of local life than just the expressway to the city!

There were many other decisions over the week, not all of which we had prepared for, but the element of chance could have been reduced or even removed if that’s what we had chosen (eg for reasons of time availability or independence). We were happy with the level of risk/spontaneity.

Going back to the business plan (or had I left it?)

1. What is the strategy, vision or goal?
2. With what level of risk are you comfortable? Do you like to ‘wing it’?
3. Do you want (or need) to plan everything you can control (or think you can)?
4. Who are the other stakeholders? A partner, investor or bank will look at this very differently – plans will have to be adjusted accordingly. Trust and experience play a big role.

Finally, I hear you ask, how was the holiday and did the plan work out? Yes it did, and we had a fabulous time thank you! How do you approach your business plan?

City2Surf Business Plan

August - another City2Surf and I did a fairly good job, even if I do say so myself. But….if the buses ran better at either end, if there wasn’t so much congestion at bag collection, if etc etc….I’m sure I would have done better and enjoyed the day more.
August…..another financial year over and annual results are in – a fairly good year but it could have been better….if the banks weren’t so stringent with their credit policies, if my marketing had been more effective, if etc, etc….

Running a business, or a race, involves many components working together effectively. Obviously hard work (or fitness), motivation and focus are fundamental, but in order to take advantage of opportunities or avoid obstacles along the way, we must anticipate these as much as possible in our business or race day plan.

This was my eighth City2Surf so you’d think I should have learnt something from previous years like to allow plenty of time for public transport, to come back later to collect my bag (or don’t have one to collect). I make excuses to myself that things are different this year and previous lessons are out the window – there are more people in the race this year (80,000!!), more people to move and bags to sort. However things aren’t really that much different, I just forgot what previously happened as I was wrapped up in the euphoria of the day. Maybe this time I’ll record it while I remember and let it form part of my race day plan for next year!

Was this my first year in business? As it happens it was, but the above lessons still apply. Ok, I didn’t have a previous year to learn from but there are many ways of learning other than trial and error – advice from friends, colleagues, experts or peers at business or social occasions, on-line forums etc. Of all the advice and suggestions I received, how much did I take on board or did I think I knew better what applied to my business. Well of course I didn’t know everything and yes, there are many things I could or should have done differently. Will they now be recorded to form part of my business plan for the new financial year – I’d like to think so.

I’m happy with my race time too – although I hadn’t given myself any targets (eg split and end times) apart from finishing. My training regime had not been as good as it should have been (less haphazard and more structured would have helped). If my time had been just one minute better I would have been ecstatic as it would have moved me up a category – how much extra effort or planning would have been required to achieve that? Perhaps not very much.
The first year of my business was solid, but not spectacular. Could it have been much better with more, or better directed or planned, effort? Almost certainly yes.

A business (or race) plan that anticipates many opportunities and obstacles will help grow your business. Breaking this down into numbers helps demonstrate what effort or investment is likely to be required at each stage in order to achieve the desired outcome. This may be a training plan, a race day plan and a series of targets or a business plan with forecasts, projections and sensitivity (or what if) analysis.
Or are we happy to have a wait and see attitude and let outside circumstances guide our performance rather than manage our own destiny?

And for the record…..I had a terrific day and can’t wait for next year's City2Surf!

The bank wants a forecast for my business! Where do I start?

If you are looking for a bank (or indeed anyone else, not just an investor) to support or advise on your business then you are going to need to give them information. Trading history is invaluable, and essential in many cases, but what most people will want to know is how the business will perform in the future. Short of having a crystal ball how can you show this and, most importantly, how can you convince others that your forecasts and projections are accurate – or at least fair and reasonable.

For an established business, trading history is the place to start - although not an indicator of future performance as we are constantly reminded with superannuation and other investment advice! However what you will get is:

• A framework or format for the forecast – this should be the same as your financial reporting for reasons of consistency and accountability
• A comparison which can lend credence to projections

No history? New business or business idea? The same principles apply but the starting point will change. Before you even look at an accounting system your business plan (or feasibility study) should set out your business as you wish to see it. This can then be converted into a chart of accounts (and/or budget) and then uploaded/imported/copied into an accounting system. Most systems will offer you a default chart of accounts but that will often be too general if you want to measure and control your business – if you just need to give something to your accountant to prepare the tax return then the default will usually be more than adequate. You really need to consider how you want to look at your business – professional advice is always a good idea but ultimately the decision is yours, most professionals will be able to put this vision into reality (or a model thereof).

