3 Mistakes I See In Most Annual Plans
Hey, Hey, well, it is planning season and this is my favorite time of year, but today I'm probably going to get up on my soapbox and rant a little bit about the mistakes that I see entrepreneurs making year after year when they do planning. if you're new around here, you might not be aware that I spent over a decade in banking in the finance department and for the last three or four years of my career. I pretty much solely focused on planning and you're probably thinking, well, isn't that just like a one-off, no planning as a living breathing tool that you use to measure performance throughout the year, that requires explanation analysis, and adjustment. And let me let you in on a little secret, everybody is always off plan. So I hope that secret alone has helped you just like drop your shoulders and relax a little bit the idea of a plan is not for it to be perfect. But as for you to be able to measure performance against and to know when you need to course-correct, so let's run through three big mistakes that I see. The first one is unrealistic plans. There is nothing. More demotivating than an unrealistic plan. If you don't believe you can hit that number. It almost becomes irrelevant to you because you're never going to hit it no matter what you do. So who cares how you're measuring against it. And that's a really dangerous place to be. That's not where we want to be. We want our plans to feel motivating and to give us like really useful data that we can use the whole year. instead? I want you to think about every number that you've put on your plan. Ask yourself, what's driving it. So if you put down a revenue number, ask yourself, what is the split between your products? What price is that product selling it? And when do you expect to sell it? Is it something that you sell throughout the year? Are we dividing by 12? Is it something that we launch once a year? And that's when all that revenue is expected to come in? Once you have what feels like a realistic number that you know, what you need to do in order to reach it, even if it feels a little challenging, you want to make sure that you don't land up halfway through the year thinking, huh? Why did I think I would have made this much money here? You want to make sure that you have documented every single assumption that you have made. So instead of just having a one-liner for revenue, you want to have a documented that that revenue is broken down by these products at these assumed prices you don't just want to have one big revenue number divided by 12, that you have no idea how you came to it. Because while you're in the planning process, it's going to feel like you could never forget that that's how you pull it all together, but I promise you even three months down the line, you'll be looking at your plan going when I'm off plan. I'm not sure why. And I can't remember why I was supposed to make all this money in March. And I promise you, we're planning is concerned. The old adage about, if you assume goes out the window, your plan is riddled with assumptions. Because you have no idea what's going to happen next year everybody's plans for 2020 assume there would be no pandemic. So you want to make sure that while you're doing planning now, June-next-year-you knows what October-you was thinking and why. the third mistake I see people make is not adjusting their plan and I'm not referring to you having a good, better, best plan. I am a big fan of good, better, best goals, because good allows you to stretch a little bit better, allows you to think, okay, what could I achieve? And based as kind of like naked cartwheels down the street, like what if I could just get there? When I'm talking about an adjusted plan, I'm talking about thinking about a couple of things. One, do you know something different? So every time you're sitting there down to review your plan, which is hopefully at least monthly, you're asking yourself, Hey, these are the assumptions I made. Has anything changed? Do I know better now? And do I need to make adjustments? The pace of this gets really dangerous is say you have a bumper Q1 and you actually make double the revenue you were expecting. subconsciously what happens, in that case, is the foot just comes off the gas. It comes over the accelerator just a little bit. And so what we want to be doing when we're reviewing our plan is not just adjusting for what we know, but adjusting for our performance, but here's the kicker. You only get to adjust up. your plan that you set as your baseline, you are constantly chasing that number or higher. As a reminder, number one, make sure you have a realistic plan that you can explain at a service price and number of units kind of level. Number two document everything it's going to feel really excited at first, but I promise when it comes to reviewing your plan, later on, you are going to be so grateful that you have this information because it will be such a quick comparison. I thought I'd sell 10 units. I sold 11 units. That's why I'm off plan and finally, always be adjusting your plan upwards for new information or better performance. If you have any questions. I love this topic. I nerd hot on this topic. I'm always available in the DMs.
Make planning a useful tool for 2021 not a simple box checking exercise.
Planning is a living breathing tool that you use to measure performance throughout the year, which requires explanation analysis, and adjustment.
In This Episode
- My prior career in planning
- 3 mistakes I see entrepreneurs make in planning.
- What to do instead.
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The information contained above is provided for information purposes only. The contents of this podcast episode and article are not intended to amount to advice and you should not rely on any of the contents of this article or episode. Professional advice should be obtained before taking or refraining from taking any action as a result of the contents of this article. Diane Mayor disclaims all liability and responsibility arising from any reliance placed on any of the contents of this article.