Preparing a business plan can be a daunting process but it’s fast becoming a popular tool to help practices see where there are struggles and triumphs
So you need to prepare a business plan. Let’s start with two basic questions. Who wants a business plan, and why do they want it? This will guide your approach.
There is no single format or template for a business plan, though there are standard approaches and disciplines. If you are preparing a business plan to satisfy another organisation’s needs – perhaps a bank or other potential lender – they will probably supply their own template and expect you to follow it.
If your target audience is internal, however, you can choose your own format, provided it meets the needs of whoever requested the plan. If it’s for the practice partners, for instance, they may be used to seeing and absorbing information in a certain style – in which case you should stick to that style unless there’s a good reason why not. But you may wish to model the impact of a particular anticipated change, such as new GP contracts or increased reliance on locum staff. If so, you can tailor the format accordingly.
If you still prefer to follow a template, there are plenty to be found online. Simply search under ‘business plan’ and up they will come. Excellent generic guidance is available on Gov.uk (see Resources). Whatever your local needs and preferences, a standard template offers a sound way to begin. Even if you choose not to follow the headings of a template too slavishly, they offer a valuable checklist for your own work.
Where can I get help with the financials?
Because financial projections form an essential part of any business plan, it may be tempting to hand the “financials” over to an accountant. Indeed, if you have in-house financial expertise, it’s a good idea to involve them. Accountants are trained in relevant techniques – such as allowing for the changing value of money over time – and in the presentation of financial data. An accounting qualification offers assurance that’s valued by leaders and decision-makers.
That said, a business plan is about more than money. It typically begins with the organisation’s objectives and values, then moves on to forecasts of activity and sales. These are fields where accountants often feel less comfortable, though they drive financial performance.
Even when it comes to spending projections, it’s wise to avoid over-reliance on the bean-counters. Accountants are trained to value ‘prudence’: an excellent quality, but not always the most helpful when trying to quantify important yet uncertain trends.
Take, for example, inability to recruit GPs: a trend that’s driving up costs for many primary care practices. The traditional NHS approach is to budget for the salary and oncosts of a doctor; then, in the interests of financial control, to challenge any deviation from that budget. But in many parts of England, practices are struggling to recruit doctors. Using a locum is typically a lot more expensive. A sound business plan will not deny this reality, and will attempt to quantify its impact – uncertain though that impact may be.
You can do this but your accountant may struggle.
Business plan or business case?
In recent years, organisations in and around the NHS have grown familiar with requests for business cases to support new initiatives or capital investment. Typically these form the core of a bid for funding, submitted up the government chain of command to those who control a pot of money.
Like a business plan, these business cases often follow a specified format. Many of the headings will be identical. There is, however, a crucial difference:
Contents of a business plan
Irrespective of the precise format you choose to follow, four guiding principles – in this case, outlined by The Prince’s Trust (see Resources) as help for those embarking on a business venture – are well worth bearing in mind:
The third of these – know your market – may jar a little for those working within the NHS, but it is as important in primary care as for a commercial start-up. GP practices traditionally enjoy a degree of market protection, for instance in terms of catchment areas and remuneration packages, which brings an illusion of security. Yet in a politicised environment this cannot be taken for granted.
Remember too that your market is not limited to the one in which you currently trade.
Any good business plan includes, at its outset, a summary. It will probably be the last thing you write, and it’s your opportunity to draw important conclusions from the more detailed material in the body of the plan. It may, for instance, highlight whether current trends in the trading environment can be accommodated, or whether strategic change – on your own part, not anybody else’s – is needed. What’s the impact of local population change on list size? Is seven-day working a minor irritant, or something that undermines the viability of the practice – or an opportunity to grow? What are neighbouring practices up to? And what do you need to do in response?
Your plan may highlight new and perhaps radically different options.
Whatever the summary says, it should say it in plain English. This can be scary, but it’s immensely liberating. Don’t hide behind polite circumlocutions, say what you mean and be concise.
Describe the business you’re in
You know what you mean by primary care, but does your reader? Be specific. Chart what you do, how well you’ve been doing it, and where you intend to go.
Include statements of your core values, your corporate mission, but be sure to include numbers. How many patients? How many contacts? If you don’t know, estimate as sensibly as you can. If others challenge your numbers, don’t take it personally, that’s how inaccurate numbers are improved.
Decide the period of time that your business plan covers. Typically a
single year will be too short, many pressures can be ridden out for one year, but become material over three, four or five years.
Single-year budgets allowed the NHS, nationally, to believe a 4% efficiency gain was achievable; but five years of 4% savings have brought many hospitals to the edge of bankruptcy. Don’t follow the same path.
Finally, be bold. Look at major change and how you, locally, might fit in with it. What about NHS England’s attempts, via vanguards, to force cooperation between primary care, community care and hospitals? What about scientific advance, for instance in diagnostics? What about shortages of hospital doctors? What about strikes? At the very least, such developments may have a local impact; they may also offer strategic openings.
Describe the competition and the market
Yes, there is competition. So, what or who might rock the boat? What can you do about it?
And who are your customers? Will they still want what you’re selling? Can you grow at the expense of others? If these words don’t fit comfortably with your vision of a collaborative, co-operative NHS, try asking how a potential newcomer might encroach on your own practice’s turf – step on your blue suede shoes. Then revisit your assumptions.
Try and attach numbers to your vision. They may be rough and ready, but you’ll begin to get a feel for how much of your business could be at risk – and, conversely, just how big the growth opportunities might be.
Placing your financial forecasts after your business description, market analysis and activity projections isn’t mere convention. It’s your local market and what you do in it that determine financial performance, not the other way round.
This is sound business sense, but it’s not the way NHS finance people always think. NHS accountants are conditioned to expenditure budgets that roll forward from one year to the next. Their language is of baselines, growth and efficiency savings – and of a funding requirement to match. Commissioners are accustomed to drawing down funding as it’s required.
Primary care practices, however, are real business. They can, and do, go bust, though fortunately not often. So the established disciplines of financial management and forecasting are not just relevant: they are vital.
There are four main headings:
Once you’ve prepared the numbers, look at them. What tale do they tell? What conclusions can you draw from them?
Preparing a coherent draft business plan is what’s commonly known as an iterative process.
So, read it through from top to bottom, imagining you’re an intelligent outsider new to the organisation. Does it make sense? Could it be clearer, shorter?
As it’s 2016, you’ll have produced your narrative using word-processing software, probably MS Office. So take a copy and trim it by 200 words. Go on, be brutal. It’ll improve your clarity no end. And if you enjoy this word-cull, do it again.
Once you’re finally happy with the narrative, it’s time to write that summary.
Noel Plumridge, finance columnist.