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Business Plan Maintenance
Alto Software, Inc.
A business plan is
not a one-time document, at least it shouldn't be. Most businesses put
together a business plan during their start-up phase to organize, attract
partners and employees, and to try and get a loan or financial investment.
This is a great use of a business plan, however far too often once the
company has started up the plan isn't touched again.
Ultimately, a business
plan is about results, about making your business better. If you don't
think doing a business plan will improve your business, then don't do
one. Planning for planning's sake is a waste of time.
Where a plan is most
likely to make your business better is by allowing you to:
- Set priorities
- Track plan vs.
actual results and make course corrections.
- Plan and manage
the critical numbers that aren't intuitive: not just profit and loss,
but the relationship to cash flow, balance sheet, and ratios.
- Communicate your
plan to others: partners, employees, lenders, and investors. You may
have a great plan in your head, but as soon as you need to explain it
to others, you need to write it down.
So how do you maintain your business plan? We have to first establish
that without regular review -- monthly or at least quarterly review of
your planned vs. actual results, with practical analysis of the reasons
for variance -- planning is likely to be a waste of time.
Real planning requires
regular reviews just as much as navigation requires knowing where you
are as well as where you were and where you wanted to go.
Every real plan needs
to be full of specific dates, budgets, forecasts, and management responsibilities.
People involved have to know there will be tracking and following up on
specifics. Then that plan must be reviewed against results, and those
reviews should produce course corrections and fine tuning.
Generally a business
hopes for a consistent long-term strategy built on short-step incremental
changes, not major revisions. Consistency is important to strategy, and
the business should avoid the temptation to jump around from one strategy
to another so quickly that no strategy is ever really implemented. Remember
that even a mediocre strategy well and consistently implemented is much
better than a brilliant strategy that wasn't implemented.
do come to crossroads demanding major revisions in their business plan.
These are some signs that indicate its time to review your plan:
Always keep the revision
in perspective. While you do want to review and correct constantly, you
don't want to change a strategy unless you are sure it isn't working or
you see real changes in the underlying assumptions that formed the foundations
- Major changes
in market situation.
Look especially for changing market factors and changing market behavior.
- Have your underlying
business assumptions changed? As an example, the Internet has changed
the business landscape so enormously that in some industries almost
any plan that was developed without a view of the Internet may need
revisions. That may not be true for a landscape architect or restaurant,
but for a travel agent, graphic artist, or market researcher it's
- Do you have
new competition? Have new competitors emerged, or existing competitors
changed the business landscape so much that you need to review and
- Has the product
or service picture changed? For example a new technology may have
emerged, changing the market perception of what you sell. There
may be new products or services offering related solutions to the
same user needs you satisfy.
- Major changes
in internal situation.
The most obvious major changes are changes in ownership, which are frequently
the result of changing partnerships, divorces, deaths, and investment.
The company takes on new partners, or sells out to a larger company.
On a more ominous note, the company suffers significant declines in
sales, profits, and financial health.
The purpose of maintaining your plan is to use business results to guide
your future decisions. The plan itself has no value if it doesn't help
you improve business. That's regardless of how good or bad, how brilliant
the ideas, writing, or how elaborate the tables and charts. Its value
is the decisions it leads to.
That means, of course,
that to make a plan worth the effort of developing it, you'll want to
follow it up. Whether that's every month or every quarter, you need to
track results, analyze the difference between plan and actual results,
and manage. Change things that need to be changed. Compare what you planned
to what happened in reality. Ask yourself the following questions:
- What went wrong,
and how can we fix it?
- What went right,
and how can we take advantage of it?
- What changes took
place in the competitive landscape that could be updated in the plan?
- What changes took
place affecting our market that could be updated in the plan?
- What changes took
place internally in our organization that could be updated in the plan?
After you've answered
these questions, update your plan accordingly, set new budgets and milestones,
adjust your financials, and repeat the process with another review of
your plan again next month or next quarter. Update your plan accordingly
again, and keep repeating. You'll find that maintaining your business
plan gives you a better grasp on your business, your market, and everything
else that happens with your company.
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