Simple Guide to Monthly Business Planning
Jan 29, 2024 by Roger Scherping
Failing to plan is planning to fail!
Out of simple necessity, small business owners tend to be focused solely on the day-to-day. I always say that all they can focus on is getting all of their orders out by Friday. There’s no time for anything else. And when the next week starts, they begin the same cycle over again.
It’s difficult for small business owners to find time to do any business planning. It just doesn’t make it onto their priority list. We argue that they need to make the time! Monthly business planning will keep their business on track to achieve its goals. Otherwise their business is like a car stuck on autopilot when a course correction is necessary!
This is where the trusted advisor can really benefit their clients by explaining the benefits of monthly planning. With just a few simple steps, trusted advisors can help their clients plan easily and with minimal effort every month.
So in a perfect world, what would you tell a client that efficient monthly business planning process looks like?
The RAAP Sheet
We have a tool for small business owners to improve their monthly planning. Bob Voss invented it, and he calls it the RAAP Sheet. Here’s a link to download it.
The acronym stands for Review – Answer – Analyze – Project. Bob created the RAAP Sheet with the idea that you purposefully to take a short break from your busy schedule once a month, find a quiet place, and carefully analyze your business. The idea is to start by analyzing your recent performance and then take what you learned and create an action plan for the next 30 days.
Step 1. Review
The first step of the RAAP Sheet is Review. Monthly business planning starts with looking backwards. When your monthly financials are ready, review them in great detail. Make sure you understand exactly what happened the prior month: what improved, what declined, why the results occurred, where the opportunities are for the current month, etc.
You probably have other, non-financial metrics that you should review, too. Maybe you call them KPIs (Key Performance Indicators). They could include things like late deliveries, injuries, key inventory levels, past due Accounts Receivable, etc. Review those, too.
With all of this information, you will have solid data on where you are at and ensure that you are acting on facts, not feelings.
Then, here are three very important questions to ask yourself: What were sales last month? How many customers do I have? How many prospects?
Step 2. Answer
The second step is Answer. Answer seven key questions about your business performance and your marketplace during the previous month. Each question is focused on an important aspect of your business. They include: What did you learn about your current pricing? What did you learn about competitors? How is your marketing working?
Objective answers will tell you where you are doing well and where you can improve.
Step 3. Analyze
The third step is Analyze. Here you carefully analyze what happened in the prior month.
- What went well?
- What didn’t?
- What have you learned in the last 30 days that you should apply going forward?
You might come up with some simple course corrections, like tweaks to a product offering. On the other hand, you might have had a new competitor enter your market, or you might have lost a major customer. Big events like these will likely require significant changes in your business.
Step 4. Project
The first three steps – Review, Answer, Analyze – involved collecting data, making some observations, and analyzing your results. Now it’s time to take what you learned and apply them to your plans for the next 30 days.
The fourth step is Project. This is where you use your knowledge of your company, your industry, your market, and your recent results to figure out your next steps. Based on what you learned in the first three steps, you may need to change your vision of your future, perhaps significantly.
Step four is where you figure out your plan. It consists of five questions:
#1. Sales Goal. What is your sales goal for the next month? Record it here, and explain where the revenue will come from.
#2. Customers. Record where the new customers you need to reach your sale goal will come from.
#3. Prospects. To get the required number of new customers, how many new prospects will you need? Record the number and how you will obtain them.
#4. Expenses. What major expenditures do you need to plan for in the next month? You need to stay on top of your cash flow!
#5. Profit. Take the actions you decided upon and put them into a 12-month projection so you can see the expected results of your plan. The projection will tell you your planned profit for the next month and how much you will be able to pay yourself.
When you have your action plan for the next 30 days, do a 12-month financial projection of the planned changes you intend to make to ensure that these changes will drive the improvement that you’re looking for. The numbers will tell you whether your plan makes sense.
Finally, Update Your Business Plan
A business plan shouldn’t be something you do once, when you launch your business, and then put on the shelf and forget about. Instead, you should have a business plan that is a living document. You should review your business plan every month and make changes to it.
Yes, I know how you feel about writing a business plan. Just the thought can be intimidating and off-putting. But a business plan can be a very simple document that outlines (1) how you finance your business, (2) who your customers are and how you market to them, and (3) the key managers in your business.
The real benefit of a business plan is that it forces you to think through every aspect of your business thoroughly enough that you can write exactly what you intend to do. Use any format you want, even a simple 2-page Word document, but this kind of clarity will keep your focused as you move into executing your new plan.
Trusted Advisors: Encourage Business Planning
Your clients won’t sit down and do it without you! You need to emphasize to your clients the importance of this type of planning. Tell them that they need to step out of the day-to-day for just a few minutes each month and elevate themselves into their role as business owner and think about their future. They are so used to thinking just days ahead, but they need to spend these few minutes thinking months ahead.
Of course, you can’t make your client do anything that they don’t want to do. So the best course is to turn your monthly financial review into a financial planning session:
- Review the prior month financials
- Complete the RAAP Sheet
- Update their 12-month financial projection
- Document any changes to the business plan.
Just Do Business Planning
We created ProjectionSmart to help you help your clients plan better.
First, we wanted to create a simple way for small businesses owners to do a 12-month financial projection. We call it a prediction. We know that your client doesn’t have a background in finance or accounting, so we created a tool that is perfect for you to use with them. In less than an hour, they’ll see your financial future. The prediction will alert them to problems that lie ahead and give them plenty of time to take action to fix them before they become a reality.
Second, our Proof Plan™ is the simplest way to write a business plan. We focus on the three key areas that bankers and investors care about: How do you make money? How do you get new customers? And, who is on your team? Our small set of questions is focused on helping you prove that your new business will succeed.
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So add ProjectionSmart to the services you provide your clients every month. ProjectionSmart is very simple to use, and it requires only a few minutes per month to achieve many benefits for both them and you.
Maybe you are able to bill for an additional hour each month to create their prediction, or maybe you bill them an additional fee for their prediction. It’s up to you.
When you do a monthly prediction with your clients, they will be more successful and more comfortable with their numbers. They will be anticipate and avoid problems, leverage resources more effectively, make more quantitative business decisions, and feel much better about their business’s future – all because of you!
On your side, you will increase your monthly revenue, have happier and longer-term clients, help your clients be more successful, and differentiate your practice.
After all, who doesn’t want happier and more successful clients and more revenue? Let us help.
Here’s a video to show you how easy ProjectionSmart is to use.
Try out the new ProjectionSmart here.
Tags: Proof Plan, prediction, Planning, RAAP