Business Plan Monitoring

This page communicates how business plan monitoring is used to create a feedback loop to improve and adjust the business plan, communicate results to interested parties and provide input for the next years planning session.

Up until now all the information you have been reading is about how to develop a business plan. But what happens when the plan is approved? How do you know that you are meeting the goals you said you were going to meet? More important, how do your investors and supporters stay committed to you if they cannot determine if you are doing what you said you would do?

The only way to resolve this dilemma is by business plan monitoring. Showing the progress you have obtained toward your specified targets using empirical data.

Let's show you how this is done using a technique call Key Performance Indicators or KPI's.

First, the definition of a KPI:

A KPI is a set of quantifiable measures that is used to gauge or compare performance in terms of meeting a strategic and operational goal. The KPI not only consists of a measurement target but also defines what is acceptable above and below the target (tolerance) and identifies who to contact if a tolerance is exceeded and potentially a process to follow when that tolerance is exceeded.

An example of a KPI for business development may be expressed in revenue growth (important for your investors):

KPI Example:

% of new revenue

The percentage of new revenue generated for the company in a month.

You will notice that there is a tolerance for exceeding the target as well as not achieving it. Although this may seem odd in this particular case, exceeding revenue targets can be just as dangerous as not meeting them. Statistically most bankrupt businesses go under in their best sales year. The reason is simple; they have oversold their capacity to deliver what they have sold. In other words, while the salespersons are high fiving each other on what a great job they did, the poor people in production or shipping are forced to either fall way behind in delivering the orders or use exorbitantly expensive processes that meet the sales, thereby running at an overall loss.

We mentioned in my home page that we would show you not only how to create a business plan but also use a minimalist strategy that results in a manageable plan that can be monitored on a regular and frequent schedule (daily, weekly, monthly, etc.).

Developing a plan when a business may have many goals can quickly turn into a nightmare to manage. Typically a business has five to eight major goals that support its mission. Each of these goals can usually be broken down to five to eight sub goals and they in turn can be subdivided into five to eight more goals each.  This means that a typical small business can have 125 goals (5 * 5 * 5) that translate to a comprehensive action plan. Although this is commendable in terms of planning it is unruly in terms of monitoring.

Is there a more manageable approach to monitoring the plan? Well, yes there is. It is through the use of Critical Success Factors (CSF's). Before we go further let's look at the definition of a CSF:

A Critical Success Factor is:

a character, condition or variable covering any aspect of a business that is identified as vital for the success of the mission of the business. A set CSF's is usually used to define the core competences of the business and are considered an essential element in achieving and maintaining competitive advantage. For the typical business there are only 3 to 8 CSF's at a given time. Some areas to consider for CSF's are:

If a goal does not support a CSF then don't monitor it. Chances are if you focus on the critical ones, all the others will take care of themselves.

This is how a set of goals in a plan becomes manageable!