As the second quarter (for most) comes to a close, many business owners begin questioning what it is they should actually be doing. You’re half way through the year and hopefully results are exceeding your estimates (you do have a regular planning process right?).

What’s actually the most surprising thing is that the annual average growth rate of businesses that apply quarterly planning is 32.4 percent! That’s right, 32.4 percent growth because they developed and executed a plan each and every quarter.

Planning seems simple, right? So why do so many business owners fail to make it happen?

The answer depends on a variety of factors, but normally the reason it doesn’t happen is because a business owner has a million other things to worry about and something has to take a back seat. It sounds pretty silly when you put those two sentences together (32.4 percent growth and too busy) but in most cases that’s the reality. If you take a look under the hood at highly successful companies, in most cases they have a routine established that focuses on a clear planning process, which is then supported by quarterly planning to ensure alignment.

A quarterly plan doesn’t technically need to be very complicated, the vast majority of successful quarterly plans are surprisingly very short, in the one to two-page range. So, the question becomes what is it that a quarterly planning process really entails? Well, it actually entails three things; comparing forecasted financials against real results, laying a plan for the next 3-months and adjusting your actions for the next 3-months to arrive at a desired end result.

Comparing Forecasts versus Actuals

Comparing forecasts against real results just sounds like its boring, and the honest truth is, to some degree it is. However, the value created by comparing where you want to go against how you’re doing is incredibly powerful – whether you’re on or off track, knowing how to adjust your actions for the coming 3-month interval is critical to the success of your business.

Let’s say you’ve hit your numbers dead-on, that’s great but could you have done better? The key questions you want to figure out is, how could you have improved and actually beaten your forecast, here are some points to think about;

  • Was there missed revenue opportunities? If so, find out why.
  • Were there areas where cost reductions could have been realized? If so, make a list.
  • How did your actual profit as a percentage of revenue differ from what you forecasted?
  • How did your actual expenses as a percentage of revenue differ from what you forecasted?
  • How did your labour costs as a percentage of revenue differ from what you forecasted?
  • Were there any glaring areas that jump off the page at you? If so, dive into it to determine why.
  • Were your key performance indicators (KPIs) solid? If not, dig in to find out why.

Now, if your results fell short of your forecasts, many of the same questions above apply. The one major difference is that you want to act like a coroner trying to determine a cause of death, what went wrong and why? That’s no small task but failing to clearly understand what occurred could mean the difference between a viable business and failure.

When we work with clients to determine why they didn’t meet or beat their forecasts we always return to the first step – the forecast itself. Although at the time the original forecast was created we’ll assume you took your time and put significant effort into ensuring you produced the most accurate forecast you could but running back over it can on occasion can find the problem. It’s also critical that when you compile the original forecast that you do it with reality in mind. Without a shadow of a doubt, most forecasts are far too aggressive. Obviously, you want a little aggressiveness to ensure you’re trying to beat the status quo but if you create something filled with fiction than it wasn’t worth much to start with. Typically, we check client forecasts for the following; was the initial forecast rooted in reality, are the calculations correct and were there any major events that could have contributed to the difference.

If the issues aren’t with the forecast, then that leaves only one option, the execution wasn’t where it needed to be. Most people have a very hard time admitting that they didn’t give something the necessary effort, excuses are a dime a dozen. If you’re serious about being a business owner, you have to be hard on yourself, you should have put in the requisite effort to achieve whatever you defined as success. Maybe it wasn’t entirely your fault, maybe your partner or employees didn’t do what they needed to do but ultimately it all leads back to you. Maybe it wasn’t about effort at all, maybe it was not properly managed or your staff weren’t properly managed to align with the vision.

So, throw on your detective hat and figure out exactly what went wrong. This isn’t a blame game, finding the answer to what occurred is paramount to the next step which is fixing it. We traditionally take our clients through a process where we do a detailed line by line review of their results, taking a slow and methodical approach to try to find the root cause. Yes, this process takes some time and yes it certainly isn’t puppies and rainbows, but it must be done.

Once the problem areas are identified, it’s time to dive into the next step, planning.

(As an aside, there are a significant number of business specific questions, results or KPIs you’ll want to review. This can range across a variety of areas; sales, manufacturing, quality, etc).

Planning for the Next 3-months

So, you’ve gone through the last 3-months’ worth of data, and hopefully you’ve clearly identified what needs to be adjusted. Before diving into how to go about making those adjustments, you want to take time to lay a plan for the coming 3-months.

At this stage, you’re already armed with knowing a lot about the 3-months, but what is the vision for the coming 3-months. Sure, there are going to be some items that you’ve uncovered as part of your comparison in step one but are there other areas that need to be addressed.

We walk our clients through a couple of key processes, but the end result is what want the thought process to surround a couple of core topics; internal drivers and productivity drivers. Internal drivers revolve around ensuring proper people, process and financing is in place to adequately support the company, we work with our clients to look at areas including employees, finance and record keeping. Productivity drivers focus on revenue generation, we work with clients to look at areas including customers, operations and sales.

Effectively, we’re trying to take a data-dump and convert it into something actually usable. Traditionally, a lot of business owners know to some degree where they want to go, but that information normally resides in their heads – and in some cases they just assume everyone around them knows the same things they know. What we are aiming to achieve is to actually get you to put pen to paper and articulate the things that are important, for example how can you ensure your pipeline is full of work? In some cases, the answer seems simple, like the need for more customers in the pipeline, but the goal is to boil it down to actionable line items (i.e. here is exactly how we are going to land more customers).

Said in the simplest way, compartmentalize your business into unique departments and then find 1-2 things in each area that you know can be improved. Determine what the 5 most important things are that need to be changed, improved or accomplished in the next 3-months. Take the step of defining in writing, what precise actions can be taken to improve those 5 things and for clarity if you don’t know what those actions are that’s OK but make sure your first action is to find out. Once you’ve outlined the actions to make, assign responsibility to individuals to make it happen and figure out a way to measure progress. With our clients we use this lovely software called Smartsheet, it’s basically a shareable project management software than allows you to list tasks, share it with your team, set reminders and add commentary all in one central location – it avoids the need for consistent meetings.

Adjusting Your Actions

So, you’ve either met, beat or fell short against your original forecast and you’ve established your plan for the coming 3-months. So, now you want to turn your attention to implementation and execution. Some of what I’m about to say with wholly dependent on the size of your business, if you’re the only employee than much of still it applies.

The planning process is normally sort of fun, the execution is usually the hard part – what I mean by that is committing to the plan, making sure every day you’re making those actions happen. It happens pretty consistently that business owners will lay out a plan, make it important for a period of time but when other urgent items come up, they deviate and fall back into a firefighting role.

Accountability is the name of the game and nothing drives accountability more than having egg on your face after sharing your plan and then not executing it. So, once you’ve defined your plan, share it with as many people as you can and find someone to hold you personally accountable. Our company has a Monday morning meeting, each and every Monday, our team meets and goes through the plan line-by-line to ensure we all know for the coming week what actions need to be taken. If you’re the only person working in your business, that’s fine too, but carve out time each week to go over and update progress against the plan.

To summarize, the key to making sure you make progress each quarter and grow as a business is to; know where you’ve been, define where you’re going and ensure your actions make it a reality. Hold yourself accountable and refer to your plan daily so you constantly are reminded.

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