The plan-as-you-go business plan has several important advantages over the old-fashioned, formal business plan document, often seen as a hurdle. For example:

• It gets results. It helps you manage your business. It optimizes your efforts. You start simply with what you need and only what you need, and you grow your plan as you grow your company. When there’s need for more — like more formalized descriptions for outsiders, or proof of concept or market for outsiders, or description of the management team for outsiders, then you create it.
• It’s faster and easier. Call it right-sized business planning. Start anywhere, get going. Maybe in the beginning it’s just a sales forecast, or an expense budget; maybe it’s the sense of core strategy. You do what you need first and grow it organically.
• It manages change better than the normal business plan. This approach pulls assumptions to the top,  where they are visible. It recognizes that change is constant. It focuses on the management process that absorbs change without losing the proactive management that takes change to heart.
• It’s more realistic. Today’s world requires flexible planning that builds on actual needs and uses, rather than a recipe or list of components.
• It’s within your ability and grasp. You don’t need a consultant. It’s a matter of laying down the basics, like tracks, and then following them. It doesn’t have to be big, it doesn’t have to be formally written, it doesn’t have to have a specific list of components or recipe. It’s about what works.
• It’s just plain the right way to do it. I’m sorry, I know that seems arrogant, but I’ve been in the business of business planning for 30 years now. I’ve seen successes and failures, and I’ve seen what works.

I don’t expect you to read from start to finish. I wouldn’t. So here’s a guide to where you might want to go. The book is divided six into chapters. Following is an outline of the contents of each chapter.

Why do you want a business plan? You already know the obvious reasons, but there are so many other good reasons to create a business plan that many business owners don’t know about. So, just for a change, let’s take a look at a longer-than-usual list of the most important reasons you need a business plan.

1. Grow your existing business. Establish strategy and allocate resources according to strategic priority. You can find more information about growing your business with a business plan by reading my article “Existing Companies Need Planning, Too” at bplans.com

2. Create a new business. Use a plan to establish the right steps to starting a new business, including what you need to do, what resources will be required, and what you expect to happen.

3. Set specific objectives for managers. Good management requires setting specific objectives and then tracking and following up. I’m surprised how many existing businesses manage without a plan. How do they establish what’s supposed to happen? In truth, most of the people who think they don’t plan are really just taking a shortcut and planning in their head–and good for them if they can do it–but as your business grows, you want to organize and plan better and communicate the priorities better. Be strategic. Develop a plan; don’t just wing it.

4. Deal with displacement. Displacement is probably by far the most important practical business concept you’ve never heard of. It goes like this: “Whatever you do rules out something else you don’t do.” Displacement lives at the heart of all small-business strategy. And most people have never heard of it.

5. Share and explain business objectives with your management team, employees and new hires. Make selected portions of your business plan part of your new employee training.

6. Share your strategy, priorities and specific action points with your spouse, partner or significant other. Your business life goes by so quickly: a rush of answering phone calls, putting out fires, and so on. Don’t the  people in your personal life need to know what’s supposed to be happening? Don’t you want them to know?

7. Hire new people. This is another new obligation (a fixed cost) that increases your risk. How will new people help your business grow and prosper? What exactly are they supposed to be doing? The rationale for hiring should be in your business plan.

8. Decide whether or not to rent new space. Rent is another new obligation, usually a fixed cost. Do your growth prospects and plans justify taking on this increased fixed cost? Shouldn’t that be in your business plan?

9. Seek investment for a business, whether it’s a startup or not. Investors need to see a business plan before they decide whether or not to invest. They’ll expect the plan to cover all the main points.

10. Back up a business loan application. Like investors, lenders want to see the plan and will expect the plan to cover the main points.

11. Develop new business alliances. Use your plan to set targets for new alliances, and use selected portions of your plan to communicate with partners.

12. Decide whether you need new assets, how many, and whether to buy or lease them. Use your business plan to help decide what’s going to happen in the long term, which should be an important input to the classic make vs. buy decision. How long will this important purchase last in your plan?

13. Deal with professionals. Share selected highlights of your plans with your attorneys and accountants, and, if this is relevant to you, consultants.

14. Sell your business. Usually the business plan is a very important part of selling the business. Help buyers understand what you have, what it’s worth and why they want it.

15. Valuation of the business for formal transactions related to divorce, inheritance, estate planning, or tax issues. Valuation is the term for establishing how much your business is worth. Usually that takes a business plan, as well as a professional with experience. The plan tells the valuation expert what your business is doing, when, and why as well as how much that will cost and how much it will produce.

Adapted from a column for entrepreneur.com

This book, my work, plan-as-you-go planning is about making your business planning a powerful process that helps you determine your business’s future, guide your business to the future you want for it, set strategy, and manage, and implement. Your planning should be a very powerful tool for driving your business. That includes steering. Keeping the long term visible while minding the details in the short term.

The essence of the plan is its heart, its flesh, and its bone. It isn’t necessarily a document, or a presentation, or a speech, or a summary; it’s what you’re doing and what’s supposed to happen. The output of that might vary. Its actual physical existence might be as simple as thoughts in your head, at the beginning, and — I really hope — will quickly become a collection of words and pictures and numbers you keep on your computer.

