Business Planning is Working ON the Business

Written by: Roger Scherping

At ProjectionSmart, we’re all about business planning. I searched “business planning” on Google, and all I found was countless articles on writing business plans: “How to Write a Business Plan” and “How to Write the Perfect Business Plan.” Another article, despite its title of “Definition of Business Planning,” was also all about the importance of a business plan.

So what is my definition of business planning? I say that it means briefly pausing in the performance of your day-to-day activities, stepping out of working IN the business, and spending a little time working ON the business. It is putting all your urgent priorities aside temporarily and changing your focus to think about the big picture.

Business planning is figuring out where your business is at right now, where you think it is on track to be in the next 12 months, and what changes you need to make now to adjust your trajectory.

Nothing against business plans. They’re great. You will certainly benefit from developing one, and an investor will always expect to see one. We developed the Proof Plan© as the simplest way to write a business plan.

But I’m talking about business planning as a routine, monthly (at least) activity – something that you can make a regular habit of which will have a huge impact on your business.

Start with History

Business planning starts with reviewing your latest financial statements so that you clearly understand where you have been.

Begin with your Income Statement. Do you understand every line there? What drove your sales last month? What new customers did you get? What were your top selling products? How are your sales trending? Will that trend last?

How about margins? What is driving last month’s margins? Are they trending up or down?

Finally, what about overhead expenses? Are you aware of everything you’re spending to run the business? Are all of those costs necessary? Are there any expenses you can cut?

Then look at your Statement of Cash Flows (SCF). What is that, you ask? Only the most overlooked of the financial statements! While your Income Statement tells you how your equity (profit) changed for the month, your SCF tells you how your cash balance changed. Profit and equity can be very different, so understand what your key cash flow drivers are. QuickBooks will easily produce a SCF for you.

Finally, look at your Balance Sheet. Your Balance Sheet is a snapshot of where your business is at today. Compare your current Balance Sheet to the prior month or prior year. What do you see? Are Accounts Receivable or Inventory up? Are you keeping up with your Accounts Payable? Take a look at ratios like your current ratio and debt to equity ratio to see if they are improving.

Where Are You Headed?

With a solid understanding of where you’ve been, now it’s time to figure out where you think you are heading. What is your current trajectory?

ProjectionSmart will help you easily do a projection that will tell you where your business will be financially in 12 months. Just put in a high-level budget for the next 12 months and then answer a few questions about your plans for things like equipment purchases, debt payments, and distributions. ProjectionSmart will then give you a complete set of financial statements that will show you where you might be in 12 months.

What are Your Goals?

An existing business may not feel they need to do a formal, written business plan. That’s fine because an existing business will probably focus instead on setting and meeting various business goals: sales goals, margin goals, profit goals, debt reduction goals, etc.

It’s important that you set goals that are in alignment with your vision for your company. Where do you want to be in 10 years? 5 years? 3 years? An operating system like the Entrepreneurial Operating System (EOS, or Traction) has a great process for creating your vision and from that creating annual and quarterly goals that will help you make your vision a reality.

If you’re considering an exit from your business, then your vision will be to really drive up the value of your business in the remaining years before you sell.

You need to get your vision right. Remember what the wise philosopher Yogi Berra once said: “If you don’t know where you are going, you’ll end up some place else.”

Look at the projection you just did. Does your projection align with where you want to be? If not, take a closer look at the goals that are included in your projection.

As the saying goes, nothing happens until somebody sells something, so your sales goal is usually your most important goal. Can you exceed the sales level you included in your projection? Is it adequate to achieve your vision? Likewise, are your projected margin and net income adequate to fund your future plans?

Make the necessary changes to your projection and analyze the results. Keep working your assumptions and your projection until you have a plan that is in line with your vision for the business.

ProjectionSmart actually allows you to do three different versions of your projection so that you can analyze multiple scenarios. You can investigate three different plans to see which is the best one to help you achieve your vision.

Don’t forget cash flow! Be sure that you can actually cash flow your plan. You may need to build additional financing into your plan, especially if you plan significant growth.

Planning to Succeed

Once you have a projection that is in line with your vision for the business, then it is time to execute!

Does your plan so that you are already on track? Great! Then you just need to keep things going. Figure out how you are going to achieve your sales and profitability goals.

If your plan says that you need to make changes, then you need to act now! What changes do you have to make to the business to affect these changes? Business planning is about figuring out how to turn your vision into reality!


You may do business planning more often than you think. Anytime you and your partners meet to talk about your vision for the business and how you intend to achieve that vision, you’re doing business planning. ProjectionSmart helps you formalize the business planning process, making it a monthly priority and giving you a tool to quickly and easily run the numbers on what your financial future looks like so that have a plan to get you to where you want to go.

ProjectionSmart helps entrepreneurs and small business owners PLAN their business. We have developed the fastest and simplest way to plan your business. Learn more here

About the author:

Roger Scherping

Roger Scherping has many years of financial and general management experience in small companies. As CFO, COO, general manager, or president, he has successfully grown companies of up to $20 million in sales. Many of these companies were in trouble, and he turned them around and created for them a path for profitable growth. Roger’s expertise is in financial management, business planning, managing and fixing small businesses, and financial modeling.

Roger Scherping
Founder, ProjectionSmart


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