The Value of Business Plan Assumptions

(This post is an excerpt from my latest book, Lean Business Planning, reprinted here with permission.)

Identifying assumptions is extremely important for getting real business benefits from your business planning. Planning is about managing change, and in today’s world, change happens very fast. Assumptions solve the dilemma about managing consistency over time, without banging your head against a brick wall.

Assumptions might be different for each company. There is no set list. What’s best is to think about those assumptions as you build your twin action plans.

If you can, highlight product-related and marketing-related assumptions. Keep them in separate groups or separate lists.

The key here is to be able to identify and distinguish, later (during your regular reviews and revisions, in Section 3), between changed assumptions and the difference between planned and actual performance. You don’t truly build accountability into a planning process until you have a good list of assumptions that might change.

Some of these assumptions go into a table, with numbers, if you want. For example, you might have a table with interest rates if you’re paying off debt, or tax rates, and so on.

Many assumptions deserve special attention. Maybe in bullet points. Maybe in slides. Maybe just a simple list. Keep them on top of your mind, where they’ll come up quickly at review meetings.

Maybe you’re assuming starting dates of one project or another, and these affect other projects. Contingencies pile up. Maybe you’re assuming product release, or seeking a liquor license, or finding a location, or winning the dealership, or choosing a partner, or finding the missing link on the team.

Maybe you’re assuming some technology coming on line at a certain time. You’re probably assuming some factors in your sales forecast, or your expense budget; if they change, note it, and deal with them as changed assumptions. You may be assuming something about competition. How long do you have before the competition does something unexpected? Do you have that on your assumptions list?

The illustration below shows the simple assumptions in a bicycle shop sample business plan.

Sample List of Assumptions