The Heart of the Plan: The Core Strategy

1. Who you are. As a company, if you are one, or an individual if you’re just starting a one-person business. It’s your identity. Your DNA. Especially what you do well, differently, better; long-term objectives. Goals. Dreams. What do you like to do. Keep the focus in mind, too; that is, think about who you aren’t, what you don’t do well.
2. Whom you reach. That’s a customer, a company that buys from you, a client, a beneficiary. Your target market. By the way, it’s hard to pull this apart from how they find you, how they know who you are and what you do.  Keep focus in mind: who is your target, and what’s different about your target that narrows the focus better. Whom don’t you reach on purpose? How is your target different from the rest?
3. What you do for your target. Fill a need, perform a service, offer a benefit. What business are you in?  Think of focus as well, meaning what you don’t do for your customer.

You can probably see here why I might call these items identity, market, and offering – more standard terms that sound more MBA-like. Also, I might call them the tricameral heart of the plan.

Is this strategy? Maybe, when done well. Strategy is focus. Make that heart of your plan strategic by focusing more narrowly on the most important elements. Narrow your sense of identity to focus on core competencies, what really makes you different. Concentration is power. Narrow your market to a finely cut target segment, the people and companies who really need you and want you — those who really get it. Narrow your offering to set yourself apart, differentiate, position yourself well. It’s what you’re not doing and why not. Focus on your business’s unique keys to success. Resist the temptation to please everybody, do everything, offer it all.

The Flesh and Bones

1. Assumptions. Always list your assumptions, and keep that list at the front of your plan. Things are always changing. Listing your assumptions helps you remember to review them frequently.
2. Review schedule. It’s essential. No way around it. Please don’t do a plan without scheduling times to review the plan and share results with participants and make corrections. At Palo Alto Software we did it on the third Thursday of every month, for years. “We” were the people who ran the company, three or four of us in the early years, five or ten later on. Every quarter you should dig into the strategy. And you need to set those schedules for review ahead of time, so everybody knows and can plan accordingly. This is where managers are going to track progress against goals, and share with peers, and coordinate. Review milestones, review results, review changing assumptions.
3. Metrics. It starts with money. Sales. Costs. Expenses. Taxes, interest, profits. Assets, liabilities, capital. That boils down to money in the bank, cash flow. But be creative, beyond money: think about drivers, nonmonetary metrics, like customers, deliveries, complaints, calls, presentations, trips, meals, people served, client companies, repeat business, whatever. Everybody needs metrics. You want to be able to track progress, remember?
4. Who does what. Call it management team, management structure, organization — it boils down to who does what. Who’s in charge? Who’s responsible for what metrics?
5. When? Who does what when. Milestones. Dates and deadlines. Concrete specifics.
6. How much will that cost? Who does what when; how much will it cost; and how much will it generate? Budgets. Forecasts. Tie down the concrete specifics related to business activities, tasks, managers. Your plan should leave tracks.

The Rest: Dressing it Up

Separate the plan from the dressing. The plan is what, why, how, who, and how much. Dressing is supporting information.

This is important: form follows function. So of course you want a plan, no matter who you are or how big or how new your company is. However, that doesn’t mean that everybody needs to have the full formal business plan with all the supporting information.

For example, you might be running or growing or starting your own one-person business. You feel very comfortable about knowing your customers and your market and you’ve got a strategy. Why are you writing all this down, formalizing it, making a big project that you don’t really need?  No good reason. Planning is about the decisions it causes, it’s not about showing off your knowledge.

Example: You’re doing a new coffee roasting business in Bend, Oregon. It’s just you and your spouse, and a close family member who is also investing. You want to develop your strategy and cash flow projections and decide who will do what, and you want to track progress against goals, so you do need a plan. But it’s not going to be a formal business plan document with a heavy market analysis and competitive analysis. It’s going to stay on your computer. You may or may not do a special research and analysis project for this plan, but either way, you’re comfortable with your sense of the market and the strategy you’re developing.

So if you don’t have to do the formal plan, because you’re not required to by the investor or the bank, then don’t. And when you do want to do the plan, because things are changing (maybe you’re entering a contest, or looking for an investor, or the bank asks for it), then you take the next step of developing the document with all the supporting information.

You do what the business needs demand —  no more, no less.

There is a lot to be said for the formal business plan. Concretely, it covers all the bases. You get a full review of a business, soup to nuts as they say, and if you follow one of the standard outlines, you’re less likely to leave something out. That makes things conceptually easier.

So while I’m not recommending that big formal plan for all, you certainly can start with the plan-as-you-go plan and end up with the formal business plan. And I’d hate for this book not to tell you how.

Allow me, then, to go over the standard contents of the standard plan, and relate them to part of this book. I’ll give you the jumps, so to speak.

Danger: Don’t confuse not having a business plan event with not needing or wanting a business plan.

The business plan event forces you to present a plan. It might be that you’re seeking outside investment, or applying for business financing from a bank or other lender, or you’re involved in a business class that requires a business plan, or you’re going to enter a venture contest that requires a business plan.

It’s because of these business plan events that people confuse the idea of needing a business plan with wanting business planning. Suddenly experts can make themselves feel good by advising people not to do the formal business plan, because they don’t have a business plan event. It sounds like they are saying don’t plan, when what they mean is more like don’t bother to do the big ponderous formal plan document.

This potential confusion is dangerous. Don’t deprive yourself of planning just because you don’t have to present a formal plan to outsiders. Plan your business regardless. That’s why I’m suggesting that you plan as you go.