plans are usually created to plan how the company will operate over
the next five years. Leadership from every department of the company
should have input into the plan, since each department manager is
usually responsible for achieving the goals and budgeted financial
amounts in the plan.
Plans can be
very formal or less formal, depending on the requirements of the
leadership. Often, if the business receives investment funding from
outside sources, such as banks, a more formal business plan will be
A business plan will have several
sections that guide readers through the long-term planning of the
- History of the company.
- Mission statement of the company.
- The code of conduct for the company.
- The goals and objectives over the next five
- Assumptions that were made in developing the
- An employee headcount and organization chart by
- A financial section that will include:
- Forecasted sales and expenses for each of the
next five years.
- Capital expenditure plans.
- Revenue and margin by platform, product or
- A list of any cost reduction initiatives.
- Financial performance bridge from one year to
The history of the company is important. It reminds everyone that the
company is about people, and that many people have worked hard and
relied on the company. It helps to provide a sense of unity for the
employees and stakeholders.
The mission statement should clearly state what the company's purpose
is. The statement will also state what the company's product or service
is and how it will make its mark in the world.
The code of conduct will state the company's moral obligations and how
employees should conduct themselves while employed there. It will
usually expand on these ideas with a set of rules that all employees
and stakeholders should know and follow.
The goals and objectives of the company will show the readers of the
plan where the company is going and how it is going to get there. Will
the company grow though acquisitions, what are the plans for new
revenues? Will plants be opened or closed, etc.
Any long-range plan has assumptions. No one knows exactly what is going
to happen in the future, especially four and five years from now. The
reader needs to know what the assumptions are so he can make his own
decisions about the information. Common assumptions are that the
current business with the customer will continue through out the next
five years. In reality this is usually not a certain event. Also, it is
necessary to make assumptions about acquisition of new work in the
future that is not certain at the time of the creation of the plan.
An organization chart is included for each year of the plan. It will
plan out how each area of the company will look in the future. This is
a planning tool, and the dollars associated with the organization chart
changes need to be accounted for in the financial section of the plan.
The financial section will have revenue and costs for each year of the
plan. It will show the programs, products or services and how revenues
and costs will look each year in each area. If capital expenditures are
going to be made for new work or in order to achieve cost reductions,
the costs for this will be incorporated in the financials.
The financial section should read like an income statement for each
year with revenues and expenses and net income. This section should
show the readers what is changing from year to year. This is usually
accomplished with a financial bridge. The bridge will show financially
what has changed from year to year. Has the volume of business gone up,
or have cost reductions created income? A list of improvements is
usually made with the financial impact for each improvement.
The business plan is a great tool for every business. It is the vision
of leadership and the plan to get there. Managers at every level of the
business are usually held responsible for making the plan happen. A
monthly financial analysis is done to compare actual results
to the budget, with each department required to explain the variances
to the budget.
from business plans
to business reports