An Introduction to Lean Planning

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It was the fall of 2008 and the financial world was falling apart. The great recession was just beginning and, as companies like Bear Stearns failed and entire industries teetered on the brink of failure, some of our own sales channels at our small company dried up.

My wife and I had just recently taken over Palo Alto Software and were still getting our feet under us as we worked frantically to figure out the right strategy that would get our company through the recession.

During this time, we developed and refined the business planning process that kept our company alive. Not only did this process keep us alive, it actually helped us survive without having to do any layoffs. We came out the other side of the recession a stronger, healthier company. On top of that, we used the experience to formalize the business planning process that helped us survive. We call that process Lean Planning and ended up building LivePlan to make it easy for anyone to implement.

Lean Planning isn’t just for existing companies like ours. In fact, it’s even more useful for new startups and small businesses that are risking everything to get up and running.

In this post, I’m going to give you a quick introduction to Lean Planning and teach you how to make it work for your business, whether you just have an idea that you’re considering turning into a business or you’re an established company looking to take things to the next level.

What is Lean Planning?

Lean Planning is a business planning process, not a single business plan document. Lean Planning helps you develop a solid strategy for your business, refine your strategy as you learn more about your customers and their needs, and track your performance as you go.

Lean Planning can help you produce the business plan documents and presentations that you might need as part of getting started, raising money, or getting a loan. But, the goal of Lean Planning isn’t to just produce documents. Instead, the Lean Planning process helps you build a healthier company that will outlast all the business failure statistics.

We like Lean Planning because:

  • It’s faster than traditional business planning. You can complete an initial pitch—a “Lean Plan” that’s an overview of your business idea—in 20 minutes.
  • Your plan stays up-to-date because it’s easy to update as you learn about your business and your customers. You can revise your plan and strategy in minutes instead of hours.
  • It’s concise. Because Lean Planning requires you to document your ideas with limited text, using the “pitch” framework, your ideas are distilled to their core essence.

Here’s an overview of the Lean Planning process and how to use it to grow your business:

  1. Create a Lean Plan
  2. Test your idea
  3. Review your results
  4. Revise your plan

Step 1: Create a Lean Plan

Get started with Lean Planning by writing down a simple overview of your business. We use a “pitch” format for this step.

Your goal is to answer these basic questions: What are you going to do, and how are you going to do it? Those questions are the core of any business strategy and the first step in the Lean Planning process.

For this step, I recommend a format I call “the pitch” because it’s easy to work with and easy for other people to understand when you share it with them. It’s also short and simple to adjust and change as you go. Think of your pitch as your virtual bar napkin where you’re jotting down ideas about your business. Unlike a napkin, it’s easy to change and revise things as you go.

The pitch format is essentially a one-page summary of your business concept. It’s great because you can easily share it with business partners and even investors to give them a summary of your business. But, it’s also a very useful tool for entrepreneurs because it helps you quickly understand your business, test and validate your assumptions, and refine your strategy as you learn more about your customers.

Your pitch will cover:

  • Strategy: what you’re going to do
  • Tactics: how you’re going to do it
  • Schedule: who is doing what and when
  • Business model: how you will make money

Your pitch can also be used as the foundation for a more detailed, written business plan document if that’s something you need for lenders or investors. But, for many entrepreneurs, a pitch might be all the planning you need to do and you’ll be able to skip the entire detailed business plan.

If you want to skip ahead, you can download our free one-page pitch template and get started right away.

Here’s a more detailed overview of what your pitch should contain:


Your business strategy outlines who you are and what you’re going to do, in simple and easy-to-understand statements. Build your strategy with five key components:

  1. Business identity: Who are you and what do you do? Your identity is your key value proposition to your customers. Your identity should be no more than one sentence and simply declare the value that you provide. For an example bike shop, their identity is, “We offer high-quality bike gear for families and regular people, not just gearheads.”
  2. Problem: What problem are you solving for your customers? You should be able to define the problem you are solving in one or two sentences or in a few bullets. Example: “It’s hard to buy a good bike in this town without being an ‘insider’ cycling expert.”
  3. Solution: How are you solving the problem you’ve identified? This is essentially a brief description of your product or service. Example: “Garrett’s is a snob-free zone where regular people can get top notch gear and expert advice.”
  4. Market: Who is your customer? Are you targeting multiple market segments? Describe your ideal customer in a few bullets. You may want to think about the size of each of your market segments at this stage to make sure you have enough potential customers to build a sustainable business. In-depth market research isn’t always necessary, but you do want to have a good sense of who your target customers are. Check out the graphic below for an example.
  5. Competition: Who is your competition and how are you different? Just list your top competitors and a brief sentence or phrase about how you are different.


