Any plan is a statement about the future. And who, apart from Nostradamus, can predict the future?

The irony is that it is just because our plans are almost certain to be wrong in some aspects, that we need to do our planning regularly and rigorously.

We must have a plan of where we are going and how we intend to get there. And, of course, we need to check our progress against those plans and review and revise them accordingly.

A plan is based on a set of assumptions about the future.

How do we plan, if we cannot predict the future? The answer is that we need to make a set of assumptions.

If you give explicit recognition to every assumption in your business plan (for example, in our plans, assumptions and decisions about the future are printed in red), you will see that there are literally hundreds of assumptions in most plans.

Running a business is similar to sailing an ocean.

In any endeavour, including running a business, success is very largely dependent upon having a very clear idea about where you want to be as well as having a plan of how you intend to get there. We use the analogy of a ship sailing across a large ocean. There are no roads to follow, but nevertheless the Captain has plotted a course across the sea. In plotting that course, a number of assumptions are made. These relate to the performance of the vessel as well as a number of external variables relating to the weather, sea conditions and so on.

The Captain also knows that many of those variables will change and therefore the assumptions made about them will be wrong. It is therefore necessary to monitor the ship's position regularly and to make adjustments in order to stay on course. This is not something that happens when the Captain feels like doing it. It must be done regularly, relentlessly and with as much rigour and discipline as possible. Running a successful business requires the same discipline. It is crucial, not only to have your plan, but also to be passionate about monitoring your progress every step of the way.

As the owner of your own business, you are under a lot of pressure to keep the ship afloat and on course. You have to attend to every detail. In doing so, it is very difficult not to get so embroiled in the engine room that you lose sight of the fact that you are also required on the bridge in order to assess where you are, where you are going and what you need to do to get there.

Business Planning is hard work.

Just like sailing the ocean, you need to sit down and chart your course. This is not trivial. Nor is it easy. Writing a Business Plan is no fun. It's not something you look forward to. It's something that goes on for a long while with repeat sessions of agony.

But as you complete your Business Plan you will actually begin to feel excited. The psychological benefits alone are worth the effort. They include a feeling of confidence and a sense of control over your own destiny.

A business plan is a powerful tool, which is useful only if properly used.

Your sense of control could be completely misleading unless you realise that your Business Plan is a tool (albeit a powerful one) to help you manage your business. To be useful, that tool should be used regularly and properly, just as our Captain uses the ship's navigation equipment.

You will not reap the real benefits of the effort and cost of preparing your Business Plan if, like many plans, it is filed away to gather dust.

Business Planning is a cycle, not an event.

Having prepared your business Plan, you need to use it as a tool to monitor how your business is performing and what adjustments you need to make, both to your plan and to your own behaviour in running your business.

We need to monitor our performance (analogous to the performance of the ship) as well as what is happening in the environment in which our business operates (analogous to the sea and weather conditions). Remember that we said earlier that any plan is a set of assumptions (and decisions) about the future. As the future unfolds, we must evaluate where we are relative to our projections, decide what we should do in response (using a "What if …?" approach to evaluate alternatives) and update our plan accordingly.

This process should be ongoing. We should be continually aware of our plans and the issues that will affect our business' performance relative to that plan.

This is where your financial practitioner or business consultant can help. By having an external party meet with you formally on a monthly basis, you will be forced to take stock of where you are, how you did last month and what you need to do differently next month.

In order to make this approach work, you both need to agree on each of your responsibilities. These will include:

	The preparation of your annual budget of income and expenses.
	Handover to and critical evaluation by your mentor.
	The deadline for and format of you handing over your invoices, expense vouchers and bank statements so that your financial statements can be prepared.
	The deadline for and format of your management accounts, to be presented to you for discussion.

Update your business plan continually to reflect the changes discussed. We know for sure that circumstances change - those changes must be reflected in your plan for it to be a powerful decision-making tool in managing your business.

If you were driving to a new destination, you would almost certainly get a map or directions. And having done so, you would monitor your progress every step of the way, checking that you are on track. Treat your business in the same way as that trip and you will greatly enhance your chances of a rewarding journey.

Andrew McGregor is a director of the business PLAN. He can be contacted at adml@tbp.co.za or (011) 782 6746.

Back to www.bizland.co.za