3C: Business planning

To take on and run a successful facility there must be a business model that works

Section 3 progress

The club or community organisation and the local authority need to have a reasonable level of confidence that enough income can be generated to cover costs and invest back into the site. Otherwise the venture will fail, and that is not in anybody’s best interest.

The business plan also demonstrates that the organisation is strong, with good governance, the right skills and the ability to operate the facility successfully.

What does a business plan cover?

A local authority will always expect to see a business case before agreeing to an asset transfer.

Some councils provide their own template whilst others leave it to the group themselves. If the transfer opportunity is part of an open competitive process, the business plan will need to stand up to very robust scrutiny and there will probably be a scoring framework for decision-making which can guide the structure of the plan.

 A local authority will always expect to see a business case before agreeing to an asset transfer

 A thorough risk assessment is vital to help you to develop your own plans and to convince others that you have thought through all the possible eventualities and acted to minimise any negative impacts. Do not hide any risks from partners; it is almost certain that they will spot hidden issues of concern given their experience with similar projects, which may lead them to conclude that your feasibility and business plans are not robust. This could ultimately see them rejecting your plans.

The main topics your business plan should cover include:

  • A short summary about the club/organisation, your vision and purpose
  • Information about the club and its people
  • The asset transfer project
  • Information about the business model
  • Marketing
  • Resources
  • Management
  • Risk assessment

Have a look at the Business Plan Guide for more detailed information on each of these areas.

Remember, don’t try to write too much in the main body of the plan. Some information can be in appendices at the end as supporting information. A business plan should be easy to read and understand and sell your case well.

There are many guides to writing a good business plan.

There are also consultants who can help with business planning and this can be useful as a critical friend and to take the pressure off volunteers and staff.

However, if you do have an external person writing your business plan, do make sure that the project team understand the plan and what it means for you in terms of managing the business and the asset.

Your business model

As a community organisation or charity you may not even think of yourself as a business, but every community business has the same elements as a normal business – customers, products and services, finance, marketing and, hopefully, profit.

The key difference is that any profit generated is for social and community benefit, not individual gain. However you still need to generate profit (or ‘surpluses’) to plough back into the business and the facility.

In order to write a convincing business plan you need to understand and articulate your business model and make sure it is reflected throughout your plan.

Your business model is the plan for the successful operation of the business, identifying sources of revenue, the intended customer base, products, and details of financing.

  • Business models for community businesses tend to be more complicated than for conventional businesses. You will most likely have a mix of income including fees and charges, sale of services, donations and possibly contracts with public sector bodies
  • Another complication for community business planning is that the customer doesn’t always pay - so you may have users such as children or disabled sports-people where the service is paid for by a donor or a public sector client rather than directly
  • Every community sports businesses has a different business model. What matters is that you are clear about yours and that the rest of your business plan reflects this in terms of staffing, financial projections, governance, etc.
  • Part of the business model for every community business is its ‘social return’ i.e. its benefit to the community, so your business model also needs to show who benefits and how.

Which income streams are open to you may depend on your legal structure only charities can apply for some charitable grants and there are restrictions to how much charities can generate income through sales of products and services which aren’t ‘on mission’.

Income streams

Here are a typical range of business income streams and products and services for community sports businesses:

  • Fees and charges
  • Pitch/court/hall, equipment hire by clubs, schools, uniformed groups and businesses
  • Catering/bar/social events
  • Coaching and training
  • All-inclusive membership
  • Low cost access only membership
  • Individuals pay to play
  • Corporate team building
  • Apprenticeships and alternative education
  • GP prescriptions
  • Corporate sponsorship
  • Sale of merchandise
  • Fundraising events
  • Grants and contracts relating to sports participation and physical and mental health
  • Personal social care budgets.

Forecasting capital and revenue costs and income

Capital costs are the costs which relate to the structure, site and equipment. Capital costs will also include all the professional costs related to a building project such as the architect’s fees.

Revenue costs are the ongoing costs of running your facility including staffing, utilities, marketing and minor repairs.

You will need income and spending projections and cash flow projections for at least 3 years. Projections are always guesstimates but should be based on real figures as much as possible. These might include historic costs from the local authority or previous operator, your own historic costs, estimates and quotes, figures from the accounts of similar size and type businesses and facilities.

There are a few other important points:

  • Don’t get caught by ‘optimism bias’ – assume income will be worse and costs higher then you hope;
  • Remember to build in inflationary uplifts;
  • Always include contingency cost lines, a sinking fund and funds for essential repairs and maintenance;
  • Don’t forget additional staffing costs like training, redundancy and HR advice.

See the attached checklist for an outline of potential capital and revenue costs and income.

Cash flow

Cash flow is the way in which money flows in and out of your bank account. It’s no use having a large grant or donation due in 3 months’ time if you don’t have enough money to pay the wages next week.

When the Capital and Revenue Costs and Income have been projected and show that income exceeds costs, it is important that these are put into a cash flow for the first years of the project and that the timing and assumptions about timing for income in the cash flow are clearly explained and presented. Businesses often failure due to problems of cash flow rather than their overall profitability.

Whole life costing

Whole Life Costing is the systematic consideration of all relevant costs and revenues associated with the asset.

Typically, a surveyor estimates over a 20-25 year period what it will cost to operate, repair, replace and renew building or landscape elements. These costs are then given a current value in order that the owner can make decisions about and plan investment in the asset. It involves making judgements about which elements (windows, doors, etc.) will need replacing or repairing and what kind of cyclical maintenance (like decoration) will be required.

Locality have developed a simple Whole Life Costing tool which you can use to find out what the facility will cost you over the lifetime of your agreement.

 

Community: Is your business plan expectation reasonable and proportionate?
Community: have you found a critical friend to help you with writing the business plan?
Community: Have all members of the project team been involved in business planning at some point?
Community: is there a viable business model at the heart of your plans?
Community: Have all the costs associated with managing the asset been identified to include in the revenue projections?
Community: Have costs and income been projected in enough detail?
Community: Have hiring/rental levels been set to balance access with profitability?
Community: Does the committee/management group understand all the figures for the project and the assumptions on which they are based?
Community: Is the repairs and renewals budget based on a whole life costing assessment of the asset?
Local authority: Have you offered independent support to groups to help with business planning?
Local authority: Have you interrogated and tested the business model?
Local authority: Have historic operational and capital repair costs been provided?