There are a couple of basic ideas that will help you – whether you’re new to the process or an old hand – if you want to develop defensible numbers and projections that at least make some basic sense. While plans are basically useless, the planning process, properly done, is absolutely critical.
Solid, well-thought plans aren’t guarantees but they will help you detect changes and make course corrections as you go forward. Keep in mind that they aren’t anything more than today’s best guesses because you can plan all the plans you want, but you can’t plan results. For better or worse, you live the results of your old plans every day.
Do your homework.
As amazing as it seems, far too many entrepreneurs jump into new markets without even the most basic understanding of the ground rules, regulatory environments, competitive offerings, etc. This is in part due to the curse of Uber, which taught too many newbies the idea of forging blindly and quickly ahead — and then asking for forgiveness rather than permission. Even apart from the fact that the strategy doesn’t work in all markets, it’s a dumb approach and doomed to fail.
Start by building your plan backwards.
Figure out first where you want to end up. Then determine the steps and the required growth and resources needed to get there. Finally, do a realistic inventory of your current assets and capabilities to see whether you have the funds and foundation required to complete the journey. You may discover that you simply can’t get there from here and save yourself years of headaches, heartaches and hard times.
Consistency is easier to defend than accuracy.
You’re going to need to “sell” your plan over and over to your own team, to your board, to customers and regulators, and to investors. It’s hard to look smart with bad numbers. If you can’t explain succinctly where your numbers came from and how they were arrived at, you can forget the whole drill. No one really knows what the future holds or what certain specifics will be down the line – costs, rents, taxes, etc. You can only do your best but it’s crucial that your plan be built based on logical premises and straightforward assumptions. Anyone can argue the assumptions and change the numbers in your models, but it’s your logic and approach that needs to be rock solid, consistent and clear.
Dream in years, plan in months, review weekly, and react immediately.