Hours and hours of time are invested in constructing business plans for start-ups all over the globe. Innumerable amounts of similar blogs and articles are written about the value of these business plans. And, yes there is value
in them. Especially if they include well-defined performance milestones across business functions.
A Common Planning Mistake
A huge error made by many entrepreneurs is seeing their business plan as a one-time use only document. This is simply not true and here is one reason why: The plan should include financial forecasts and a business life-cycle timeline of some sort. Investors and lenders want to see this in order to determine their own Return on Investment. This is one area where the business plan becomes much more than a one-time use only document. While you may see those numbers only being important to obtaining that needed capital from investors, the opposite is true. Quality forecasts and timelines can be your own internal performance measurement baseline.
This is how performance measurement works. First, a baseline must be created and then actual performance is measured against your “planned” performance. That creates the ability to have meaningful analysis and really flesh out why your start-up is on track, over-performing, or under-performing. A good baseline makes it easy to find focus areas later down the road. The more detail included in your own internal and original plan, the better.
Keys to a Good Baseline
First and foremost a good baseline requires specific milestones both financially and chronologically. These will be different for each business depending on your industry and business model. Milestones may include breaking even, staffing upgrades, product development, market expansion, conversion rates, capital investments, and many more. Most importantly, no matter your industry, is to create specific, measurable, and meaningful milestones. They should be driving factors in business development and success. Be careful not to get bogged down by performance indicators that have no meaning or are not driving your business. Such things may be variables in other, more important milestones.
Performance Milestones Help Us Make Informed Decisions
Strong performance milestones with a plan built around them will aid you in knowing how to allocate resources and budget to individual areas within your company. When things go good or bad this will help you make more informed decisions about how to reallocate resources and budget because of the framework in place that tells you what is important and where over-performance and under-performance are taking place.
The Extra Work is Worth It
Anyone who has created a business plan before understands that creating quality forecasts and timelines is difficult and time consuming. Often a rough forecast seems sufficient. And honestly, in the short-run, will probably get you what you are looking for. But in the long-run the extra effort is extremely worth it as your company matures and begins to grow. Time and money will be saved because a framework is already in place for recognizing progress and problem areas. Starting from scratch months or years down the road can be even more costly than doing it at inception.
As you begin your business plan, see it as a long-term investment and take the time to establish meaningful and measurable performance milestones. The milestones you create and the performance measurements taken from them are going to bring true value to your business plan and bring true ROI for the time and money spent on constructing your plan.