Business Planning Guidance For Arts And Cultural Organisations

Section B:Business planning process the words and numbers are not integrated andgive the impression of having been developedseparately and ‘slapped together’ at thelast minute the assumptions underpinning the financialprojections are either non-existent or unclear significant elements of the organisation’sactivities are not discussed in the plan risks and challenges are not addressed orare seen as purely externalIn general, strong plans exhibit many of thefollowing characteristics: they are short and to the point with the coreplan (excluding appendices) being no morethan 20-25 pages long and in a readable font they are focused on the future and not on thepast or on what the organisation currently does they focus on action not rhetoric – clear actionplans with measures of success rather than lotsof quotes from third parties they demonstrate a good awareness of theirexternal environment they are built around a strong strategy treeframework the text and numbers are well integrated andtell a consistent and coherent story all major aspects of the organisation’s activitiesand operations are considered challenges and risks are openly acknowledgedand management strategies identifiedIn practice: the business planIf you are preparing a business plan for thefirst time or want to try something differentit is often valuable to look at other people’splans to see what you like, what you don’t,what works and what doesn’t.A good way to do this is to source examples ofbusiness plans from other charities online andthen discuss them with a group of staff andtrustees. Most of the larger charities and manyof the smaller ones publish their plans onlineand they can be a great source of inspiration(and warning!).Weak plans tend to exhibit many of thefollowing characteristics: they are overly long and wordy aims, goals, priorities and objectives are usedinterchangeably and are too numerous the focus is on ‘selling’ the organisation’sunique value and its track record rather thanon planning for the future there is an undue focus on history as if that isargument enough for future support the focus is internal with little acknowledgementof the external environment and of how itmight change there is little or no clear sense of what ‘success’would look like there is little or no sense of how theorganisation will change and develop9Back to contents

Section B:Business planning process4 Governance and business planningOver the past 18 months there has been aheightened focus on the importance of effectivegovernance, especially following the collapse ofKids Company and widespread public anxietyabout the ethics of charitable fundraising inthe light of Olive Cooke’s death. The PublicAdministration and Constitutional AffairsCommittee produced highly critical reports in theaftermath of both events. Bernard Jenkin MP, theChair of the Committee, noted in January 2016:In practice: getting board members involvedin business planning Try to involve board members at an earlystage, both to get their buy in to thedirection of travel and to draw on theirexperience and perspectives Consider establishing a project group ofboard members and senior managers/staffto work on the plan together Involve different board committees insupporting the development of differentaspects of the plan and do not leave allthe scrutiny to the Finance Committee Share an outline of the plan early on tohelp with engagement and avoid surprises Invite board members to consider howboard development will form part ofthe plan Explore together how the business plan canform the framework for future reporting.For example, board reports could bestructured around delivery of the key aims“ This is the last chance for thetrustees of charities, who allowedthis to happen, to put their house inorder. Ultimately, the responsibilityrests with them. No system ofregulation can substitute foreffective governance by trustees.”There has been equal scrutiny of companydirectors in the aftermath of the 2008 financialcrisis and more recent corporate crises andfailures such as those at Volkswagen and BHS.The board’s involvement in business planning isone of the key mechanisms through which trusteesand company directors can discharge their legalobligations and demonstrate effective stewardship.Regular reporting against business plan aims andobjectives is a powerful way to increase boardengagement and raise the quality of governance.10Back to contents

Section B:Business planning processCompliance for charities: in its key guidancethe Charity Commission sets out sevenkey legal responsibilities in addition tothe requirement to ensure that you arelegally appointed1:Active participation in the process of businessplanning should ensure that trustees: understand the purpose for which theircharity exists understand how all of the charity’s activitiessupport or further its purpose have considered public benefit in theirdecision making have taken, as required, balanced andadequately informed decisions, thinkingabout the long term as well as the short term have ensured that the charity does notover-commit1. Ensure your charity is carrying out itspurposes for the public benefit2. Comply with your charity’s governingdocument and the law3. Act in your charity’s best interests4. Manage your charity’s resources responsibly5. Act with reasonable care and skill6. Ensure your charity is accountable7. Reduce the risk of liabilityIn addition, a well-designed process canenable trustees to discharge a number ofspecific obligations:In 2015 two new Statements of RecommendedPractice (SORP) for accounting by charitieswere issued2. These included a number ofadditional disclosure provisions as well aschanges in the accounting treatment forsome items. setting, publishing and reviewing areserves policy establishing and maintaining appropriatesystems for assessing and managing theprincipal risks and uncertainties facingthe charity overseeing fundraisingA robust business planning process shouldbe one of the key ways in which trusteescan comply with these obligations anddemonstrate their good stewardship.The process can also highlight the need forchange around key areas of compliancesuch as health and safety, safeguarding andfinancial controls.1 -do#act-in-your-charitys-best-interests-12 tials-march-201511Back to contents

