Business Planning in 7 Steps

People like step-by-step. It’s a useful metaphor. I’ve been asked to develop seven steps for a business plan, and I can’t do it. It hurts too much to put it into a fake step by step order. What I want to see, for everybody either starting or running a business, is a planning process, not just a plan. Your plan lives on forever, you review and revise, add as needed, when needed.

That plan document, or the elevator pitch, or the presentation — they’re all just output from your plan, which lives on your computer. That’s just the most recent version. It will change — or should change — as assumptions change.

The plan is just the first step towards planning. And the order depends on who you are, what your planning needs are, and your preferences. It’s not like a tax program, from step 1 to step whatever.

Still, I was asked to put it into seven pieces. Here’s my compromise: a first of seven steps, a seventh of seven, and the rest are in no specific order.  Do all seven, but adjust the order of steps two through six to work how you want it to work.

Step 1: Set the foundations

Ask yourself some fundamental questions about your plan, your planning, and your business. Answer them for yourself and your team. For example:

1. What is this plan for? What is its business purpose? If you are merely creating a document to share with a potential investor or bank loan manager, then that’s different from developing a plan as part of a planning process to run your company better. Form follows function, so what you do with the plan should depend on what you want to get out of it.
2. What are the roles of the people involved? Is the plan a joint effort? If so, who on the team has the last word on what part of it? Is this planning by committee, with issues decided by vote. Do all team members get the same number of votes? Do some team members have more to say about some parts of the plan, and less about others?
3. What are the most important elements of the plan?
4. Where will this plan live? Is it to be printed out and stored in a drawer, or on a desk? Or will it live on a computer, or on a network? Who will have access to all of it, and who will have access to just a part of it.
5. How will progress towards plan be tracked? By whom? How often?

Steps 2-6: Mix and match

These next five steps are completed in the order you prefer. We’re human, we’re different, so you do this whichever way works best for you. It’s not actually going to be in steps, because you’ll keep jumping back and forth as what you do with one step affects the others. Still, in an effort to break it down into bite-size pieces, here’s my guess at the next five steps — in whichever order you chose.

• Know your business and your market

This is where you make sure you have good market analysis, including segmentation and target segment strategy, competitive analysis, a good sense of standard costs and how things are done in your specific industry, your specific location, with your specific match of resources.

You might suggest that you should know the market and the industry before you do sales and expense budgets. Good point. Still, some people already know that and dive straight into the forecasts and projections, and others will discover the need for market and industry analysis as they do the basic numbers.

This might or might not be documented so outsiders can read it. That depends on the foundations laid in point 1, above.

• Strategy: Identity, market, and focus

Strategy is tailored to your company, so it’s always unique to your specific situation. There aren’t best practices for certain industries, or formulas anybody can use. It will be a combination of your company identity (what it’s good at, what it wants, what resources it has, things like that); it’s target market (what it sells to whom, why they want it, what they get out of it, who isn’t in the market, and why); and it’s strategic focus (recognition of how real strategy involves as much what you don’t do as what you do; the secret to failure is trying to do everything, or trying to please everybody).

The form for this depends on your specific needs. It could be just a few bullets in a text in your Business Plan Pro plan; it could also be slides, or, if needed, a formal detailed edited text.

• Basic numbers: Sales forecast, expense budget, starting costs, etc.

Don’t worry too much about guessing the future accurately. It’s planning, not accounting. You’ll have plenty of opportunities to review and revise in the future. Set up a manageable sales forecast, expense budget, and, if you’re starting a new company, startup costs including expenses and assets you need. This leads of course to cash flow, which is vital.

I’d expect a few tables at this point: sales and cost of sales as one, personnel as another, profit and loss with expenses, starting costs or starting balance, and, by the time you have those, a projected cash flow.

• Who does what, when. Call it commitment

Break the journey towards business goals into meaningful steps, with metrics — dates, deadlines, spending budgets, sales results — so you’ll be able to track. Bring in the people charged with getting things done, and use discussions and planning process to develop commitment. Plans work when people are committed, not just involved. Your planning process is only going to work if it generates management, commitment, and tracking. And that won’t happen unless there are concrete, specific, and measurable steps to track.

This should result in a milestones table that the key managers agree on. And in some cases, depending on who’s using and reading the plan, an organization chart and management discussions.

And you should list assumptions. You’ll need a good list of assumptions for the seventh step.

• Dress and polish as required

I said above that your planning might produce a document, slide deck, elevator pitch or some other output. This step is where you stick to the business results, a form dictated by the function for your business. If you need the formal plan, fill in the words that your readers will look for, depending on the details; edit and polish, create the document you need. If you’re planning just for management and operations, then make the important summaries available for the team members involved.

Keep it simple and practical. For example, if you’re planning is for management only, then don’t bother with the formal document process. Don’t describe the management team or the company history. If, on the other hand, you need a plan to be available to prospective investors, then describe the team and the history and an exit strategy and proprietary and defensible points.

Step 7: Review and revise, from now on

Now you follow up with regularly-scheduled plan reviews involving yourself at least and, if there are more members on the team, the management team. These meetings should be scheduled in advance, at least once a month, and treated with respect and importance.

Start each meeting by reviewing key assumptions. Changed assumptions are important for dealing with a living plan, and a planning process. You don’t want to just change the plan every time it’s wrong, because it’s always wrong so you’ll never have plan vs. actual to look at. You do, however, want to change the plan to deal with changed assumptions. There is a bit of paradox here, but that’s why the people do the planning, not just the algorithms.

What you end up with, I hope, is a good healthy planning process that helps you manage your company. Planning is steering.