Restaurant Tip of the Month
Tip #8: Reviewing and Maintaining Your Business Plan
Reviewing Your Plan
So how do you maintain your business plan? We have to first establish that without regular review, monthly or at least quarterly review of your planned vs. actual results, with practical analysis of the reasons for variance, planning is likely to be a waste of time.
Real planning requires regular reviews just as much as navigation requires knowing where you are as well as where you were and where you wanted to go. Every real plan needs to be full of specific dates, budgets, forecasts, and management responsibilities. People involved have to know there will be tracking and following up on specifics. Then that plan must be reviewed against results, and those reviews should produce course corrections and fine tuning.
Generally a business hopes for a consistent long-term strategy built on short-step incremental changes, not major revisions. Consistency is important to strategy, and the business should avoid the temptation to jump around from one strategy to another so quickly that no strategy is ever really implemented. Remember that even a mediocre strategy well and consistently implemented is much better than a brilliant strategy that wasn't implemented.
However, businesses do come to crossroads, demanding major revisions in their business plan. These are some signs that indicate it's time to review your plan.
- Major changes in market situation. Look especially for changing market factors and changing market behavior.
- Do you have new competition? Have new competitors emerged, or existing competitors changed the business landscape so much that you need to review and revise?
- Has the product or service picture changed? For example, a new technology may have emerged, changing the market perception of what you sell. There may be new products or services offering related solutions to the same user needs you to satisfy.
- Major changes in internal situation.
- On a more ominous note, the company suffers significant declines in sales, profits, and financial health.
Always keep the revision in perspective. While you do want to review and correct constantly, you don't want to change a strategy unless you are sure it isn't working or you see real changes in the underlying assumptions that formed the foundations of the strategy.
Maintaining Your Plan
The purpose of maintaining your plan is to use business results to guide your future decisions. The plan itself has no value if it doesn't help you improve business. That's regardless of how good or bad, how brilliant the ideas, writing, or how elaborate the tables and charts. Its value is the decisions it leads to.
That means, of course, that to make a plan worth the effort of developing it, you'll want to follow it up. Whether that's every month, or every quarter, you need to track results, analyze the difference between plan and actual results, and manage. Change things that need to be changed. Compare what you planned to what happened in reality. Ask yourself the following questions:
- What went wrong, and how can we fix it?
- What went right, and how can we take advantage of it?
- What changes took place in the competitive landscape that could be updated in the plan?
- What changes took place affecting our market that could be updated in the plan?
- What changes took place internally in our organization that could be updated in the plan?
After you've answered these questions, update your plan accordingly, set new budgets and milestones, adjust your financials, and repeat the process with another review of your plan again next month or next quarter. Update your plan accordingly again, and keep repeating. You'll find that maintaining your business plan gives you a better grasp on your business, your market, and everything else that happens with your company.
Make sure to look for Tip #9 next month..."How to Manage Capital."