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Failure to do Long-Range Business Planning

July 21, 2016

The ultimate mark of a good business or organization (if a not-for-profit) manager is how much of their success is deliberate. Yet I am amazed that so many owners or managers fail to do long term planning at all or fail to make more than a perfunctory attempt at it.

I believe long range planning is essential, yet may limit what they do to preparing a budget for only the next year. Developing a long range plan is one of the most important jobs an owner or manager has, and one that in many cases only they can do. Failure to plan, especially to develop long-range plans, can lead to many serious financial problems that can eventually undermine a business’ viability.

One of the “why it can’t be done” reasons I get is that they feel they cannot project reasonably well for any period longer than a year. One client in particular, who believed in preparing annual budgets, argued strongly that he would never use or trust a 5 year budget because too many variables were involved. He said it would only be a waste of time and undoubtedly be completely wrong.

The client finally did prepare a 5-year budget, primarily to stop me from bugging him about it. What he found out was that his main product line had virtually exhausted its growth capacity. He realized that if he did not begin to develop other areas, his business would run into a dead end. He then thanked me immensely.

The point is not whether his numbers are on the mark, but whether the planning process provides him with information to help guide the overall growth of the organization. In this case, long range planning helped my client realize that he had to take some aggressive actions immediately to assure his future success, rather than not acting and eventually confronting the continued existence of his company.

It is a mistake to forego planning just because the numbers will be wrong. Of course your 5-year projection will be wrong, but it can help to show the trends and patterns that are most likely to develop within and outside the company. It is a tool, not a panacea or cure-all. To be successful, use every technique recognizing the shortfalls but looking to yield the benefits that can be presented.

One Comment leave one →
  1. 6hawthorne permalink
    July 21, 2016 2:27 pm

    Great article Bob

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