How to Make Sure a Business Plan Is Working
Measure the success of an implemented business plan by comparing planned effectiveness to actual effectiveness.
A business plan is used to guide the activities of a business over a defined period of time, typically six months to a year. The components of a business plan, such as the market analysis and operations plan, are subject to change over time. Scheduled reviews of a plan allow a business's management team to make sure a business plan is working. There are standard procedures you can follow to evaluate your business plan's success by comparing the actual results of your business's activities with the results that were assumed in the business plan.
Compare the planned output to the actual output. Output refers to the product or service your company provides. For example, a manufacturer may have set a goal in the business plan to produce 1 million widgets in six months, but may have actually produced 2 million widgets in six months. Therefore, the company's output was greater than expected.
Compare actual effectiveness of output to planned effectiveness. Effectiveness may be measured in revenue, new customer acquisition or other terms. A law office may have acquired three new clients in six months, per the business plan, so as to increase billings by 15 percent. However, the law office may have increased billings by only 12 percent. Thus, the effectiveness of the output was less than expected.
Compare the actual budget required for a given output to the planned budget requirement. A restaurant may have planned to expand into an adjoining space to increase seating capacity at a cost of $50,000, but the restaurant may find that the actual cost to complete the expansion will be $60,000.
Summarize each point of comparison and analyze the discrepancies. Provide specific reasons why each part of the plan met, did not meet or exceeded expectations.
Propose changes to your business plan based on your analysis. You may change output goals, effectiveness or efficiency expectations, budget plans or other parts of your plan to reflect the new analysis.
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