STAFDA 2011 Session Preview: Strategic Planning

STAFDA Consultant Dr. Bart Basi reviews the fundamentals of successful business plans.

CPA and attorney Dr. Bart Basi is STAFDA’s Business Succession, Valuation & Tax Planning Consultant and president of the Center for Financial, Legal & Tax Planning.

There is no precise road map for preparing a strategic business plan. The length of the plan and areas of focus will depend on the industry, the stage of the company’s development, the complexity of its business, and the intended audience. Strategic business plans are never identical. They are constantly evolving with the identification of new market opportunities, new technical breakthroughs, and the shifting of competition.

A well-written strategic plan is essential to the capital raising process. It is a way for investors to review your company’s potential. Today, most investors and banks will not even consider putting money into your company without first seeing a strategic plan. So, let us look at some of the key factors to consider when organizing your strategic plan.

Basics and Background
Obviously, you cannot begin to write a strategic plan if you cannot describe your business. However, this is more comprehensive than a simple description. It should include:

  • The specific business you are in
  • The product you sell
  • The customer base you service
  • The background of your business, including a short history of who started it, the highlights of its progress, and the roles of key personnel over the years
  • The ownership of your company

The importance of this section is to specifically lay down the foundation of your business to all banks, potential investors, and those involved in your business to establish credibility and demonstrate your commitment to your business plan.

Market Analysis
This section is very important and forms the basis for the remainder of the strategic plan. In addition, this section provides a broad overview of the market sector and the specific niche being targeted. An ongoing business that wants to develop a new product or service, or service a new market, will need to show the demand for the product in the target area. Your objective in this section is to convince people that:

  • There is a market need for your product
  • You understand the potential customer’s needs, and your product meets that need
  • You can sell your product at a profit

If you cannot show these three things in your market analysis, then you will never persuade anyone to invest in your company, to loan you money or to work for you.

Other questions that may need to be addressed in the market analysis section to make your strategic plan more complete include: Who are the potential customers and industries that would be interested in our business? What are the expectations of price, quality, and service from these groups?

In addition, it is also significant to analyze market size and trends. By doing so, you can provide a broad overview of the market sector and the specific niche being targeted. Present the overall market size and growth, significant industry trends, and major opportunities and constraints presently facing the industry. Ideally, this information should be supported with references from trade journals, industry studies, industry experts, and
government sources that compile historical data and industry forecasts.

Another aspect to consider when conducting a market analysis is identifying your competition. In this section, questions should be answered with regard to the market share potential of each competitor, how your product compares in price, service and warranties, and your competitors’ strengths and weaknesses (financial, marketing, and operational areas of management).

All too often strategic business plans fail to acknowledge the presence and potential of forms of competition. Identify the existing competitors in the market with a discussion of their particular strengths and weaknesses. Provide an estimate of their market share and information about their financial performance and resources.

This analysis should also include competitive responses to your product offerings, both those that have occurred and those that are anticipated. Provide a rationale for the expected responses from the competitors, both current and long-term.

Once you have obtained all of this information, it is easy to get bogged down in the data. It is essential to organize the information in a clear and orderly fashion. One of the easiest ways to show comparative data on the competition is to use a matrix. An objective appraisal of your competition adds significant credibility to your plan. 

Management and Organization
One of the most important pieces of a strategic plan is an overview of your company’s key management team. This section will receive significant attention from everyone. It is essential that people involved in the organization be properly trained and educated both in product knowledge as well as with the goals and objectives of the business. In preparing a strategic plan, this section must include:

  • An explanation of how the company’s management team will be organized, along with a description of the primary role each team member plays
  • Key Managers — a brief synopsis of each key manager, including duties and responsibilities, career highlights, and significant past accomplishments that demonstrate ability for the task that will be required (resumes should be included) 
  • Compensation and Ownership — how will each person be compensated and what investment each individual owns
  • Board members — identify the members and describe how each will help in the development and growth of the company

Many agree that one of the strongest indicators of success in a company’s growth is the track record of its management. Let your reader know about the key people in the company and their backgrounds, and highlight for the reader how the people surrounding the owner complement the owner’s own skills. If you’re just starting out, show how each person’s unique experience will contribute to the success of the venture. 

