Formal business plan or not, here are three planning essentials that all business owners need to do.
You may or may not need a business plan document for your business. Some businesses have what I call a “business plan event” that requires preparing the plan document for outsiders. Common business plan events are applying for commercial credit and looking for investment.
But whether or not you need the plan document for outsiders, if you want to optimize your business and management, or steer strategically, or generate a growth spurt, then you still stand to gain from business planning process. And that’s with or without the formal plan.
One: Manage essential numbers
Technically you can manage cash flow and financial health without forecasting; but it’s a lot harder. Managing without the numbers is like driving blind.
I made this argument in Why Bother with Financial Forecasts on a previous post in this space:
“The goal of business forecasting is not what you might think. It isn’t about accurately guessing the future. It’s about running your business right. With good forecasting you track your business numbers back to the drivers that you need to manage. You watch the connections between sales, costs, and expenses. You watch the ups and downs. If sales are up, you adjust inventory. If sales are down, you adjust expenses.”
The most critical factor is cash flow. Real-world businesses can’t survive without healthy cash flow. To manage cash flow, they have to manage sales and other revenue, spending on costs and expenses, and spending on debt repayment and buying assets. You may be smart enough to keep all of this in your head; but I’m not, and few of us are.
Instead, (quoting again from that previous post) …
So you forecast your key business indicators including sales, costs, expenses, and cash flow. And every month, you review results and compare what happened to what you expected to happen. Ideally, you compare it as well to the previous month, quarter, and year.
You don’t just look at the numbers. You look at the business behind the numbers. You identify what to do more of, what to do less of, and what to change.
Two: Manage the constant what’s next: milestones
Every business has important dates, deadlines, and specific task responsibilities. I like to call them milestones. It’s the new version, the new store, the new menu, a new marketing campaign, the important new hire, or whatever else. You, the business owner, can just take a step back from the details and see these steps in your head.
Write these things down for yourself and, if you have a team, for your team members. You don't really get accountability into the business without writing down and agreeing on what's supposed to happen, when, and who is supposed to do it.
And then, having milestones written, follow them up on a regular basis. Just like with forecasts, you review monthly, or quarterly. Go over the progress made towards the major milestones. Celebrate when you execute on time and worry and make adjustments when you don’t.
Three: Manage strategic alignment
Don’t get lost in the smoke blowing, hand waving, pomp, and circumstance of so much of what’s written on business strategy. Keep it simple. It’s about what you sell, who’s in your target market, and why you’re different. For a refresher, I posted A Simplified Approach to Setting Small Business Strategy on this blog a while ago.
Strategic alignment is as simple as matching your tactics to your strategy. For example, a restaurant selling high-end dining ought not to have a discount drive-through window or a playground for kids. Your pricing, messaging, positioning, delivery, channels, and administration ought to match the core points of your strategy.
The planning process involved in managing strategic alignment is writing down the key points — not elaborate text, just simple bullet points — and reviewing them regularly. As with the other essentials here, you do it for yourself, or, if you have a team, with your team. Reviews might be monthly or quarterly. And you write this down because it’s way easier to manage it written somewhere than to keep it all in your head.
Bonus thought: Redefine business planning
Here’s a final thought: if you have your essential numbers forecasts, your milestones and your simple strategy and tactics written down, and you review and revise regularly, then you’re getting the best of business planning for your business. Call it a lean plan, congratulate yourself on adopting planning to the realities of 2019, and keep it up.