For many, the end of the year is about celebrations, but for me it’s all about planning for next year.
As a company leader, there are two things that I abhor: insincere business plans and budgets that are finalized two months late. In some companies, the writing of next year’s business plan and budget is nothing more than a mundane chore that, over time, has become a fill-in-the-blank computer template to meet some whimsical benchmark.
Taking the business plan and budget seriously has always been important to me. In fact, it nearly got me fired. Back in the day, I worked as a general manager at Wickes Lumber, which—like many national entities—would have budget conferences with upper management. Prior to the meeting, the location manager would draft the budget using company templates. It galled me to write a make-believe plan.
During one particular conference, a regional vice president was frustrated with me because I wouldn’t capitulate to his fictional number. At some point during the exchange I said, “Just tell me what number you want me to put down.” Needless to say, that was the wrong thing to say in front of 12 other managers; however, I survived.
As an executive, we can hope, wish, or dream of a number. But unless that number can be backed up by tangible plans and actions, it won’t happen. The mistake that the regional vice president from Wickes Lumber made was that he wouldn’t listen.
My approach is different in that I talk to our managers and I push them to excel. We come to an agreement of what is really doable.
A business plan, which grossly under-or over-achieves, is a poorly written plan in most cases.
Here are some of my basic business-plan guidelines.
- To determine growth potential, develop a one-page, concise, articulate market analysis that details the market conditions, competition, and factors for the next year.
- Each location then develops next year’s top two to three initiatives for business improvement, capital improvements, and operational improvements.
- From the location initiatives, I develop the overarching company initiatives.
- A seasonality formula based on the number of sales days per calendar month and prior sales history is developed for each location.
- Then, an actual budget for the entire operation is developed for everyone to review.
- The budget is finalized and distributed to all locations before Dec. 31.
Most importantly, I hold a monthly P&L meeting, and during those meetings the initiatives and budget comparisons in the business plan are reviewed. We truly keep score.
My advice is simple: Have a happy and prosperous New Year, but don’t forget to include some planning with your celebrating.