Business planning for success

How well can you articulate your business goals and are you confident that the actions being taken will deliver them? ...... it is very easy to be busy, but your business could be doing the wrong things and possibly heading in the wrong direction.

If the business is cash constrained or seeking to secure financing, either debt or equity, then it is even more critical to have a well articulated plan. Such a plan serves two purposes, to set actions on the right path and to act as a communication tool to demonstrate ‘readiness’ to utilise any funds being sought.

The process of preparing a plan is important as it provides a catalyst to enable senior management to analyse options and challenge preconceptions - in doing so its important not to become overwhelmed by detail when evaluating scenarios.

Red Jay Associates has experience of having worked on a range of investment deals, covering a spectrum of sectors, size, complexity and financing needs. We can help clients to quickly identify the strengths and weaknesses of their business, develop strategic plans or financing proposals and generally to move the business forward.

The required contents of a plan depend on the audience, particularly if funding is needed, but typically should include:

• an executive summary, or “teaser”, designed to give an overview which grabs the attention of potential lenders or investors;

• career details of key members of the management team, their roles, skills and experience;

• detailed market analysis of the products or services produced by the company and analysis of competition in the industry sector;

• historic financial data;

• financial forecasts for revenues and costs over at least the next five years, depending on the term of financing required;

• projections of the cash and debt position;

• supporting information on assumptions being used;

• analysis of investment or funding requirements and key milestone deliverables, anticipated financial yield on projects etc.;

• upside and downside scenarios showing the impact of changes in forecast assumption parameters and the sensitivity of financial returns to such changes;

• analysis of the commercial risks and measures to mitigate and monitor them.

Before looking for external capital, businesses should make sure they have a deep understanding of the operational parameters of their business and the amount of cash and working capital required to operate effectively.

A weekly cash-flow forecast is often essential to demonstrate that cash flow management is under control, particularly in the early growth phase of a new business. Some additional steps may be needed to ensure that working capital is being carefully managed, for example control of inventory and credit , factoring of debtors etc.

If a business is raising debt finance the plan needs to demonstrate “repayment headroom”, i.e. ability to comfortably repay capital and interest when it falls due. In so doing it may be required to hold a minimum reserve of cash at all times.

If a plan is in support of an equity funding request then the projections should also provide information on dividend expectations and the financial returns generated by the equity investment itself.

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Red Jay Associates Limited is a specialist finance consultancy advising on corporate finance and business transformation, we would be very happy to discuss your business and develop a proposal for how we could support your needs. For more information please contact Ed Rogers on 07771 913528 or mailto: edmond.rogers@redjay.co.uk. Visit our website on www.redjay.co.uk