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Member News: C.C. Eship / NACCE Journal Fall/Winter 2008

Plan-as-you-go Business Planning

Thursday, January 14, 2010   (0 Comments)
Posted by: Matthew Montoya
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By Tim Berry
President

Palo Alto Software

Plan-as-you-go business planning is a new concept intended to bring the idea of the business plan up-to date with the kind of flexibility and power we have in the tools we use in business everywhere. It is intended to focus on the real power of planning–meaning management and tracking and accountability–and ease up on the form to make sure that form follows function. For convenience, let’s call it PAYG. The plan-as-you-go business plan is PAYG planning.

What’s Different?

How is the PAYG plan different from the standard business plan? Good question. Let’s get into some specifics:

It’s a process, not just a plan. Every PAYG plan has a review schedule built in, from the beginning. It sets the dates and participants in the future review meetings, taking 60-90 minutes once a month and 2-3 hours once per quarter. And PAYG planning is about process, the regular review and management of the plan, and not just the plan.

Form follows function. The PAYG plan is not necessarily the same kind of formal business plan document you did in business school or read about all over. It doesn’t necessarily follow a recipe. Every PAYG plan is unique. It might generate a formal document at some point, or over and over again actually at different points in company history, but until you need the formal plan document to show somebody, the PAYG plan lives on your computer. You pull from the plan to make a pitch presentation or elevator speech or summary memo or full detailed business plan document, as required for business purposes. It’s the source of all of these, the key thinking including strategy and metrics and dates and deadlines, without having a specifically defined form.

It assumes and manages change. The PAYG plan is about navigation, not just a static map. It assumes that assumptions will change. That’s why it builds the review schedule into it, and in keeping with that idea, assumptions must always be visible, on top, where they can be reviewed. Unlike the misunderstood formal business plan, the PAYG plan is a way to keep your view of the long-term goals and directions while also managing the short-term surprises.

Accountability. Plan-as-you-go planning develops accountability in the process, as a matter of metrics and tracking. It is important that accountability be a matter of collaboration.

Now you could read this list and say "but that’s the same as good planning has been for years, it’s not so new and different.” And I’d say, "That’s right; you’re getting it.” What’s most important about PAYG planning is that start-ups, growing companies and people in the real world alike can actually use it. It gets people out of the silly talk about how a business plan isn’t useful because they misunderstand how a business plan is supposed to be used.

What’s Essential

Start with the review schedule. If you don’t have a plan review schedule, you don’t have PAYG planning. You might have a plan, but it’s not PAYG planning. Set the dates from the very beginning. As you develop the plan, you keep the people involved aware of the touch points, when and how and who you’re going to track.

Develop useful metrics. PAYG planning is about actually managing, not just planning into thin air. The main metrics are money, and the most important is cash flow, but look for metrics that involve the team. Calls, presentations, visitors, inquiries, average time of calls, downloads, whatever. Ideally, everybody on the team deserves metrics.

Identify the assumptions. Effective PAYG planning keeps the assumptions on top, where you can revisit them with every review meeting. We assume things change and the planning is about navigation, not just a static map. This is how you keep your plan alive and active.

Every plan has a heart and flesh and bones. The heart is strategy, market need, differentiation, and focus. This is as true with PAYG planning as with traditional plans. The flesh and bones are just as important, and in PAYG planning that’s metrics, milestones, tasks, dates, deadlines, and responsibility assignments, and, most important, cash flow planning.

Important Principles of PAYG Planning

Start anywhere. Get going. The plan is a matter of interlocking blocks, so some people start with a numbers task, like a sales forecast, and others start conceptually, with a vision or a strategy or focus. Just get started. Don’t wait until your plan is finished, get going. Start today and start using it tomorrow.

All business plans are wrong–but still vital. It’s a matter of humanity. You are predicting the future; you’ll be wrong. But you set down tracks so you can follow up and revise without losing sight of the long-term goals and directions.

Good business plans are never done. My company’s business plan started in the late 1980s and it’s still a work in progress. If your plan is finished, your company is finished. Instead, you revise as needed, as in steering, navigation, and walking. The core of the plan is the collection of heart and flesh and bones, its content, thinking, and specifics. And from that you spin out a document or presentation or elevator speech as needed.

Form follows function. Do only as much as you need to run your company, to manage, to build strategy, follow-up, long-term goals and directions. If you don’t need to create a formal plan, don’t; keep it on your computer.

Keep it alive, always, and spin the output as needed. Don’t ever let your plan go static. Keep it on top of things, active, and alive, not forgotten in a drawer.

Planning is worth the implementation it causes. You measure a plan by results. It’s as good as the decisions it guides.

PAYG Planning in the Classroom

In the classroom, the big win of PAYG planning is accepting the idea of adequate and appropriate levels of planning, rather than the old-fashioned way of making a business plan a big document. You can tailor the planning to your needs in the classroom. Maybe it’s a complete formal business plan, or maybe just the sales forecast, start-up expenses, and strategy.

It’s about time we all loosen up and get more flexible about business planning. By always making it a big formal document, we’re losing a lot of planning from a lot of people who have a lot to gain, but don’t do it because it seems too big and too hard.

 
Tim Berry may be reached at tberry@paloalto.com

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