The following article was published by the SBA.
Are you thinking about starting a business in 2019? This is a good time to go over the essentials of how to write, review, and manage your business plan. Like so much else in business, the business plan has evolved with technology and changing business standards.
I have dealt with business planning as a main focus since the 1980s. It’s still my main focus, but what works, and best practices, are always changing. This post is about the latest in business planning, not the standard or traditional.
SMART stands for specific, measurable, attainable, relevant, and timely. Most healthy businesses work towards collections of goals. A good business plan revolves around SMART goals.
- Some of these are obvious: sales, costs, expenses, keeping cash in the bank.
- Some are specific to your business, such as, repeat customers, renewals, churn, cost of customer acquisition, leads, close ratio, events, trips, whatever.
- Some are what I like to call milestones, things that have to happen, such as opening the new location, refreshing the website, reaching some number of customers, launching a new version, an ad campaign, filling a team vacancy, and so forth.
I want to emphasize specific and measurable in this context. We business owners often imagine goals like “great customer service” or “being the best of breed.” Those generalities are not specific, not measurable, and not very useful. Actual management takes tracking, comparing results to expectations, and dealing with actions and causes. All of which should be part of a business plan and the process of frequent review and revision.
Also, attainable. I dealt with business plans as an expensive consultant first, for a couple of decades; and then as business owner for another couple of decades. I have seen first-hand that unrealistic goals don’t actually work for getting things done. They reduce incentive. In my experience, people identity with goals they can reach.
Planning, Not Just a Plan
As you do your business plan, think not of the old-fashioned formal plan but rather the planning, a process of setting goals and tracking progress. It’s not just a single plan, but rather an ongoing process that starts with a first lean business plan and keeps that lean plan refreshed and up to date using regular tracking, plan review, and revision.
This frame of mind makes the business plan easier to do because it’s always more like a latest draft than a finished product. Don’t postpone life or business for planning. Always be planning. Start with a simple plan that just covers your main goals or what you focus on first. Don’t sweat making it perfect. Just get it started. There is no such thing as a perfect business plan, and the closest anybody comes is a plan that helps you manage by laying out goals, tracking results, and highlighting the progress and problems along the way.
Whatever your initial plan, make sure you revisit every month. Review progress, analyze results, and make course corrections.
Do Only What You’ll Use
The web, blogs, business books, and business courses are full of recommended business plan outlines and recommended contents. The SBA site hosting this post has several. Common recommendations include summary, company description, product or service, management team, exit strategy, marketing, financing and so forth.
What I recommend is that you develop your own plan contents based on what you are actually going to use, track, and follow through with to optimize your business. For example:
- The SMART goals that drive the business. You might group them into goals related to different elements of the business and the traditional plan such as marketing, sales, product development, administration. Call them milestones if you want to, or deadlines, projects, steps … get them written into your plan so you can track and manage.
- Essential numbers. You can’t manage cash flow without managing expectations, budgets, and actual performance on sales, costs, expenses, assets, liabilities, and cash flow. This site and the web and bookstores and online software offerings are full of help for business owners who want to understand, forecast, and manage their business numbers. You don’t have to know accounting or even bookkeeping to understand what drives your cash flow and keeps your business in good financial health.
- Key strategic and tactical decisions you need to keep in mind and regularly review and, when necessary, revise. Strategy, for example, may not meet the full criteria of SMART goals; but strategy is focus, and focus is good for business. You don’t have to have pompous text in a large plan to summarize your business strategy. You can use a simple bullet-point list to remind yourself about choices you make regarding what you sell, to what market, and so forth. Similarly, tactics are choices you make to execute strategy, such as price, deliver, channel, configuration, financing, and so forth. Find the SMART goals hiding in your tactics and write them out a part of your plan. Then you can start managing with tracking progress and reviewing and revising as necessary.
In addition, it’s important to avoid doing the traditional parts of a business plan that you won’t use. If you aren’t doing a plan to describe your business to outsiders such as bankers or investors, then don’t bother to describe in text what you already know. Leave out descriptions like management team or exit strategy and just keep the specific trackable attainable goals that drive those concepts.
A Practical Summary
In brief, here’s how to put this in practice, for your business, during the National Do A Business Plan month of December:
- Write a lean business plan, simple bullet-point lists and tables, to gather together the SMART goals you need to track, essential numbers, and key concepts. Do only what you’ll use. Do nothing for outsiders unless you need to show a plan to outsiders.
- Use whatever outline and contents list you like. When in doubt, I recommend what I call a lean business plan that includes strategy and tactics as bullet-point lists, plus a list of milestones and metrics, and essential business numbers including sales, spending, and cash flow.
- Make those lists and tables full of specifics you can track. And then track those numbers regularly.
- Schedule ahead to make sure you take an hour or two at least once a month to review progress, identify successes and failures, analyze results, and make changes.