Planning Interval

Many people think of "planning" as an annual process. Thousands of companies publish an annual plan each year, outlining their expectations about operating results for the coming 12 months. Realistically, though, you're probably planning all the time. Most business owners are always thinking about ways to make their business better. In discussing a "planning interval," what we're really suggesting is periodically setting aside a certain amount of time to create or update a written business plan. Part of this planning commitment includes deciding just how often and at what time of the year to set aside that time.

So how do you select a reasonable planning interval? Start with the assumption that you'd like to have at least one planning period each year. Many factors that affect your business will be tied to some annual cycle. For example, income taxes are due yearly, and federal safety rules require posting annual summaries of information. If you don't engage in some planning at least once a year, you can get some unpleasant surprises when, for example, you prepare your income tax return. Also, many employees will expect annual raises or bonuses. This and other factors make annual planning a reasonable starting point. But your circumstances may require a different planning interval.

Consider a business located on a small chain of lakes. It operates a marina and boat repair facility from spring to fall. As the boating season ends, the business switches to servicing snowmobiles and supporting ice fishers. Even though the results of marina operations are available as of the end of the season, that information is of limited value in planning for the coming winter. The information that is meaningful to the business owner trying to plan for winter relates to the prior winter's operations. Planning for summer operations and for winter operations wouldn't have to occur at the same time, and there would likely be benefits from scheduling two planning sessions.

Another consideration in scheduling a planning period is the availability of the information that lets you know whether your business is on track. If sales and financial information are only summarized once a year (because you have to file a return), it will be hard to hold more than one planning session a year. It's difficult to project what will happen next year if you don't have a clear picture of what's happening this year.

If you work as a consultant on a project basis, it might be necessary to engage in some planning activities as you get near to wrapping up each project. For many consultants who work alone, planning is all about lining up the next job or the one after that. It should be more than that, however. Take the time to assess how the most recent project compared to your expectations. If you negotiated a flat fee for your work, look at how many hours you spent. Are you being compensated at a reasonable rate? You want to be able to plan for your upcoming jobs based on the most accurate information you have. By comparing the time actually spent with what you projected, you can revise future plans and perhaps make other adjustments to ensure that operations are generating the income you wanted.

You also need to consider whether there are any time-based dependencies that can affect your ability to plan. These dependencies can relate to how you keep your books, the lead times you need to keep inventory current, other deadlines, etc. Trying to plan without adequate information is frustrating and fruitless.