It is near the end of the year and I would hope by now that most companies have been through a revision or two of their strategic plan and budget for 2007. While strategic planning and budgeting is a task that some may find quite onerous or even useless, it is an imperative process and one that will help align your team and continue driving the growth of your business. Rather than go into a step-by-step walkthrough of this process, I thought it would be more helpful if I share with you the number one mistake I see made year in and year out – companies putting together plans and revenue targets which are unattainable. Look, we all want our companies to excel and stretch to reach their goals but at the same time setting a bar in the clouds can be detrimental to you and your company’s health.
Why is this a problem? First, creating a plan that is too ambitious only sets you and the company up for failure. People don’t like to fail and you and your employees can get demoralized after repeatedly missing targets by a significant amount and especially if your compensation is tied to a plan that will never be realized. Secondly, in trying to hit an unattainable plan, management teams typically make another huge mistake – overhiring too early or frontloading all of their hires to spend their way to success. What this does is speed up cash burn without delivering the desired results. In an earlier post, I mentioned how hiring too far in advance of your market can lead to ruin:
"Do more with less and be careful of ramping up sales until you have a repeatable selling model. In other words do not hire too many sales people and send them on a wild goose chase until you have built the right product, honed the value proposition, identified a few target markets with pain, and can easily replicate the sales process and model from some of your customer wins."
So just do yourself a favor when you build your strategic plan for next year – get input from all of the key stakeholders (sales, marketing, engineering), get them to buy off on the plan, and put together goals that force the company to perform at its best while at the same time being grounded in reality. A good possible solution is for your company to lay out 2 plans – a baseline growth plan which the board approves and an upside plan that has a higher benchmark which the employees use as their goal. What this does is allow companies to manage to a certain burn rate (baseline) but at the same time continue to push its teams to excel and deliver results. If the company exceeds the baseline plan in a certain quarter, companies can always add a few more people to maintain the upside growth.