By Lisa Plonka, Partner, CPA, CFE, Plante Moran
Change is truly the only constant in business. While some shifts are easily anticipated, others are less predictable and potentially more impactful. Franchisees can take steps to protect their organizations against the inevitable ups, downs, and uncertainties of the market by developing a strategic business plan.
Most franchisees track cash flow, costs, and other key indicators on a regular, short-term basis. What’s often missing is a formal, longer-term look at what might happen to the organization if various scenarios should come to fruition. That’s where a strategic business plan comes into play.
A strategic business plan enables you to operate your company in an ongoing state of knowledge and alertness. Some might call it “contingency planning,” but strategic business planning doesn’t focus on a responding to extreme or unlikely events. Instead, it gives you a data-informed view into what might happen to your business if potential scenarios should become reality and also gives you a road map for how to achieve long-term goals.
As a result, it allows you to troubleshoot in advance and react faster to both internal and external fluctuations. For example, it could help you adjust to evolving consumer trends, navigate economic headwinds, or think through succession planning.
Although a strategic business plan requires an extended view, it should not peer so far into the future that it becomes meaningless. To be effective, it should:
- Start by focusing on two to three years and then extend to five once the model is fully developed. Any longer is likely too hypothetical to yield valuable insights.
- Include key metrics as a basis
- Be a living, breathing document that is updated at least annually.
- Focus on realistic scenarios or long-term goals.
- Stay flexible; the plan must be easily adjustable over time.
Take three foundational steps
Strategic business planning is a dynamic process that relies heavily on data, so ensuring you have the data access and staff expertise necessary to create spreadsheets and develop scenarios is important. Ideally, planning should be done in conjunction with your franchisor, business coach, or other resources who can offer templates, macroeconomic data, and other essential insights. Still, while this exercise is very data-driven, don’t make it too complicated—a simple Excel spreadsheet and a skilled person to build it out may be all you need.
Once your resources are secured, the process should start with three foundational steps:
- Look internally. The first step is to “know thyself.” Take a thoughtful inventory of significant categories, such as:
- Revenue trends
- Cost structures
- Key performance indicators (KPIs)
- Seasonal tendencies
- Customer behavior
Dive deep into the company’s historical finances and trends. As a franchisee, you may not have complete autonomy over some aspects of the business (such as products or pricing, for instance). Therefore, defining the factors within your control and those that are not is crucial. Concentrate your strategic business planning around the areas within your control.
- Evaluate external data. Most franchisees have a good grasp on their own numbers, but keeping tabs on all the external factors that could potentially shape an organization is much harder. You may want to start by tracking the data on elements such as:
- The competitive landscape. What competitors have entered or left the market? How have product and service offerings changed? What are the current delivery model trends?
- Customer demographics. How are your customers’ tastes shifting? How are their spending habits evolving?
- Cost impacts. What is happening with interest rates and tax rates? Will tariffs affect the cost of products, components, or ingredients? How have real estate valuations or lease costs changed? How are labor laws and job trends influencing labor costs? It is imperative to watch over the major cost categories, especially if they are mainly out of your control.
Some of the relevant data points will be local, but regional, national, and global trends may also apply. Your franchisor may be a beneficial source of assistance, especially if they can access national or international data and information.
- Bring internal and external data together. After all the data is gathered, the key to a solid strategic business plan is to carefully assess your essential business drivers and develop realistic scenarios around them. Determine which scenarios seem most plausible, then plug in the data to see how your company would be affected by the “best case” and “worst case” scenarios. Evaluating “middle case” scenarios may also be helpful.
For each scenario, think through the decisions you would have to make. Consider how you might need to modify your assumptions. Most importantly, identify the actions you would want to take in response. After all, the goal of a strategic business plan is to allow you to pivot quickly should circumstances actually arise. For example, organizations operating with a plan in place during the pandemic tended to adjust faster due to their constant state of readiness.
Stay alert to stay ahead
It’s important to keep in mind that a strategic business plan can be executed flawlessly yet still fall short if a company has tunnel-vision on implementation but does not stay vigilant to real-life changes in circumstance that might impact the plan. Conversely, a forward-thinking, adaptive approach is key to improve decision-making despite ever-shifting market currents and challenges. Maintaining a constant state of alertness and readiness is not just a safety net; it’s a way to fuel success.
That is why a thoughtfully crafted strategic business plan is always a good idea. It can help franchisees remain vigilant, keep sight of influential changes, and even unlock opportunities that might otherwise go overlooked. It is a well-established strategy to weather uncertainty and thrive in an evolving market, and it’s never too late to start.
About the Author:
Lisa Plonka, CPA, CFE, leads the franchise and consumer goods and services practice at Plante Moran, one of the nation’s largest accounting, tax, consulting, and wealth management firms. She is a Certified Franchise Executive and a member of the International Franchise Association (IFA), the AICPA, and the MICPA. She continually educates herself on issues impacting the franchise industry, then transfers that expertise along with creative strategies to help power clients’ growth.
Reach Lisa at lisa.plonka@plantemoran.com or visit https://www.plantemoran.com/get-to-know/people/lisa-plonka