One Page Pitch - The Strategy - LivePlan

The business strategy section of your pitch. This one was created with LivePlan, but you can also download a free one-page pitch template.


Tactics are how you’re going to make your strategy happen. Key tactics that you’ll want to cover are:

  1. Sales channels: This is how you will be selling your products or services. Are you selling online? Out of a storefront? Or, maybe you’re building a product that will get sold in other companies’ stores. In that case, you might be working with distributors. Outline how you plan on selling in this section.
  2. Marketing activities: Add a few bullet points on marketing your business. What are the key marketing activities that you’ll be using to drive customers to your door?
  3. Partners and resources: Some businesses need to work with other businesses in order to be successful. If your business has critical partners, list them here. This is also a great place to list key resources your business needs, such as a license for intellectual property.
  4. Team: While “team” is listed last here, it’s typically one of the most important elements of any business. A great team can mean the difference between success and failure. List your key team members and their roles here. If you don’t have a full team yet, that’s okay. Instead, list the key employees you hope to hire as you grow.
One Page Pitch - The Tactics - LivePlan

The tactics section of your pitch. You can use the LivePlan Pitch to document the tactics that you’re going to use to support your business strategy or download our free one-page pitch template to get started.

Now, you may have additional tactics that support your strategy, such as details about your product or service, your location, or other key aspects of your business.

You can start documenting some of these tactics in a business plan document, but be careful not to spend too much time on these details yet. Remember, the first pitch that you build is just a quick way to document your business idea. You’re writing down all of your assumptions about how your business might work. But, until you test your idea and prove that it’s going to work (step two in the Lean Planning process), you don’t have a business that’s ready to launch.

The goal with Lean Planning is to minimize the amount of time that you spend planning and maximize your chances of success. You’ll have a much greater chance of success if you move quickly through these first few steps and get to step two where you’ll find out if your business idea is going to work or if you need to revise it before you move forward.


Your schedule is simply your commitment to start building your business. It’s a list of tasks, or milestones, with dates, responsibilities, and budgets. Without accountability in your Lean Plan, it’s easy for things to fall through the cracks and not get done.

Here are some things you should consider creating tasks for in your schedule:

  • Create a plan and schedule tasks to figure out if your idea can actually turn into a real business. I’ll go into more detail on testing your idea in step 2 of the Lean Planning process.
  • Add tasks that you’ll need to complete to complete to actually get your business up and running. This could include dates for making your business legal, getting licenses and permits if necessary, and setting up shop.
  • Finally, and most importantly, you need to create a schedule to review and revise your plan. If you don’t regularly check your plan and make adjustments, you can easily get off track. Not that you should follow the plan blindly, either. Instead, a regular plan review meeting will give you a chance to look at what’s working, what’s not, and revise as you go. That’s Lean Planning.

These schedules will evolve as you go, so don’t spend a lot of time initially documenting every last step you’re going to take to launch your business. Instead, plot out the next few steps you’re going to take. When those steps are done, come back add more steps as you go. After all, Lean Planning is an ongoing process, not just a one-time event.

Business model:

As you flesh out your business idea, you’ll need to think about how your business makes money—this is often called the “business model” for the business. For most businesses, this is a straight-forward concept. You sell your product or service to your customers and you have a budget to cover your expenses.

Initially, don’t even bother to build out a detailed financial forecast on your pitch. Instead, you can just list out your primary revenue streams and major expenses. Later, you’ll want to come back and create a proper sales forecast, expense budget, and cash flow forecast. But, for now, just think in broad strokes.

Using Garrett’s Bike Shop as an example, we might list out revenue streams for bikes, clothing, accessories, and bike maintenance. Garrett would have an expense list that would include salaries for employees, rent, marketing, utilities, and insurance.

The goal here is to just document how your business works as quickly as possible so you can move on to the next step and figure out if you have a good idea that can turn into a real business.

