What we learned this week…
How far ahead are you looking right now? When talking to my clients, I do not know any who have not had to radically revise their plans during 2020. They may have revised these downwards – as with airlines, hospitality, entertainment – or upwards. Think Amazon.
A consistent theme is appearing. Remember the idea of the “Five Year Plan”? That’s not happening right now. It is not just that we are planning to the horizon rather than beyond it, but our horizon now is like the view from the bottom of a steep hill: you can only see the obstacle in front of you. The horizon is closer.
Planning timescales become longer in periods of stability and consistency. What we have possibly not appreciated is that we were living through one of those periods between around 2012 and 2019. And also between 2001-2007. Not to mention 1992-1999. Which is not to say there were not significant changes in those periods, but that the type of change is different, and arguably amount of change in 2020 has been packed into a shorter timescale.
I am not the first to talk about this. Here is a carefully curated selection of quotes, with a few additional gems from me:
“By Failing to prepare, you are preparing to fail.” – Benjamin Franklin (Preparing to fail is also preparing to fail. You need a success mindset too)
“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” – Abraham Lincoln (I have literally done this in my garden recently. But without the 4 hours sharpening. Lincoln has a point.)
“If you don’t know where you are going, you’ll end up someplace else.” – Yogi Berra (Alternatively, you will get there anyway…)
“The time to repair the roof is when the sun is shining.” – John F. Kennedy (Similarly the time to prepare for a pandemic is…2019)
“Always plan ahead. It wasn’t raining when Noah built the ark.” – Richard Cushing (And the time to prepare for a pandemic is…well you get the idea. Again.)
“Someone’s sitting in the shade today because someone planted a tree a long time ago.” – Warren Buffett (Nice thought about the outcomes of what you deliver, not just what you deliver.)
“Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success.” – Pablo Picasso (You can buy a lottery ticket, but have you seen the chances of winning?)
“Good fortune is what happens when opportunity meets with planning.” – Thomas Edison (That is, there is no such thing as good fortune. See also the Gary Player quote about success in golf)
“Just because you made a good plan, doesn’t mean that’s what’s going to happen.” Taylor Swift (She has clearly read my thoughts – see below)
“To achieve great things, two things are needed; a plan, and not quite enough time.” – Leonard Bernstein (My favourite. Reminds me of the old gag “What’s the best thing you get from a publisher?” – “A Deadline”.)
“It is not the strongest of the species that survive, not the most intelligent, but the one most responsive to change.” – Charles Darwin (How many times have you seen this quote this year? I know – an unprecedented amount…)
With shorter time periods and horizons, here’s some thoughts about business planning for the rest of the year, and maybe into next year too:
• Remember that reality will always differ from the plan. Most aeroplanes spend most of their time flying off course. That is not the issue – this is why we have pilots. There are no auto pilots available for keeping a business on track.
• A budget is a plan. Ever seen a budget where the actual expenditure matches exactly? Me neither. So, you know what to expect – a variance. That is not the problem, it is the action you take in response that counts.
• Remember the difference between your vision and your plan. Vision is where you want to be: your plan is how you will get there. Vision may be long term and remain relevant even for short term periods where your progress towards it remains intermittent.
• I really like the idea of 3,3,3 planning recently shared by Roger Harrop, The CEO Expert. What will you do in the next 3 days, 3 weeks, 3 months? No point looking any further ahead than that.
• If you like, add the next 3 hours to that one.
• There are no rules about business plans. I know some organisations have their preferred formats and processes for planning, but those are not rules. Find a type and style of plan which works for you. And implement it.
Finally – “A good plan, violently executed now, is better than a perfect plan next week” — George Patton
(and on that note, get your pen & paper, or device and app, and get planning now. Have a good week.)
Buzzwords of the Week – Cash Flow
Definition – The amount of cash or cash-equivalent which the company receives or gives out by the way of payment(s) to creditors is known as cash flow. It gives a snapshot of the amount of cash coming into the business, from where, and amount flowing out.
Shorthand for profit retention plus depreciation (which is not a cash item).
Alternate View – This is 2020, this is the only financial element to focus on. The Cash Flow Forecast is THE most important financial tool, enabling you to decide whether you can pay wages or furlough staff, keep going or give up. The Cash Flow Statement is a historic look back and reconciliation of what happened to the company’s cash situation, but right now it is the view ahead that needs all the attention. If anyone tells you that all that matters is profit, they have never really read the cash flow forecast.
Online Learning – my first online programme – How to Read Financial Statements – is now available. This is a series of 7 online lessons:
1. How finance fits with Strategy
2. The Language of finance
3. Owning & Owing – using the Balance Sheet
4. Measuring & Managing Profit
5. Measuring & Managing Liquidity
6. Budgets, what, why & how
7. The most important part of all
Each lasts between 20 & 40 minutes and includes the slides and videos to help you understand what good looks like in financial terms. There is a special offer price this week of just $49, and is available now at https://app.mastermind.com/masterminds/8443