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Attitude Adjustment: 5 Planning Fundamentals for Every Business

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Attitude Adjustment: 5 Planning Fundamentals for Every Business

By Tim Berry, Guest Blogger
Published: July 12, 2011

 

Former president and military strategist Dwight D. Eisenhower said it best:

“The plan is useless; but planning is essential”

And that’s as true for businesses as it is for armed combat. Whether or not you need a formal business plan document for your business, you can always benefit from good planning. This post is about five principles of good planning that can help every business. Including yours.

1. It’s about results

The purpose of business planning is better business: More money, better management, teamwork, collaboration, tracking results, improving performance, and getting things done. It’s not a good or bad plan because of document factors like wording or layout or readability or comprehensiveness. Your business planning, like everything else in a business context, is about the results it gets.

Unfortunately the common folklore is that a business plan is about convincing investors or bankers. In truth, what planning is supposed to be for, for the 90 or so percent of businesses that aren’t trying to convince investors or bankers, is steering the business. Planning is supposed to be management.

2. Form follows function

Don’t think of your business plan as a formal document unless you happen to be one of those select few looking to impress investors, bankers, professors, or somebody else outside your business. For the rest of us, the business plan lives on the computer where anybody on the team can access it. It’s just big enough to cover strategy and management.  It might be as simple as a few bullet-point reminders of fundamental strategy, plus a review schedule, list of assumptions, milestones (tasks and responsibilities), and projected sales, profits, and cash flow. If you’re not using it to explain your business to outsiders, don’t worry about format, or executive summary, or describing the company or management team. Stick to what’s going to happen, when, who’s responsible, and how to measure progress.

3. Planning is about accountability

Accountability is going to be increasingly stressed, noted, and discussed in the future as we move steadily away from the warming-the-chair mentality of the past to the performance-and-accomplishments mentality of the future. Technology has changed the business landscape. Every day more people work on the web instead of in an office. Telecommuting, virtual workspace, and remote work is the future.

And good planning includes setting commitments, responsibilities, measurable goals, objective metrics for tracking, and following up on all of this with regular plan vs. actual review. And tracking and reviewing measurable performance factors – not just sales, costs, and expenses, but conversation rates, presentations, leads, trips, Klout scores, posts, page views, etc. – is what leads to accountability.

4. Planning manages change

People mistakenly think planning gets less important as the pace of change quickens. They ask: “Why plan when nothing is predictable.” What that idea misses is that your planning is about the interdependencies and linkages and coordination of the different parts of the business, so that having a plan makes dealing with the unexpected much easier, not harder. There is no virtue in just sticking to a plan because it’s the plan; good planning reviews results and assumptions regularly, at least as often as once a month, and revises the plan when the assumptions change.

All business plans are wrong, but nonetheless vital, because changing a plan is many times easier than reacting to the unexpected when there is no plan. The interdependencies and coordination are already established, in the plan, so that adjusting and revising is more like adjusting the knobs on the dashboard than starting all over again.

5. It’s planning, not accounting

The standard projections in a business plan, specifically the profit & loss, balance sheet, and cash flow, look a lot like accounting statements. But where accounting is reporting on a database of actual transactions, planning is making estimated guesses based on estimated monthly totals of transactions. Planning requires summary and aggregation where accounting required absolute detail. These are very different mentalities. You can’t take an accounting mentality forward into the future, you have to change your view to a planning mentality. That makes the educated guessing easier to deal with.

After all, if you do it right, you’re going to be following up with tracking actual results every month, and reviewing and revising. So you don’t have to guess the future accurately. Instead, you lay the future out and break it down into assumptions so you can track results as you move towards the future, and compare plan vs. actual.

Conclusion

I call these five principles my attitude adjustment for the kind of planning I call plan-as-you-go planning, with is what I see as the kind of business planning that everybody, even the one-person business, can use to optimize management and steer their business better.  

About the Author:

Tim Berry

Guest Blogger

Founder and Chairman of Palo Alto Software and bplans.com, on twitter as Timberry, blogging at timberry.bplans.com. His collected posts are at blog.timberry.com. Stanford MBA. Married 44 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including The Plan As You Go Business Plan, published by Entrepreneur Press, 2008.

Comments:

When one considers the issue at hand, i have to agree with your decisions. You understandably show cognition about this theme and i have much to learn after reading your post.Much salutations and i will come back for any further updates.
Taking actions without planning is like getting in a bout without a paddle, as you hard to move in any direction and you're just relying on the air and water flow. I agree that business planning plays central purpose of making things in order without it business is a "no" "no". Great post from five principles of planning and I think it could not only be applicable in business sector as to real life. Philippines real estate

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