LESSON 19: How to design your own future, and control i Articles

LESSON 19: How to design your own future, and control it, with a planning model

 We have now completed the first half of this work, which focussed on recording monetary information in your business and getting feedback about your profit and financial position. What you will learn in this second half is altogether more exciting. This is where you learn how to design your business and its activities to yield […]

19.1 You’ll need a planning model

 The first thing to realise is that just as you need accounting software to record your financial transactions, you similarly need dedicated software with which to do your planning. The software you will need is a planning model. This does not have to be as weighty as accounting software. And unlike accounting software it is […]

19.2 The magic of planning models

 In one breath, the magic of a planning model is that it enables you to predict what your cash and profit is likely to be at some future time. Although it is true that nothing and no one can know what the future holds, a good planning model used in the correct manner can provide […]

19.3 Here are the seven major ways you can use your planning model to get the results you want from your business, and from life

 What can you do with a planning model, and why would you want to do any of those things anyway? The answers to these questions are so rich, so far reaching and so fundamental to your business success that we will spend the next several sections of this work exploring and explaining them. However, in […]

19.4 The four principle benefits of having a budget

 Once you have settled upon a course for your business for the next year or so, that takes expression in money terms as your budget. So your budget shows your exact monetary targets, typically for a financial year. While we will cover budgets and related topics in detail over the coming chapters here are the […]

19.5 The four principle benefits of preparing forecasts

 You use forecasts to look ahead. You can peer into the future and anticipate what is coming up. We will explore forecasting in detail later, but for the time being here in a nutshell are the major benefits you gain from using forecasts. 1. Radar. Forecasts are your ‘business radar’; they identify potential obstacles in […]

19.6 A quick note on formal ‘business plans’

 You may have noticed that nowhere have we talked about producing a complete ‘business plan’. The term ‘business plan’ is generally used to mean the wider document describing in words the business, its founders, its product or service, strategy, goals and so on, all supported by numerical projections of profit and cash. While full business […]

19.7 What a planning model is and how it works

 As we have said, the actual ‘engine’ that enables you to plan is a planning model, which is usually in the form of a spreadsheet or a specialist program. The plan itself is built up of a series of assumptions about future actions you can take with your business, the likely consequences of those actions, […]

19.8 Garbage in, garbage out

 As we have seen, plans in all their forms are composed of assumptions and estimates. Anyone can make their future expected profit or cash look magnificent if they make over-optimistic assumptions about, for example, the high price they can charge for their product or service, the high volume of sales they will make, the low […]

19.9 Example of a completed plan – Profit & Loss, Balance Sheet, and Cash Flow

 Below is an example of a planned Profit and Loss Account, Cash Flow, and Balance Sheet. As you look at these three reports appreciate that what you are seeing is the final product in summary form of quite a complex process. There is a considerable amount of information lying behind these reports, as well as […]

19.10 Six key points about the completed plan

 There are six things you ought to notice at this stage. Here they are… The plan covers twelve months You will see that each report covers twelve future months, with each month appearing as a separate column. This is the most common presentation. Although a plan can be completed for any time period they are […]