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Business Plan vs. “Business Planning”

July 29, 2009

by Tim Berry,  July 2009

What if you don’t need to show a business plan to investors or bankers: Does that mean you don’t plan your business? I hope not.

Why is it that people, even some experts, keep linking business planning to that very special case in which a business plan is part of a loan application or an investment pitch? Doesn’t that confuse everybody else, who wants business planning as a way to manage better, work towards goals, generate growth, and steer a business?

Many people seem to confuse the value of business planning (which is management) with the misguided idea that planning is a matter of predicting the future and then sticking to your guesses, regardless of reality. Or there’s the equally misguided idea of doing a plan as though it were an obstacle and then throwing it in a drawer to gather dust.

The important opportunity is to develop a planning process as a tool to improve the business. So, with that in mind, I thought a few simple dos and don’ts might help.

1.  Do start every planning process with a review schedule, set in advance, specifying when results will be reviewed, and by whom. Schedule the meetings.

2. Don’t ever do more of a plan than what your company actually needs and will use. Not needing to show a plan to a banker or investor doesn’t mean you don’t want the benefit of planning. But do just enough to run your company, and no more: strategy, review schedule, assumptions, milestones, and financial projections.

3. Do understand that it’s planning that matters, not just “a plan.” It’s about the planning process, setting long-term goals and short-term steps, and specific tasks and projections, and then following up to review results and make course corrections. Planning is like walking, or steering–a process of correcting changes.

4. Don’t ever print your plan unless you have to. Not printing it, keeping it on your computer, avoids the common mistake of confusing planning process with having a plan document.

5. Do remember that every business plan is unique, tailored. Forget the idea that there is some business plan “out there” for one type of business or everybody. You have to develop your own best practices, not find them in somebody else’s business plan.

6.  Don’t try to keep a plan in your head. That doesn’t work because the point of the plan is reviewing results vs. assumptions, and changed assumptions, and, frankly, unless we write it down somewhere (hint: leave it on the computer) we lie to ourselves. We forget what our assumptions were. Not some elaborate formal document; just bullets, lists, and projections, but write it down (create it in a usable, retrievable format) so you can track results.

7.  Do break a plan into modules or components. Which comes first depends on what you like and how you think — strategy, SWOT, mission or mantra, assumptions, tasks, responsibilities, whatever. Plan for a bit, then act, then plan some more. Think of the planning as if it were a loose-leaf binder on your desk; pick it up, jot something down, put it back.

8.  Don’t put off planning to save time — not planning takes way more time than planning — or because you’re too busy. Not planning makes you busier — in the wrong way — than planning.

9.  Do a sales forecast, no matter what. And track how reality differs (and it will) from your projections. And think about why it differs, and what to do next, because of that difference.

10. Don’t ever forget cash flow. Neither sales nor profits guarantee cash flow. You need a good cash flow projection, always. For real businesses, one of the most immediately useful positive results of business planning is a better view of cash flow.

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