How good is your business planning process?

Evaluated your business planning process recently?

How effective is your business planning process? In the annual planning cycles of some companies, reviews of the previous period are often held as a prelude to the work of the planning session. One poor practice frequently observed is when a review is presented as a statement of fact, and not included as a full working session in itself.

As for the planning sessions, some companies prepare information packs ahead of the sessions and some require pre-work by attendees. The level of preparation may be company size and industry dependent, but significant preparation by the company and attendees is more an indicator of best practice (see Ace your business planning preparation).  There are a wide selection of formal strategy and planning tools used, with many companies electing to use their own approach. One good practice is surveying attendees at the end of the exercise and incorporating feedback for next year’s planning session. Rarely in my experience, will the business planning process itself be more rigorously evaluated.

In this post, I will point out some elements and references that may help you improve your business planning process.

Business Planning Process
Business Planning Meeting ( Ltd)

Have you selected the right business planning tools?

There are many approaches to strategic and the more incremental annual planning, see for example Vaughan Evan’s “Key Strategy Tools” for an excellent summary of many modern strategy tools.

Ultimately, the right tool for the job depends on the task and the form of the plan expected by top management. For example, top management may prefer a single plan with detailed assumptions, risks and opportunities, or they may prefer that two or three options  be developed.

For most planning events a commercial finance model of the cost and benefits of the plan is expected. It is always important to keep this model simple and make sure that it provides the type of output used to approve and measure your company’s projects.

Increasingly companies are gathering and analysing their own internal and customer data using new ‘big data’ techniques. These give some insights into areas such as customer demand trends and production/delivery responsiveness.

Have you considered your business model?

Your business model defines a range of assumptions about how the company operates. If you are really looking for transformational change, then you should look to challenge at least some elements of your business model in the planning debate. Unless explicitly put on the table by top management, most senior managers will assume that all aspects of the business model should not be challenged.

Let’s define the business model in the context of this discussion. At the top level, your business model consists of the type of company structure you have in-place, the products and services that you create and the markets that you serve. At the next level, you might describe the company functions (e.g. departments) and geographies of operation, and the associated brief history and rationales for these operations. The stories of influential people in the company and their contributions is often a powerful representation of the company’s goals and culture.

Among the types of companies most willing to challenge their business models are start-ups who, albeit with less vested interest in their existing business model, recognise that a different business model may be disruptive in their industry and for their competitors, whilst aiding their own growth.

Have you selected a business planning framework?

Most mature companies have a business planning process and use the same or similar data and document templates from year to year. Apart from the administrative advantage, this can offer an easy-to-understand framework to managers trying to review previous changes.

Shortcomings in the previous plans are more apparent if a similar planning framework has been used in previous years. For example, you may be able to identify a pattern such as: “the annually repeated under-prediction of new staff costs over several years as the company continued to expand across Asia”.

Another approach is to capture the current state of operations and to estimate the future state after the implementation of the key changes. This is most valuable if done with some granularity, and enables the simple expression of outcomes expected from the key changes.

A current state and the future state descriptive approach has several advantages:

  • provides a broad range of areas on which to assess the impact of the key changes
  • the outcome focus (target state vs current state) simplifies the description of the cost and benefits
  • helps you and other managers reach agreement on the impact of the proposed key changes

Some examples might be estimates of the current state and future state for each business function:  “Operations: a planned 50% uplift in manufacturing at plant A”, “Marketing: enter 5 new markets in South-East Asia”, “Human Resources: a 20% planned reduction in Finance department employment” and so on. My Kitbag has developed this approach into a useful aide–mémoire to capture your thoughts about your business (see our app).

How do you test your plan?

Many companies have a process in-place to test the plans developed, although some companies leave a significant level of testing and evaluation to the later project definition phase.

To evaluate the fortitude of the plan, the development of an issues, assumptions, risks and opportunities matrix assessment is recommended. Once principally used for major projects, this type of risk assessment is now is required for planning as of the most recent update of ISO 9001:2015 Quality Management Systems – Requirements.

There are similar risk assessment tools such as those developed by the Project Management Institute  and the older international standard ISO 31000:2009 Risk Management – Principles and Guidelines (standards available here). Although there are variations in each approach, the basic steps include:

  • document all issues, assumptions, risks and opportunities and using a standard approach, determine the likelihood and consequence for each
  • develop mitigation strategies for the most significant issues, assumptions, risks and opportunities
  • highlight for management consideration, the top issues, assumptions, risks and opportunities and their mitigation strategies in terms of the overall plan’s goals.

Some companies test their plans with experts in their industry. The experts will not have been involved in the plan development, and may be from within the company or outside friends of the company. The experts’ role is to probe the thinking behind the plan, whether it will achieve its objectives, and use their experience to identify weaknesses (e.g. unrealistic assumptions), strengths and any gaps.


How did your business planning process rate? Do you really evaluate it regularly, challenge your business model, incorporate a business planning framework and test your plan with risk assessment tools and external expertise?

Hopefully this post has helped you think a little differently about your business planning process and provided ideas and key references to apply to your own situation. You are welcome to provide feedback of how you conduct your business planning process.