“Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success.” – Pablo Picasso
Once a business has more than seven or eight employees, it can benefit from some sort of formal planning. When it’s in the 35-plus people category, such planning is required.
In past messages, I’ve recommended one- and five-year plans. By taking a look at what you are doing now and making sensible calculations about how that will grow and change in the future, you can help yourself prepare for those changes in three critical ways:
1. You will be able to determine how much cash you will need to achieve your goals in time to go out and get it if it won’t be generated internally.
2. You will be able to anticipate investments you’ll have to make in business.
3. You will be able to understand what people you’ll need and go out and hire them in plenty of time.
But almost as soon as you figure out what you will need in terms of cash, capital investment, and personnel, your projections will change and some of those needs will change too.
You may feel frustrated by the disparity between your budget and what actually happens with your business. You may even question the sense in budgeting.
Don’t. The analysis and planning you do at budgeting time is well worth the effort, even when your calculations fail. The important part of the process is imagining contingencies and deriving solutions to them, for this kind of thinking makes you a stronger, more capable problem solver.
Growing businesses are dynamic. They are more like growing creatures than static machines. When machines are subjected to extraordinary change and pressure, they break down. Organisms often change and evolve in such situations. So take comfort in how fast your business needs to change. These changes are opportunities to get better, quicker, and more useful. Every time you change your business plan, you are accomplishing something that moves you forward.
When your competitors fail to make such changes, they slip behind. My personal experience has been that when a company is in its first 10 years of growth, yearly plans need to be revised every six months and five-year plans yearly.
By forcing yourself to do a business plan and budget — and by revising them when needed — you will develop a much better and more realistic understanding of what makes your business succeed, how your industry works, and what numbers (and activities) are critical when it comes to long-term profits.
Two Important Questions to Ask When You Do Your Five-Year Plan
When planning for the long term (five years or longer), keep in mind that the skills you will need to make your business work then may be different from the skills you need to make it work now.
First, ask yourself: “Five years from now, what will be the most important skills I — and my senior executive staff — will need in order to make this business plan work?”
Don’t make the mistake of assuming that the skills you employed to get your business where it is today are the same skills you need to take your business into the future. I can tell you from first-hand experience that you and your key people have to change as the business changes. And that’s not easy — because your built-in habits feel right and they sometimes are.
Then, when reviewing the plan with your staff, ask them: “What new ‘core competencies’ (as they say in the business-management books) will we need to compete effectively in five years?”
Armed with the answers to those two questions, formulate a development program for anyone who needs to learn the new skills.
It Works in Your Personal Life As Well
This is something you can do to help achieve your intellectual, social, and health goals as well.
Let’s say you plan to retire from business and write screenplays in five years. What will you need to do to develop your scriptwriting skills between now and then?
Let’s say you want to be CEO of your company in five years. What industry-specific knowledge will you need? What people will you need to know? What skills, that you don’t have today, will you need to master?
Tomorrow always comes around faster than you expect it to. If you are not prepared for it — by having the skills you need to succeed — there will be nobody to point a finger at but yourself.
What You Can Do Now
Take out a pencil and a piece of paper right now. Divide the page into four quadrants: one for your business, one for your health, one for your intellectual life, and one for your social life. Now, take out your list of five-year goals for each of those areas. (As an ETR reader, you should have made this list during the first week of your subscription. If you haven’t done it, do it now.) Imagine yourself having completed those goals and then ask yourself: “What new skills, abilities, and attitudes will I have then (if I achieve my goals) that I don’t have now?”
That line of thinking should help you identify the skills, abilities, and attitudes that you need to start developing now.
Figure out what you need to do, break those objectives down into tasks with deadlines, and them add them to your personal task lists.[Ed. Note. Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]