Section B:Business planning process5 Stakeholder management and businessplanningCompliance for company directorsDirectors of companies that are not charitiesare not required to disclose as muchinformation as trustees of charities buttheir legal duties are still considerable3:Business plans are primarily tools for internalstrategy setting and management but they dohave a key role to play in securing external supportand building strong stakeholder relationships.A good plan can give a funder confidence thatyour organisation knows what it is doing and why.A weak and confused plan can have the oppositeeffect, leading to an erosion of confidence andthe need to invest significant senior staff timein explaining the organisation’s choices andrebuilding stakeholder confidence. to act with powers to act in a way the director considers(in good faith) is most likely to promotethe success of the company for thebenefit of its members as a whole to exercise independent judgment to exercise reasonable care, skill anddiligence to avoid conflicts of interest not to accept benefits from third partiesby reason of being a director or doinganything as a director to declare an interest in a proposedtransaction or arrangementIn practice: involving stakeholders inbusiness planning Meet with your key stakeholders as nearto the beginning of the process as possibleto help you understand their view of yourorganisation, their priorities and theirperceptions of the wider context If you are planning a major shift ofdirection, signpost this early and share yourreasoning before the plan is fully developedto test its attractiveness Communicate your timetable and processclearly – if stakeholder feedback and/orsign off is needed make sure this isscheduled into your timetableThese requirements do apply to all companydirectors, including those charity boardmembers and executives who are directorsof charitable trading subsidiaries. Activeinvolvement in business planning is one of thekey ways in which a director can demonstratetheir discharge of these duties.And, as with charities, the process can alsohighlight the need for change around keyareas of compliance such as health andsafety, safeguarding and financial controls.3 es-of-directors12Back to contents

Section B:Business planning processThe business planning cycleThis section is about the process of developingyour business plan; it includes tools and practicaladvice and highlights the links between businessplanning and good governance. We have brokenthe business planning cycle into seven stages; theamount of time and effort needed to completeeach stage will vary greatly between organisations,and they will be iterative. Missing out any stage islikely to lead to a weaker plan.PlanningAnnual revisionand updateUnderstandingthe big pictureMonitoring andevaluationDevelopingthe planSign off,communicateand engageTestingthe plan13Back to contents

Section B:Business planning processStageKey activities1. PlanningAgreeing rolesIdentifying deadlinesPlanning the project2. Understanding the big pictureChecking/agreeing the visionExternal environmental scanning including stakeholder consultationOrganisational assessment including staff consultationBusiness modelling3. Developing the planStrategy treeDeveloping key strategiesWriting the plan including appendicesDeveloping financial projectionsMilestone planningSetting objectives4. Testing the planScenario planningRisk assessmentStakeholder consultation5. Sign off, communicate and engage Board approvalSharing with fundersStaff engagementOnline publication6. Monitoring and evaluationAgreeing key evaluation criteriaAgreeing data collection methodsConfirming reporting procedures and timetableReporting on progress against targets7. Annual revision and updateReviewing performanceIdentifying major internal and external changesRevising the planConsidering extending financial projections by one yearSecuring sign off, etc14Back to contents

Section B:Business planning process focusing too much on past or presentposition – it’s important to share yourcontext but this should be a futurefacing document lack of recognition of planning constraints– while you should be ambitious you alsoneed to be realistic becoming too wedded to one strategytoo soon unclear strategy or goals action planning is not specific lack of performance/outcome indicators lack of review/update arrangements lack of organisational ‘voice’ – try not toproduce a generic plan, it should reflectyour organisation’s character, passionand talents think about using charts, models andimages as well as textIn practice: the business planning processThere is a danger, given everything else thatneeds to be done for the day job, that thebusiness planning process is side-lined or leftto the last minute. It can also be the case that,when guidelines such as these are given, itbecomes a rather formulaic ‘paint by numbers’exercise. Business planning should be anongoing, dynamic process that is part of thenatural development of any organisation.This is particularly the case given the rapidchange and disruptive events we haveexperienced in recent years.Part of the process of developing yourbusiness plan should also include the ‘what ifs’: what if we are 30 per cent wrong in ourincome projections? what if our two most senior staff leavein the same year? what if some new technology has a majorimpact on how we distribute our work?Compliance: as part of your businessplanning process you should be takingaccount of current and future legal orregulatory requirements that will have animpact on your planning. This means youwill need to have up to date knowledge ofthese areas and someone will need to takeresponsibility for ensuring it is included inthe planning process.So while it is important to develop anoverarching business plan, it is also helpfulto have a plan B or C in mind.Some of the pitfalls to look out for in thebusiness planning process can be: lack of an evidence base – make sureyour assumptions are justified15Back to contents

