4 steps for effective business planning

11th November, 2015

Plan your retirement

Many people spend more time planning their holidays than they do on planning their business.

Business owners are often focused on things like running a tight ship, rather than investing in the appropriate resources to enable the business to grow. It’s understandable, and probably effective in the short term, but not a great long-term plan. Many business owners fail to plan simply because they get too busy.

The upshot of this is that in many cases, the owners run out of hours in the day to hold regular board or management meetings, and it is extremely rare to find a smaller or medium-sized business with the discipline to hold an annual planning session for the year ahead.

There are a few ways to plan effectively for your business. Here’s one method that has been really effective for our business.

Another option is to follow this simple process, which I have regularly used in planning sessions with smaller businesses. It goes like this:

1. Determine profit improvement potential

As part of engaging a client in a planning session and determining and strengthening objectives, I demonstrate the profit improvement potential in the business by looking at what-if scenarios based on tweaking the key drivers of revenue, cash and profit. This is why it is helpful to get your accountant involved in the process.

2. Discuss different financial scenarios

I prefer to discuss three scenarios, which I loosely call Low Growth, Medium Growth and High Growth. Working with the business owner, I determine the scenario with which the owner is most comfortable (it needs to be both achievable and stretching), and we then lock in that scenario.

3. Discuss key points for attention relevant to the preferred scenario

Prior to the planning session, I have the business owner answer a series of questions that have he or she thinking about their performance in a range of different areas of their business. In the planning session, we then go through the responses and pay particular attention to those issues that need to be addressed to ensure the preferred financial scenario has the best chance of being over-achieved.

4. Develop an action plan

Your most important tool in the planning session is a ream of flipchart paper. You will use this consistently throughout the day. When an idea comes up, capture it on the flipchart paper. By the end of the session, you should have paper plastered all around the walls. During the day, you can refer back to previous issues and remind yourself of what you felt was important. Out of this emerges the action plan.

The key to a powerful action plan is relevance. Your must be able to discern a clear link between the items on the action plan and the achievement of the goals and objectives that you have agreed upon. Short and concise beats long and waffly every day of the week.

As you consider the validity of an item proposed for your action plan, you should consider why you are proposing this particular action item. To what greater gain does its implementation contribute? To which specific objective does the action item pertain?

In our coaching work with accounting firms, we allow just three projects to be entered onto the 90-day action plans prepared by our clients on a quarterly basis. We have found that implementation is higher and much more focused with a small number of items on the action plan.

Let’s take ourselves back into the meeting room toward the end of your planning session. We are nearing the end of the planning session. There is flipchart paper all over the walls, and it is time to pull everything together into a coherent plan. Here is how you do it, and feel free to pass on this process to your independent facilitator if he or she does not have a process of their own:

  • Move to the first flipchart paper. (It is important to number your pieces of flipchart paper so that you can summarize in an orderly fashion.) Spend no more than a minute summarizing the discussion you had that led to the points noted on that piece of paper.
  • Go through each point in turn. If a point is duplicated elsewhere, cross it off. If several points can be categorized together, bracket them as one action point.
  • Move to the next piece of flipchart paper, and repeat the process. Go around the room until you have discussed them all.
  • Write down the top three projects that you will commit to implementing in the next 90 days. Think long and hard about these projects.

Double check your projects by ensuring they stand up against the following questions:

  • Going back to our preferred financial scenario, which dimension of the business is this project aimed at? (For example: increasing the number of customers, increasing average transaction value, improving margins, etc.)
  • Specifically why do you feel this project is important? (Guidance: what is the critical success factor that requires attention?)
  • Who is going to be accountable for the delivery of the project?
  • By when will it be implemented?
  • What goals will be achieved by implementing this project?
  • How will you measure progress and outcomes in respect of this project?

If you follow this process, you will note that it is essential to revisit the plan every 90 days to ensure the projects you selected have been implemented, that progress is being made toward the financial scenario you selected and that appropriate accountability is in place to ensure implementation. Once again, your proactive accountant can play an important role here.

Don’t fall into the trap of being all consumed by what your business does. As the owner, it is critically important that you step out of working ‘in’ the business at least once a quarter and spend some quality time planning your business (and personal) future.

READ: 8 tips for getting the most out of business planning meetings