Live vs. Lean Planning: Looking Ahead While Scaling Back

by / ⠀Entrepreneurship / December 17, 2013

Plan ahead

The recession taught us a lot about business. Small replaced “too big to fail,” startup culture replaced corporate culture and lean replaced elaborate business plans. Streamlining your business doesn’t mean approaching the future blindly, however. Remaining lean and planning need not be mutually exclusive. At Palo Alto Software, we used principles of lean planning and lean innovation to help us transition from a company that developed and sold Windows software to one that develops and sell a SaaS, subscriptions and online applications.

We transitioned from selling our flagship Windows product, Business Plan Pro, to selling an online product without taking on debt or raising outside capital. To do that, we had to plan the launch and initial sales process very carefully. Because we did not know how customers would react, we needed to be able to be nimble and change course quickly if need be. Planning allowed us to have a plan in place that focused on top metrics to measure, and then quickly adjust the plan as we gathered more data. It let us quickly test some theories about conversion rates, lifetime value and churn, and see how they would impact our business and our cash flow.

“Failing fast” may make it easier to identify problems, but planning ahead enables you to peer into the future, spotting potential issues and taking the “fail” part out of the equation. Live planning isn’t an elaborate 12-step process, either.  Accomplished in two stages, live planning is a habit rather than a single act that ensures long-term success.

Step 1: Plan

Completing a business plan doesn’t have to be an arduous or time-consuming process. For the description of your business and goals, think of yourself as a journalist. Detail the who, what, where, when and why of your business and what you hope to accomplish. If you’re active on Twitter, embrace the same sort of brevity with which you’d compose a tweet in summarizing your objectives. The resulting language will not only serve you well in tracking business goals, but also in communicating with potential investors.

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As for the financial component of your plan, you’ll want to create an expense budget, a sales forecast, and a cash flow forecast, complete with goals. While that may sound overwhelming, your goals will dictate your sales forecast and keep you on track.

In working with small businesses, we’ve found that the main reason they tend to fold is that they run out of cash. With proper forecasting, running out of cash can be an entirely preventable problem.  I’ve worked with various small businesses in Eugene, Ore. where Palo Alto Software is based. It is surprising how many of them have very little understanding of the key performance indicators that affect their cash in the bank. I worked with a nonprofit organization that offers kids’ programs year round, but makes most of its money from programs in the summer from summer camps they offer. In helping them plan for some major growth, they realized that they were not understanding all the costs involved in expanding the camp. By putting together a forecast, that included a breakdown of the costs per new program added, they were able to stick to adding only new programs that brought in the most money.

I always encourage small businesses to work with their accountant or mentor to identify potential missteps. Combine that with some lean planning, and you will see how much easier it is to make decisions about your business.

Step 2: Track

Tracking should be a daily activity. It is for us at Palo Alto Software. Just as you habitually check Facebook or your email in the morning, you should be checking your numbers to see where you stand against your goals and how the day’s activities might influence your stats. We not only track as much as we can, but we also disseminate the information to all employees via weekly tracking meetings, and weekly emails to everyone about where we are compared to our forecast and budget. The best live plans and dashboards enable you to check your current metrics against goal and against past months, quarters or years. Make sure you’re tracking revenue, expenses and net profit, not just cash in the bank.

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Beyond daily tracking, schedule milestone check-ins to evaluate the big picture. Crafting a living plan that includes both a written and financial component is important. Regularly, you’ll want to check financials against goal. Monthly or quarterly, determine whether your business is living up to your vision. Are you delivering the experience you want for your customers? Your employees? Yourself? Are you collecting payments as you planned, or buying inventory as you planned? Qualitative and quantitative metrics need to be in balance.

When I worked with the non profit that runs kids programs, I helped them set up ways to track families that took multiple programs, and identify them as the most valuable “customers.” These families then received different email messages and information, as they were most often the families that also help spread the word about the programs.

It’s easy to get wrapped up in the day-to-day tasks of running your business. Without a solid plan of where you want to go, or a way to check in, and track how far along that path to your goals you are, you may intend to take time out to evaluate, but never get around to it. Planning and tracking combat procrastination and take very few resources or time and as a result, coexist perfectly with lean.

Sabrina Parsons has served as CEO of Palo Alto Software since 2007. She and her husband, Noah, founded a UK software distribution company in 2001 that was acquired by Palo Alto Software in 2002. As CEO, Sabrina is a staunch supporter of entrepreneurs and entrepreneurial organizations. 

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About The Author

Matt Wilson

Matt Wilson is Co-Founder of Under30Experiences, a travel company for young people ages 21-35. He is the original Co-founder of Under30CEO (Acquired 2016). Matt is the Host of the Live Different Podcast and has 50+ Five Star iTunes Ratings on Health, Fitness, Business and Travel. He brings a unique, uncensored approach to his interviews and writing. His work is published on, Forbes, Inc. Magazine, Huffington Post, Reuters, and many others. Matt hosts yoga and fitness retreats in his free time and buys all his food from an organic farm in the jungle of Costa Rica where he lives. He is a shareholder of the Green Bay Packers.


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