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To Plan or Not to Plan?

Why developing a business plan is key to helping family businesses succeed Part 2.

October 30, 2017
By Jessie Topp-Becker, Freelance Writer

It’s no secret that family business planning is a time-intensive process that requires intentionality and effort. When it comes to starting the planning process, people often turn to the internet or books for information. A Google search for family business planning generates more than 25 million results in less than one second. A search on for family business planning books results in 2,193 books. Clearly, family business planning is a popular topic, and for good reason. However, with so much information on the topic, it’s easy to get overwhelmed.

To help webinar attendees identify areas where they could start building a complete family business plan, Davon Cook reviewed four types of business plans. According to Cook, the four most common types of business plans are strategic, operating, business continuity, and estate and succession plans.

Strategic plans are one of the most popular business plans. Cook explained that these plans provide a big-picture view of where the business is now, where it’s going, how to get there and how to measure progress. A typical time frame for a strategic plan is 3-5 years. All businesses have a common goal: to maximize profits. The purpose of a strategic plan, Cook said, is to force businesses to consider how to accomplish that.

Another common type of business plan is the operating plan. Cook encouraged people to think of operating plans in one-year time frames. “Think about how you are going to make the goals in that strategic plan actually happen on an operational basis,” she suggested. When developing an operational plan, family businesses should consider five areas: production, marketing, physical capital replacement, financing and human capital.

For each operational area, Cook suggested family business members answer the following questions.

  • Production: What are we going to grow, raise or process to create value?
  • Marketing: How are we going to sell our products and manage the price risk?
  • Physical Capital Replacement: What assets do we need to buy, sell, repair or replace to execute this operating plan?
  • Financing: How are we going to finance our operating plan?
  • Human Capital: Who are we going to use to put this plan into action?

The business continuity plan is one that no one likes to think about having to use, but it’s very important. “What happens if a critical leader suddenly becomes unavailable?” Cook asked attendees. This plan is not difficult to develop, she said. “You just have to sit down and do it.”

To develop a business continuity plan, individuals involved in a family business should answer these questions.

  • Does your spouse know whom to call in the event of critical illness or death?
  • Who in the organization has authority and is qualified to make decisions?
  • Who are the business’s trusted advisors?
  • Where are the critical documents, including financial statements and insurance policies?
  • Where are the computer and online account passwords?

Although this plan is critical, creating the business continuity plan isn’t enough. “Make sure you give it to the people who are going to need to know that information,” Cook said.

Estate and succession plans are among the most well-known business plans. Of all the plans Cook discussed, the estate and succession plan “really merits significant time and attention, but will vary in its importance based on the life cycle of your business,” she said.

Although it is one plan, the estate portion of the plan addresses the transition of assets, both physical and financial, from one generation to the next. The succession part of the plan “is really a process of creating psychological ownership among a group of people who are going to be continuing the business,” Cook explained.

Developing family business plans is a process. One of the most important aspects of the planning process is putting pen to paper. “It forces a deeper thought and reflection when you have to articulate it on paper,” Cook said. Having a written plan also provides greater accountability for everyone involved with the business.

Cook encouraged families not to get bogged down in the pursuit of perfection, but rather to pursue progress over perfection. “I can assure you the magic is not in having the perfect method; the magic is in the fact that you’re doing it and the communication that it creates.”

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