Business planning gets a bad rap.
Far too many entrepreneurs see it as complicated, time-intensive, and only useful when applying for funding. So what happens? They either:
a) Write a business plan just to get a bank loan and never look at it again.
b) Don’t bother with any business planning at all.
Either approach can lead to costly business mistakes, especially in the complicated, post-pandemic world we live in now. Just think about everything that has changed since 2020:
- 1 in 4 Americans now work from home
- Supply chains are more fragile than ever
- Inflation has hit a 40-year high
But this isn’t entirely a bad news story. While this unpredictability hurt businesses that couldn’t adapt fast enough, other companies not only survived but thrived in this new economy. How?
They planned fast, tracked their numbers, and made quick data-driven decisions.
That’s what it takes to succeed in this changing world and growth planning gives entrepreneurs the process to get there.
The need for planning is greater than ever
The pandemic made the world a more complex and fast-changing place. Let’s look at just a few of the current challenges:
Supply chain weaknesses
The pandemic highlighted the fragility of the supply chain and how disruptions can lead to seemingly endless waits for production, manufacturing, and distribution. About 61% of small businesses have had their supply chain disrupted, according to the Q4 2021 U.S. Chamber Small Business Index.
How growth planning helps
By tracking and forecasting sales, you can better predict how much inventory you should purchase to ensure stable production. Financial forecasting can also help you spot opportunities to pivot your business, which could mean more sales and faster growth.
Recommended Reading: 7 ways for small businesses to overcome supply chain issues
With restrictions forcing many companies to shut their doors during the pandemic, entrepreneurs had to offer digital services to stay afloat. This sparked an unprecedented boom in eCommerce, led to the ‘digitization’ of many brick-and-mortar companies, and challenged our assumptions about the role of technology in business.
How growth planning helps
Having a plan and reviewing your finances regularly helps you take advantage of the digital-first economy. Think back to all the news stories about small businesses pivoting during the height of the pandemic. Many entrepreneurs were able to expand their revenue by switching to online business models.
The inflation rate has passed a 40-year high, skyrocketing costs for all types of goods. This means small businesses will need to look at raising their prices to compensate for higher production costs.
How growth planning helps
Building what-if financial scenarios help you understand how inflation will impact your bottom line. You’ll also have a better idea of where to reduce costs, what products you might discontinue, and how to minimize the impact of inflation on your business overall.
Some analysts refer to these post-pandemic changes as the Novel Economy — everything is new, unusual, and often unpredictable. And that means entrepreneurs can’t afford to ‘fly blind’ anymore. You need a plan.
Recommended Reading: 8 strategic options for small businesses to overcome inflation
The old way of business planning is too slow & difficult
Traditional planning is a chore for small business owners. It takes too long to write, the data is almost immediately obsolete, and they aren’t always easy to use for day-to-day operations. It’s no wonder so many entrepreneurs balk at this stuff.
For decades, business planning meant writing a monstrous 40+ page document that required hours of research, numerous revisions, and number crunching. And yet, some companies continue to hold onto this outdated concept like a stubborn toddler.
“It has become deeply institutionalized. The planning cycle is usually referred to tongue-in-cheek as the ‘silly season,’ reads one Inc.com article about the history of business planning. “In recent decades, accelerating change has made it even more difficult to accurately predict what will happen six months out, much less a year out. Planning structures have grown very large, ritualized, and rigid.”
A ‘traditional’ or ‘formal’ business plan is only required if you need to apply for funding from a bank or government organization. But as a strategic document, it’s overkill.
And most of all, traditional plans don’t provide entrepreneurs with the flexibility needed to adapt to today’s fast-changing world. In response, experts have come up with some alternatives.
In the late 2000s, Swiss business theorist Alexander Osterwalder developed the Business Model Canvas. It’s a faster and more visual alternative to formal business planning, but it’s mostly useful for high-growth, tech-focused startups. Other entrepreneurs find this approach to be complicated and difficult to learn.
Fortunately, there’s an even simpler way to plan in this fast-moving world we now live in. And any entrepreneur can do it — regardless of their background, education level, or how established their business is.
Growth planning: Faster, simpler, smarter
Growth planning gives you a process to build and grow a profitable business—no matter your business stage. More importantly, it helps you become a smarter, more strategic business owner.
Because it’s no longer enough to focus only on creating better products or services — you also need to think about the future of your business and plan accordingly. This requires ‘living in the numbers’, as Palo Alto Software CEO Sabrina Parsons says.
Only by creating a flexible plan, tracking performance, and reviewing the results can entrepreneurs thrive in the new economy.
“Use the planning process like a GPS for your business — the plan as your destination and route, and monthly plan review for constant course corrections,” said business expert Tim Berry, who developed the Lean Planning methodology that inspired growth planning.
Growth planning in action
Many of the world’s most successful companies have been doing this type of strategic work for years.
For example, when Spotify noticed its free user model wasn’t holding up financially during the pandemic, they pivoted to offer original podcast content instead. The company signed exclusive deals with celebrities and started to curate playlists. This allowed Spotify to successfully position itself as a ‘tastemaker’ in the market.
A non-pandemic example is Netflix: it originally delivered DVDs via mail, but later added a streaming service as it saw that type of online content grow in popularity. You can go back even further to how Play-Doh started out as a wallpaper cleaner.
These profitable shifts were only possible because the companies were tracking their financial performance and making data-based decisions. But this type of planning isn’t reserved just for major corporations.
By following the growth planning process, even mom-and-pop stores can uncover opportunities hidden within their numbers.
A powerful data-driven process backed by research
Anyone can start growth planning, even with minimal business experience. All you need is a Google or Word doc for your plan and a spreadsheet to track your results. If you’d like a tool to do the heavy lifting for you, LivePlan business planning software makes the process much easier.
Growth planning follows a simple four-step process:
Start with a simple overview of your business strategy. This involves thinking through questions like: What problem are you solving? Who is your target market? What is your real competition?
Entrepreneurs with a plan are 129% more likely to push their business beyond the initial startup phase and grow it.Study in the journal of Small Business Economics
Forecasting your sales, expenses, and other important metrics helps you understand where your business is headed. That way, you can track your actual performance against your goals and predictions.
Businesses that track against their plan grow 30% faster than those that don’t.Study in the Journal of Management Studies
Compare your forecast to your actual sales and expenses each month. This makes it easier to hold yourself accountable to your goals, spot new opportunities, and figure out if your strategy needs to change.
Reviewing your goals makes you 40% more likely to achieve them.Study from Dominican University of California
Once your review is complete, update your forecast and one-page plan accordingly. You might want to tweak your business model, change your prices or alter your product line to better meet demand. Or maybe you’ll pivot your business entirely.
Businesses that successfully execute their strategies generally increase revenue by 80-120% in a three-year period.
Turning business owners into business people
Most people start a business because they’re passionate about what they do — that might be baking, coding, or building custom cabinets, for example. And although the enthusiasm they bring is essential for starting a company, it’s often not enough to succeed.
To thrive in the complicated world we live in now, business owners must do more than focus solely on mastering their ‘trade’. They also need to think strategically about their business, plan for worst-case scenarios and make quick data-driven decisions.
Small business owners can no longer say: “I’m not a business person.” Everyone has to think like a business person now. That’s why growth planning not only gives entrepreneurs a process for growing their companies, it helps them become smarter and more strategic business owners.
Ready to apply the growth planning process to your business? Explore how LivePlan elevates and embeds this process within your plan and financials, allowing you to spend more time doing what you love—growing your business.