No plan of operations extends with any certainty beyond the first encounter with the main enemy forces.
Helmuth von Moltke the Elder
Business plans have a bad reputation and it’s 100% deserved.
Big heavy documents, tens if not hundreds of pages full of blow, bullshit, assumptions, and aspirational targets (none of which ever prove accurate).
Business plans are prepared to impress investors, grandparents and bank managers. Beyond this audience, they have no practical use:
- Operationally, they give no guidance to management about how to make decisions for the day-to-day.
- Financially, they shine a harsh spotlight on how wrong those initial assumptions are.
- Strategically, a business plan may outline what will and will not be done but as we all know, plans change once we’re in the trenches.
No business I have ever worked with has had an up-to-date business plan. Some have never had a business plan at all.
The secret, I tell my clients, is to have a business plan that’s kept up-to-date and partially shared with the whole organisation.
The business plan I outline for them is different from all the templates and examples you find online. It has 3 components:
- Strategic Plan. This changes very little from year to year, more like an incremental creep than an annual rewrite. It’s the part that’s full of things like mission,, vision and purpose statements, and all the vague kumbaya words that make readers feel warm, loved and comfy. It’s a testament to what the business is, and does, and stands for. Very much prepared for public consumption, it should be no longer than 4 pages with graphics.
- Operating Plan. This is prescriptive, unambiguous, and mapped out month by month for the year. Products to be introduced, updated or retired. What will be marketed, how and where. What sales are planned, to whom and how many. The few business-wide metrics that quantify success or failure, Prepared for internal use so everyone knows the deal. Aim for succinctness before brevity – typically, these run 2-10 pages, max.
- Financial Plan. For management and the finance team. Basically, the budget and supporting notes in a spreadsheet or accounting software. Selected figures can be shared with the organisation but some numbers need to be kept hidden.
I ask my clients to prepare these for the coming financial year well ahead of time so the Board can review and revise before the start of the year. That way everyone knows, fro the fist day of the financial year, what’s in store for them.
I also ask they hold off making any revisions for the first 3 months (1 quarter, 13 weeks). By then, management has a reasonable idea of what areas in the business are spawning wins or losses, and can adjust the operating plan and, most importantly, the financial plan, so that owners and investors are kept informed and happy.
One final point. A business thrives or dies on available free cash. This is the most important metric of all, so be certain to keep your accounting system current.
