Whether you're just starting out, growing your business or seeking outside help, good business planning will help you achieve that goal. And take note: this means you, business owners. The startups know why they need a plan, but we business owners often think planning is just for startups. That’s not the case.
Also, to be clear, I’m writing about planning, not just a plan. That’s an important distinction. It’s almost 2017. Planning means planning process, a lean business plan with monthly reviews and revisions to guide management. Planning is not a document that you use once and throw away. It’s an ongoing management process.
Furthermore, I’m not talking about a big formal business plan. I’m talking about lean business planning, with a simple plan that is just big enough to manage the business.
- Manage cash flow. Profits are accounting creativity, while cash flow is your bank balance. You can’t spend profits. Plan cash flow with linked projections of sales, spending, and cash. It’s the number one essential of business planning.
- Set strategy. Strategy is focus on specific differentiation points, target market, and business offerings. Most business owners want to do everything for everybody; but success requires focusing on doing the right things for the right market segments. So we write down the key points. Then we refer back to them, regularly, as reminders.
- Match tactics to strategy. Tactics are decisions you make on product or service, marketing, pricing, promotion, financing, and so forth. Too often we forget the strategy while executing tactics. Does pricing match differentiation and target marketing? Does promotion?
- Set specific milestones, metrics, tasks, responsibilities, dates, and deadlines. Management is about setting expectations, tracking results, and comparing the two. So expectations need to be specific, trackable, written down, and communicated. So do results. Accountability requires specific metrics and task responsibilities. All of this happens with planning. Use planning to get everybody in your team on the same page. Communicate expectations and results as part of the planning process.
- Deal with displacement. You can’t do everything. You have your strategic focus laid out, so then you decide what you can and can’t do, realistically, in the context of strategy. The principle of displacement says that everything you do rules out something else that you can’t do because you are doing that first thing.
- Manage fixed costs, locations, and spending. Use your planning process to put numbers on key concepts to guide decisions about new locations, upgrades of equipment, and so on.
- Know when and why to hire new people. Use your planning process to pinpoint needs for new hires, functions required, and related expenses.
- Manage a team. People work better when they know their specific metrics, tasks, and expectations. Use the planning process to keep those clear and share with the team. Accountability is a lot easier when you have numbers and tracked results. Your review process gets a boost when it links to the plan vs. actual numbers in your planning.
- Plan and execute financial needs. Know ahead of time before you need a loan or seeking investors. Understand the relationship between growth and working capital. Fill financial needs before your back is against the wall.
- Grow your business. Your planning gives you a forum to review strategy and results, review tactics, and develop plans for growth into new markets or into new business offerings.