The problem with “old-school” business plans
The knock against the classic business plan document is that it has a short shelf life. You do all this work to produce a “finished” plan, but then things in the real world go differently than you expected, and important parts of your plan become outdated and unhelpful. What’s the point?
We agree. That sort of planning — where you write a plan, print it out, and expect those exact words and numbers to guide your actions for many months to come — is fundamentally flawed and a poor use of your time. That does not mean you should give up on planning, though, any more than the failure of a badly designed fad diet should keep people from trying to lose extra weight.
To accomplish your long-term goals, you just need a better way to plan. You need the ability to quickly and regularly review your plan, make adjustments, and keep it relevant. You need a live plan.
Good planning is about making adjustments
Why do static, unchanging plans go out of date so quickly? Because plans are mostly predictions, and predictions are often wrong. That’s OK. You don’t need a crystal ball to plan effectively. What you do need is a way to keep a close eye on your predictions and assumptions, so you can spot variances early and adjust your path to stay on target.
Football coaches do this all the time. Each coaching staff starts the day with a solid game plan based on what they think is likely to work. Not everything goes as they thought it would, though. Their team’s execution breaks down in key areas. The weather turns unexpectedly foul. The turf proves wet and slippery. Their competitors have success with elements of their own plans. Does the coach stick doggedly to the initial plan, watching the same attempts continue to fail in the same ways? Of course not. They tinker with their plans. They try new things, based on what they see on the field. They make adjustments.
Business planning works the same way. Yes, you should spend time to put together an initial plan, taking your best guess at how things will play out. Once you start executing, though, that’s when the real magic of live planning kicks in.
Watch the scoreboard to see how you’re doing
In a football game, you can tell how you are faring by checking the scoreboard. We have built a Scoreboard of our own as part of LivePlan to serve the same purpose. After each month, you can quickly enter your actual results — your actual sales, expenses, direct costs, net profit, and so on — or pull in that data from QuickBooks, and then see how well your plan is working. Are things going better or worse than expected?
This is more than just informational – it’s actionable intelligence. Say your sales and expenses are right on target but your cash balance is low. It sounds like there is a timing issue with your payments. Maybe your customers are taking a lot longer than expected to pay for sales on credit. More aggressive collections can make a big difference to cash flow. Or the problem might be on the other side. Maybe you need to better manage the timing of your own payments to vendors, hanging onto your cash a little longer to help fund your operations.
The same process applies to the milestones in your plan, which you can add and track on the Schedule tab in LivePlan. Say your planned launch of a new product slips from March to May. To keep your plan relevant, you need to adjust your sales forecast, removing the March and April sales that won’t materialize now. Then you should review the rest of your plan to spot any cascading effects. Do you need to cut down your expenses to maintain your profit margin? Or seek funding to help bridge the gap? Your Scoreboard within LivePlan can help you stay ahead of your competition.
Update your plan to keep it relevant
An aging business plan is of little practical use and will soon be forgotten. Your time is way too valuable to squander on a relic. Instead, use your time wisely with LivePlan. Create a solid plan quickly, and be clear about the important assumptions that you need to validate and milestones that you need to hit. Then set up a regular review process to see how you’re doing, identify places where your plan is weak or off base, and correct your course immediately to keep on the path to your goals. With a live plan, you can get yourself where you want to go.