Ask Tim Berry: “What type of business plan do I need?”

Ask Tim Berry: “What type of business plan do I need?”

So the question is: what kind of a business
plan, what do I really need? It comes up a lot and it’s hard to answer specifically but
I kind of like asking you back, well, what are you going to use? Reflecting on the case-by-case
nature of business plans and business planning, people unfortunately think of the business
plan as some hard to do, ponderous formal document with a recipe, that you have to start
with the Executive Summary and go through and it has to have this and this and that,
and I say no. Wait a minute. It’s business. Form follows function means that your business
plan should contain, should include, what you need to run your business better. So then
you look at what the needs are. Some people are in a growth or startup mode where they
need a business plan as a way to communicate with potential investors, or bankers, or partners,
or employees. “Here’s what we want to do with this company.” And then you create kind
of a general summary. And you might actually print it out as a document that somebody can
read, or it becomes kind of the script of doing a pitch presentation or what have you.
But, the distinction is important. The vast majority of us running a business, what we
need for a plan is to keep track of the key elements of our strategy, and think through
the steps that we’ll have to take to reach our goal, and assign metrics and tasks of
dates and deadlines for our team members, and project sales and costs and expenses and
assets and liabilities and capital so that we can then manage cash flow, which is critical
of course. And as we manage that cash flow, well, we’ll be using our planned versus actual
results, comparing plan to actual so that, if sales are lower than expected, well then
we have to adjust expenses and costs, or our cash will be in trouble. And if sales are
higher, then we want to adjust so that we have the benefit of more resources to go into
our priority areas. And we want to be able to predict cash flow based on the nature of
our business, our flows, like sales on credit and receivables and inventory and payables,
and things like that. So what kind of a plan you need? You need the plan that will help
you run the business better. That’s what business planning
is for. And that document that you fear? Might or might not be required output for your plan.
It might be that your plan stays on the computer and the output is the management meetings,
the plan versus actual, the management that flows from your plan. So that’s my kind of
framework for deciding what you need. It depends on how it’s going to be used. And some of
us need to have that document that’s not the plan, it’s just a snapshot of what the plan
was at one point, and some of us never really need to spin out a document, but we may need
to spit out an elevator speech or a management meeting, or an operational tracking of plan
vs actual or whatever. That’s how you determine what kind of a plan you need.

Comments (2)

  1. You're very welcome, we're glad it helped!

  2. Very nice because it keeps it simple for someone like me who has been overwhelmed with too much information and too many offers for help by some heavy hitter business gurus. All I am trying to do is become a certified yoga instructor and need to present something to a non-profit rehab program that will hopefully fund that.  It can get complicated later. Thanks.

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