Throughout my career, I have started small companies and worked at large Fortune 500 companies, and in both scenarios there was a strong belief in conducting annual planning sessions to prepare for the coming year. A little over a year ago, I founded Relus Technologies, my fourth start-up, and we are now going through this same exercise. I have learned a ton in past iterations of business plans, and I will hopefully use some of this knowledge in preparing our 2015 plan.
Prediction of revenue based on past performance is highly inaccurate, and prediction based on any other data is merely a guess. Sure, it is important to make these guesses, but companies often fall into the trap of believing that the plan that was made at the beginning of the year is the Bible. “Thou shall not question the budget!” It has been carved in stone. Unforeseen market conditions can and will make your budget almost meaningless within weeks. If you then have hiring plans, compensation, capital expenditures, and other decisions tied to the budget, these decision points are now meaningless as well.
Only twenty or thirty years ago, the practice of annual budgeting and business plans seemed much more accurate and meaningful. Change happened rather slowly, so planning a year in advance seemed practical. For example, the new fax machines the company was planning to purchase and roll out to all their offices would have a fairly predictable return on investment. Over a 2-3 year period, the company could plan on reducing its mail room, and reduce postage and express mail fees. Numerous other business decisions were planned and budgeted, and accountants then rolled all these decisions into an annual budget to be chiseled into stone and announced to the company and investors.
In 2015, the pace of innovation has accelerated exponentially since 1985. I won’t go into all the disruptive technology trends we are seeing (that is in my other blogs). The net result is that rapid technology advances are enabling new business models, faster product launches, and new revenue streams. Furthermore, businesses today are much more connected to international forces than ever before. An earthquake in Asia, a coup in Africa, an election in Europe, or an oil discovery in Canada can all have unpredicted consequences on your budget. So what is a company to do in 2015 to plan, if so much can change so quickly? I am trying to answer that question in coming up with our Super Secret 2015 Business Plan.
- Be Nimble.We have built in the culture that we need to be prepared for rapid change. Because our business probably will change rapidly, our titles, reporting structures, and seating charts are all temporary.
- Be Quick.We need to make decisions quickly. Therefore, we are eliminating much of typical corporate America bureaucracy. In 2015, we will eliminate the barriers to being able to implement changes immediately. Gone are any approval cycles that take months or weeks. To succeed, we need to make decisions within hours—and be prepared for immediate success or failure.
- Jump over the candlestick. Jumping over a flame is a great analogy for a new method for business decisions. With new technology, companies can now experiment easily, quickly, and inexpensively. Being able to fail quickly is a powerful new weapon. In a traditional annual budgeting model, plans were revisited once per year. To succeed in 2015, we need to jump. If we get burned, we can quickly try a different strategy. Experimenting and quickly learning from mistakes is key to our 2015 strategy.
There you have it. Be nimble, be quick, and jump over the candlestick. Relus Technologies is prepared for an awesome 2015. We are budgeting for over 100% growth, but I am not going to carve this in stone yet—it may be 200%!