Guidance

Stage 7: business plan

Published 28 March 2017

1. Overview

This section sets out the process and areas to consider when developing a business plan. Producing a business plan provides an opportunity to plan, in detail, the way in which the alternative delivery model (ADM) will operate and will be a guiding document for the new delivery model in its first few years of development.

A business plan is typically needed when the identified preferred option requires a change in delivery model to be led by the in-house team. This could be a Local Authority Trading Company (LATC), Public Service Mutual (PSM), joint venture or in-house with re-engineering.

If the preferred option is to outsource the service, the next step will not be to produce a business plan. Instead you will need to develop a service specification along with documents to support the relevant procurement process (such as a Pre-Qualification Questionnaire and an Invitation to Tender).

The importance of engaging stakeholders in developing the business plan should not be underestimated. While this may take more time, it will create broader buy-in to a shared vision and smooth the journey of transition in the months to come.

2. Why develop a business plan?

The business plan is a useful document that allows stakeholders to understand what the new delivery model will do and how it will operate. The document will also serve as a future reference for the library service’s management team, enabling them to test the service’s development against the original vision. It is good practice for organisations to repeat the business planning process every 3 to 5 years. It may be helpful to link the period of your initial business plan to that of the initial contract (for example 3 or 5 years).

The process of developing a business plan is relatively fluid. Although it is a written document, the content for each section should be thought through before being documented. It can be helpful to use workshop sessions for this process, which also allow for stakeholder input. In addition to workshops, a certain level of research and desk-work is required to complete elements such as the market analysis and the financial model.

We have a 5 year business plan and annually produce a service plan for the year ahead which is shared with and approved by the council. Plans for the future include:

• expanding and developing new and attractive services for current and new users of our existing provision in Devon and potentially expanding our reach geographically by bidding to run other library services
• growing our technology services through expansion of our Fab Lab model into other libraries and environments, including local schools
• expanding our local, national and international partnerships with a wide range of complementary organisations to innovate and enhance our service offer
• increasing our reach and impact by developing libraries as spaces for high quality arts and culture
• developing new models through research into the social value of libraries and our wide range of services
• developing our own infrastructure as an independent organisation, we already have our own financial system and, over the medium term, will have our own payroll and HR systems and an independent IT infrastructure

Libraries Unlimited

3. Business plan structure

Typical areas covered in a business plan are outlined below. We have developed a (downloadable) business plan template (including guidance notes) that can help you to develop your business plan.

Vision and purpose

This section describes what the new delivery model wants to achieve, and how it will do this. It also helps to define the identity of the new organisation for both staff and customers.

Our business plan has also always been informed by our own ambitions and the way we align resources to deliver these. This is bigger than a business plan for divestment, and wider than the council’s vision, which was by necessity informed by its statutory duties.

It also confirmed the need for expert commissioning - a strong client for the council when agreeing the transition, and commissioning when the service is being provided independently. Suffolk Libraries IPS

Market

This section describes the external market in which the delivery model will operate. This should be considered at a number of levels (locally, regionally and nationally) and will include aspects which you will have started to already develop during the case for change and case for externalisation. These are:

• likely demand for the service
• analysis of typical customers
• competitor analysis
• PESTLE analysis - looking at external factors that may influence the market
• SWOT analysis - strengths, weaknesses, opportunities and threats

Services

A clear and concise description of the services that will be intended to be delivered by the new delivery model. This may include both the initial services (delivered at the point of go-live) alongside future services to be developed. It may be helpful to describe services in terms of the way they will be experienced by different stakeholders, including library users, Friends Groups, the council and the local community.

Developing your future service profile is an important part of the business planning process. As libraries provide a wide range of service, it’s not easy to look at each service from a commercial perspective. It’s often difficult to accurately map demand for services and understand the true cost base and benefits realised by each service. This is ongoing for us as part of our overall development of the organisation.

We worked hard during set-up to determine a clear vision and purposes for our organisation and in our first year, we have become much more aware of the true costs of the different services we provide. Both these activities are helping us to make decisions about which services we should invest or disinvest in. However, we also weigh up the social value of our services when taking decisions so that we don’t inadvertently cause a negative impact on the difference our libraries make to individuals and local communities.

Libraries Unlimited

Organisational form

This section will consider key questions including the legal form of the new organisation, its governance and management, and how any surpluses will be used. We strongly recommend that you access expert legal advice when considering your legal form.

