Creating Your Five-Year Growth Plan
Any business with aspirations for continued growth should take the time to create a five-year plan that can serve as a blueprint for building a strong, scalable business. The potential benefits of such a plan are wide-ranging--not just for what it can provide, but also for what it can help prevent. As Tony Peressini, CEO of GreenDrop, LLC, warns, "If you're not constantly looking to grow and adjust your plans according to the current business climate, you will most likely become stagnant."
A five-year growth plan is part of a larger strategic initiative that all organizations should undertake, advises Christopher A. Szpryngel, acting dean of the Malcolm Baldridge School of Business at Post University. A strategic plan acts as a roadmap for the future direction of a company. It involves setting organizational and departmental goals, describing the company's mission and vision, and measuring success and progress over time. The role of the five-year growth plan within that overall strategic plan is to "illustrate the organization's planned growth for each year, identifying what areas are expected to grow and at what rate," he explains.
Creating an effective five-year growth plan is not a solo project. "Plans created in isolation stand less chance of being adopted easily," notes David Clayton, executive chairman of SDL, a provider of global content management and language solutions. While owners and CEOs generally have a strong sense of the direction in which they'd like to take their companies, involving direct reports in developing the plan provides owners and CEOs with the value of different perspectives, and it promotes a greater sense of ownership throughout the organization when it comes to executing the plan.
The areas of focus in a five-year plan may vary depending on the nature of the business, the industry in which it competes, and its goals, but the key is to concentrate on issues related to scalability. "If we define scalability as continuing to maintain or increase profits while increasing revenues, then it's important to watch expenses," Szpryngel says. Two important areas are cost-of-goods-sold (including labor, materials, billable hours, overhead, etc.) and supply chain management.
Szpryngel suggests starting with a SWOT (strengths, weaknesses, opportunities, threats) analysis to determine where the company is today and its most important challenges and opportunities for growth. Next comes a market analysis to identify your target customers and determine how best to reach and convert them. That's followed by a competitive analysis: Who is your competition? What are their strengths and weaknesses? How much market share do they control, and how much can you take from them? Finally, you need resource assessment to determine whether you have the human capital resources and required skills to accommodate additional growth.
The outline of a typical five-year plan should look something like this:
- Executive summary
- Company profile
- Growth goals
- Market analysis
- Customer analysis
- Products/services marketing plan
- Operations plan
- Leadership team
- Financial projections
- Key performance indicators (KPIs)
Your five-year plan should be updated continuously because it is a dynamic document, Clayton stresses. "Change is constant, and plans need to be updated whenever things change. Although on the surface it might seem this could lead to mass confusion, the reverse is actually true. Frequently updating your plan based on current conditions and assumptions provides more order and predictability," he says.