Business plan

Create a quarterly business plan to evaluate your performance

Image source: Getty Images

Creating a quarterly business plan doesn’t have to be complex. Discover the nine simple steps to create an action plan that stimulates growth.

If you’re a small business, you might be wondering why you need a business plan, especially if everything seems to be going well. The reality is that whether your business is lagging, holding up, or thriving, a strategic plan will help keep you focused and on track to achieve your goals.

Why create a quarterly business plan

Think of your business plan as a GPS. When you start your journey, you set the GPS to your destination. If you stray from the path, the GPS will let you know and help you find your way back. When you reach your destination, it will announce that you have arrived. Your quarterly plans and annual plans for your business can do the same.

  • Setting goals and tracking performance will help you see the big picture.
  • Achieving milestones gives you confidence that you are reaching your goals.
  • If you fail, it’s a roadmap for where you need to adjust.
  • If you need a business loan, lenders or investors will want to know that a plan is in place.

If you have created an annual business action plan, your quarterly plan will be a review to assess your performance against the plan and what you need to revise moving forward. If you haven’t made an annual plan, now is a great time to get started by creating a quarterly business plan for small businesses.

1. Perform quarterly financial analysis

At the end of each quarter, companies of all sizes should conduct a financial analysis to determine the health and trajectory of their business. While there’s no end to what you can track, most companies focus on the fundamentals:

  • Income statement: revenue, cost of goods, operating expenses, net profit
  • Balance sheet: assets (capital and liabilities), equity, retained earnings
  • Cash flow: operational, investment and financing activities

What is important is to measure performance against your expectations. This information will help you in your gap analysis.

2. Do a gap analysis

A gap analysis considers gaps to understand why you did not meet your financial goals. This will help you determine where to focus your efforts in the future. These typically take the form of one or all of these types of scans:

  • Measure performance against budget targets
  • Analyze market trends to identify opportunities
  • Staff and resource assessment
  • Profitability gap analysis

If there are shortfalls, determine their importance to your overall operations and use them as a framework to write down your goals for the next quarter.

3. Update your business impact analysis

With the disruption we’ve seen with COVID-19, every company should also perform a business impact analysis. It is important to identify potential disruptions to your business operations and the financial impact that may result.

While you couldn’t predict the massive disruption to supply chains caused by the coronavirus or the huge shift to remote work environments, you can measure the impact of other disruptions. For example, what if your point-of-sale (POS) system goes down for more than a few hours?

With our growing reliance on technology and the volume of data generated, pay close attention to analyzing your operations.

You may find things you need to implement in your quarterly plan to mitigate financial risks in the future.

4. Analyze the KPIs of the previous quarter

I hope you created goals and key performance indicators (KPIs) for the last quarter. If so, you need to take them out and see how you did. Were they completed? If so, celebrate. If not, should they be adjusted for the next quarter?

Pay close attention to your sales analytics. Revenue is what keeps you in business, so many of your KPIs will likely revolve around that: how well you generate it and how hard you put in to achieve it.

5. Comparison with peers

If possible, benchmark your performance in key areas against your peers and competitors in your industry. It’s easier if a company is listed on the stock exchange and you can review its business figures and public records. For small businesses, check with your trade association or search online for benchmarking data.

For example, if you’re in the plumbing industry, a Google search might show you these industry averages for an assortment of financial benchmarks to use for comparison.

Financial references from ReadyRatios for the plumbing industry.

ReadyRatios provides financial benchmarks for many industries. Image source: author

6. Adjust KPIs for the upcoming quarter

After the first steps, you should have an idea of ​​what you need to improve or develop. To do this, define the KPIs you use to measure success. The clearer your goals are, the easier they will be to measure.

For example, suppose your goal is to increase your quarterly profit margin by 2%. To do this, you need to track income, expenses, and margins. In the next step, your action plan will detail the steps to achieve your KPIs.

7. Create a Quarterly Action Plan

It’s time to detail ways to improve performance at work to achieve your goals and hit your KPIs.

When creating your plan, it’s helpful to use a quarterly action plan template or create a one-page action plan. It can be tempting to create a long to-do list. Don’t. If you put too many quarterly planning goals on the list, it can be overwhelming and you risk losing focus. Find one, two or three most important goals and put them on your checklist. If you can mark them as complete, you can add more if you wish.

8. Sample Business Action Plan

Once you’ve narrowed down your list of priorities, break each goal down into smaller action steps. Identify who is responsible for completing each step and a due date. You can sketch it out on paper, use sticky notes, or use a spreadsheet. Here is an example.

Action plan template showing goals, KPIs, action steps and due dates.

Quarterly action plan template. Image source: author

Here is a simplified example of how you might complete it. Of course, yours will be different, depending on your goals and action steps.

Action plan template showing examples of goals, key performance indicators, action steps, and due dates.

Quarterly action plan template with examples. Image source: author

Of course, a better way to define your goals and action steps would be to quantify everything you can. For example, instead of generating more qualified visitors to your e-commerce site, you might say increase the number of visitors by 15%.

9. Assess your resources

Once you have your KPIs in place and an idea of ​​your overall goals, look at your resources. In our example, you’ll be spending money on marketing to attract more qualified buyers to your e-commerce site. You will need to have an allocated budget to do this. Besides marketing expenses, you will need to ensure that you have sufficient inventory and extra budget for any additional carrying costs.

You will also need to factor human resource planning into the equation. Do you have the staff or resources to launch and manage your marketing campaign? If successful, can you handle the volume increase?

Your strategic to-do list

For many small businesses, the idea of ​​a formal business plan can be daunting. It is not obligated. Approach it as a strategic to-do list to hold you and your team accountable. If possible, narrow down your goals, break them down into measurable goals, and keep them on one page. Put it somewhere you can check regularly to make sure it remains a priority.