Time View and detail level of Business Plan 

Before embarking on the plan, itself, it is a good to bear this pun:

 The Law of planning: Things always last longer than we expect, even if we count with the "Law of planning".

This smiling rule very well reflects the fundamental contradiction between planning and reality.

This smiling rule very well reflects the fundamental contradiction between planning and reality.

People are incredibly uniformly horrendous and horrible planners. It is probably because they are not omniscient and unexpected changes, the black swans, but also the minor deviations significantly distorts the very detailed plan.

Fundamental misconceptions arise because people have a constant tendency to underestimate the schedule.  The more complex plan is, the more interlink contains, and one change can cause other changes, and suddenly the plan is beyond the original timetable. How these changes affect the entire project can be seen very well in special programs such as Microsoft Project, etc. But we are going to be dealing with simpler matters.

Any planning process immediately generates a query of type:

  • What outlook should I include to the plan – how far should I to plan?
  • How deep details I should include to the plan?

Time Outlook

Answer of this question follows for what purpose The plan is being prepared.

1)      We want credit:

Bankers usually have a time picture of what your plan should correspond to if you want to apply for a loan. Here you can usually talk at least about 3 years period. For new companies, their first plan should have the overall horizon set right on this threshold.

2)      The payback periods

The payback period is another good concept which help us to establish time period of plan. The time horizon is usually around 5 years. This is usually the time when we expected our initial investment to be returned and when our business begins to deliver a reasonable profit.

3)      Speed of technological changes

If your business is focused on high-tech, or if you are running in disciplines where rapid technological changes and innovation are taking place, then, according to this criterion, the life cycle of these changes should be decisive for your plan's time horizon.

Schedule Detail

The level of planned details can make the long-term plan more readable. Any business plan should be sufficiently detailed in the first year.  What, when and how it happens. Moreover, it should also be accompanied by a planned monthly or weekly Cash Flow (depending on the nature of the business). In addition, at least quarterly planned profit and loss account and the initial and final balance sheet (about this accounting documentations, what does it means, how does it is created and how to read it we discussed in another place).  If we put all this together, we have just produced a "budget".

The following years of our plan can be described with smaller details – from here it should suffice eg. Quarterly Cash Flow.

If we plan for a very long time, this horizon is defined by market, technological changes, trends in industry, profit margins and market share. We are dedicated to these topics in another place.

We need to refute one superstition before we begin to take a closer look at the planning process. Planning and budgeting process, mostly in large organisations, is often hold as a matter for a purely financial department. An activity that has nothing to do with the organization's and business's daily running. This is just a huge mistake!

And for small organizations, the problem is whether the plan exists at all and if is being prepared. And if so, it is clear that none of other than the entrepreneur himself the plan not prepare.