Financials are what the bank most wants to see but the rest of your business plan needs to support this and demonstrate how the figures will be achieved (eg with a marketing plan). This is more important for a new business venture or a significant change over prior results.

Your forecasted projections are not just done once – forecasts should be regularly revisited and updated in light of current circumstances and performance and to take full advantage of future or potential changes, internal or external. The closer this is aligned to regular management reporting, the easier and more reliable will be the whole forecasting process.

Is Cash King?

That might seem like a rhetorical question. Not many businesses can exist without a positive cash flow – at least in the medium to long term.

There is a well-worn adage in business that turnover is vanity, profit is sanity, but cash is king. However to use an analogy a king is not what he used to be – how many absolute monarchs are left in the world today?

Certainly it is cash that will make or break a business but unless it is being managed as part of an overall business strategy cash management is just not enough. After all using your reserves and selling assets may keep you trading but that is hardly a sound way of doing business. Another way to look at this is to ask if cash is king, can we get by without credit cards? In the vast majority of cases the answer will surely be no.

A sustainable long-term cash flow for your business can only happen if you also have in place strategies for:

• Profit management which includes looking after
• Margins
• Cost control
• Asset management – using business resources efficiently
• Debt management – in many cases you will need money to make money
• Credit control – or how your profits translate into cash

Volumes can be, and have been, written about how to manage your business and dig deeper into the concepts listed above (as well as others). There is no one answer – what works for one person in their business could be very different from another business, or even someone else in the same business.

Another view is that cash flow is merely a by-product of other strategies (e.g. profitability and credit control) and a cash management strategy is actually making efficient of surplus cash in the business.


So is Cash king? Probably, but only as part of a constitutional democracy of other business strategies and methodologies.

Why are financials often at the back of a business plan?

That’s a good question and there’s no hard and fast rule, just a widely accepted convention. The Profit & Loss and/or Cash Flow Statements are invariably the most important parts of the plan, and will be the first port of call for many readers (e.g. banks or investors).

The End Result

The financials could be at the back because everything else leads up to there – but if the numbers don’t stack up, no amount of justification or support in the rest of the plan will make any difference. However if the figures do look good, most cautious (or sceptical?) readers will want to see if, and how, they are supported.

Numbers aren’t everything

This is true but they’re a common language for all parts of the business and, most importantly, are how the outcomes of the business can be expressed i.e. money in the bank! We can be creative with numbers and it’s not too hard to put together a set of figures that tell a good story. The words (research, competitor analysis, demand studies, operations, marketing etc.) and numbers must combine to show a rounded and reasonable business plan.

Numbers aren’t sexy

I can (reluctantly) accept some people might think that. For many new business owners their passion is their business idea, whether it is marketing, design, retail or whatever. And while that makes such a difference, usually it is the business owners who don’t or can’t use their numbers who are amongst the 90% of new businesses that collapse in the first three years of operation. Like it or not, you live and breath by numbers.

Planning the Plan

So should the financials be done as the last part of the business plan i.e. the conclusion? I think the answer should categorically be no. Imagine doing all that work and finding out that when you add up all the pieces there isn’t a viable proposition! So the first draft should probably be done before anything else and, as the rest of the business plan is being complied, the assumptions and variables in the model can be tested and updated.

Update early and often

One of the great things about a financial model is that it can (and should) be changed. This does mean that the model needs to allow for quick and easy changes, even ‘on the fly’ – you should be able to test a hypothesis, like what would be the bottom line effect of selling 100 X widgets instead of 50 Y widgets, without having to wait for all the calculations to be redone.

Live the Plan

Even after the plan is completed your assumptions and variables will change (that is why they are called variables!). The whole business plan, and in particular the financials, should be a dynamic document. A budget or fixed plan is a snapshot in time from the model, and as such it can be a very useful measurement tool to keep you and your business accountable and on the right path.

So remember, the order your business plan is laid out will often not be that in which it is read, and certainly should not be the order in which it is prepared.

What do you think?