Consider the intended membership of your board of directors, the intended role of each director, and who from your senior management team should have a position on the board by right of their position within the delivery model (for example the ex-officio director).

We opted for a conventional legal form, a company limited by guarantee and registered charity. This allows us to have staff and community members as members, be governed by a board of trustees, and ensure 100% of any surplus generated is reinvested into library services. This form facilitates a more entrepreneurial, commercial approach but within clearly defined parameters of public benefit.

If offers transparency as a tried and tested model, well recognised by funders and partners and gives us flexibility in how we operate. It allowed us to apply for registered charity status which in turn ensures the organisation qualifies for business rates relief; and means we can access funding we may not otherwise be able to.

Libraries Unlimited

Team

This section will introduce the proposed leadership team for the delivery model, and consider the staffing structure. You should also consider training needs of both the leadership team and the future workforce.

Bring in some independent commercial experience and get good HR and employment advice on all the processes your undertake. Think about:

• which terms and conditions you might want to change - do you want to keep public sector terms on sickness and any enhanced payments?
• whether you want to stay with the national employer negotiations, if not you can create your own with your own methods of awards and recognition

Suffolk Libraries IPS

Stakeholders

This section will identify and prioritise a range of stakeholders that are important to the new delivery model. This could vary from council commissioners to library users. A clear engagement strategy for influencing these stakeholders should be outlined. A (downloadable) stakeholder mapping and communication planning template has been provided to support you during this process.

Quality assurance and monitoring

This section should outline the delivery model’s approach to assuring high-quality services to its customers, considering aspects such as risk management and performance management of contracts held by the delivery model.

Resources

This section should set out the practical resources that will be needed to deliver services. This section should include enabler and infrastructure elements, including:

• premises and office space
• equipment and resources
• legal requirements and quality standards
• partnerships with other agencies and/or suppliers
• external advisors
• supporting functions (such as IT, HR and payroll)

It should also include consideration of assets and staff.

Finances

This is a crucial section of the business plan which will come under close scrutiny if you decide to seek external or grant funding. It will need to demonstrate that you have considered how the financial management of the delivery model will work, and show that the organisation is forecasted to be financially sustainable over the medium term. The content of this section will include summary financial projections, based on your 5 year financial model.

There is a contradiction between the need for a strong financially robust business plan that convinces the council that there are both short and long term savings, whilst trying to reassure staff in relation to terms and conditions and not gambling on a windfall of external grants, donations and income generation. Our approach was to be realistic in the hard savings.

Inspire Culture, Learning and Libraries

We recommend that you access specialist VAT advice to consider any VAT implications for your new delivery model.

Understand how your services’ finances will be different from being in the council. Work with external accountants as soon as possible. Be clear about where you will generate income from and be realistic about the possibilities.

York Explore

Transition

This section outlines a plan showing activities required from the sign-off of the business plan to the go-live date for the new organisation. Special consideration should be given to timescales and dependencies relating to technical aspects of the process, including the consultation process, setting up a pension scheme, transferring assets, establishing the company as a legal entity, and setting up support systems (such as IT, HR and payroll). For further information please refer to Stage 8 - Transition.

Risks

This final section should capture risks, their anticipated impact, and the actions that have been identified to mitigate and manage them.

4. Intended outcomes/outputs

Once you have developed the full business plan for the new delivery model, it should be formally signed off by the council. This ensures that key stakeholders are appropriately sighted on the vision for the new organisation and understand how it intends to operate.

5. Lessons learnt and critical success factors

The CEO’s of the current library service delivery models have identified the following learning points in relation to the business planning process:

Libraries Unlimited

Independent advice from a business consultancy was incredibly valuable because it was the robustness of the business plan that enabled us to give confidence to internal council decision-makers, particularly those in finance and legal departments. We learnt a whole raft of new skills that we hadn’t needed before because the wider council took care of it for us. More than anything the process showed us how important it would be to bring new skills into the organisation once it was established.

The most challenging aspect was quickly obtaining the information that we needed in order to plan effectively. You need to pull together up-to-date information from across different council departments and often this was information that hadn’t been needed before.

Suffolk Libraries IPS

There was dedicated council support for us initially, but it soon became clear we needed our own and it had to be independent. Paying for it has to be part of the transition and set up process. It’s important to get independent contractual, HR and employment advice from organisations which have a strong background in charitable, public contracts or commercial ventures. Conflicts of interest will arise during your discussions with the council, so accessing independent support is crucial.

The next section covers the eighth stage of the process - planning and undertaken transition to a new model