My Planning's Off. What Now?

I've said many times that what really matters in business planning is the planning, not just the plan. This time around I'd like to go into more detail about that moment of truth when you're working your plan, time has passed, but the plan is out of synch with reality. What do you do then?
Just asking this question means you're already on the right track. You can't get to this point without having done several things right:
• You have a business plan. I'm hoping that your plan lives on your computer, not just on paper. It's all right to have a printout, but it's far more important that you still have it on the computer where you can manage it easily.
• You've reviewed your plan. This is another good sign. It means your business plan had specifics in it. You had some numbers projected in your plan, probably forecasts of sales, expenses and costs. I hope you also included a milestones table, listing dates, deadlines and responsibilities for the tasks you included as part of the plan.
• You can compare your plan to your progress. You're getting actual business numbers back from your accounting system and comparing them to those in your plan.
If the three points above don't apply to you, you're missing out on the benefits of planning for managing your business. An idea-only plan--without specifics--can be useful but not nearly as useful as a planning-to-manage-your-company plan. If these points do apply to you, congratulations; but you still have the problem of what you do with the difference between plan and actual.
Step One: Review the Assumptions
I hope your plan includes a list of assumptions. This is a normal part of any modern business plan. Here's where you put the assumptions to use. Examine each assumption and figure out which ones, if any, have changed.
Step Two: Comparison of Plan vs. Actual
In the finance world we call it variance: the difference between plan and actual. Variance is positive when there are more sales or profits, or reduced costs or expenses. It's negative when sales and profits are lower, or expenses and costs have increased.
But variance isn't the end; it's the beginning of the analysis. It's not just numbers; it's the people and the activities involved. For example, expenses lower than planned are always a positive variance, but what if expenses were lower because the marketing programs weren't implemented? That would mean the variance is really the result of a failure to work the plan.
Regardless of whether the variance is positive or negative, the question is always: What management is required? If your plan included a good sense of who's in charge of what, then you know whom to talk to when things don't go according to plan. What went wrong? What should we do better from now on? What has to change? And remember: Changed assumptions are the best reason to change a plan.
Step Three: Revise the Plan Accordingly
It's about the planning process. Avoid falling into blame mode. Give credit easily. Revise wherever it will make the continuing management more likely to succeed. It's not a guessing game, it's like steering: You correct constantly to stay on course and keep heading for your destination.
A business is a web of interrelated factors. Sales and marketing programs affect cash flow, employee management affects morale, and morale affects productivity. I imagine a loose web of things that swing together. When sales go one way, we need to track the other things that need to move along with sales. Planning isn't about just guessing; it's about being able to follow the links in the web as things change.
Ultimately you develop strategic choice based on your judgment. Yes, your plan will be wrong because all plans are wrong. But having a plan will help you figure out what you misjudged. And then you can decide whether your best course is to give things more time or to let them go. And always look first to see what assumptions have changed.

Business Planning for the Rest of Us

So let's say you don't need a business plan. You say your understanding has always been that business plans are for starting companies. Or maybe because you're not looking to take your existing company to market, borrow money from a bank, sell it or get new investment, you don’t need a plan. Those are myths, and they don’t really argue against business planning. But let's suspend disbelief for a bit and settle for this question: If I don't need a business plan, do I not want to plan my business?

Here are some reasons to have a plan, regardless of whether or not you need to show one to some outsider:
1. Long-term goals: You want to manage, develop, review and implement long-term business strategy.
2. Business management: You need to manage teams, tasks and accountability. The problem of who does what, when and how much it costs comes up again and again. Responsibility has to be defined. All of this needs to be written down. You need to know what's going to happen. You need to coordinate between people, vendors, events and so on.
3. Cash-flow management: You need to manage money. You have to watch sales to be able to manage expenses and, more important, cash flow. You don't need any surprises.
4. Staying strong: You want to keep your business healthy. That means watching for new opportunities, threats and new developments in your market. You don't want to stagnate.
All of these goals are related to business planning. None of them, however, relates directly to the classic business plan document. They don't involve validating your market or showing off your management team. Nor do they involve valuing your company for investment or proving your company to bankers.

They are about managing the company, not explaining it.
My suggestion: Don't throw out the baby with the bathwater. Do your planning, whether or not you develop a full, formal business plan. Do just what's necessary, not what the formal business plan would involve.

But what is it, then? Where is it, how do you do it, how do you share it? Here are my recommendations:
• Assume the plan will live on your computer. Don't worry about printing it out.
• If you're more than one person in your business, get the others involved. If you're a lot of people, then get the important managers involved. Share the planning process. Do a SWOT (strengths, weaknesses, opportunities, threats) analysis. Set up a schedule for review meetings for comparing plan vs. actual results and making course correction.
• Define your strategy in simple bullet points, perhaps pictures. Identify what's special and different about your business--a focused target market, and what you're offering to solve somebody's problems. Include the SWOT. Don't worry about format or tools or software; do whatever works best for you.
• Set up a list of dates and deadlines and decide who does what. Determine what is supposed to happen to make that strategy happen.
• Run some basic numbers: sales forecast and expense budget.
You don't have to stop life, even temporarily. Don't wait for the big plan to be done. Get going. Put your plan together one piece at a time, on your own schedule, and keep it somewhere easily accessible. Before you know it, you'll be planning to manage your business.