The business plan should not be primarily for outsiders, such as the bank or the investor group. However, that is often why they are generated. It should be a tool you actually use for running your business.
For a business plan to be useful, it needs to be incorporated into your normal business routines. You should write the plan in a format that can be tracked, measured and updated. Here are a few suggestions for making your business plan something other than a leveling device for a table with a short leg:
- Identify each general activity you planned. Shorten it up to a phrase that becomes a heading on a separate piece of paper. In the remaining white space on that paper, add information each month, quarter or year as appropriate on the specific actions taken, when they were taken, the results, and the decision to continue or stop. Use a separate piece of paper for each activity.
- If an activity is stopped, indicate if another activity is taking its place. Add another sheet for each new activity.
- For each activity identified above, you should have some type of quantitative measure. Ideally, you will have already identified this in the business plan, but if you did not, identify it now. Quantitative measures include things like sales growth rates, number of employees, gross margin percentage, operating margin percentage, etc.
- Set up a tracking sheet for your quantitative measures, whether they be ratios, rates, numbers, etc. Including your targeted measure, actual measure, targeted date, measurement date, and a short explanation for differences.
- For your cash flow, income statement and balance sheet, set up separate sheets for each to show the business plan estimates and comparison to actual for each period you track. Explain differences.
- If the plan is significantly different than reality, you may need to add an activity to address it.
- You may want to load your business plan into your accounting software as the budget. This will automate your tracking, making it integrated into your usual financial reporting package.
- Keep track of the time it is taking to accomplish your business plan goals as well as the quantitative measures. You should have a timeline for accomplishments in your business plan. Track the timing of your actual accomplishments against this timeline.
- Review results periodically with your Board of Directors/Advisors and/or your key employees and investors to report progress but also to get feedback on future expectations and additional actions that are needed to accomplish the business goals.
- Revise your business plan when direction has shifted and assumptions are different than they were initially. Don’t be too quick to give up on your goals, but don’t beat yourself up if the goals are no longer realistic. This principle works both ways.
- If you accomplished your goals in record time, don’t rest. Set higher goals.
The timing for performing a review of your business plan against your actual results has been deliberately left out of the discussion above. The reason is that the frequency of this review can change depending on circumstances and how stable your business is. When your business is new, you may want to have your business plan on your desk all the time for reference and review it against actual every month. If cash is very tight, you may need to review your business plan versus actual results more frequently as well. Once your business stabilizes and is going well, you may increase the time between reviews to quarterly.
Your business plan does not have to be beautiful-looking, written in complete sentences or contain colorful charts and graphs, unless you are using your business plan to attract investors or get approval for a bank loan. In that case it may be helpful.
For the business plan to be used by you and your business, however, the appearance requirements are pretty low. The key is actually tracking your actual results against your business plan and making adjustments and corrections to get back on track. Use your business plan as your roadmap to success.