June 16, 2023
What's the Point of Planning? The Benefits of a 5-Year Business Plan
Jonathan Hancock
©Getty Images/libre de droit
To say we’re living in "interesting" times is putting it mildly.
We're still feeling the effects of the global pandemic. Oil prices fluctuate wildly. War has returned to Europe. The climate is in crisis. Generative AI has arrived.
And political, social and technological change is only going to get faster, more frantic – and harder to foresee. It’s the epitome of a "VUCA world": volatile, uncertain, complex, and ambiguous. [1] It’s become very difficult to see any kind of clear view ahead.
“May you live in interesting times” was always meant as a curse, after all.
But there are also opportunities amid unpredictability – if you're ready to grab them. And, while many businesses are going by the wayside, many others are finding ways to survive and thrive. They keep a grip on their future – however fractured things get.
And usually, it’s because they have a plan.
In turbulent times, mid-to-long-term planning lets you and your organization focus on the things you can control – and at least be aware of the things you can't. Get it right, and you'll keep a handle on who you are as a company, what you want to achieve, how you’re going to do that, by when, and with what effect. And you'll spot some of the difficulties and dangers ahead.
Your plan isn't a rigid list of actions you can take to guarantee success, because that's just not possible now – and probably never was.
Instead, it's a well-thought-out map for the way forward, with room for a little "course correction" along the way. And it lets you bring others on the journey with you. Even if the direction has been set by the C-suite, managers at all levels need to know how they fit in, to make sure the core work gets done. Only then can they inspire their teams to help turn aspirations into actions.
Without a plan, you’re lost.
I know the power of a good plan from personal experience.
Eighteen years ago, my family life felt like its own little VUCA world. My wife and I both worked in radio, and our industry was changing fast: new technology, unexpected challengers, different ways of doing things. And in the radio station where we worked, large-scale change was looming.
We had two young children then, and suddenly there were big decisions to make – about our jobs, where to live, how to share the childcare, what to do about schools… It felt overwhelming trying to consider everything: to know what would be best for everyone, and how to achieve it all.
So we made a five-year plan – a fairly small-scale one, granted, but, in retrospect, it was actually a very business-minded approach. Because it covered many of the things that commercial enterprises need to put in their plans (just couched in ways that made sense for two parents and their kids!).
Here’s an example of the type of business plan I’m talking about. It shows what many companies consider when they’re starting out, or looking for new investment, or launching new products or services, or – like us – just in need of more clarity about where to go in the next few years and how to get there. There are nine common components:
And here’s how that collection of information, analysis and ideas can work in practice – as experienced by my wife and me!
We started with our version of the executive summary – an in-a-nutshell description of all the information and ideas we’d be pulling together – then followed it by drafting a kind of mission statement, based on who we were, what we wanted to achieve, and why we felt it was important.
For us, that highlighted the importance of getting a good work-life balance, doing jobs we felt passionate about, and finding a community where our family could thrive. For businesses, it’s often a useful way to summarize plans for stakeholders – or maybe prospective investors.
We did our own version of a SWOT analysis, listing all the strengths, weaknesses, opportunities, and threats that we could think of, relating to our family. My wife and I both love learning, for example, and could retrain if we decided to – that was a strength. We had little help with childcare though – that was a weakness. The value of our house had gone up recently – so there were opportunities there. But we also saw a new level of competition for jobs where we worked, adding urgency to our decision-making.
In a commercial plan, this is a particularly important part of the process, helping to shape ambitious but achievable strategies, and to secure internal and external support.
For us, all of this led naturally to defining our goals – and trying to do it in a SMART, businesslike way. We looked for useful metrics, including the income we’d need at different points in the plan. And, since a key goal was to have more time for the kids, we chose some fairly loose ways to measure that, too.
We did our own kind of industry analysis. As in a typical business plan, we thought about our industry – radio – as it was then, and how it was likely to change in the near future.
I suppose we even did some competitor analysis – thinking about the people who might be coming for our jobs, as well as the market forces that were putting the whole industry under pressure.
By this point, we'd already begun thinking about leaving radio – potentially to retrain as teachers. So we had a new target audience to research. Were there enough opportunities for us there? What needs could we satisfy – and what did we have to offer?
And then, to make that shift, how would we show off our experience and skills? A marketing plan of sorts emerged as we decided to spruce up our CVs, and targeted people to talk to. As in a commercial business plan, all the earlier analysis focused our ideas.
The financials were particularly important. Like any business we looked back at our records, drew up budgets, and made projections. More companies use complex algorithms to do that. We took a simpler approach, but we still had to be rigorous. Any five-year plan needs to make financial sense, with regular checkpoints, a little wriggle room, and at least some form of safety net in case things get really tight.
Looking back, that financial part turned out to be the one we relied on the most. It helped us make decisions, gave us confidence – and, occasionally, confronted us with hard truths – as we enacted our plan.
The last element was a conclusion, bringing together everything we’d collected and explored. In a commercial five-year plan, this summary often becomes a rallying call to stakeholders and a powerful message to potential investors. For us, too, it was a clear call to action. It crystallized everything we’d been thinking and talking about.
Suddenly we had a route to follow to the future we wanted. It fueled our confidence to push ahead – and, as we did, we learned even more about the full power of a well-made plan.
Whether you’re managing people in a company or a family, having a plan helps at every turn.
It provides clarity for everyone involved and influences everything you do – from the people you gather around you, to the products or services you decide to develop, to the way you end up delivering them.
It can help you to secure funding if you need it, and keep your stakeholders involved and informed as you move forward.
However busy things get, you’ve got a document to refer to that reminds you of your purpose and your priorities. It helps you to do the things that move you in the right direction – and say no to the things that don’t.
It’s a way to avoid overwhelm, manage stress, and stay motivated. But it also lets you see when to adjust your course a little – because, inevitably, things will change.
Five years after making our plan, we were both fully trained teachers, living in a new city, and our children were happy in their schools. Some of our work-life balance was right, although that part was still very much a work in progress. And we’d taken a financial hit that would take a while to heal. But our plan had helped us get the big things right, bounce back from the odd misstep, stay afloat financially, and just about manage all the moving parts of family life.
Some of the thinking we did back then still guides our decisions today. It's good to look back at our original goals and see how far we’ve come. And we may well repeat the process before long. The kids are starting to leave home. Retirement is no longer a distant prospect. Where do we want to be five years from now – and how are we going to get there?
Meanwhile, times are likely to keep getting more “interesting” for everyone. In families and businesses everywhere, VUCA levels can make it hard to see anything beyond the struggles of the here and now.
But experience tells me that, when you feel like there’s simply no point making any meaningful plans, that’s exactly when you need them most.
To learn more about business planning, Mind Tools members have a range of resources to choose from, including:
Business Requirements Analysis
Reference:
[1] U.S. Army Heritage and Education Center (2018). Who first originated the term VUCA (Volatility, Uncertainty, Complexity and Ambiguity)? [online]. Available here. [Accessed June 9, 2023.]
About the Author:
After a 15-year career as a BBC presenter and producer, Jonathan switched to education, where he spent a decade as a teacher and school leader. With numerous books about memory and learning to his name, he compiles quiz questions for TV shows and heads up the U.K.'s Junior Memory Championship. Since 2019 he's been a writer and editor at Mind Tools, working on a wide range of resources and co-presenting the Expert Voices podcast. Outside of work, he loves watching soccer, tending his garden, and running – everything from 5Ks to ultramarathons.
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