Space Requirements
A strategic plan must be realistic in its sales projections as they relate to space requirements. Many people do not realize that with increased sales comes an increase in inventory. This, in turn, requires a larger amount of space to store the inventory and more people to service the extra warehouse space. A complete strategic plan will detail
how the space will be acquired if sales are expected to increase. In writing this section, you must ask yourself the following questions:

  • Is the current available space large enough to handle the projected sales?
  • Where will the company acquire extra warehouse space?
  • How will the company pay for the extra labor required?
  • Will the extra costs associated with the inventory bring a greater profit? (If no to this, please consider stopping this process.)

Having answers to the questions listed above removes a lot of the guesswork concerning the business’s space needs. There is no worse feeling than not being fully prepared when entering into a business venture. Armed with this information, the business owner gains confidence in his strategic business plan, as well as his business.

Financial Information
Banks and other lending institutions are extremely adverse to working with a company that has not properly structured its objectives, people, marketing and place in the community. It is critical that the funding needs be documented by having financial statements that are dependable and reliable, showing an overall asset and debt structure on a current basis together with the operational aspects of the business.

Once the financial structure is established, the next step involves forecasting. A strategic plan will need financial statements and projections for the next three to five
years, including:

  • Projected statement of operations
  • Balance sheets
  • Cash Flow statements
  • Break-even analysis

Your projections should be tied to your market expectations. It is extremely important to clearly state the assumptions you used when preparing the financials and projections. Your financial analysis should identify and support the amount of money the company is seeking from potential investors or bankers. This section requires some knowledge of accounting and finance. If you do not have the expertise, it is imperative to obtain some outside help with this section of the strategic plan!

Even though it is said that money is the root of all evil, it is difficult to run a business without it. Many people believe that money and funding the operation are the first steps necessary for a business to be successful. However, if the sections prior to this are not based upon sound business principles and already in place, then all the money in the world will do nothing to maintain a successful operation.

This section of the plan should specify the amount of money you will need, when you will need it, and how it will be used. You should ask yourself questions like:

  • How much money do I need now?
  • How much money will I need over the next three years, and when will I need the money?
  • What will I do if I have underestimated the amount of money I need?
  • How will I use the initial cash funds?
  • What portions of the cash funds will be debt and what portion will be equity?
  • What will the terms of any restrictions on the legal documents be?

You should always address your plans for cashing out the investors or paying off the debt when you are structuring the deal. Lenders want to know how long you plan on having the outstanding debt. By addressing these concerns in the beginning, a bank is much more likely to commit the funds to the business, since the payoff is incorporated into the initial plan. The end result should be cash flow projections for three to five years that are realistic and as accurate as possible.

Plan Summary
The plan summary appears first in a strategic plan. However, it should be the last section you write. The plan summary should highlight key elements of the entire
strategic plan, including:

  • Your objective for the business
  • Your products and/or services
  • Your estimate of market potential and assessment of competition
  • Your management team’s experience and talent
  • How the products will be sold, or the services performed
  • Projected financial results
  • How much money you need and what will you do with it
  • The anticipated return that investors will realize and when they can expect it

In other words, the plan summary is a complete description of your business and your plans for the next several years. It also explains what the business does, outlines who will buy the product or services, and includes financial forecasts and indicates how much money is needed.  

The strategic business plan is your most important strategic document. It is used as the blueprint to finance your business and represents the foundation on which any future deal will be structured. It should be regarded as a key marketing proposal that will gain the maximum level of interest from potential investors. An adviser will play a key role in the drafting of the business plan, ensuring that it is drawn up in a way that will appeal to
the finance community. CS

CPA and attorney Dr. Bart Basi is STAFDA’s Business Succession, Valuation & Tax Planning Consultant and president of the Center for Financial, Legal & Tax Planning. He writes STAFDA’s Tax Report. Reach him by e-mail at or at