Why Do You Need an Operating Plan?

So why not just wing it? You’re moving fast. You don’t know what your assumptions should be. Heck you don’t even know what your business model will be. So why try to set goals, write them down and measure your performance? The last point “measure your performance” is reason enough. Every startup team thinks they can accomplish more in a certain period of time than they actually can. What separates great performing teams from mediocre ones is the ability to set goals, measure performance against those goals and make changes to people, systems and processes so that perform to your goals.

As an owner or manager of a small or medium business, can you afford not to plan? Do you let your business depend on reacting to events? Or do you want to plan for priorities, and manage your growth proactively. That’s a leading question, of course, the answer is obvious.

“Without an execution strategy, the rest of your plan is meaningless.” 

You need to think about the kinds of details you’ll be facing from the day you open the doors of your business. Here are some of the benefits:

  • Guide Your Growth. Your business will grow, or not, depending on a lot of different factors, including overall economic trends, location, specific market needs, hard work, and other elements. Businesses that plan do it to guide and influence their growth, so that they move proactively towards defined objectives rather than just reacting to business events.
  • Manage Priorities. Strategy is focus. Allocate resources where they will do the most good. Work towards your strengths and away from your weaknesses. Develop the company by doing the most important things, according to your long-term objectives.
  • Assign Responsibilities. A plan gives you a place to develop organizational responsibilities.
  • Track Progress. Think of a plan as a business positioning device. With a plan, you can track your progress towards goals, measure results, and manage the business. Without a plan, how do you tell whether or not you are moving in the right direction. What do you measure against?
  • Plan for Cash. Profits are not cash, and cash is not intuitive. You spend cash, you don’t spend profits. However, businesses don’t plan well for cash, and they need to. That may not sound strategic, but it is. It is also the core of an operations plan, and an annual plan. Whatever else, you have to plan for cash.

This may seem like too much structure and process for a startup where you are simply trying to get the product right and achieve some customer traction. However, even at early stages and certainly by the time you are taking external capital into the business its important that everyone is aligned on where the business is going and what defines success in the near term, even if success is defined by “get 2 paying customers”. Even an objective this simple requires sales, a product, technology reliability and scale, support, design, analytics, etc. such that each department has a list a mile long of things they can’t get accomplished due to resource constraints. A well constructed Operating Plan helps to coordinate priorities across departments and keeps everyone’s eyes on the prize.

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