The new Fit and Proper Requirements (Board Notice 194 of 2017) requires Financial Service Providers (FSPs) to implement and adopt a governance framework, which must include a business plan.
A business plan is a tool that helps pave the way for the future of a business. It is like a roadmap for your business that outlines goals and details how you plan to achieve them.
A business plan needs to mention and include some of the following:
- General requirements: the operational ability of the FSP and KI, an organogram, legal structure of the business and remuneration principles. These principles ensure the remuneration structure is aligned to the overall business strategy without being detrimental to the interest of clients.
- Scope of business: the business’ target market, marketing strategy, due diligence process applicable to product providers, total number of clients the business is servicing and prospective client growth.
- Risk management and business continuity: the processes and plans to mitigate and manage risk in the business, and the continuity plans for the business.
Some of the above aspects can be obtained from your Conduct of Business Report, a document that will replace the Annual Compliance Report.
A business strategy is an internal guideline that lists the actions you need to take daily to support and grow your business for the next three to five years.
A well-formulated business strategy enables you to create, monitor and measure your business’ success. It entails initiatives and plans that may involve marketing to prospective and existing customers, assessing client information on the CRM system or database to identify needs, setting the number of clients to see per day or week and detailing processes to ensure client retention.
Other aspects that can be included are:
- Your product lines or services and your due diligence processes that ensure your products suit clients’ needs.
- Business size, which determines the number of clients per advisor.
- Business growth.
- Target market your product offering is best positioned to serve.
- Client segmentation, which segments your client base and identifies the appropriate services per segment to ensure promises are delivered on, within a framework of profitability, growth and retention.
Benefits of a business plan
Besides being a legal requirement, there are benefits to having a business plan. It offers the best opportunity to develop your role as a business owner, working ON your business to articulate your decisions, create a roadmap to success and prioritise your business. It also offers the chance to work IN your business, as you lead the qualified people who help run your business effectively.
Creating a business plan that works requires more than completing a template or framework relating to what your business does. It will be unique, based on how you run your business, your particular business goals and objectives and how you plan to meet these goals and by when. The key factor in creating a business plan that works is proper business planning.
It is also important to incorporate the six TCF outcomes throughout the business planning process and embed them in your business culture and operations.
As a business plan does not ensure that what is planned will happen, it cannot be static. It must respond to changes in the business and regulation, and therefore requires consistent monitoring and adjustment. As author Dan Sullivan wrote in ‘How to Get to the Top and Stay There,’ “Staying connected with your vision can be a real challenge … and unless it’s something you revisit regularly your vision is going to get lost in the shuffle … of the day-to-day concerns.”
Masthead runs regular business planning seminars to assist advisors to draft an effective business plan. Read more about the seminar “How to create a business plan that works”