Section B:Business planning processStage 1: PlanningStage 2: Understanding the big pictureThis stage includes: ensuring that the vision, which may have beendeveloped several years ago, remains relevantand compelling updating or creating a shared understanding ofthe organisation’s current position and of yourexternal context determining what business model(s) thebusiness plan will be based uponIt can be very helpful to see the developmentof a business plan as a project and to bring to itsome of the same techniques that you would usein creating a new artwork, or running an event.There are three steps in this stage: agreeing roles,identifying key deadlines and planning the project.1. Agree what roles everyone involved in theprocess will be undertakingPeopleJobs to be doneTrustees including Chair,Treasurer and FinanceCommittee membersExecutiveSenior managersStaffVolunteersStakeholders and fundersCustomersKey partnersResearchPlanningWritingFinancial modellingRisk assessmentReviewSign offProvide feedbackConsultInvestment of time and effort in this early phasewill pay dividends when you come to write theplan and create the budgets.2.1 A compelling visionA vision is a statement of your reason to existand the change you seek to make in the world.If your organisation is a registered charity it shouldbe a powerful statement that translates yourcharitable objects into a call to action.A compelling vision needs to take account of: Content: the vision must appeal to followers andstakeholders alike. A content rich vision appealsto various needs and recognises what willmotivate people. This differs from an ‘enterprise’vision that tends to focus on a wide range ofstakeholders and as such becomes more vague Context: the vision needs to be meaningfulin the context of the work you do. Time andcircumstances can create a need for the visionto shift but you also need to be aware of visiondrift or the ‘vision-du-jour’ syndrome Credibility: ensuring the vision is inspiring willbe as much to do with the credibility of yourorganisation’s leadership as with the content.This can be due to track record, personal styleand/or persuasion. Credibility will also bejudged by ensuring it is based on a healthydose of realism and it needs to be plausibleYou may decide as part of the process that youwant to bring in external expertise; this will needto be factored in to your resourcing and timescales.2. Identify key internal and external deadlinesand constraints such as board and committeemeetings, funding commitments, holidays andinternal busy periods when it will be hard toprogress the plan3. Produce a clear project plan and share it witheveryone involved16Back to contents

Section B:Business planning processTwo tools (SWOT and PESTLE analyses)are commonly used to do this and bothare discussed below.And is developed through: Collaboration: however visionary you are thevision needs to respond to the needs, wants,desires and passions of those responsible formaking it happen. Commitment develops fromempowering others through the process andensuring they have a chance to shape the vision.The process needs to be approached with anopen mind, and the challenge is perhaps toenvision in the early stages rather than tohave a fixed vision.External environmental scan – PESTLE andstakeholder consultationYour organisation does not exist in a vacuum: it ispart of a sector, a community, a region, a nation,an economy, a society, a continent and a world.Developing and sharing a good understanding ofhow your external context is changing and maychange in the future is vital to the survival andsuccess of your organisation. It will enable you toidentify new opportunities as well as threats.In practice: visionThe best tool for doing an environmental scanis a PESTLE analysis (you may have come acrosssomething similar with other acronyms – PEST,STEP, STEEP, STEEPLE). This tool will help you toexplore the likely future environment in terms ofsix key drivers of change. Is it very descriptive of what you do? Whatyou want is something that describes whatyou hope to achieve not what you do Is it simple and straightforward? If not trydistilling it into a four word sentence; whatis your four word story? Is it easy to remember and to tell others?This makes sure you have not made itover complicated Have you lived with it for a while? You don’thave to finalise the vision at the first attempt.Give it time to sink in and test it outPESTLE: The six key drivers of ment2.2 Mapping your contextYour business plan cannot be developed inisolation from where your organisation has beenand is now and the environment within whichit is operating. The process of reaching a sharedunderstanding of what you are good at, whatneeds work, what opportunities you might exploitand what threats you need to address will enableyou to build a stronger, more ambitious plan.17Back to contents

Section B:Business planning processHave a look at other PESTLEs on the weband see the sorts of factors that differentbusinesses are taking into account. Try not tojump to conclusions about the future basedon present or past performance: they arenot always reliable guides. Get other peopleinvolved so you get as many perspectives aspossible. This is often something that boardscan be particularly helpful in contributing toas they often bring wide ranging expertiseand backgrou

Business planning process A business plan is A business plan is not a clear and coherent plan for action a guide to the future a ‘live’ internal document which is revisited and revised annually one of th