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Creating Success With a 5-Year Business Plan
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The world of Canadian entrepreneurship is always evolving and technology innovation is changing the way that most businesses function. Unfortunately, many operations are now having trouble reacting to this recent change of pace, especially if they haven’t come up with a good strategy to get their company through tough times.
If that’s the case for your operation, don’t panic, because this type of hardship can be easily avoided if you create the right 5-year business plan to help your company respond to current trends while staying on track with its primary mission. Keep reading to learn about the different benefits of strategizing properly.
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Why Does Your Business Need a 5-Year Plan?
Just as it sounds, a 5-year business plan is a summary of how your organization is going to get through the next half-decade. As mentioned, this plan would help your business react quickly to market changes and other unforeseen events that could otherwise affect its goals and profit margins in the short, medium, and long-term.
It’s also used by internal parties to evaluate the company itself and pinpoint which components are crucial or unnecessary to its survival, as well as by external parties, such as banks and investors to analyze any issues with its financial well-being.
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Not to mention that a good 5-year plan is one of the best ways to persuade new investors to provide your business with additional capital or banks and other lenders to approve you for the financing it needs, now and in the near future.
Essentially, if you don’t create a feasible business plan, not only could your organization be declined for funding, it could suffer some serious financial problems down the line and cause it to react poorly to the aforementioned market changes.
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How Can You Build a 5-Year Business Plan?
If you’ve never drawn up this kind of plan, it can be a bit difficult to know where you’re supposed to begin. However, there are few important elements that should absolutely be factored into the creation of any good 5-year business plan, such as your company’s future goals, growth strategies, financial projections, vision, and mission as a whole.
The Executive Summary
As an introduction to any parties involved, the first thing you should create is an executive summary, which is an outline of all the elements that will be included within your 5-year business plan. Keep in mind that this is the first thing any investors or lenders will examine, so it should be concise and clearly describe your company’s goals, strategies, and projections to catch their eyes without going into too much detail.
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Your Company’s Current Overview
This next section is where your business plan should gradually become more in-depth. Although your company’s future prospects are equally important, investors, lenders, and internal representatives also need to know how business is doing presently so that they’ll have an easier time moving forward.
The company’s overview should include details such as its current:
- Goals, mission, and vision
- Products and/or services
- Financial health (debts, income, expenses, etc.)
- Management team and employee structure
- Properties, equity, and other assets
Another essential step to take for your company’s overview is to perform a SWOT analysis. Short for “Strengths, Weaknesses, Opportunities, and Threats”, this is how you can assess your business’s current situation before you decide to make any changes to or finalize your 5-year plan.
- Strengths are the most positive aspects of your business, including the products or services that generate the most profit, how employees are treated, what materials you can access or manufacture, and what sets you apart from your competitors.
- Weaknesses are when you should be realistic and focus on the sectors where your business is lacking, such as unpaid debts, faulty systems, insufficient income, employee issues, or other problems that you may not be aware of.
- Opportunities are the potential developments that could help your business succeed further, such as deals with clients and other companies, advancements in technology, new market trends, and changes in government policies. Basically, how you can grow your enterprise and get ahead of the competition.
- Threats are the elements that might harm your business in any way, both internally or externally. This can include but certainly isn’t limited to negative shifts in your current field or market, employee shortages, decreases in product or service demand, and manufacturing or supply problems.
Your Company’s Future Goals
Once you’ve performed a thorough SWOT analysis and come up with solutions to any weaknesses or threats, you can begin focusing on how its strengths can help improve business in the future, whether it’s next month or in a full 5 years from its current state.
If you’re attempting to increase your sales, it’s a good idea to ask yourself and answer all the important questions, such as:
- How can your short-term, medium-term, and long-term goals be achieved?
- How can you increase marketing efforts and boost profitability?
- Would it be possible and affordable to expand into a new market or area?
- Would it be lucrative to introduce a new product line or service?
- How easy would it be to market your products/services to a new audience?
You may also want to draw more attention to your business through advertising, in which case you should look into these types of marketing strategies:
- Television, radio, and other paid media broadcasts
- New signage, posters, and company logos
- Newspaper, magazine, and social media publications
- Endorsements, co-branding, and viral marketing
You should also update your company’s “vision” and “mission” statements:
- Your vision statement is basically a way to boost company morale and get your employees (particularly the management) on board with your future business goals and projections, as well as how it will succeed in the years to come.
- Your mission statement, although similar in name, should be more catered to your investors, lenders, and potential clients. This statement is important for your company’s reputation, now and in the future, so it must be well thought out and clearly specify the things that separate your business from the ones around it.
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One of, if not the most important part of any good business plan is the section relating to your financial projections over the next 5 years, which can help you pinpoint the areas where your organization would benefit from financing. After all, investors or lenders will only approve you if they predict that their investment will be returned in due time.
Within this section, you’ll have to describe how your business would use any newly acquired capital, whether it’s to purchase assets, expand into another market, take on a larger staff, or otherwise improve your business structure as a whole.
To properly display your previous and future financial projections, don’t forget to include the following documents within your 5-year business plan:
- Balance sheets, income statements, and cash flow statements from the past 3 – 5 years
- Projected balance sheets, income statements, and cash flow statements for the next 5 years
- Capital consumption budgets and changes in equity over the next 5 years
- Ratio and trend analysis (which monitor past and predicted financial data)
Remember, every penny must be accounted for when you’re running a business, especially if you plan to apply for financing of any kind, so make sure all the numbers line up before you present your 5-year plan to any potential investors or lenders.
During your presentation, you should also be prepared to outline how you came up with all this data, as well as how any improvements, detriments, or changes in the economy would affect its future financial health.
Create Your 5-Year Business Plan Today
Having the right 5-year business plan is one of the best ways to reevaluate your company, secure financing, get ahead of your competitors, and adapt to any shifts in the market or technology. That said, the first step is to measure your organization’s current performance so you can create and tweak your plan accordingly.
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