How to Improve Your Business Management by Using Your Business Plan
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The traditional business plan has a short shelf life, which is a drawback. You put in all this effort to create a “completed” plan, but things in the actual world turn out differently than you anticipated, and key elements of your plan become obsolete and useless. What is the point of this?
We concur that the type of planning, in which you develop a plan, print it, and expect those exact words and numbers to direct your actions for months, is inherently incorrect and a waste of time. That isn’t to say you shouldn’t plan ahead, any more than the failure of a poorly planned fad diet should deter individuals from attempting to lose weight.
Strategies of making your business plan a powerful tool to manage your company
You just need a better technique to plan in order to achieve your long-term objectives. You must be able to evaluate your plan on a frequent basis, make improvements, and maintain it’s current. You’ll need a live strategy.
Live planning is a concept that allows you to maximize the value of your company strategy. It actively encourages you to plan for the future while also recognizing and assessing issues that have an impact on business operations. You simply set a course and stick to it using a static strategy. You may make revisions, test assumptions, and keep planning using a living plan.
Holding monthly plan review sessions is the simplest version of this. Every month, set aside time for you and your team to review your finances, discuss goals, and make decisions. The benefit of a living business plan, on the other hand, is that you can check it and make changes as needed.
If you’re a newly launched startup, you might be analyzing your cash flow and making course corrections on a weekly basis. You may only need to do this once a quarter if you work in a relatively stable and uncompetitive business. Regardless of how often you evaluate your strategy, the fact that it’s lean and always up to date means it’s always ready to go.
Making modifications and keeping it flexible are the important parts of good planning.
Why do plans that are rigid and never change go out of date so quickly? Because plans are mainly guesses, and guesses are frequently incorrect. That’s OK. To plan effectively, you don’t need a crystal ball. What you do need is a mechanism to maintain a careful eye on your predictions and assumptions so that you can identify any deviations early and change your course to stay on track.
This is something that football coaches do all the time. Each coaching staff begins each day with a well-thought-out game plan based on what they believe will succeed. However, not everything goes according to plan.
Their team’s execution is lacking in several important areas. The weather suddenly deteriorates. The grass is dripping wet and slick. Their rivals have had success with components of their own strategies. Is the coach adamant on sticking to the original strategy, despite the fact that the same attempts keep failing in the same ways?
Obviously not. They experiment around with their schemes. They experiment with new ideas based on what they observe on the field. They make modifications.
The same is true for business planning. Yes, you should devote some effort to putting together an initial strategy, based on your best guesses about how things will unfold. But it’s when you start executing that the true magic of live planning emerges.
What are the time effective ways of planning?
“How can I maintain my strategy up to date without wasting a lot of time?” you might be wondering. And it’s a reasonable question to pose. In reality, it’s the time commitment that causes many entrepreneurs to abandon their business plans immediately away.
But that’s with the old planning system, where you have a 40-page document that’s nearly impossible to keep up with. When it comes to live planning, we advocate creating a lean plan. It’s the same type of document as a typical plan, with the same essential information, but it’s much shorter and easier to update.
You may simply set up spreadsheets to replicate over your financial data for your financials. You can even semi-automate this procedure if you use the appropriate formulas. Working from a lean plan and doing some of this work ahead of time will save you time and make it easier to actively work off your planning materials.
Keep an eye on the dashboard to check how you’re progressing.
Checking the scoreboard during a football game can inform you how you’re doing. To serve the same goal, we created the Dashboard as part of LivePlan, which works similarly to a scoreboard. After each month, you can rapidly add your real results – sales, spending, direct costs, net profit, and so forth — or import data from QuickBooks or Xero to assess how well your strategy is performing. Is everything going as planned, or is it going as planned?
This isn’t simply data; it’s intelligence that can be put to use. Let’s say your sales and spending are on track, but you have a low cash balance. It appears that there is a problem with the timing of your payments. It’s possible that your customers are waiting far longer than planned to pay for credit sales.
Collections that are more aggressive might have a significant impact on cash flow. Alternatively, the issue could be on the other side. Perhaps you should better control the schedule of your own vendor payments, keeping your cash on hand a little longer to assist fund your operations.
The same procedure applies to your plan’s milestones, which you can add and track under LivePlan’s Schedule page. Let’s say the introduction of a new product is pushed back from September to October. You’ll need to update your sales projection to remove the November and December sales that won’t happen now if you want to keep your strategy relevant.
Then go over the rest of your strategy to see if there are any cascading impacts. Is it necessary to reduce your expenses in order to keep your profit margin? Or do you want to look for funds to help you bridge the gap? This procedure is made much easier by your dashboard in LivePlan, which can help you keep ahead of the competition.
Keep your plan current by updating it.
Create a good plan immediately, and be explicit about the critical assumptions you must verify and the milestones you must meet. Then establish a frequent review process to check how you’re doing, identify areas where your plan is lacking or incorrect, and change your course as soon as possible to stay on track to meet your objectives.
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