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5 Ways Planning Helps Your Business and Your Life

“In preparing for battle I have always found that plans are useless, but planning is indispensable.”

-Dwight D. Eisenhower

Have you ever asked yourself why you spend so much time planning when life turns out differently anyway?

  In your business, you may have developed a financial budget, business plan, or project plan and then found that very little happened the way you expected. It probably became outdated and useless very quickly. Have you ever spent so much time planning and talking that you became paralyzed and not able to take action?

I recently heard the above quote from Dwight Eisenhower, and I have found myself quoting it over and over. I have heard comments such as, “I can’t put a plan together until I know all the variables.” I have heard other people tell me it is a waste of time and we need to just get out and grow our business. Others say that they will do this when their business gets bigger. Does there really need to be a certain business size before you start planning? I am not criticizing them because I have had those same thoughts, and I am a planner by nature.

Why do we spend the time to plan?  Below are five ways that planning helps your business and your life.

1. Planning helps us begin with the end in mind.

In Stephen Covey’s book “The 7 Habits of Highly Effective People”, Habit 2 is to begin with the end in mind. What does this mean?  It means that you visualize where you want to be in the future in your business or in your life and you develop a plan that will help you get there.

Michael Hyatt and Daniel Harkavy’s book “Living Forward” gives a great analogy that makes a lot of sense.  Many of us have planned a vacation before.  The first thing we have to do when planning a vacation is to decide where we want to go. This will help us determine other variables such as clothing, transportation, and activities to do when we get there.

2. We consider contingencies and variables not considered before.

 There might be a tendency to wait until we have all the information before we create a business plan or financial model for our business. Recently, I have been helping a friend with a business plan for an MBA project.  We developed a financial plan and began examining the revenue model’s effect on his expenses such as personnel and operating costs. While analyzing the cash flow, I asked how we are going to receive payments from customers. He said the business was going to accept credit cards. This reminded me that we need to input a fee for credit card processing.

We are never going to know all the variables, but we will begin to know more as the business gets started and other decisions are made.  We can then make adjustments in our financial plan and see if it all makes sense. The act of developing a plan and looking at how the financial plan changes based on different variables will enable you to be smarter at running your business.

3. We aren’t in control of everything, but we are in control of more than we think.

 We certainly do not know the future, and it seems that a lot happens differently than we expect.  What is the alternative? Do we just drift through life letting other situations happen to us and be reactive?  This will lead us to accomplish very little.

The “Living Forward” book illustrates this point very well.  When you go into the ocean, if you don’t watch the shoreline, there is a tendency for you to drift based on the tide of the ocean. You can look up and be quite far away from where you need to be.

We need to have control over our business and life to the best of our ability. When something happens outside of our control, we should adjust to get us back on track.

 4. Planning gives us a benchmark to measure against.

 If we do not plan, then how do you know when we have arrived at our destination? If something doesn’t seem right in your business, then what do you compare it to?  You can compare it to last year. You can compare your business to the industry. I suggest that you also need to compare it to a plan.  Your cash, expenses, personnel, capital expenditures, and new business plan is all contingent on a plan. If anything changes, you can adjust the financial model.

Be flexible and do not get stuck with analysis paralysis. Develop a good dashboard with key metrics such as revenue, profit, revenue per person, growth over last year, and variance from plan. There really are many different metrics, so find the ones that are right for you and review them regularly.

5. Planning helps us focus on what is important.

 We all know that distractions are everywhere.  Have you started your day before and found that you were working on something entirely different than expected? How do you decide whether you have time to do something? How do you prioritize your schedule? If you plan your business and the tactics to meet your plan, then you know exactly what you need to do.

I would argue that virtually all businesses should develop a plan for new business. You need to focus on what you are doing to meet your new business goals. Make sure you are consistent and assess how much new business you have accomplished in accordance to the goal. Of course, new business may not close at the rate you want, but you must stay focused and make minor adjustments along the way.

Conclusion

In summary, planning is important because it helps us begin with the end in mind and consider all the variables and contingencies. Although we aren’t in control of everything, we have more control than we think. Also, planning gives us benchmarks to measure against and helps us focus on what is important.

Eisenhower’s “plans” versus “planning” distinction is indispensable for business owners. While plans are useless because they will not happen as expected, the act of planning is an essential habit that will set you up for success not only your business, but also in your life.

About Bender CFO Services Inc.

Bender CFO Services Inc. provides fractional CFO services to small to medium sized companies. This affordable solution gives companies higher level accounting and finance services such as financial reporting, financial forecasting and modeling, and investor, banking, audit, and accounting support without the need of a full time CFO, Director of Financial Planning & Analysis, and in many cases, a Controller. For more information, please visit www.bendercfoservices.com or email me at shane@bendercfoservices.com.

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