Gain competitive advantage from better planning

Business Insights

It is often said that people don't plan to fail – they just fail to plan. Like many clichés, there is more than an element of truth in this – particularly for small businesses. Planning is difficult and time-consuming, is always inaccurate – sometimes wildly so – and diverts resources from other tasks. However, this article argues that planning is nevertheless a vital process, which, when combined with good analytics, can be a significant source of competitive advantage enabling businesses to operate more efficiently, achieve higher margins and respond quickly to events.

To unpack all this, let us examine the Why, What, When and How of business planning.

Why plan?

Although forecasting is never perfect, it does at least provide a baseline against which to operate. It allows cash flows to be projected, suppliers to be briefed about future demand, and personnel requirements to be assessed for staffing contact centres etc.

However, what is equally important is to monitor performance against plan closely. This makes it possible toimprove the forecast over time, by applying the experience to date to future time periods, whether it be overall performance, or details like product mix. This latter can help you to achieve a higher average margin by running winners and promoting products with a projected surplus early (avoiding a fire sale at the end of the season), and also to ensure that staffing is matched to expected demand.

Plan what?

The planning needs of businesses are as diverse as the businesses themselves, which is why the various planning tools on the market tend to be highly configurable. However, it is possible to make some general observations.

  • Plan drivers not outcomes: rather than planning revenues, plan the things that deliver those revenues. Not just, say, orders and average value, but the drivers of those, e.g. marketing activities, customer base, order frequency, product mix. These detailed drivers provide meaningful signals that can be acted upon – if revenue is down, is it because you are losing customers or because they are buying fewer or cheaper products? Knowing this tells you exactly where to focus your marketing efforts.

  • Extend forecasts beyond orders and revenues: planning business drivers enables you to extend the forecasts into many areas: e.g. demand for products and components, packaging, human resources etc. This prevents a failure in any link in the chain, such as a shortage of packaging materials or warehouse staff, from causing outsized problems.

  • Keep a close eye on the financials: accurate forecasting helps businesses to keep a watchful eye on cash flow – the main cause of small business failure - and working capital requirements. If more short-term finance is needed, then having a good set of forecasts, backed by solid data, will make the bank much more amenable.

  • As detailed as possible: planning daily sales allows businesses to be agile, as problems can be spotted early. Planning SKUs rather than just categories supports more efficient inventory management, and less capital tied up in buffer stock.

Plan when?

Many businesses operate on an annual or six-monthly planning cycle. However, some are moving to a practice of rolling forecasts, where the process is more or less continuous throughout the year. With the right systems, they can always access an up-to-date full-year forecast, comprising actuals to date, and planned figures in the remaining weeks of the year. Specialist tools make this easy by combining planning and reporting into the same platform and stitching planned and actual data together into a seamless time series.

One advantage of this is that the organisation gradually improves its forecasting ability over time. With a six-monthly planning cycle, the business never gets really good at it, but after a couple of years of continuously monitoring performance and revising forecasts, the organisation builds up a wealth of experience which streamlines the process and makes it significantly more accurate. In addition, rolling forecasts mean that the next year's plan is largely in place before the budget process even starts.


How is a busy organisation supposed to manage this process, along with everything else it has to do? For all but the smallest businesses, that industry workhorse, the spreadsheet, is simply not up to the task.

The good news is that there are a few cloud-based tools that can help, and even make the process relatively pain-free. Our own product, Compas, has been designed to allow you to replicate your existing business planning and reporting processes to make the transition relatively painless. It does this by providing a flexible platform, which the team can tailor to your business to reduce the learning curve. Other systems have different strengths – some are aimed primarily at the Finance function, others have a focus on project planning or workforce management.

It is difficult to get a real feel for what a system might be like by just visiting the vendor's website, so the best thing is to request a demonstration – ideally incorporating some of your own data and requirements. If at all possible, find something with a 'try before you buy' option – a significant free or heavily discounted period when you can actually use it in your own workplace before committing for the long term. That is the best way to check if it will really work for you.

The author is Managing Director of Golden Orb, the company behind Compas. He can be contacted on