Step 2: Test your idea

Reducing risk is one of the most important things that Lean Planning can help you with. Instead of rushing out to start your business, unsure if it’s actually going to work or not, take the time to make sure you have a good idea and that you’ll be able to create a viable business.

Most businesses that fail have skipped this critical step and build their business before they test their idea. So take your time here and make sure you’re idea is going to work.

When you developed your idea using the pitch framework in step one, you wrote down all of the key assumptions that you have about your business. These were your best guesses about who your customers will be, the problem they have, and how your business will help them.

Now it’s time to find out if everything that you’ve written down so far is true:

  • Do your potential customers have the problem you think they have?
  • What do your potential customers think of your solution?
  • What’s the best way to sell to your potential customers?
  • What marketing tactics will work?

The best way to answer these questions is to go out and talk to potential customers. There’s no better way to learn from them than to actually talk to them about your product or service, find out how much they’re willing to pay, and what potentially competing products or services they currently use.


Step 3: Review your results

As you talk to your potential customers, you may find that you need to refine your solution, or even re-consider the problem that you are solving. For example, perhaps Garrett (our example bike shop owner) first thought that he’d start a bike shop for people who race bikes, but as he talked to people in his community, he found that the real need was for a bike shop that was easy for non-expert bikers to shop in without feeling intimidated.

Since you haven’t created a detailed business plan at this point, you can easily refine your pitch as you learn more about your customers and the best way to solve their problems. Remember, your pitch should only be a single page, so it should be easy to update as you learn more about your customers, how you’re going to market to them, and what your solution actually is.

The key to testing your idea is to constantly go back to your pitch and revise it as you learn. Lean Planning is an iterative process where you are constantly circling back and making adjustments.

Existing businesses should also review their financial performance:

If your business is already up and running and you’re using Lean Planning to steer your business to a smarter strategy, you’ll do more than review customer and prospect feedback on your idea. You’ll also track your actual financial performance.

Tracking your performance is arguably the most important component of Lean Planning. Without tracking the key metrics for your business, you won’t know if things are going well or going poorly. Spotting trends early and making adjustments to your strategy and tactics is critical to business success.

Tracking your performance is a simple process. At a minimum, review your actual sales and compare them to your goals. Review your spending and see if you’re staying on budget. Beyond sales and expenses, you may want to track other metrics in your startup to ensure that you’re on the right track. Depending on the type of business you are starting, you’ll have different numbers that you’ll want to keep an eye on.

Don’t beat yourself up if you aren’t meeting or beating your plan. The goal of tracking your performance is not to “stay on plan” but to make adjustments if things aren’t going “to” plan.

Beyond financial metrics, your business probably has other key metrics that show how healthy it is. Perhaps it’s the number of sales calls made, or the number of tables turned in your restaurant, or the number of new leads you have.

Whatever the key metrics are in your business, it’s critical to track and measure them to know how you are doing and to make adjustments quickly if needed.

Step 4: Revise your plan

So far, you’ve created an initial lean plan for your business, you’ve learned about your target market and know that your potential customers are interested in your solution. Hopefully, you also have a good sense of what your customers are willing to pay.

Based on all the information you’ve gathered, you should revise your initial pitch. It’s likely that you’ve modified your target market slightly or tweaked your assumptions about the problem customers are looking to solve. Maybe you’ve even changed your ideas about your solution.

There’s nothing wrong with making changes to your assumptions. Right now, you’re just thinking about your business on paper so the risks are low. It’s much riskier and often much more expensive to make changes to your business once it’s up and running.

Now is also the time to figure out if you can build a real business and see if the numbers work.

Once again, with Lean Planning, you don’t need to build out incredibly detailed spreadsheets, but instead, you just need to pencil in the numbers in broad strokes to get a rough idea of what it will take to make your business successful and if it even makes financial sense to start a business. If you run an existing business, you probably already have these financial forecasts. But, if you don’t, now is the time to set your sales goals and create a budget for your expenses.

For this step, you will create:

  • A sales forecast
  • An expense budget
  • A cash flow forecast

Building a sales forecast:

For your sales forecast, think about how many widgets, hours, or meals that you might be able to sell in a given month and what each customer will pay, on average, for each widget. Then think about what it costs you to deliver each widget (your “cost of goods sold”). For detailed advice, check out our guide on building a sales forecast.

