Tips For Creating a Five-Year Business Plan
In speaking to members at our recent Summer Summit, we learned many of them were looking for advice on how to create their own five-year business plan for valuation, funding, and more. Based on our own experiences, and what we’ve seen management companies across the industry go through in the past, we thought sharing some tips on how to create this type of business plan could help anyone who is struggling to put their own strategy together.
The Magic of 5
Before sharing those tips, what makes five years such a magical number when it comes to developing a business plan? Five years provides you with a period of time that allows you to look at the short-term goals of your business, while providing a glimpse into the longer-term picture. This timeframe also provides a structure from which goals and objectives feel more realistic.
There is also time and flexibility to make adjustments for any unexpected situations or changes in the overall business environment, which often cycles through changes over a similar period of time.
And, while you often do not know what is likely to happen in those five years, failing to create any type of business plan means your business sets off into un-chartered waters with no known direction or destination. With a plan, you’re anchored to specific objectives to help get you where you want to go – and what you will do to get there.
Starting with the Right Components
To get the most from your five-year business plan, you’ll need to know the right type of information to include and the most relevant data to track. You need to have some key components that define your business and its purpose, so you can develop the initiatives and strategies that achieve that purpose. These components include:
- Executive Summary: summarizes the entire business plan
- Company Description: defines the company and its purpose
- Organization Description: explains the departments, functions, and roles that make up your company
- Product/Service Description: describes what you make or offer to clients
- Competitive Analysis: breaks down your company’s strengths and weaknesses as well as lists what makes you different from your competition
- Marketing Analysis: provides research about your market, target customer, and other data that informs your marketing plan and messaging
- Sales Strategy: plans how your company will bring in revenue
- Financial Projections: explain how you will grow revenue and profitability over the course of the five-year plan
Investing in Research
It’s important not to rush your business plan development. Once you have all your components from the list above, the next tip is to take the time to conduct a thorough amount of research.
- Do a deep dive into your industry, understanding the competition, environment, risks, and opportunities.
- Assess your own capabilities in terms of strengths, such as skills, competitive advantage, and specialized knowledge and weaknesses.
- After gathering all your research, focus on the key points to share in the business plan. Those who you share it with do not have to know every data point from your research; only those that have helped shape your strategic direction.
Focus on Your Purpose
Throughout your business plan, you will need to emphasize the purpose of your business and tie all actions and projections to this purpose. It is the point to everything that you are doing with your business. The purpose is what motivates you and helps design your company culture so your talent becomes passionate about why the business exists and why they work there.
You can focus on your purpose in each part of your plan. This includes
- The description of the company
- How it is organized
- How it is part of your product or service
- How it makes you different from the competition
- How you share that purpose with a target audience who can also become passionate about your business
Matching Your Business Plan and Marketing Plan
To ensure your business plan succeeds, your marketing plan must be aligned with your growth goals, target audience, and financial projections. Therefore, the business plan’s inclusion of your marketing strategy needs to define how you product or service will be sold.
When adding information on your marketing strategy to this five-year plan, describe marketing components like price, promotions, marketing channels, and messaging. Although your marketing strategy and tactics may evolve over the five years, this provides a foundation within your business plan that makes the case for how you will grow.
Considering the Extras
You may want to include some extras in your five-year business plan, depending on what you do and where you want to take your company. For example, you may delve into descriptions of an international expansion plan or details about the legacy of your company (sell, take public, pass onto family, etc.).
Or, it may be important to have a section that addresses risks or crises that could impact your business over the course of the next five years. While no one could have known the pandemic was coming, you might be able to address cybersecurity, natural disasters, and business continuity planning within this main document.
Taking the Time to Update
A five-year plan also affords you the opportunity to freely update the plan as your situation or the business environment changes. Revisiting your business plan can remind you of your purpose and strategic direction. During this time, you can add updates and address specific situations that may be the basis for any pivot in the company’s direction in terms of products or services, messaging, and/or financial forecasts.
Get Feedback
Don’t be afraid to reach out to colleagues for feedback and advice on what you can do to improve your five-year plan. When you are inside of the business, it is often difficult to identify everything around you that may influence or impact results, opportunities and challenges.
Partnering with a company like Innovia Co-op helps you do just that. As a cooperative, we have a community that can provide advice, research, and mentoring so you can develop the most relevant five-year business plan. Contact us today to learn more about leveraging these benefits and more!
