Do You Really Need a 5-Year Business Plan?
“Startups need a 5 year plan!” How often have you heard that?
I’m here to throw a wrench into that kind of thinking.
According to conventional wisdom and old-school business pundits, a 5 year plan is essential. Every business should have one.
Lack of planning or poor planning are often listed as one of the top 10 challenges for startups. So there must be something to that, right?
You can spend a lot of time and effort to create a 5 year plan. A plan with all kinds of detailed projections and action steps.
Chances are, by the time you get to Year 1 or even the 6-month point of this plan, so much will have changed that your plan becomes essentially useless.
The problem with 5-year plans is that people look at them as implementation guides. They are not.
As wise people before me have said, plans are useless, but planning is indispensable.
The purpose of a 5-year plan is to think through your business model and modify it as needed, and to check if these big vision goals for your company could be implemented.
And it’s good stuff. But a 5-year plan isn’t going to help you much in the day-to-day.
You can still create a 5 year plan if you want to. If you’re looking for funding from a bank or other financing source, they may require it. Go ahead – give them what they want. But keep in mind its purpose. A 5 year plan is really a picture of what you currently believe is possible, from where you sit at this moment.
Because of the scope of a 5 year plan, most plans are just no good from an implementation standpoint. They tend to be too conceptual, with not enough detail for implementation.
And even more important, 5-year plans can seem cast in stone and therefore don’t take into account the very nature of business and taking action.
Successful businesses are less like a hefty block of stone than they are the water trickling over it.
For a business to thrive, it must constantly be in motion. In successful businesses, the scenery changes constantly as you move over the new terrain. Flourishing businesses can also move the immoveable, just as water over stone can create new pathways.
So, rather than acting like you have to follow the monolithic stone of a 5-year plan, or even a 1-year plan, your business will do best on a daily basis if you think of it like a flow of water. As soon as you begin to act, you’ll notice the landscape shift. Suddenly, opportunities that weren’t apparent to you before become visible. You see additional or alternative steps that could be taken.
This doesn’t mean you should have no plan at all. Free-for-all chaos is not the way to go.
Instead, when it comes to implementation, think in shorter time horizons.
Even a year is a long time in the future when it comes to human motivation and consequences. Procrastinating today on something that you plan to complete a year from now just doesn’t seem that bad or significant.
A 12-week time horizon works remarkably well for implementation planning. It’s long enough to allow things to get done and an outcome to be seen. And it’s short enough to keep a sense of urgency. Putting things off becomes less of an option, and a lot more consequential.
Another huge advantage of the 12-week plan is that insights can be put into action right away. Plans should always be flexible enough to allow you to reconsider and make adjustments.
Keep to the plan as much as you can, though, or you can waste precious time chasing shiny new alternatives. Unless it’s an immediate opportunity that needs to be acted on right now, include it in your next 12-week plan.
At the end of the 12-week period, assess what’s happened. Measuring your progress will go a long way to really seeing how much you’ve accomplished. And you’ll see what still needs to be done.
Creating a short-term plan does wonders for your business.
One of the ways that startups fail is through a failure to implement effectively. This planning process puts you in a great place to solve that problem.
Before we go into the process further, let’s talk about something that can be at the heart of every business, and therefore at the heart of any planning that you do.
Impact is where your unique self and business meets the world and makes it better for all of us.
In the work I do with clients, we define your impact intention, your vision for the impact that you want your business to have, the difference you want to make with your business. Business has the potential to do great good in the world. How can your business contribute to making the world a better place?
To create your own short-term plan so you can implement effectively while keeping your intended impact front of mind, follow these steps:
- Brainstorm: What is everything you (and your team) can think of that would move you closer to your aim? Write them all down, without judgement at this stage.
- Set goals that are IMPACTORs: Goals tell you where to go next. From your brainstorm list, choose goals that can be completed or significantly progressed in 12 weeks. When you develop goals, make them IMPACTORs.
- Refine: Which of those objectives has the best return on investment of time/energy/money? What can substantively move you forward in 12 weeks? Working with my clients, I’ve found that focusing primarily in one area of business per 12-week period is particularly effective. Keep the number of goals small: three objectives are ideal.
- Track: Create a spreadsheet or other tracking system that lists the key results for every objective and how you will get there. Track your progress week by week.
- Assess: At the end of the 12-week period, look at what’s been accomplished. See an outcome of 70-80% completion on your objectives and key results as success. Objectives should be challenging, so 70-80% completion is a great outcome.
- Repeat. Repeat the process for the next 12-week period. And keep going!
This 6-step process will transform your business planning and take you through your implementation successfully. Now it’s up to you to execute! To help you do that and make the process even more effective:
- Adjust as needed throughout the 12 weeks if a new insight significantly shifts your view. Otherwise, stick to your list! That’s how you’ll remain focused and get things done.
- In addition to it being an effective way to get stuff done, completing a 12-week cycle is a natural point to take a break. I have been taking time off at the end of the 12-week cycle, to rest and rejuvenate. That puts me in a much better place to enter into the next 12-week period with vigor.
One last thing about business plans. Your business is not your whole life, even with a startup. It may be a very important and integral part of your life, but still, it’s just a part. You have many other ways you can be fulfilled and have impact, from friends and family to community involvement. You also need to have some fun and take time to rest.
So, make your business plan part of your life plan, not the other way around.
Don’t be one of those people who, at the end of your life, wish they had worked less. Find harmony between the aspects of your life that feel most precious to you. And your business can certainly be a part of that. That’s why I work with people around the impact they want to have in their lives, not just their business.
You can give up depending on your 5-year plan to take high-impact action in your business.
Choosing a shorter time window will help you be more agile, get better results, and like the flow of running water, carve some new pathways for your own impact with your startup.
Ursula Jorch is a business consultant and coach, speaker, and podcast host who shows entrepreneurs how to increase profits while turning their businesses into agents for lasting change, global impact, and a force for good in the world. In her 22 years as a successful serial entrepreneur, Ursula has mentored many high-impact leaders.
Find Ursula at WorkAlchemy.com along with free resources for you and your business. Listen to her popular podcast, Work Alchemy: The Impact Interviews with guests as diverse as Seth Godin and Marianne Williamson.