Budget for expenses:

With a rough sales forecast in place, think about your expenses. Think about rent, insurance, marketing, payroll, and other costs of running your business. Create a list of these expenses and then compare the costs of running your business to your forecasted sales. In very broad strokes, this will tell you if you can run a profitable business based on your best initial guesses. Sales need to be greater than expenses, if not from day one, at least eventually.

You’ll almost certainly need to refine your numbers after your first pass, but this is a worthwhile exercise to figure out if the business actually makes sense and can make money. For more detail on creating an expense budget and calculating profitability, check out our guide on budgeting.

Forecast cash flow:

Finally, and most importantly, you’ll want to look at your projected cash flow. Your cash flow forecast will help you determine how much money you need to raise to get your business off the ground and fund your growth. It’s especially useful for companies that sell “on credit,” meaning that customers don’t pay right away and companies that need to carry inventory.

You can learn all about cash flow in our article series over on Bplans and you can also check out our cash flow calculator for some quick back-of-the-napkin calculations.

I recommend checking out LivePlan to help you quickly produce all of the financial forecasts you need without having to understand how to put together detailed spreadsheets, but you can also certainly put them together yourself with Excel.

Now, get started

So far, you’ve developed your business strategy, refined the tactics you’ll use to go to market, developed a schedule of tasks and milestones, and created an initial financial model to show that your business can work. You’ve also tested your assumptions with real customers to make sure your business ideas are going to create a business that can grow and scale.

For many businesses, this might be all you need to do before you start your business. Lean Planning really can be a simple process that doesn’t involve writing detailed plan documents. Instead, it’s about helping you get the information you need to build a successful business. It’s about spending less time on planning, which gives you more time to grow your business, all while increasing your chances of success.

What if you need a complete business plan?

You may have what we call a “business plan event.” A potential investor may have asked to see a full business plan or a loan officer may require a detailed plan alongside your loan application. And, sometimes you might just want a 10-page document that you can hand to your team that explains the details of your strategy.

If that’s the case, it’s time to use your pitch as a starting point and build a detailed business plan in a more formal document that you’ll use to present to bankers, business partners, and investors.

Thankfully, you’ve already done the hard work of developing your business strategy. Your formal business plan will expand on that strategy and also include additional details on your marketing, sales, and product strategy.

Read our guide on producing a complete business plan document for all the details on this step.

Even if you don’t have a business plan event, documenting additional details about how you plan to start and grow your business can be a useful exercise. I suggest reviewing a business plan outline and adding in a few bullets about your business strategy into each section.

Don’t write paragraphs and paragraphs of text. Keep things as short and concise as possible.

This short plan will help you think through the details of your business. The resulting document can also be a useful tool to hand to business partners to ensure that everyone is on the same page and executing on the same strategy.

Rinse and repeat

Lean Planning is never done. It’s an ongoing process that you use to build a growing and sustainable business.

As you track your performance and interact with customers, you’ll refine your strategy, improve your sales and marketing tactics, and adjust your sales goals and budgets.

How we use Lean Planning

Here at Palo Alto Software, we’re constantly reviewing and revising our plan. In fact, we have a monthly plan review meeting to review our goals and refine our strategy.

To make Lean Planning work for you, you need to set a regular review schedule for you and your team. At least once a month, you should review your progress, adjust your goals, and revisit your strategy.

Lean Planning is backed by science

In fact, academic studies have proven that companies that track their progress and continually refine their goals actually grow 30 percent faster than companies that don’t incorporate planning into the process of running their business.

And, since Lean Planning is a simple process with a one-page pitch for your strategy, financial forecasts that are easy to adjust, and a basic schedule of key milestones, you should be able to adjust quickly to changes in your business.


I hope you found this guide to Lean Planning useful. The Lean Planning framework has been instrumental in growing our business and I hope you find it helpful as well.

Not only do we practice Lean Planning as a company, our LivePlan product is all about making Lean Planning easy. We use LivePlan to manage our Lean Planning process and are constantly refining it to make it even better for our own business and for yours.

Let me know what you think about this process or if you have questions about LivePlan.

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Posted in Business Plan Writing