Whether you’re just starting out, growing your business, or seeking outside help, good business planning is essential for achieving your goals. And yes, this applies to business owners too. Startups know they need a plan, but business owners often think planning is just a startup activity. That’s not true.
To clarify, we’re talking about the planning process, not just having a plan. This is a crucial distinction. Planning involves a lean business plan with monthly reviews and revisions to guide management. It’s not a document you use once and discard; it’s an ongoing management process.
Moreover, this isn’t about creating a big formal business plan. It’s about lean business planning—having a simple plan that’s big enough to effectively manage your business.
Manage cash flow. Profits are an accounting measure, while cash flow represents your bank balance. You can’t spend profits. Plan your cash flow with linked projections of sales, spending, and cash. It’s the most vital aspect of business planning.
Set strategy. A good strategy focuses on specific points of differentiation, target market, and business offerings. Many business owners try to cater to everyone, but success requires focusing on the right things for the right market segments. Write down the key points and refer to them regularly as reminders.
Match tactics to strategy. Tactics include decisions on product or service, marketing, pricing, promotion, financing, and more. Often, we lose sight of the strategy while executing tactics. Ensure your pricing matches your differentiation and target market. Make sure your promotions align too.
Set specific milestones, metrics, tasks, responsibilities, dates, and deadlines. Management involves setting expectations, tracking results, and comparing those two. Expectations should be specific, trackable, documented, and communicated, as should the results. Accountability requires clear metrics and task responsibilities. Planning helps get your team on the same page by communicating expectations and results.
Deal with displacement. You can’t do everything. With your strategic focus set, decide what you can and can’t do realistically. The principle of displacement means that everything you choose to do rules out other possibilities.
Manage fixed costs, locations, and spending. Use your planning process to put numbers on key concepts to guide decisions about new locations, equipment upgrades, and more.
Know when and why to hire new people. Use your planning process to identify the need for new hires, the functions required, and related expenses.
Manage a team. People perform better when they know their specific metrics, tasks, and expectations. Use the planning process to clarify these and share them with your team. Accountability becomes easier with clear numbers and tracked results. Your review process benefits from linking actual performance to the plan.
Plan and execute financial needs. Understand your financial needs ahead of time, whether you need a loan or are seeking investors. Know the relationship between growth and working capital so you can meet financial needs before you’re in a tight spot.
Grow your business. Your planning provides a platform to review strategy and results, evaluate tactics, and develop plans for expansion into new markets or business offerings.
