Let’s talk about planning. Planning can be a very frustrating and an anxiety ridden process especially if you’re just starting out and you have no baseline. Realize first that, especially when you’re starting out, any plan is going to be an educated guess and, therefore, will necessarily be wrong. As long as you’re OK with being wrong as well as everyone else, then you should be fine progressing to the next step. Just remember that you cannot abuse yourself for not being entirely accurate as it’s a plan and nothing more.
The reason that you have a plant is primarily so that you could manage something Monday and called cash flow. And business cash flow is your lifeline, your blood source, and that needs to be managed very closely. Will get into cash flow planning in the future today let’s just talk about the generalities of planning. I read a blog site now that there are two types of plans: one that you “will“ do and another that you “might“ do. Naturally, the further you planned out to the future, the more that your plan falls into the “might“ do category. There is absolutely no way of knowing what’s going to happen in the distant future and even three months away is a bit of a stretch frequently so it’s important that you understand that dynamic and that you’re willing to give up you’re willing to understand that a long-term plan is definitely going to be much more foggy than a short term plan.
The most important part of planning is the process of determining whether your efforts are successful or not successful. And add environment where there is a lot of volatility and change, and even in a violent environment where you’re not dealing with so much volatility, you’re dealing with unknown elements and the plan will tell you whether you’re moving in the right direction or not. You’re gonna find out that is, frequently, the most successful businesses are the ones that are very persistent but also change and adapt for their environment. This is where the plan comes in and if you don’t meet your plan then you change your approach towards what you’re doing.
Planning and compasses three elements. You’ll hear me say this over and over again in an attempt to make the planning process as approachable as possible. Those three elements include:
- Where you are today
- Where you want to be at a future time
- How to get from point a to point B.
It is absolutely critical that you have a point a and point B delineated as closely as possible or your plan will be flawed. Think of a ship in the open ocean if they do not know exactly their GPS coordinates at that specific time and the coordinates of where they want to be at some future time then the plot a course that they plot will absolutely be in accurate. The same goes for any type of planning, your boss know where you are and you must know where you’re going before you can plot your business course.
The other elements of data and planning is a description of your status. Your status can be made up of one of two or multiple of these two elements: a static element and a dynamic element. Not to get too complex or confusing, your static element is your status at any one point in time. And example of that would be your driving in your car. I static element would be how much gas you have currently at this moment in time. The dynamic element is a performance measured over a period of time. And example of that would be in your same vehicle how fast are you going measured in miles per hour. Even the name has the dynamic time elements in it “per hour.“ and a business you have exactly the same thing. You have a balance sheet which gives you status of different accounts at one period in time and an income statement which gives you performance over a span of time. Will go over balance sheets and income statements a little later as they are your ultimate of dashboards for evaluating success in your company.
The last element and planning is the period over which you were planning for. These periods covered include “tactical” plans which cover a period of one month to one year. Tactical plans include such things as budgets, sales quotas, etc . The second period covered is a “strategic” plan and that covers anywhere from a year, generally speaking, to five years and beyond. Small and medium businesses generally don’t need to go past five years, that area is left for large corporations and governments that have major infrastructure projects that could spend up to 50 years. Will go over strategic and tactical plans in another article.