After working on several client cases, I have noticed that preparing a successful growth plan requires a significant team effort from people in finance as well as different parts of the business and operating model. Still, in many cases the growth plan seems to be built up the wrong way around, often resulting in discrepancies between the growth plan and the financial ambition.
The answer for a successful business plan would be inductive thinking. This allows an organisation to describe the future state and then work backwards to come up with an actionable plan to reach the defined target state.
Two ways to create a growth plan – which one do you choose?
I recognize two general ways to create a growth plan. In the first alternative, business owners are asked to assess their growth options, analyse them, select the most attractive ones, and finally prepare the plans on how to seize the opportunities. Then they work together with the finance function in order to translate the plans into forecasts. There may be a sensitivity test or two, but after some iteration these plans are combined into an organization level growth plan and forecast. The plan is then approved, and ready to be executed.
The second way, the right way, to prepare a growth plan starts from the desired end result. Instead of working deductively from the growth options to the actual plan and related financial outcomes, the starting point should be the financial ambition of the organisation as whole. “Where do we want to be in the next 3, 5 or 7 years?” should be the first question asked. When the management team is aligned on the financial ambition, it is safe to start backtracking to the actual growth plan. This approach also ensures that the whole management team is focused on the future rather than the as-is state of the business.
Will your business model deliver your growth objective?
At this point it may become evident that the business model choices, which otherwise would have been made at the start of the process, are actually insufficient to meet the financial ambition. There may be a need to reconsider the markets where you are playing, the core customers you are serving or the value propositions you are offering.
At KPMG Global Strategy Group (GSG) we have recognized that this may seem as an overwhelming task for many organizations, but it ultimately guides the thinking to focus on those growth options that really can contribute to reach the financial objectives. The end result is a solid, fact-based growth plan which has better chances to keep you on track from the start.